ACEF scam: Lost billions, lost opportunities

By Gerry Lirio, ABS-CBN Investigative Team

Posted at Feb 10 2014 04:53 PM | Updated as of Feb 13 2014 09:04 AM

(First of two parts)

ALLEGATIONS of corruption, misuse, abuse, and neglect have marred the government's 19-year-old agricultural program meant to help prepare farmers and fishermen compete with their Association of Southeast Asian Nations (ASEAN) counterparts in time for tariff-free trade in 2015.

With an accumulated budget of P13 billion, the program called the Agricultural Competitiveness Enchancement Fund (ACEF) is meant to help small farmers and fishermen improve the quality and volume of their harvest by funding their expansion and training programs. Its aim is to make them competitive vis-a-vis the expected untramelled entry of imported goods as a result of ASEAN integration and trade liberalization.


ACEF was created by Republic Act 8178 in 1996. Its funding comes from the collection of tariffs imposed on imported agricultural products. Its initial funding of P500 million came only five years later for lack of implementing guidelines. It was supposed to end in 2005, but Republic Act 9496 extended it up to 2015.

Now on its final year, the program has turned instead into a scheme that betrayed, defrauded, and deprived farmers of huge sums and big opportunities through the years from the Arroyo to the Aquino administration, according to interviews and documents gathered by the ABS-CBN Investigative the past weeks.

Funding will stop next year.


Both the Aquino and the Arroyo administrations, farmers said, didn't have a master plan to make the sector competitive. Each farmer to his own project, a mango grower in the North said.

“Among the earlier limitations of the program,” according to a recent study by the government think-tank Philippine Institute for Development Studies (PIDS), “were its weak identification of strategic investment areas to benefit the most vulnerable agricultural sectors, lack of a monitoring system to ensure the availability and timely release of funds, and the absence of impact assessment to determine the contribution of the fund to the competitiveness agenda.”

Of the P13-billion fund, about P8.5 billion has been lent to borrowers, mostly due to political patronage during the administration of former President Gloria Macapagal-Arroyo. The program has not yielded any solid result for the agricultural sector so it can keep pace with trade liberalization in the ASEAN region.

ACEF 101: Why the Agricultural Competitiveness Enhancement Fund was conceived
IN KEEPING with globalization, the 10 members of the Association of Southeast Asian Nations (ASEAN) agreed to turn into an ASEAN village, to be called the ASEAN Economic Community (AEC), one component of full ASEAN integration.

The envisioned regional community will finally take place in 2015, despite fears that some members may not be able keep up with the rest for various reasons, ranging from political, economic and environmental issues.

ASEAN leaders initially envisioned a one regional economy when they adopted the ASEAN Vision 2020, which means a shared region, "outward looking, living in peace, stability and prosperity, bonded together in partnership in dynamic development and in a community of caring societies.”

But they decided to advance integration by five years during the 12th ASEAN Summit in Cebu.

So, next year, the Philippines, Brunei, Singapore, Malaysia, Indonesia, Vietnam, Thailand, Cambodia, Laos, Myanmar will fully open their economies. There will be free flow of all agricultural products and services with the removal of legal barriers and tariffs within the region. It will achieve the goal of ASEAN as a single market, hoping it will become a strong, cohesive economic regional force as it shifts its focus from away from traditional markets like the United States, Europe, Japan, and China.

The AEC is banking on ASEAN’s strengths such as the region’s strategic location, its big population of around 600 million, mostly young men and women, and abundant natural resources, among others.

A report by the Department of Trade and Industry has noted that many business sectors are prepared for integration, but some, like agriculture, are not yet competitive. In fact, it appears to be moving at a snail’s pace compared to its ASEAN neighbors, according to the National Statistical Coordination Board.

As the free regional trade nears, the Philippines now lags behind ASEAN members such as Singapore, Malaysia, Thailand. Its performance has slipped in indicators such as foreign direct investments and poverty reduction.

Leaders of Congress and the agricultural sector foresaw this problem decades ago. In 1996, Congress passed a law appropriating funds sourced from tariffs on imported agricultural goods.

It was envisioned to help farmers enhance their competitiveness by funding their expansion program and training seminars. Hence, ACEF was born. -- by Gerry Lirio, ABS-CBN Investigative Team

Of the P8.5 billion, around P3.5 billion was released to grants and some P320 million to bankroll scholarship and training of farmers.


The remaining P5-billion is supposedly intact but idle since 2010, and Budget, Agriculture, and Customs officials can't quite agree as to where exactly it is now, except to say it has been there in the General Fund.

But some restless farmers hopelessly awaiting the release of their loans in the last two years have expressed concerns that the fund might have been diverted elsewhere, used particularly for the equally-controversial Disbursement Acceleration Program (DAP), now facing scrutiny at the Supreme Court.

