IF the information I received is true, then the planned merger of the United Coconut Planters Bank (UCPB) with the Land Bank of the Philippines (LandBank) will materialize soon.
I’ve been active in the coconut industry since the 1960s and I know a great deal about UCPB, being a former director of this bank for several years. I am also privy to the circumstances that led to the institution of the so-called coco levy fund, which was the main source of money used to purchase the First United Bank (now UCPB).
Let me share with you first a bit of background about UCPB, its creation and purpose, and later enumerate the many questions that will certainly bug its merger with the government-owned LandBank.
In 1971, Congress enacted Republic Act 6260 creating the Coconut Investment Fund (CIF) that mandated the collection of the first-ever coco levy from coconut producers for a period of 10 years. The target collection was P100 million, although the amount was not reached. The collection was then used to set up the Coconut Investment Company (CIC).
About a year later, there was a global shortage of fats and oils that caused coconut oil prices to skyrocket, something that the government paid much attention to so as to prevent a supply shortage in the domestic market. Because of the high price of coconut oil in the world market, producers would rather export this commodity and thus earn dollars and a windfall, to the detriment of the local market.
This led to the institution of another coco levy via Presidential Decree (PD) 276. It is another form of collection meant to subsidize Filipino consumers in their purchase of coconut-based products through the Coconut Consumer Stabilization Fund (CCSF). Because of this fund, producers allocated part of their produce for the domestic market.
Then came PD 755. This law directed that the funds collected from RA 6260 and PD 276 be used to acquire a bank that would provide financing for working capital and other production-related costs of the coconut farmers. This bank was later identified as the First United Bank, which was then owned by the family of the late Jose Cojuangco. FUB was later renamed UCPB. Later, the government caused the distribution of shares of stocks in UCPB to coconut farmers who were able to present the so-called coconut fund receipts, which evidenced payments of the coco levy. It came to a point where about 65 percent of the outstanding stocks in UCPB were already owned by the coconut farmers.
After the 1986 revolution, the issue of whether the coco levy fund was a private fund, or ill-gotten wealth of certain government officials, or a fund that actually belonged to the government were raised before the Sandiganbayan. The graft court, and eventually the Supreme Court, ruled that the various coco levies collected by government were effectively in the nature of a tax, and thus pertained to the government. To the detriment of thousands of coconut farmers, their shares of stocks in UCPB were declared invalid and ordered reconveyed to the government. The redeeming part of this 2012 Supreme Court decision is that the proceeds of all the coco levy assets that included oil mills, 33 million San Miguel Corp. shares, and the integrated coconut chemical firm purchased or established through the coco levy funds, as well as shares of stocks in UCPB were directed to be utilized by the government exclusively for the benefit of coconut farmers and the development of the coconut industry.
Now, I heard there is a resolution approved by the UCPB Board that was pushed by the government represented by the Department of Finance (DOF), allowing the merger of UCPB with LandBank. Another resolution was said to have been passed by the UCPB Board requesting that the existing loan given by the Philippine Deposit Insurance Corp. (PDIC) to UCPB be converted into preferred shares in UCPB. This loan amounts to more or less P12 billion.
There are so many serious questions concerning the planned merger.
Isn’t it that LandBank was created via another special law, which mandates this bank to provide financing for the agrarian reform program of the government and provide credit to our rice farmers? On the other hand, UCPB was acquired and established as the financing arm from which coconut farmers can obtain working capital and other credit accommodations to fund coconut production-related costs. Don’t these special laws have different mandates and are still in full force and effect as they have never been repealed?
Let me stress that the Supreme Court had specifically directed that the proceeds of the coco levy assets should be used for the benefit of the coconut farmers and the development of the coconut industry. This, I believe, is the reason why President Benigno Aquino III, through Executive Order 179 and 180, directed the identification of all coco levy assets (those purchased or established through various coco levy funds) as well as mandated the disposition of these assets.
There are now bills pending in Congress that propose the establishment of a coconut trust fund from the proceeds of the coco levy assets. For one, Sen. Cynthia Villar is pushing such bill in the Senate. It appears that the direction of the country’s leaders is to liquidate these assets so that the proceeds can be placed in the proposed trust fund. But to my simple mind, these steps are clearly aimed at implementing the Supreme Court’s 2012 decision.
Surely, questions will be asked as to whether or not the proposed merger of UCPB with LandBank is consistent with the Supreme Court mandate. Some quarters believe that merging the two banks is violative of the Supreme Court decision.
Doesn’t the merger of UCPB with LandBank necessitate the passage of a new law amending both the special laws that envisioned the creation of these banks, and not through mere resolutions issued by the boards and stockholders of both UCPB and/or LandBank?
Isn’t it a more viable option to just sell through bidding the shares of stocks of UCPB and other coco levy assets so the proceeds can be used for the coconut industry and the farmers as originally intended?
Another point. PDIC was created to provide emergency loans or assistance to distressed banks. Isn’t the conversion of PDIC’s loan into preferred shares in UCPB contrary to the former’s charter? Wouldn’t the conversion of such loan into preferred shares be tantamount to an equity investment in UCPB? Wouldn’t it be best that this loan be simply returned to PDIC so that these funds can replenish its revolving fund that will in turn be continuously used to assist ailing or distressed banks? After all, this is PDIC’s core function.
I really believe (actually a position shared by many) that it is better to just privatize UCPB and the other coco levy assets so that the Supreme Court’s mandate is complied with and our coconut farmers will not again feel betrayed or abandoned by the government.
The coconut farmers are in dire need of support right now because they are also victims of the Covid-19 pandemic, not to mention the effects of the recent series of typhoons that hit the country. The coconut farmers are probably among the poorest of the poor in the country since they do not have the capacity to intercrop and venture into other livelihood sources for lack of funding support.
Clearly, there are more advantages to a UCPB privatization over the planned merger with LandBank.
Dr. Jesus Lim Arranza is the chairman of the Federation of Philippine Industries and Fight Illicit Trade; a broad-based, multisectoral movement intended to protect consumers, safeguard government revenues and shield legitimate industries from the ill effects of smuggling.
Sir I am a retired Landbanker and also a coconut farmer from Talipao Sulu.. Yes I do agree with you that the coco levy funds can be out to good use byvinvesting them to coconut farmers like planting of new crops the short fruit bearing type as harvesting the nuts have been a burden to farmers on the labor side… Coconut oil has so many medical uses as well as its one of the healthy oils.Dessicated coconut is in huge demand as well . DOST in collaboration with PCA DA and the coco farmers have to work together to rehab many of this farms and encourage new farms and planting in abandon areas… LGUs should assist the government in listings these farms that have much need for funds to rejuvenate or replant new varieties. I can’t understand the logic behind merging UCPB to LBP.. or is there some plan to utilize this bank to reach out to the Farming/Agri Sector?
Sir, question, what will happen to those who are holding or have stock certificates of UCPB?
That is also my concern, because I am holding a stock certificate of UCPB under my late father, so is there a chance that I can benefit from it?