PRESCRIBING MEASURES FOR THE STRUCTURAL ECONOMIC ADJUSTMENT PROGRAM FOR THE COCONUT INDUSTRY

WHEREAS, a rationalization program for the coconut industry
was mandated by LOI 926 in 1979 to save the coconut oil milling industry from
financial collapse whereby a cooperative endeavor was organized among coconut
farmers, oil millers and exporters of coconut products to pool and coordinate
their respective resources in the buying, milling and marketing of copra and its
by-products;

WHEREAS, a self-reliance energy program was instituted by
the Government whereby the energy requirements of the country would be serviced
from indigenous and renewable local sources and thereby diminish its dependence
on imported energy;

WHEREAS, the Coco-Diesel Program was conceived and
implemented as a substantial element in the country’s self-reliance energy
program such that coconut oil, one of the country’s indigenous and renewable
sources, would be utilized as a diesel fuel extender and fuel blending
stock;

WHEREAS, to ensure a continuous supply of coconut oil for
the Coco-Diesel Program and at the same time strengthen the rationalization
program for the coconut industry, Presidential Directive dated 1 September 1982
was issued mandating that the coconut oil production of intermittent exporters
of coconut products and the excess production of those primarily engaged in the
domestic market be instead channeled into the Coco-Diesel Program rather than
into the world market, and pursuant to which, the Philippine Coconut Authority
(“PCA”) issued Administrative Order No. 002, Series of 1982 establishing Rules
and Regulations to implement the said Presidential Directive;

WHEREAS, the severe drought in 1982-83 caused a substantial
reduction in the copra production of the country and compelled the Government
thru PCA to adopt measures to meet Philippine and world market requirements for
coconut oil; to prevent cutthroat competition for copra; and to forestall short
term cycles of artificially high prices of coconut products in the domestic and
world market including the issuance of PCA Administrative Order No. 002, Series
of 1983;

WHEREAS, since the promulgation of the Presidential
Directive and the PCA Administrative Orders, copra production of the country has
dropped even further as a result of numerous typoons in late 1983 and two (2)
super typhoons in 1984;

WHEREAS, in 1974, the Government launched a national hybrid
coconut replanting program with actual replanting commencing in 1979 as a viable
means of increasing copra production and thereby enhance the country’s
competitiveness in the international market of fats and oils, which was however
suspended in 1982 in response to the public clamor against the coconut levy
which financed the replanting program;

WHEREAS, pending review of alternative schemes for financing
the replanting program, the Government ordered, as a result of the super
typhoons in 1984, the replanting of the devastated areas with high-yielding
hybrids with this limited replaing program not bearing fruit until the
1990’s;

WHEREAS, external forces beyond the control of the
Government plunged the country into a severe economic and financial crisis
compelling the Government to seek a standstill and a restructuring of its
external debts;

WHEREAS, to enable the country to restructure its external
debts, the Government has implemented a series of substantial economic policy
measures which include reforms in the production, pricing, marketing, credit and
institutional arrangements of the coconut industry;

WHEREAS, after a thorough review, it is deemed to be in the
interest of all that there be less Government intervention in the marketing of
coconut products and allow the private sector greater access to the markets, and
at the same time encourage and require the private sector to establish and adopt
appropriate measures to enhance the competitiveness of coconut products in the
world market;

NOW, THEREFORE, by virtue of the powers vested in me by the
Constitution and the laws, I, FERDINAND E. MARCOS, President of the Philippines,
do hereby decree and order the following:

SECTION 1. PCA Administrative Order No. 002, Series of 1982,
and PCA Administrative Order No. 002, Series of 1983, and all other rules and
regulations promulgated by various governmental agencies in consonance with the
aforesaid PCA Administrative Orders are hereby repealed and all oil millers are
hereafter permitted and authorized to export their coconut products to the world
market subject only to such rules and regulations that the Ministry of Trade and
Industry, the Central Bank and PCA may prescribe to ensure that coconut products
are sold at competitive prices in relation to other fats and oils and that the
proceeds of such sales, less actual expenses, are remitted to the country;
Provided, however, that no rule or regulation shall be promulgated
which may delay or restrict the expeditious exportation of coconut products to
the world market.

