SPONSORSHIP SPEECH

Extending the Agricultural Competitiveness
Enhancement Fund (ACEF)
Senate President Pro-Tempore Ralph G. Recto
23 September 2015

Mr. President:
The Agricultural Competitiveness Enhancement
Fund or ACEF traces its genesis to our ascension to
the World Trade Organization.
When the gospel of globalization made the world
flat, and the world started chanting,” I believe in
GATT, the treaty almighty, creator of wealth on
earth,” we also demonstrated our faith to the new
world order by changing our laws to make our
country GATT-compliant.
One of the laws we passed was Republic Act 8178,
which replaced quantitative import restrictions on
agricultural products, except rice, with tariffs, and
putting all collections in the ACEF.
In short, protectionist walls would come tumbling
down and what would come up are tariffs.

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The general rule was that agricultural goods, for as
long as they can hurdle health, sanitary and other
rules, can come in for as long as they pay the tariffs
we have set.
To use a simple analogy, we replaced the “Do not
enter” sign on our borders with a “You may enter,
provided you pay” notice.
The problem, however, with rolling out the red carpet
for imported agriculture products is that they will pull
the rug from under our farmers, who historically
have been having a hard time standing on their own
feet.
There are reasons why most of them are down on all
fours most of the time: knocked down by typhoons,
floored by costly inputs and indebtedness, which
have kept them on the ropes for as long as they can
remember.
RA 8178 mandated that all tariff collections on
agriculture products covered by minimum access
volume, principally rice and sugar, be plowed back
to them.
No, Mr. President, tariffs were never envisioned to
be distributed as dividends, CCT-style. Rather, they
will be used to build, and let me quote from the law,
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“irrigation, farm-to-market roads, post-harvest
equipment and facilities, credit, research and
development.”
Also covered are “marketing infrastructure, provision
of market information, retraining, extension services,
and other forms of assistance and support to the
agricultural sector.”
The idea was to use the very same taxes levied on
imports to finance projects that would boost local
agriculture and allow it to compete with imports.
Some labeled these as safety nets that would
cushion the fall of farmers sideswiped by imports.
Others preferred to call them “ladders” that would
allow farmers to climb out of the rut they are in.
And who shall earmark the funds?
Under RA 8178, it will neither be the Department of
Agriculture nor the Palace, but Congress. We should
remember that this law was enacted in 1996, when
congressional power of the purse, was real and not
illusory.
So when imported rice started to fill bodegas, as well
as the pockets of importers, whose unli greed was

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matched only by our love for unli rice, the coffers of
ACEF was getting filled too.
By May 2013, some P10.3 billion in MAV in-quota
tariffs had been collected.
In addition, there was P1.2 billion raised from sugar
conversion fees, plus P300 million in loan
repayments and other collections, bringing the total
to P11.8 billion.
This was the figure which stood two years ago.
But according to DA 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.
This shouldn’t surprise us at all. If shiploads of
smuggled rice can disappear without trace, collected
tariffs on rice can easily evaporate too.
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.
The fund flow goes like this: Tariff collected is
remitted to the Treasury, and it is the DBM which

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releases the money to the ACEF Execom upon its
request.
ACEF Execom in turn released P2.6 billion as grants
to local governments, government corporations and
state colleges.
It also approved 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."
Some grantees have pulled a Houdini and can no
longer be found.
Some P2.5 billion worth of loans are covered by
letters of confirmation, whose addressees could no
longer be found.
They have flown the coop like migratory birds.
In one case, proponents of a P63 million loan have
migrated to the Great Beyond, leaving P58 million in
payables.

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Of the 294 the 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.
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.
Actually, the figures given by Senator Villar painted a
bleaker picture of a 7 percent repayment rate.
But not all defaulting debtors can’t be found, and
neither are they small farmers.
Some, according to reports, are government
agencies like Quedancor which has an unpaid tab of
P1 billion, and the National Agribusiness Corporation
with an outstanding loan of P225 million.
While these two agencies have been abolished, their
debts are not yet considered extinguished.
But unlike these two agencies whose demise is
unlamented, it is not yet time to call for ACEF’s
interment.
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First, 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.
So what is needed is not to write the requiem for
ACEF, but the law reforming it.
Which is exactly what Senator Cynthia has done.
And 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.
Plus, there is the other urgent need to extend the
current ACEF law, RA 9496, which will expire at the
end of the year.
But the bill before us does not just extend the law
but, above all, makes it more effective.
This new program for ACEF debugs it of its corrosive
and corruptive viruses.
The overarching principle of this bill is that only
legitimate farmers and fisherfolk must benefit from
ACEF.
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More stringent safeguards are being put in place.
For example, there is a ceiling of P5 million per
project. Gone is the era of megamillion unsecured
loans.
Borrower participation is also being made
mandatory. The counterpart fund should at least be
10 percent of total project cost.
This 10 percent can come in the form of capital
outlay, land for the project site, equipment and
wages. In other words, saliva equity is no longer
accepted.
The menu of fundable projects is being narrowed
down to the truly beneficial.
It is strictly limited to acquisition and establishment
of agri-based production and post-production, and
processing, machineries, equipment and facilities to
achieve modern agricultural practices, and the like.
Anu-ano ang mga ito?
Isang halimbawa ay ang mababang farm
mechanization rate natin na 2.31 horsepowers per
hectare. Pwedeng gamitin ang ACEF upang

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makabili ng mga traktora, para may katuwang na si
kalabaw.
O kaya upang magpatayo ng post-harvest facilities,
kasi ngayon, isa sa bawat pitong kilo ng palay ang
nasasayang dahil sa kakulangan ng bilaran o pagiimbakan.
The 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.
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.
In their stead, the President of the Land Bank of the
Philippines and the Chairperson of CHED will be
appointed.
The logic in placing them there can be explained this
way. If loan evaluation has to undergo due diligence,
then you need the LBP head there.

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This is also pursuant to a provision in the bill
designating Land Bank as the one which shall
manage the credit facility out of the funds.
In this role, Landbank shall determine the eligibility
of the borrower and evaluate the loan security or
collateral.
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.
Actually ACEF’s mandate is not just to ramp up
agriculture production, but also to produce
graduates of agriculture courses.
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.
Borrowers left debt notes. These scholars have
diplomas as receipt of loans well spent.
Overall, ten percent of ACEF will fund a raft of
scholarship offerings and assistance for students
who are academically accredited for agriculture,
forestry, fisheries, agriculture engineering and
veterinary medicine courses.
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Another ten percent will be used to bankroll
agriculture research or upgrade research facilities of
qualified SUCs. But like the ceiling on loans, each
grant shall not exceed P5 million.
The bulk of the fund, or 80 percent, will constitute
the loanable portfolio, for projects enumerated in a
menu in this bill.
With these parameters, the danger—or the
temptation— of the fund being used as a milking
cow, or to feather private nest eggs, is being
removed.
Mr. President:
Let me inject other element of urgency on why we
must pass this bill ASAP.
Yes, the bill has an expiry date, and audits have
opened a can of worms, but these are puny
compared to challenges that lie on the horizon which
ACEF can help us overcome.
ASEAN integration is just around the corner.
We need all the help we can get and all the
resources we can tap on how to intensify the
preparedness of Philippine agriculture.
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The reason for which ACEF was created in another
era, on how to make our agriculture competitive,
remains valid and relevant in the challenging years
ahead.
Let us pass this bill, Mr. President.

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