NATIONAL SITUATION

7.7% or 2.9 million of 37.3 million in the labor force were unemployed as of Jan. 2012

30.3% or 11.3 million were under-employed during that year

Mass Poverty

•24.9% of Filipinos were considered poor in 2013

•Over 70% of poor families are in rural areas.

•Coconut-producing provinces are where poverty incidence is high.

Exodus to urban centers & overseas in search of jobs

• Urban congestion• Traffic problem• Mounting garbage• “Squatter” housing problem• Criminality, etc. • Loss of farm hands=farm labor scarcity=high

rural labor costs=high production costs=low farm revenues

 

PrognosisIf unemployment and under-employment in the rural areas are not

effectively addressed,  purchasing power of majority is bound to get lower and lower in view of

inflation, resulting in declining capacity to buy basic consumer items.  with low purchasing power of the majority, the economy is bound to

contract, resulting in contractions of company operations and, thus, labor downsizing.

 poverty incidence and exodus to urban centers and overseas (and to CPP-NPA folds) are bound to intensify, resulting in continuing urban problems, rural insurgency, and loss of farm hands, thus endangering national food security.

What Can Be Done?

Our alternative:

SUNRISE PROGRAM (SOLVING UNEMPLOYMENT & UNDER-

EMPLOYMENT THRU RURAL INDUSTRIALIZATION & SOCIAL

ENTERPRISES)

Focal resource: Coconut It is our most abundant resource 68 of our 81 provinces are major coconut producers 3.5 million hectares are planted to coconut across the country (BAS,

2010p) There are 341 million fruit-bearing trees nationwide (UCAP, 2010) The country produces more than 14 billion nuts per year (BAS). Over 20 million people depend on coconut directly and indirectly for a

living The country remains a top supplier of coconut products to the world

market Coconut is a versatile resource that can be processed into an array of

highly marketable products

Brief Industry Situationer Rural markets for raw coconut is dominated by monopsonists (single

buyers) and oligopsonists (few buyers) who control prices. Small coconut farmers share the least in value chain: 40% of CNO;

11% of VCO; no wonder then that small coco farmers rank among the poorest in Philippine society.

Coconut oil into which copra is principally processed faces stiff competition from cheaper palm oil.

But coconut can be processed into highly marketable products into which palm oil can never be converted: VCO, skim milk, coco flour, coco sugar, coco coir/geotextile, coco water energy drink, oleochemical.

Focal Coconut Products:• VCO• Skim milk• Coco flour• Biodiesel Coco juice/energy drink• Coco vinegar• Coco coir• Coco peat• Geo-textile• Granulated charcoal• Coco gas

Our Program ProposalProgram Objectives

Improved rural employment and income opportunities;

Increased household incomes for coconut farmers; and

Reduced rural poverty incidence.

Program Strategy:

Reengineer the Philippine Coconut Industry such that:

A shift in raw material trade from copra to whole nut occurs, thereby enabling farmers to production costs associated with copra-making, in effect raising their revenues through a pricing scheme for whole nuts equivalent to copra (i.e., prevailing copra price/4).

An integrated processing system capable of producing the target products under one roof is adopted, thereby attaining economies of scale and allowing the small coco farmers to sell direct to the processing plant.

Social enterprises, so-called as these are co-owned by farmers and eventually operated by them thru their coop or federation, are established around the processing of coconut by-products as husks, coco shells, coco water, coconut toddy or sap, enabling them to share in the profits.

Program ComponentsThis strategy shapes the following components of SUNRISE:

1) Rural Industrialization

Set up integrated coconut processing plants across 68 major coconut producing provinces to serve as direct buyers of whole nuts and to process the meat into VCO, skimmed milk, coconut flour; the water into energy drink; and coco shells into granulated charcoal and coco gas to energize the main processing plants.

Set up social enterprises, co-owned and eventually operated by farmers through their coop or federation, to process the husks into coir fiber, coco peat, and geo-textile/coconets, thereby creating rural employment and income opportunities.

Program Components…2) Farm Management

To secure the supply base of main processing plant, enter into Farm Management Agreements (FMAs) with participating coconut farmers thru their coop or federation, allowing the SUNRISE project to:

co-manage the farms according to recommended cultural practices; implement necessary applied technological trainings for participating farmers.

3) Interim Project Management Integrated coco processing is relatively a new system. To raise the

chances of SUNRISE projects to survive, stabilize and grow, there is a need for professional management in the interim of no more than 5 years.

