It could be another case, as worse as its lead-footed release of funds for Yolanda-devastated areas, of the Aquino Administration’s criminal inefficiency and sluggishness in undertaking real reform programs. Or there may be a worse explanation.
Since September 2012 – two years ago – the Supreme Court finally ended nearly two decades of litigation and ruled that the P82.8 billion that originated from the so-called coco-levy imposed during the 1970s by the strongman Marcos were absolutely government funds that could be used only for the coconut industry.
This huge amount of money represented the monetization of 31 percent of shares in San Miguel Corp. bought through entities under the United Coconut Planters Bank on August 12, 1983, which the Supreme Court ruled were financed out of the so-called coco-levy, and therefore, government funds.
However, unlike other government funds, the money could be used only for the development of the coconut industry and the welfare of coconut farmers and workers, as this was stipulated in several Marcos decrees in the 1970s which ordered the collection of the levy.
It is a desperately needed fund.
Much of the country’s poverty is actually due to the backwardness of the coconut agricultural sector, which has, in effect, trapped farmers and landless workers in it over the decades. It is a sick agricultural sector since most of the coconuts are more than 60 years old, and its yields are diminishing each year as poor farmers are incapable of replacing them with new trees.
Nearly half or 10 million out of the 23 million Filipinos living below the poverty threshold are in provinces whose main crop is coconut, and whose main product is copra, or the dried meat of coconuts that are pressed in mills to produce coconut oil. The two insurgencies – Islamic and communist – have mainly emerged in these dominantly coconut-producing provinces, such as Maguindanao and Eastern Samar, as extreme poverty, probably more than ideology, has driven the people there toward rebellion.
The shares were originally common shares until government and San Miguel Corp. – with the Supreme Court’s approval – converted them in 2009 into preferred shares at the redemption price of P75 per share, higher than the market’s P54 per share price in 2009.
The shares were redeemed – converted to cash – on October 5, 2012, with San Miguel remitting to government a total of P82.8 billion. This consisted of the P56.5 billion value of the shares, plus P13.6 billion in cash dividends as preferred shares from 2009 to 2012.
Where is the P12.7 billion?
There is a further P12.7 billion in dividends, accumulated when the shares were still common shares from 1984 to 2009.
According to Presidential Commission on Good Government chairman Andres Bautista, a Presidential Task Force San Miguel “collectively decided to remit the P56.5 billion to the National Treasury, while the P13.6 billion cash dividends on preferred shares were deposited” in the United Coconut Planters’ Bank (UCPB).
(The Supreme Court ruled in November 2012 that 72 percent of the shares in the bank are government owned. For reasons I cannot fathom, the bank’s chairman for several years now has been tycoon Menardo Jimenez, who also chairs the GMA7 Network.)
Mr. Bautista informed me that the P12.7 billion “could have also been remitted to the National Treasury,” although he wasn’t sure about this. Bautista has not clarified where this part of the money is kept.
There hasn’t been an official explanation why P13.6 billion of the proceeds has been kept at the UCPB, in effect defying the Supreme Court ruling that ordered it remitted to the government, which should have deposited it in an official depository bank – which UCPB isn’t.
It appears, though, that without this money deposited in it, UCPB would go under.
The bank has been in deep financial trouble since 2009 that has required an infusion of P42 billion of public funds – P12 billon as advances from the Philippine Deposit Insurance Corp. and P30 billion in deposits from the Bangko Sentral ng Pilipinas (BSP). To keep the bank afloat, the BSP also had agreed not to recognize “temporarily” the P28 billion in losses the bank had accumulated.
“Without the extraordinary measures put in place by PDIC, BSP, and the national government itself, most recently in 2009, UCPB would cease to operate,” Purisima wrote.
One legal, albeit flimsy, justification, though, for putting the P13.6 billion in UCPB is the claim by UCPB and its wholly owned subsidiary Coconut Planters Life Assurance Corp. (Cocolife) that they had an 11 percent ownership of San Miguel shares monetized. They argued that other than the proceeds from the levy, they also invested their own funds in the companies – the so-called oil mills — that bought the San Miguel shares in 1983. These shares would total P15.6 billion, out of the monetized shares.
Government vs Government
The government-controlled UCPB had filed a case in the Makati Regional Trial Court to claim their supposed share in the P82.8 billion fund, against which the government agency PCGG protested. The PCGG elevated the case to the Supreme Court, which so far hasn’t acted on the case but has ordered the Makati court not to proceed with a trial.
According to an August 28, 2012 confidential memorandum of Finance Secretary Cesar Purisima to President Aquino, UCPB and Cocolife have been carrying in their balance sheet the value of the San Miguel shares they claim are theirs. This means that these have, in effect, bloated these institutions’ financial data.
“If the San Miguel preferred shares which UCPB claims ownership of in its proprietary capacity were to be removed from its balance sheet without compensation … this would result in UCPB’s capital adequacy ratio falling below required levels, and would be grounds for BSP to place the bank under prompt corrective action, receivership and eventual closure,” Purisima wrote in his memorandum.
The portion of San Miguel preferred shares that were subsequently redeemed and which UCPB claims ownership of account nearly half of its assets (as of end-2010), Purisima reported.
Similarly, “if these shares were to be removed from (Cocolife’s) balance sheet without compensation, this would result in Cocolife’s equity falling below required levels, and may be grounds for the Insurance Commission to revoke or even not renew the license, “ Purisima wrote.
However, even excluding the P13.6 billion proceeds of the San Miguel shares kept at UCPB and the P12.7 billion, which remains unclear where it is being kept, the Aquino government would have P56.5 billion at its disposal to inject into the coconut industry so as to uplift the poor who remain trapped in its sorry state. On the basis of a conservative interest income of 5 percent, this Administration could have P3 billion every year at its disposal to undertake poverty alleviation measures in the industry or start the much-needed rehabilitation program.
This Administration has not spent a single centavo for such a purpose, two years after the Supreme Court gave it the money.
After two years –- worse than the Yolanda rehab plan being approved a year after the typhoon devastated the Visayas – there isn’t even a master plan how the P83 billion would be used to rehabilitate the coconut industry and lift its poor small farmers and workers out of abject poverty.
All the National Anti-Poverty Commission, which was tasked to prepare the master plan, has been able to produce was a PowerPoint presentation with little detail for implementing its purported plan.
It could be another instance of this Administration’s incompetence, its sheer inability to do things.
The other explanation is that its geniuses who had thought of and implemented the Disbursement Acceleration Program have concocted a scheme to use the proceeds of that huge P83 billion fund – still unaudited – for the Administration’s campaign kitty in 2016, or maybe even to siphon off into their yellow purses.
The interest income alone of that P83 billion fund amounts to, at a 5 percent rate, a huge P4 billion, which means that just by sitting in some bank it would have earned P32 billion from 2013 till next year.