ConferenceonAgriculture&Fisheries2025

Fm: To: Date: October7,2011 Ref.: HonourableMembersofthePhilippineCongress, Below is a summary of what the Philippine Coffee Alliance recommends to ensure the proper developmentofthePhilippineCoffeeIndustryforthenext15yearsupto2025. Butbeforeweproceedinsummarizingourrecommendations,allowmetointroducewhatisPhilippine CoffeeAlliance,whoareitsmembers,andwhatareourobjectives. WhatisthePhilippineCoffeeAlliance? It is a newly registered industry association of Philippine coffee growers, processors, and distributors whobelievethatcoffeeshallbeproducedinthePhilippines(ratherthanimported)andthatcoffeeshall bedrinkfreshbrewed(ratherthanmadeofinstantpowder). WhoarethemembersofthePhilippineCoffeeAssociation? PCA has been registered with the SEC on August 19, 2011, and in less than 2 months in existence; it alreadycountssome60membersincluding: Private Corporations involved in the production, milling, grading, roasting, and distribution of fresh coffee products like Rocky Mountain Caf, Figaro, Gourmet Coffee, Allegro Beverage Corporation,andBoteCentral; College&Universitiesinvolvedinconductingresearchandprovidingtrainingoncoffeerelated matters such as Benguet State University (in La Trinidad, Benguet) and Xavier University in CagayandeOro; Government agencies and officials involved in policy formulation, program management, and monitoringactivitiesrelatedtothePhilippinecoffeeindustry; FoundationsconcernedwiththedevelopmentofcoffeefarmersliketheMeralcoFoundation; CooperativesactivelyinvolvedintheproductionofArabicaandRobustagreenbeans; IndividualfarmersinvolvedincoffeefarmingandroastingnationwideinthePhilippines, 1 NotesfromthePhilippineCoffeeAlliance Hon.FrancisN.Pangilinan Hon.MarkLlandroL.Mendoza Hon.ProcesoJ.Alcala Dr.ErnestoM.Ordonez Mr.RobertoAnsaldo PhilippineCoffeeAlliance

WhatareOurObjectives? Ourwebsiteprovideacompletelistofthe14objectivesthemembersofourassociationaresupporting, and a copy of that list will be provided to the Conference, but allow me to summarize these 14 objectivesinaverysimplemannersimplybysayingthatweexist: TosupportcoffeethatisproducedinthePhilippinesbyFilipinofarmers; Tosupportqualityfreshbrewedcoffeebeverage TomakethePhilippineonceagainaworldleaderincoffeeproduction; TomakecoffeeproducedinthePhilippinesoneofthebestcoffeeintheworld; ToturnthePhilippinefromanetimporterintoanetexporterofcoffee; Andtocontributetopovertyalleviationnationwidebysupportingthedevelopmentofarobust, dynamic,profitable,andsustainablePhilippinecoffeeindustry;

Ouropenandpublicagendais:

Allofthisinthenext10yearsorfaster! Whatneedtobedonetoachievethis? Putsimply,weneed: To build 80 Arabica, Robusta, Liberica, and Excelsia coffee nurseries in 20 coffee producing provincesofthePhilippines; Toplant20millioncoffeetreesinthenext5years Tobuild20moderncoffeemillsinthetop20producingprovincesofthePhilippinestoimprove thequalityofgreencoffeebeansproduced; Tobuild20gradingcentersthatwillproduceexportqualitygreenbeansthatcanbeexportedat highpricesincoffeeimportingcountries; Toestablish5centersofexcellencein5coffeeproducingregionsthatwillfocustheireffortson o Research&Developmentrelatedtotheneedsofthecoffeeindustry o TrainingandExtensionrelatedtotheneedsofthecoffeeindustry To establish regional Philippine coffee brands with a special identity unique to their regions, provinces,mountainsortribesthatcancreatelocaljobsandbepromotedinternationally; To change the nature of relationship between Government agencies and private sector and createrealpartnershipwithcommonobjectives,commonstandards,andcommondeadlines; Putinplacefinancingmechanicsthatallowcoffeeproducersandprocessorstohaveaccessto creditfacilitiestoincreaseproduction,improveprocessing,andaddvaluetocoffeeproducts; Putinplaceriskmanagementmechanicsforbanksandfundingagenciestomakesurethatrisks areminimizedandsharedamongvariousplayersinvolvedinafairmanner; Make sure that small players of the coffee industry such as individual farmers, small cooperatives, Indigenous People, growers associations are not left behind and have access to themarket,tocredit,andtotrainingsothebenefitsoftheindustryaresharedequally.