Program Components…4) Research & Development

This component seeks to continually improve on product quality, including improvement on the basic processing machineries and equipment.

This component will be coordinated principally with DOST.

Priority Program Areas

The Program will be implemented in all 68 coconut producing provinces.

Investment Areas

 1) Rural Industrialization

Main Processing Plants to process VCO, coco flour, skimmed milk, coco water, granulated charcoal (their number will depend on capacity design and number of fruit-bearing coconut trees in the locality).

• Capital costs (plant sites, ite development, machineries, plant buildings, delivery vehicles, etc.)

• Working capital (raw materials, direct labor, operating expenses)

• Pre-operating expenses

Investment Areas (continued)2) Social enterprise development

Primary Processing Centers to process husks into coco coir, cocopeat, geotextile (their number will depend on capacity design and number of fruit-bearing coconut trees in the locality).

• Capital costs (plant sites, ite development, machineries, plant buildings, delivery vehicles, etc.)

• Working capital (raw materials, direct labor, operating expenses)

• Pre-operating expenses

Investment areas:3) Research & Development

Capital costs Meetings/conferences

Investment areas: 4) Farm Management & Institution-

Building Farmers’ trainings

Capacity-building for partner farmers’ coop

Salaries & benefits of Farm Technicians

Investment areas: 5) Interim Project Management

Operating expenses (salaries & benefits, other operating expenses)

Mechanics of ImplementationPiloting

• The Program is proposed for implementation beginning with a pilot project. For this purpose, the San Pablo plant of Mr. Ding Princena, currently under advanced stage of completion, is proposed as a KAANIB Coconut agro-Industrial Hub Project under a toll processing scheme.

• The plant will have a daily capacity of 75,000 kilonuts (kln) per day. At 45 kln/tree/year, this would require a supply base of 500,000 fruit-bearing coconut trees, or 5,000 hectares.

Mechanics of implementation:Replication

Should the pilot experience warrant, the project shall be implemented on a wider scale a year after.

Investment Requirements of Pilot Project

item Cost Funding Source

Princena PCA

Capital outlay- 25,890,000

Land dev’t 5,000,000

Buildings 2,490,000

Machineries & equipt. 7,100,000

Vehicles 7,100,000

Training facilities 2,000,000

Office equipt., furniture & fixtures 550,000

Working capital (lease deposit, direct, indirect costs)

67,776,123

Pre-operating Expenses

2,800,000

Total 96,466,123

Economic Justifications:

1) Employment Generation: Pilot Plant

Item Direct Workers Indirect Total Main processing plant 96 43 139 Coir processing 18 4 22 Total 161

Note: Figure does not include employment associated with harvesting, gathering & transport to consolidation center which are paid for by the central processing plant.

Economic justifications:2) Projected Returns to the Social Enterprises

PRIMARY PROCESSING CENTERS: Projected Net Income

1 SOCIAL ENTERPRISE (SE) Per day P41,159Per month P1,028,983.05Per year P12,347,796.61

Economic justifications:3) Central Processing Plant (processor of VCO, coco water,

skimmed milk, coco flour, granulated charcoal)

Projected Net Income

Per day 4,107,946Per month 102,698,656Per year 1,232,383,873

Economic justifications:4) Returns to the Farmers Per 100 Trees Per Year

Incremental farm family net benefit

Year 1 P6,480Year 2 P8,480Year 3 onwards P10,480

Economic justifications:5) Multiplier Effect

The Multiplier refers to the number of times an investment is multiplied before making its total impact on the national economy. An important element of the Multiplier is the concept of Marginal Propensity to Consume (MPC), or the percentage of extra income that goes to consumption expenditures. Since the national average savings is around 20%, we can safely assume an MPC of 80%.

How the Multiplier operates is easy to understand. Assuming an 80% MPC and an extra income of Ph1.00, 80 centavos earned by consumer A is spent on consumption and is received by consumer-businessman B. Consumer B also spends 80% of 80 centavos and goes to consumer-businessman C. And the same process goes on and on. To shorten this process, the Multiplier formula was devised, as follows:

Multiplier = 1 (investment) = 1 = 5 (1-MPC) (1-0.80)Therefore, total impact on the economy is:Original investment of Php96,466,123 x 5= Php482,330,615

Conceptualized by:

PHILFARMS, Inc.

Thank you…