Metro Manila (CNN Philippines) — The controversial multibillion Agricultural Competitiveness Enhancement Fund (ACEF) would get much-needed reforms if Senate Bill No. 295, principally authored by Sen. Cynthia Villar, should become law.
Senate is set to approve the measure, Senate President Pro Tempore Ralph Recto, who co-sponsored the bill, said in a statement issued on Sunday (September 27).
The bill will not just extend the effectivity of the fund but also make it effective, he said.
The fund was created in 1996 by Republic Act 8178, shortly after the Philippines joined the World Trade Organization (WTO).
With the government’s ratification of the General Agreement on Tariffs and Trade (GATT), Recto explained, “protectionist walls came crashing down.”
So the fund was created to act as a safety net for farmers and fishermen who would be affected when the Philippines joined the World Trade Organization.
The fund sources were in-quota tariffs, which were collected from imported commodities, such as rice, placed under the restricted Minimum Access Volumes (MAV) that the Philippines imposed.
In February 2008, Republic Act 9496 extended the life RA 8178 to Dec. 31, 2015.
Loans to unintended beneficiaries
One problem that came out during a hearing on the bill, which was presided by Villar, was that the most of the people who got a loan from the ACEF were businessmen, not farmers and fishermen as originally intended.
In a statement issued last September 16, Villar said: “This is why ACEF miserably failed in achieving its objectives,’ she added. “The funds did not go to intended beneficiaries. Instead of scrapping the fund altogether, we are pushing for a law that will make sure the funds will be spent for the sole purpose of improving the productivity and competitiveness of small farmers and fisherfolks.”
In his co-sponsorship speech, Recto said that by May 15, 2013, total actual collections of ACEF had 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 some P10 billion more in MAV in-quota tariffs that had been collected was neither remitted to the Treasury nor booked as ACEF proceeds, according to the Department of Agriculture and farmers’ groups.
Of the P11.8 billion officially reckoned as ACEF collections, some P8.9 billion was disbursed by ACEF Executive Committee, of which P2.6 billion were grants to local government units, government corporations, and state colleges.
“Also approved was P5.9 billion worth of loans to 304 groups which, except for 10, were private corporations,” Recto said.
‘Low repayment rate’
On top this, Recto added, that audit records on the ACEF were “littered with adverse findings,” such as “dismally low repayment rate,” “double recording of loan releases,” and “loans without collateral.”
“Some grantees have pulled a Houdini and can no longer be found,’ he said. “There were P2.5 billion worth of loans covered by letters of confirmation, whose addressees could no longer be found.”
In one case, he pointed out, the proponents of a P63 million loan died — “migrated to the Great Beyond,” as he put it.
“They left P58 million in payables,” Recto 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. In all, outstanding arrears already hit P5.1 billion three years ago.”
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.”
He 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 Villar’s bill.
“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.
‘Stringent safeguards’
“More stringent safeguards were put in place by Chairman Villar.” Recto said.
In her September 16 statement, Villar listed down the following provisions in her bill:
Eighty percent of the fund will be set aside for loan with minimal interest.
Only P5 million per project loan will be released. This money will be used strictly to buy and set up agri-based production and post-production equipment and facilities.
The loan beneficiaries will provide a counterpart fund of not less than 10 percent of the total project cost, which may be in the form of capital outlay, labor, land for the project site, facilities, equipment, and salaries.
The Land Bank of the Philippines will manage the credit facility funded out of the fund and set the eligibility requirements and loan security or collateral of beneficiaries.
Ten percent will be set aside as grants for research and development of agricultural and fishery products, and the commercialization of such, including the upgrading of research facilities of qualified state universities and colleges, which should not exceed P5 million per project.
Ten percent will be used for the funding of a comprehensive and attractive grant-in-aid program for agriculture, forestry, fisheries, and veterinary medicine education to be implemented by the Commission on Higher Education (CHED).
To ensure the attainment of the objectives of the fund, an ACEF Executive Committee will be created. It will be composed of the secretary of Agriculture as chair, the president of Land Bank, the chairperson of CHED, a representative of farmers associations and cooperatives, and a representative of fisherfolks association and cooperatives.
Execom revamp
The the revamp of the ACEF Executive Committee is a key provision of the bill, Recto noted.
“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,” he 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 added.
“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.”
One of the few bright spots of the fund, Recto said, was its scholarship component.