Whoshallpayforthis? TomodernizethePhilippinecoffeeindustrywillrequireacombinationofprojectdevelopmentand financingapproachesincluding: PrivatesectorinitiativessuchasRockyMountainCafprojectedinvestmentofP800million in the next 10 years in the Philippine Arabica industry that will create over 7,000 jobs, increaseproductioncapacitybysome31millionkg,andbringsomeP30Billionineconomic contributiontothePhilippineeconomyinthenext10years; Public sector initiatives that will provide support to the industry for project located in remoteorlesssafeareas,orwithgroupsoffarmerslessequippedtosucceedthatneedto beassistedlikeourindigenouspeople; Joint public and private sectors (PPP) initiatives that will make things happen faster as a resultofbetterriskmanagementandbetteraccesstocreditorguaranteesforthelenders thatlendmoneytoindustryplayersinvolvedindevelopingimportantprojectsforthecoffee industry. AndForeignAssistedinitiativesorprojectsthatwillbeinvolvedforeignaidagenciessuchas JICA, CIDA, USAID, ADB, World Bank, and others that want to improve the economic developmentofthePhilippines.

Members of the Philippine Coffee Alliance are ready to develop their own initiatives, to work withPhilippineGovernmentagenciesinjointinitiatives,andtaketheleadinsecuringfinancial assistancefrominternationaldonoragenciestoassistourindustry. Presently,thePhilippineCoffeeallianceisworkingonthefollowinginitiatives: To create Regional Offices in all main 5 coffee producing regions of the Philippines in ordertoprovidePCAsupportservicestoitsmembers; To create a dynamic GIS Map of coffee growers, coffee cooperatives, coffee associations,coffeemillers,coffeeroasters,coffeetraders,andcoffeeexportersdivided by regions, provinces, municipalities, and by type of coffee produced such as Arabica, Robusta,Liberica,andExcelsia; To create a tracing system that clearly identify the type of seeds, the source of seedlings,andwherethecoffeewasexactlyharvested,processed,androastedinorder toprotectcustomersandpromoteexporttoJapan,NorthAmerica,andEurope;

Finally,PCAmembersbelieveingeneralprinciples onhowthe Department ofAgricultureshalluseits budgetforfiscalyear2012andbeyond.Theseprinciplesaredescribebelowforyourreview. GeneralComments DAshallonlydisbursemoneyinsustainableactivitiesthatincreaseproductionorvalue; DAshallonlydisbursemoneytobeneficiariesthatarefinanciallycapableofmanagingfunds; DAshallonlydisbursemoneytobeneficiariesthatcanrefundthatmoney; DAshallnotfinanceactivitieswhosebenefitsarefor1yearonly; Whendisbursingmoney,DAshallfindwaystorecovermoneyinvestedsoitcanbereused; Therefore,asarule,loansarepreferredovergrants; No DA money shall be allocated to pay for farm inputs such as fertilizer, labour, and other recurringoperatingfarmexpenses; Ifproductionunit cannot affordtopayforfarminputs,theyaredeemednotsustainable, and shallnotbegivenfinancialsupport; DA shall also identify neutral nonpartisan nongovernment parties to manage DA funded projectsandprogramstoreducetheriskofmismanagementormisallocationofsuchfunds; DAshallawardcontractstoNGOswithexperienceinagricultureandinmanagingandlending funds for agribusiness related projects instead of using DA Regional Offices to reduce the incidenceofpressureandinterferencefromlocalgovernmentunits.; PCA members believe that it is more important to focus on one or two wellfunded main activities that will bring concrete results and make a significant difference than to divide an alreadylimitedbudgetintodozenofsmallactivitiesthatwillachievenosubstantialresults; DA shall also promote the creation of centers of expertise and concentrate resources into a limited number of successful cooperatives, associations, universities, and private sector economic agents that specialize on coffee rather than on several small players that achieve nothingsubstantialorsignificant; ProductionSupportServices Asfarasproductionisconcerned,PCAmembersstronglybelievethatpriorityshallclearlybeon nursery development. To increase production, we need to increase the number of trees planted and the number of hectares planted with trees. To achieve this, we need certified qualityseedlingsthataredevelopedinaccreditednurseries. ToppriorityshallbetodevelopaNationwideNurseryProgramcomposedof80newnurseries tobelocatedin20coffeeproducingprovinces; o P40MillionshallbeallocatedfortheNationalNurseryProgramasfollow: P20Millionforinitialinvestmentbudgetfor80nurseries@P250,000each; P20Millionforinitialoperatingbudgetfor80nurseries@P250,000each; PCAmembersrecommendthatDAfocusonlyonthefollowingproductionsupportactivities: 3

