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.