“The fund was dispensed like pork [barrel],” said former Sen. Francis Pangilinan, erstwhile chair of the Congressional Oversight Committee on Agriculture and Fisheries Modernization, in an interview with the ABS-CBN Investigative Team. He and fellow Senators Serge Osmena and Ramon Magsaysay first discovered the irregularities and subsequently stopped further withdrawal from the agricultural fund in August 2010, about 15 years after the loan facility was introduced to the public.


A big size of the P8.5 billion had been used, he said, to favor Arroyo's political supporters, a scheme much like the controversial P728-million fertilizer fund allocation released through the Farm Inputs/Farm Implement Fund in 2004, now known as the Fertilizer Fund Scam.

“We saw anomalies in ACEF,” Pangilinan said. “Whoever is close to the administration gets a loan approval. The tragedy is that our poor farmers didn't get any. They have become poorer—these people who need government support the most. They have been abused, forgotten, and neglected.”


Several farmers interviewed by the ABS-CBN Investigative team revealed that some Budget officials had asked for a commission, ranging anywhere between 15 and 35 percent of their loans as a condition for the release. Three of these farmers approached by Budget officials during the Arroyo administration backed out of the program because of this corrupt practice.

One of them was Gregorio San Diego, president of United Broilers Raiser Association, which operates from Laguna to Tarlac. Before he filed his loan application, he said he commissioned a feasibility study on how to improve raising chicken.

“So we submitted all the requirements but waited two years for the loan to come,” he told the ABS Investigative News team. “Yun pala, may hinihintay sila....Eh yung kalakaran na sinasabi nila, kumbaga common knowledge naman ito sa industriya na may hinihinging regalo. Ang sinasabi nila, talagang pinakamababang-mababa na yung 10 percent. Wala ngang interest, wala ngang collateral, may hinihintay naman na manggagaling sa iyo. Magpaparinig lang na, 'kaya di tumatakbo yung papel ninyo, hindi kayo willing na magbigay'.”

If a farmer-borrower had no connections at the Department of Agriculture (DA), San Diego said, government officials may ask anywhere between 30 and 40 percent cut.

“They say it is lower than what the bank required,” he said. “But still, hindi naman ayon sa batas iyan, dapat makuha mo ito na wala kang gagastusin. ”

Another one was former Navy Commander Angel Aliwalas, director of the Powerful Development Ventures Corporation in Batangas.

“We applied in 1998,” Aliwalas said. “When the time came to avail, we changed our mind. Why? Because somebody wanted a cut on the loaned amount. Maganda sana ang programa. E yun na nga eh, may mga mapagsamantala, may cut pa!"

Another one was “Imelda,” an agri businesswoman from Central Luzon. Unlike many other farmers who applied for a loan on their own initiative, she took the reverse path: the loan sought out her interest, for it was Imelda who was cajoled by the Office of former Agriculture Secretary Arthur Yap to apply.

Imelda said the approval of her loan took less time than expected, but she ended up not taking it for two reasons: one, when she realized that others applying for the loan were bogus farmers; two, when a Budget official asked for a certain percentage share of the loan upon release.

“In the beginning, farmers got interested with the ACEF loans,” she said in an interview held in Quezon City. “I tried to research. What is this? What are the criteria? If I apply, would it be approved? I told myself: 'I would lose nothing. The government had not given anything to support the farmers. So, this was a good avenue to enhance our farm business.' But even before I could start with my research, somebody offered me the loan. 'For you, it would be a breeze,' I was told.”


Imelda said she realized that “operators” had been all over the place applying for the same loan facility in 2008.

“I asked my secretary to submit my papers to the DA,” she said. “A DBM operator was there. And he is not supposed to be there. He asked my staff: 'Whose loan application is that?' Told about my name, the DBM official replied: 'O, kay ano pala yan, hindi na yan SOP (standard operating procedure), ano na lang yan—for-the-boys! Mas mababa!' I was taken aback!”

“The program stinks," she said. “It had no interest, no collateral. This was a loan-to-forget. And I didn't like the idea that I would be put together with people who had a reputation of not paying their creditors and suppliers.”

Had she taken part, Imelda said, she would have been among its deodorizers. “The final blow was when I was told I would get my money in two tranches, not more as all others would have it. So lalo akong napaisip, may palakasan. Ayoko ng ganun, gusto ko pantay-pantay lahat.”

Imelda soon dropped her loan application. Her name and company were listed under “no release” category, according to a summary report of approved projects obtained by the ABS-CBN Investigative Team from the Agriculture department. The report summarized the loan and project status as of March 2012.

In 2009, a hog raiser in Batangas received P11.5 million out of his P15-million loan. The balance, he added, went to a DBM officer. The loan had no collateral, no interest. Until then, he didn't mind, he said.