o Plantingmaterialfornurseries) P40Million o Farmequipmentfornurseries) P3Million o Rehabilitationofnurseryfacilities P10Million Fromanoperationalpointofview,PCArecommendthat: o EachnurseryshallhaveaninitialinvestmentbudgetofP250,000/nursery(totalbudget ofP20Million); o PCAwillsubmitaListofTargetProvincesforthedevelopmentofthe80nurseries; o DAshallconsultwithexistingprivatesectornurserytoavoidduplication; o Eachtargetprovinceshallhave4nurseries,dependingofelevation,eachprovincewill havetoestablishifitwants2Arabicanurseries,2Robustanurseries,or1Arabicaand1 Robustanursery; o Overall, 75% of nurseries shall be for Arabica as this variety generates more value to farmersandtheRobustasegmentisbetterdevelopedthanArabica; o Each nursery shall also receive a onetime initial operating budget of P 250,000 to produce50,000seedlings; o Seedlingsshallbesoldtofarmers,cooperatives,orprivatesectorinvestorsinterestedto go into coffee production at the price of P 15 each so it can generate income of P750,000 annually and this income will make the nursery financially sustainable year afteryearsoDAdonothavetorefinancethisactivityagain; o DAshallrequireeveryrecipientofDAfundingtoprepareaninvestmentandoperating budgetthatdemonstratethattheprojectwillbefinanciallysustainable; o DA shall require every recipient of DA funding to prepare quarterly and annual accomplishmentreports;andfailuretodososhallleadtoblacklistingofthatrecipient ofDAfundingformreceivinganyfuturefunding; SecondpriorityshallbetodevelopaFarmEquipmentProgramforcoffeefarmers o P3MillionshallbeallocatedtotheFarmEquipmentProgramasfollow: 80nurseriesshallalsohaveaP37,500budgetforfarmequipment; Equipment shall be distributed to economic agent that goes into coffee farm development; Equipmentshallincludegrabhoe,Japanesehoe,machete,hacksaw,hose,grass cutter,anddrilltodigholesfortrees; The Farm Equipment shall be refunded to the nursery within 3 years so the nurserycanreusethemoneytopurchasemoreequipment; Thirdpriorityshallbeontherehabilitationorexpansionofexistingnurseries o P10Millionshallbeallocatedtothisactivity o BPIshallidentifypriorityareas; o DA shall also review protocol for nursery development that facilitates private sector participation,suitability,andaccountability;

MarketSupportActivities Many international funding agencies are willing to finance coffee industry related activities if onlywecanprovidethemwithfactualdatasodecisionscanbebasedonreality. Also PCA is negotiating the setting up of a traceability system for coffee products to promote food safety, transparency, and facilitate exports to Japan, Europe, and America; and we need reliable GIS data on coffee sources and processor location. While Philippinegrown coffee is primarily for the local market, some exports are there to enable Philippine coffee to secure some measure of footing in the larger international market which the PCA envisions to tap in thecomingyearsstill. Therefore, rather than investing P 4.3 Million in marketing activities, PCA members feel it is moreimportanttofinanceaP4.3MillionGeographicInformationSystemthatidentifylocation 4

