Is the Government Reconsidering the Cocochem Sale Amid a Global Market Comeback?

The Philippine government is currently assessing the sale of state-owned shares in United Coconut Chemicals Inc. (Cocochem) due to a resurgence in global demand for coconut-based products. Agriculture Secretary Francisco Tiu Laurel Jr. has emphasised the importance of reviewing whether the continued operation of Cocochem would better benefit coconut farmers compared to the previously planned sale of the factory.

Last updated: 22 October 2023 (BST)

What’s happening now

The Department of Agriculture (DA) is conducting a thorough review of Cocochem's operations, which were once a dominant force in the coconut industry. Secretary Tiu Laurel's recent inspection was aimed at determining the feasibility of continuing operations amid increasing global demand, particularly in Europe. The government is currently tendering around 682 million common shares of Cocochem through the Land Bank of the Philippines, with a target to raise at least ₱2.82 billion (£43 million) to support coconut farmers and attract private investment.

Key takeaways

• The Philippine government is reassessing the sale of Cocochem shares amid rising global demand for coconut products.
• Secretary Tiu Laurel conducted an inspection of Cocochem to evaluate its operational viability.
• The tendering of shares aims to raise ₱2.82 billion (£43 million) to support coconut farmers.
• Cocochem has transitioned from manufacturing to facilities-based income generation since 2014.
• Historical setbacks have affected Cocochem’s operations, leading to its current status.

Timeline: how we got here

Understanding the background and developments leading to the current review of Cocochem involves several key milestones:

• 1981: Cocochem is established as the largest coconut chemicals and oleo fats factory in Southeast Asia.
• 1986: Cocochem begins exporting products to various countries, including the US, Europe, and Asia.
• 2012: Plant operations are shut down due to a lack of competitiveness and market factors.
• 2014: Cocochem transitions from manufacturing to a facilities-based enterprise, generating income through various services.
• 2023: The government reviews the sale of Cocochem shares amid a resurgence in global demand for coconut products.

What’s new vs what’s known

New today/this week

The recent focus on Cocochem arises from Agriculture Secretary Tiu Laurel's inspection and the government's renewed interest in the coconut sector, highlighting the potential benefits of retaining the factory for local farmers in light of shifting market conditions.

What was already established

Historically, Cocochem has faced several challenges, including the non-implementation of Executive Order 259, which limited domestic demand for its fatty alcohol products. Additionally, fluctuating coconut oil prices affected its competitive standing against regional rivals, eventually leading to the cessation of its manufacturing operations in 2012.

Impact for the UK

Consumers and households

While the direct impact on UK consumers may be limited, the potential increase in coconut-based product availability could influence market prices and provide new products in the UK that are derived from sustainable coconut farming practices.

Businesses and jobs

The review could open opportunities for UK businesses, particularly those involved in the importation and distribution of coconut products, should Cocochem's operations resume or adapt to meet market demands. This may also create job opportunities in coconut farming and related sectors.

Policy and regulation

The government’s review may lead to new policies aimed at supporting coconut farmers, potentially influencing trade relations and agricultural practices both in the Philippines and for importing countries like the UK.

Numbers that matter

• ₱2.82 billion (£43 million): The target amount the government aims to raise from the sale of Cocochem shares.
• 39 hectares: The operational area of Cocochem, which generates diverse income streams.
• 53%: The percentage of revenue contributed by Cocochem Agro-Industrial Park Inc. to the annual income.
• 44%: The share of Cocochem itself in the annual income mix.
• 3%: The revenue contribution from residential operations related to Cocochem.

Definitions and jargon buster

• Cocochem: A state-owned coconut chemical and oleo fats factory in the Philippines.
• Oleo fats: Fats derived from vegetable oils, particularly coconut oil, used in various products.
• Fatty alcohols: Organic compounds derived from natural fats and oils, used in the production of detergents and cosmetics.
• Executive Order 259: A Philippine government mandate aimed at promoting the use of fatty alcohol in local detergent products.

How to think about the next steps

Near term (0–4 weeks)

In the immediate future, stakeholders should monitor the government's findings from the review process, particularly any announcements regarding the fate of Cocochem's sale or operational changes.

Medium term (1–6 months)

Over the next few months, developments in the coconut market, especially in Europe, will be crucial. If demand continues to rise, it may influence the government’s decision regarding Cocochem’s future operations.

Signals to watch

• New government policies supporting coconut farmers.
• Market trends in coconut products, especially in Europe.
• Announcements from the DA regarding the Cocochem review outcomes.

Practical guidance

Do

• Stay informed about government announcements related to Cocochem.
• Support local coconut farmers by purchasing coconut-based products.
• Engage with relevant industry groups to understand market trends.

Don’t

• Assume the sale of Cocochem is inevitable; government reviews may lead to alternative decisions.
• Ignore market signals; shifts in demand can significantly affect local agriculture.
• Overlook the importance of sustainable coconut farming practices.

Checklist

• Monitor news related to the coconut industry.
• Research and understand the implications of Cocochem's operations.
• Evaluate the impact of coconut product pricing on your purchases.
• Follow updates on government policies affecting the coconut sector.
• Consider supporting local initiatives aimed at fostering sustainable agriculture.

Risks, caveats, and uncertainties

The review of Cocochem's operational viability comes with uncertainties. The coconut market is volatile, and changes in global demand can fluctuate rapidly. Additionally, regulatory changes may impact the effectiveness of government initiatives aimed at supporting coconut farmers. Stakeholders should remain cautious and informed about evolving circumstances.

Bottom line

The Philippine government's review of Cocochem highlights a critical juncture for the coconut industry amidst rising global demand. The decision to either retain or sell the facility could significantly influence local farmers and the broader market. Stakeholders should remain vigilant and proactive in navigating the implications of this ongoing situation.

FAQs

What is Cocochem?

Cocochem is a state-owned coconut chemicals and oleo fats factory in the Philippines, historically significant in the coconut industry.

Why is the government reviewing Cocochem?

The government is reviewing Cocochem due to increasing global demand for coconut products and the potential benefits for local farmers.

What are the expected proceeds from the sale of Cocochem shares?

The government aims to raise at least ₱2.82 billion (£43 million) from the sale of state-owned shares in Cocochem.