But even after the government imposed interest and collateral on loans drawn from the fund, a mango farmer from the north reported that some DBM officials under the Aquino administration had demanded kickbacks from his colleagues.

“Why are they doing that,” he asked. “That would kill us.”

These farmers did not disclose the names of the DBM officials. But it is not clear why the Executive department had not initiated the allegations.


As of March 2012, ACEF has released the P5.8 billion in loans to fund 304 different agricultural projects, ranging from the upgrading to expansion of facilities in farms and fisheries.

ACEF scam: Lost billions, lost opportunities 1

Of the P5.8-billion, the government has recovered only P69 million earmarked for five projects. About P4.3 billion loans (for 209 projects) are under restructuring.

About P2.6 billion (for 104 of the 304 projects) failed to post a single payment. A total of 79 projects funded with P1.3 billion posted less than half of the payment dues.

Proponents of five projects worth P63 million had died, leaving some P58 million in unsettled accounts.


After senators discovered the anomalies, Pangilinan's oversight committee instituted some reforms, including imposing loan interests and collaterals, to ensure a speedy loan collection, but the Executive department had done little to recover funds, much less pump prime the agricultural sector through ACEF.

Two separate reports—one done by the Congressional Oversight Committee on Agricultural and Fisheries Modernization (COCAFM) and the other by the PIDS—confirmed that the management of the P13-billion fund was marred by corruption, abuse, and misuse during Arroyo's term between 2000 and 2010. The two reports did not accuse the administration of Joseph Estrada of anything.


But the Aquino administration has not been spared.

Two groups of legitimate farmers awaiting release of their loans with an aggregate amount of P370 million under the Aquino presidency between 2011 and 2012, based on several interviews by the ABS-CBN Investigative Team, have accused the Aquino administration of neglect for its failure to continue the program, thereby depriving the farmers of government support even at the 11th hour of ASEAN intergration.

Pangilinan, and Sen. Cynthia Villar, the current COCAFM chair, and co-chair Batangas Rep. Mark Llandro Mendoza, and Agriculture officials have endorsed, in principle, their loan applications to Budget Secretary Butch Abad.


A 2009 report by the Commission on Audit (COA) said “a substantial portion of ACEF funds were actually not utilized for the program, only a small portion of the collectibles of the program were collected, additional loans were granted to beneficiaries with unpaid past loans, some fund transfers were actually not released to project proponents....”

After failing to get a favorable response to their follow-up letters to Abad in October 2013 and January 2014, one of the farmers has asked if the fund is still there and whether it has ever been diverted or realigned to any other government project.

Abad told ABS-CBN Investigative Team that the fund is intact and has been ready for release, but farmers “lacked some more requirements.” He said the DBM is just the custodian of the fund and that only the COCAFM and the DA could recommend the release of the new loans to farmers.


Interviewed separately, Agriculture Undersecretary Emerson Palad said the approval lies with Abad. He told the ABS-CBN Investigative Team the DA had recommended the release of the money, saying the farmers had complied with all the requirements. “The ball is already in the hands of the Budget department, not with the DA,” he said.

In a second interview, Abad maintained the DBM was not about to make new releases of funds to the farmers for the same reason, but maintained that the fund is intact and that it is still with the General Fund.

Villar told the ABS-CBN Investigative Team that she had met with the farmers and that she would soon speak with Abad to relay the farmers' plea and push for the continuation of the ACEF program, subject to the improved set of implementing guidelines.

“By 2015, it's free for all in the trading of agricultural products,” Villar said, echoing the call for the government to support the farmers for the all-out ASEAN free trade starting next year. “That would include rice and labor. We should be ready.”

Pangilinan agreed.

“While looking for the rats, we don't burn the entire house,” he said.


Of the 27 farmers awaiting release of loans, four came from Yolanda-hit areas in Iloilo; another set from Bohol.

“Our farms have been inspected by the [Department of] agri officials several times,” a farmer from Bulacan said. “Our loans have been approved. ASEAN integration begins next year. Why can't we get help from the government now.”

If released, the loans of these farmers will be imposed an interest of four percent per annum, with collaterals, payable within six years. Each will get up to P15 million only.

“What more does Secretary Abad want?” a woman farmer asked. “This is a loan, not government subsidy. And that's all we want to stay afloat, if not competitive, after the government entered into that free-trade agreement.”


In contrast, farmers groups said their counterparts in Thailand get unrestrained backing from the government. “They get 100-percent free irrigation and free seedlings, among others,” a farmer said.

Pangilinan, himself now a farmer, said Thailand considered agriculture the backbone of its economy and indeed gave its all-out support to its farmers. It gives a big subsidy to rice and supports farmers in establishing post-harvest facility. “For why cultivate the soil if you don't have good storage facilities? Your harvest will only get spoiled before it reaches the market,” he said.