andprofileofcoffeefarmersandprocessorssoinvestmentandplanningdecisionsarebasedon realdata. OtherInfrastructureandPostHarvest PCA members would like to reduce Production budget from P 65 to 53 Million and increase postharvestbudgetfromP40toP50Million,andfocusonthefollowingactivities: o P40millioninprimaryfullyintegratedpostharvestfacilities; Thisshallinclude20facilitiesin20targetareaswhereproductionisabundant; DAshallcreateanIntegratedCoffeeComplexProgram Thisshallincludepulping,fermenting,washing,drying,dehulling,sizing,sorting, andpackagingwithaminimumcapacityof300kg/hour; ProgramshallbemanagedbyindependentNGOwithrelatedexperience; Disbursementoffundingshallbethruloansystemtorecovermoney QuarterlyandAnnualAccomplishmentReportshallbeimplemented DAshallrequireperiodicauditsoffundsdisbursed o P10millioninsecondarypostharvest(roasting)facilities; Thisshallinclude20facilitiesin20targetareaswheredemandissufficient; DAshallcreateaCoffeeRoastingProgram; Thisshallincluderoastingaminimumroastingcapacityof2MT/month; ProgramshallbemanagedbyindependentNGOwithrelatedexperience; Disbursementoffundingshallbethruloansystemtorecovermoney QuarterlyandAnnualAccomplishmentReportshallbeimplemented DAshallrequireanannualauditoffunddisbursed ExtensionSupport,EducationandTraining PCAmembersbelievethatitisbettertofocuson5centersofexcellencethatarewellfunded ratherthanmaintainingseveraltrainingfacilities,eachwithlittlefunding. PCA members recommend that the Extension, Education, and Training budget be allocated to fivecentersofexcellencein5coffeeproducingregionsofthePhilippinesasfollow: o NorthernLuzon BenguetStateUniversity P5Million o SouthernLuzon CaviteStateUniversity P5Million o Visaysas INCO P5Million o NorthernMindanao XavierUniversity P5Million o SouthernMindanao SultanKudaratStateUniversity P5Million Thesamecentersofexcellencecanalsomanageresearchrelatedtocoffeeindustryinorderto addmoreresourcestothesecenters. ResearchandDevelopment PCAmembersbelievethatitisbettertofocuson5centersofexcellencethatarewellfunded ratherthanmaintainingseveralresearchfacilities,eachwithlittlefunding. PCA members recommend that the Research & Development budget be allocated to five centersofexcellencein5coffeeproducingregionsofthePhilippinesasfollow: o NorthernLuzon BenguetStateUniversity P3Million o SouthernLuzon CaviteStateUniversity P3Million o Visaysas INCO P3Million o NorthernMindanao XavierUniversity P3Million o SouthernMindanao SultanKudarayStateUniversityP3Million Priorityresearchareasshallinclude: o EstablishingSOPfordiseasecontrolanddisseminateinfotofarmers; o EstablishingSOPforpestcontrolanddisseminateinfotofarmers; o EstablishingSOPforsoilfertilizationanddisseminateinfotofarmers; 5

Philippine Coffee Alliance

Objectives The objective of the Philippine Coffee Alliance is to strengthen the Philippine coffee industry and promoteits sustainable expansion in a market-based environment for the betterment of all participantsin the sector, by: 1. Promoting national cooperation on coffee matters; 2. Providing a forum for consultations on coffee matters among government and nongovernment organizations, cooperatives and associations, and the private sector; 3. Encouraging Members to develop a sustainable coffee activities in economic, social, and environmental terms; 4. Providing a forum for consultations seeking understanding with regard to the structural conditions in national and international markets and long-term trends in production and consumption that balance supply and demand, and result in prices fair both to consumers and to producers; 5. Facilitating the expansion and transparency of national trade of quality and export grade coffee; 6. Collecting, disseminating and publishing economic, technical and scientific information, statistics and studies, as well as the results of research and development in coffee matters; 7. Promoting the development of consumption and markets of quality gourmet coffees nationwide; 8. Improving the reputation and expand the presence of Philippine coffee on international coffee forums, associations, and markets; 9. Developing, evaluating and seeking finance for projects that benefit Member and the national coffee industry; 10. Promoting coffee quality with a view to enhancing consumer satisfaction and benefitsto producers; 11. Encouraging Members to develop appropriate food safety procedures in the coffee sector; 12. Promoting training and information programs designed to assist the transfer to Members of technology relevant to coffee; 13. Encouraging Members to develop and implement strategies to enhance the capacity of local communities and small-scale farmers to benefit from coffee production, which can contribute to poverty alleviation; and 14. Facilitating the availability of information on financial tools and services that can assist coffee producers, including access to credit and approaches to managing risk.