Press Release
September 27, 2015

Senate to OK law 'reforming, revamping' controversial agri fund

The Senate is set to approve a law that would reform a multi-billion fund financed by tariffs collected from rice and sugar imports to make sure that funds would go to legitimate farmers and fishermen.

Sen. Ralph G. Recto said the bill being debated on the Senate floor "will not just extend the effectivity of the Agriculture Competitive Enhancement Fund (ACEF), but make it effective."

Conceived as a safety net when the country joined the World Trade Organization, the ACEF was created by Republic Act 8178 in 1996 to assist farmers affected when protectionist walls came crashing down as a result of the Philippine ratification of the General Agreement on Tariffs and Trade.

It was to be funded by "in-quota tariffs" collected from imported commodities, such as rice, placed under the restricted Minimum Access Volumes (MAV) which the Philippines imposed.

In February 2008, Republic Act 9496 extended the life RA 8178 until Dec. 31, 2015.

In his co-sponsorship speech, Recto said that by May 15, 2013, total actual collections of ACEF has reached P11.8 billion, of which P10.3 billion was from "MAV" quotas and P1.2 billion was from the so-called sugar conversion fees.

But according to the Department of Agriculture and farmers' groups, there was some P10 billion more in MAV in-quota tariffs which was collected but was neither remitted to the Treasury, nor booked as ACEF proceeds.

Of the P11.8 billion that was officially reckoned as ACEF collections up to the summer of 2013, some P8.9 billion was disbursed by ACEF Executive Committee.

Included was P2.6 billion as grants to local governments, government corporations and state colleges.

Also approved was P5.9 billion worth of loans to 304 groups which, except for 10, were private corporations.

Subsequent audit reports on the ACEF, however, are littered with adverse findings like "dismally low repayment rate", "double recording of loan releases", and "loans without collateral," Recto said.

"Some grantees have pulled a Houdini and can no longer be found. There were P2.5 billion worth of loans covered by letters of confirmation, whose addressees could no longer be found," he said.

In one case, proponents of a P63 million loan have migrated to the Great Beyond, leaving P58 million in payables, the senator said.

"Of the 294 private parties who were granted a total of P4.4 billion worth of loans, only 23 had fully paid as of December 2011. Of the remaining 271 private borrowers, only 15, or 5 percent of the total, had no arrears," he added.

"As a result, P2.2 billion in loans was already due and demandable three years ago," Recto said.

"In all, outstanding arrears already hit P5.1 billion three years ago," he stressed.

But despite these, it is not yet time "to write the requiem for ACEF," Recto said. "What must be written is the law reforming it."

The senator said ACEF still has an end of 2014 balance of P3.8 billion.

"Second, and more importantly, the concept of earmarking tariffs for local development remains valid," he said.

Recto said all measures to reform and revamp ACEF were incorporated in the bill principally crafted by Sen. Cynthia Villar, chair of the Senate finance committee.

"With her experience in restructuring, no person is more qualified to write the prescriptions than her, as she has the head of a banker and the heart of a farmer," Recto said.

"More stringent safeguards were put in place by Chairman Villar. For example, in the bill, there is a ceiling of P5 million per project. Gone is the era of megamillion unsecured loans," he said.

"Borrower participation is also being made mandatory. The counterpart fund should at least be 10 percent of total project cost," Recto explained.

"Loan proceeds wilI comply with a menu limited to acquisition and establishment of agri-based production and post-production, and processing, machineries, equipment and facilities to achieve modern agricultural practices," he said.

Another important provision in the bill is that membership of the ACEF Executive Committee will be revamped.

"The chair of the Senate and House committee on agriculture shall no longer jointly-head the ACEF Execom. In fact they are yanked out of that body," Recto said.

"There is moral hazard in leading the body which you ought to oversee. Members of Congress are not supposed to serve as loan approval officers in a purely executive body," he said.

There is a provision in the bill designating Land Bank as the one which shall manage the credit facility out of the funds, Recto said.

As to the CHED head, his or her involvement can be justified by the fact that ACEF is also being tapped to finance the studies of students taking up agriculture courses, Recto said.

On hindsight, the scholarship component of ACEF was one of its few bright spots. Loans for production capital may have been malversed but, by and large, tuition to train human capital was not, he said.

"Borrowers left debt notes. These scholars have diplomas as receipt of grants well spent, " he said.

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