A few years back, Thailand launched a project worth an equivalent of some P150 billion to support its farmers, on top of its annual budget. In contrast, the Philippines has only allotted P72 billion to the Agriculture department, the bulk of which goes to payroll.

“We are an agriculture country,” Pangilinan said. “But our agri imports have exceeded our agri exports. Vietnam has $5 billion dollars in net exports, about six to seven times bigger than ours.”


The Arroyo and Aquino administrations likewise allegedly failed to monitor progress of the projects of the borrowers.

And while the Arroyo administration showed little interest in collecting loan payments, the Aquino government showed very little improvement in doing so.

Quoting a COA report, the author of the PIDS report Danilo Israel said the collection rates have declined over the years, noting that ACEF has very poor performance in terms of collecting loan amortization, with repayment rates ranging from 38.38 percent in 2004 to 7.04 percent in 2009.

“The data further indicate that the repayment rates were not only very low but also consistently decreasing over the years, he said.


There was some remarkable improvement after COCAFM under Pangilinan cracked the whip on borrowers, from less than 10 percent to 28 percent.

ACEF scam: Lost billions, lost opportunities 2

Those with the worst repayment rates of zero percent, Israel said, were in the Cordilleras, the Autonomous Region of Muslim Mindanao (ARMM), MIMAROPA (Occidental Mindoro, Oriental Mindoro, Marinduque, Romblon and Palawan), and Central and Eastern Visayas. Except for ARMM, Mindanao had the highest repayment rate.

“From the start of its actual implementation in 2000 up to the present,” Israel said, “ACEF has been plagued by various problems which may have significantly derailed the attainment of its objectives.”

The government failed to identify what we lacked, or what we need, a former lawmaker said. “We failed to put up a cotton plantation, for instance. So we have nothing to support a local garment industry.”


Except for former Maguindanao Rep. Didagen Dilangalen, no politician was listed in the summary report of approved projects obtained by the ABS-CBN Investigative Team from the agriculture department.

Dilangalen, chairman of Moro Development Company Incorporated, has obtained a total of P14 million to finance the improvement of its sugar milling. As of March 2012, he still has a loan balance of P13.1 million.

Another huge beneficiary of the ACEF fund, according to a DA source, was a politician in Northern Luzon, a long-time Arroyo supporter. The politician got P20 million, without collateral, before the 2007 elections, but failed to pay back anything at all.

The DA source said there were other political beneficiaries in Batangas, but the summary report failed to reveal their names.


The biggest creditor was Quedancor, or the Quedan and Rural Credit Guarantee Corp., a government company that provides credit line to small farmers and fishermen across the country.

Quedancor obtained a P1 billion loan, an anomalous amount and an anomalous beneficiary, according to Pangilinan and Israel. Quedancor has been dissolved without paying its loans. Pangilinan said the loan was used to pay retirement benefits, thus depriving small farmers, the intended beneficiary of the fund.

Without reforms, Israel said, “ACEF may go down the drain as one of the greatest program failures” among many in recent years.


Records of a COCAFM meeting in August 2012 revealed that the body's co-chair Congressman Mendoza told Abad and Budget Undersecretary Mar Relampagos that “while he recognizes that the bulk of the funds has already been used for general appropriations,” the DBM should make a proper accounting of the funds.

“(There) is negligence on the part of DA, BOC [Bureau of Customs], and DBM,” the minutes of the meeting quotes Mendoza as saying.

Abono Rep. Robert Raymond Estrella said the law extending ACEF to 2015 was “very specific” on the creation of a special fund to protect products or people that will be adversely affected when the local market is finally opened to free trade.


“However, (Mendoza) observed that this law is not being followed,” the records quote him as saying.

“If the law is no longer relevant to the current situation, there might already be a need to amend it,” he said.
“If a law is not being followed, this might backfire later on and administration officials would be blamed for not following it,” he added.

Estrella said that the ACEF program needs to resume its implementation. He asked Abad to make it happen.


“ACEF must continue,” Pangilinan said, noting that the flaws in the past have been addressed. “While looking for the rats, we don't burn the entire house.”

In all, the 19-year-old program seems to have failed to harvest anything, raising fears for the country's readiness with the influx of imported agricultural products from its ASEAN neighbors.

Said Magsaysay, a gentleman farmer: “Do not just focus on the corruption, think of the readiness of our agricultural sector for the globalization.”

Said Rafael Mariano, head of the Kilusang Magbubukid ng Pilipinas: “By 2015, we would see all the imported agri products from our ASEAN neighbors [set] loose upon us, the Filipino consumer would probably like that, but that would eventually kill our own farmers.”

ACEF was a nice program gone bad, another farmer said. “What we saw all these many years were wasted funds, wasted opportunities.”

Next: Is the country ready for trade liberalization?