SECTION 2. To help planters and processors organize
themselves into associations and/or cooperatives to give them greater control in
the marketing of their products, the coconut farmers, and/or the copra buyers
and/or millers/refiners and/or exporters of coconut products are encouraged and
authorized to form such cooperatives or associations as may be appropriate to
achieve economies of scale; avoid the ruinous competition for copra which pushed
the coconut oil milling industries to the brink of financial collapse in late
1979; maximize foreign exchange earnings; ensure that the coconut farmers
receive a fair share of the proceeds from exports and/or domestic sales, and at
the same time continue to assure consuming countries an adequate and continuous
supply of coconut products at fair and reasonable prices; Provided
however, that the Government or any of its agencies or instrumentalities,
including government owned or controller corporations, shall not, unless
expressly permitted by law, or by the President of the Philippines, directly or
indirectly engage in the marketing of coconut products in the world market.

SEC. 3. To ensure the survival of the coconut oil
milling/refining industry while there is an excess of copra crushing/refining
capacity and to encourage fresh equity to be invested in existing coconut oil
milling/refining capacities, no new copra crushing/refining capacity shall be
allowed without respective approvals of the Ministry of trade and Industry, the
Ministry of Agriculture and Food and the PCA, all of which agencies are hereby
required to respective promulgate the necessary rules and regulation to enforce
the foregoing. The Central Bank shall not authorize the opening of letters of
credit for the importation of capital equipment with out the respective prior
approval by the agencies. For this purpose, the crushing/refining capacities
fixed opposite each coconut oil miller/refiner listed in Annex “A” hereof, shall
be utilized in determining whether there is basis for expanding existing
crushing/refining capacities and/or allowing new crushing/refining capacities to
be established. The governmental agencies concerned shall accord priority to
coconut oil millers/refiners listed in Annex “A” for the establishment of new
facilities, or, within their respective areas, the expansion of their existing
facilities, or the restart of mills that have been mothballed by the cooperative
endeavor.

Any person or entity who may be aggrieved by the accuracy of Annex “A”
hereof, may within thirty (30) days from the date of promulgation of this
Presidential Decree, submit its perceived grievances to the Ministry of Trade
and Industry, the Ministry of Agriculture and Food and the PCA which shall
respectively submit their recommendations for the maintenance or modification of
Annex “A”, as the case may be, to the President of the Philippines for final
decision.

SECTION 4. To assure the coconut farmers a return on their
investment and to honor the commitments of the cooperative endeavor and the
country as well, in the domestic and international markets, including the
financial markets, all rights and obligations acquired or incurred by the
cooperative endeavor in implementation of the rationalization program for the
coconut industry mandated by LOI 926 and duly approved by appropriate
governmental agencies such as the Ministry of Trade and Industry, and/or the
PCA, and/or the Central Bank, must necessarily be assigned, transferred or sold,
pro rata and under reasonable terms and conditions to preserve the interests of
the creditors and the contractual commitments of the cooperative endeavor, to
the coconut oil millers/refiners who desire to service the world market,
including oil mills/refineries owned or controlled by the coconut farmers of the
Philippines as provided in Presidential Decrees No. 961 and 1468, as
amended.

SECTION 5. To encourage full and faithful compliance with
the structural economic adjustment program for the coconut industry herein
prescribed and the acquisition and the assumption of the rights and the
obligations of the cooperative endeavor as prescribed in Section 4 hereof, all
persons or entities, including the cooperative endeavor and their respective
stockholders who have participated in the pooling and coordination of their
respective resources as required by LOI 926, as so certified by the cooperative
endeavor, are hereby exempt from any and all taxes, fees, imposts, charges of
whatever kind and nature, which any, some or all of them may, or might have
incurred as a consequence of, or arising out of, or by reason of, or in
connection with, such steps, measures and/or procedures which they may adopt in
compliance with or in obedience to the structural economic adjustment program
for the coconut industry which they may deem necessary or useful or beneficial
to them, and their respective stockholders.

SECTION 6. Any violation of the provisions of this
Presidential Decree, and/or the rules and regulations herein authorized to be
issued by the governmental agencies concerned, shall be punished and penalized
in accordance with the respective enabling act or charter of the governmental
agency or instrumentality concerned.

SECTION 7. All laws, executive and administrative orders,
and/or rules and regulations respectively issued by the governmental agencies
concerned inconsistent herewith, are hereby repealed, amended or modified
accordingly.

SECTION 8. This Decree shall be effective immediately.

DONE in the City of Manila, this 11th day of January in the year of our Lord
nineteen hundred and eighty five.