TED Case Studies

Nata de Coco Boom and the Philippines



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I. Identification

1. The Issue

This case study is about nata de coco, a ..... that is very popular in Japan, bt only for a limited time.

2. Description

This case study is about coconuts in the Philippines. About 5 years ago, nata de coco, a dessert which is made from coconuts was a great craze in Japan.  There was a circumstance many times that the production of nata de coco could not catch up with its demand.  However, after the big nata de coco boom in Japan was gone, the people move to another dessert from overseas. As a result of their whim, many problems have arisen in the Philippines.

Nata de coco is that the chewy, translucent, traditional Philippine dessert which is "coconut gel-product from coconut water by bacterial fermentation-prepared." (Antarindo Trading Web Page) In 1992, a fad originated in Japan with the introduction of nata de coco into diet foods enjoyed by young girls. (Metcalfe, 1994; 76) Moreover, "Japanese believed it protects the body against colon cancer," and it became "a boon for slimmers." (Metcalfe) Nata de coco is high in fiber, good for digestive system, and low calories and no cholesterol. It was the peak moment of popularity with nata de coco in Japan in 1993. Nata de coco is everywhere at that time. A lot of makers rivaled each other for the new nata de coco products.

The nata de coco boom in Japan brought a huge impact on a small labor-intensive cottage industry in the Philippines. Nata de coco was usually produced at coconut farmers' house in countryside, and it was a indigenous dessert. However it suddenly has become one of the important exports. "Filipinos are busy capitalizing on a sudden foreign craving for an indigenous coconut by-product." (Metcalfe) The Manila Bulletin described nata de coco as 'Miracle Product'. (Metcalfe) The nata de coco boom was a stroke of luck for the Philippines, which was exercised about export depression. The cottage industry attracted many Filipinos to turn over and get into its industry because the way of making nata de coco is simple, and it does not need high-tech machinery and a lot of money. Even the cottage industry added to its factory and labor, and it put its utmost into nata de coco production, it cannot meet the demand for export.  Metcalfe mentions that "[a]t Martinez Nata de Coco in Lucena City, production has increased by 400%, from 500 to 2,000 trays a month. Expansion is limited not by demand, which appears to be limitless, but by space." (Metcalfe) Furthermore, "In Los Banos, a major producing area, the crime rate has dropped dramatically," because people was very busy making nata de coco. (Metcalfe)

It is the rule that `the Golden Age' has never maintained, and the nata de coco boom in Japan was also not an exception. Japanese people, especially young people, turned their interest to a different dessert which was also from foreign country. Japanese makers also moved their focus to the new dessert. In the Philippines, people might be depressed as they looked a stack of nata de coco. Its countryside returns its silence as though what people had been busy making "Miracle Product' without their sleeping hours was a dream. More importantly, the Philippines has got many problems which did not care during the boom. For example, producing nata de coco requires a kind of strong acetic acids. Since nata de coco made at small private factories in countryside, people did not attention to effects of the acetic acids, and they discharged it into soil. That caused dermatitis and soil acidity. (Futakami Jirou's World Web Page) What is more, the end of the boom disclose the root problem in the Philippines, such as poverty and underdevelopment.

The Philippines is the largest coconut-producing countries in the world. (Sakakibara, 1994; 88) It is said that there are 330 million coconut farmers in the Philippines, which is equivalent to that one out of three people in the primary industries engage in coconut farms. (Sakakibara; 40) Price movement easily affects the income of coconut framers. Although if a farmer had ten coconut trees, he could earn his bread at one time, now the circumstance has gone. (Sakakibara; 40) The coconut industry in the Philippines are jeopardized in intensifying competitions because 88 percent are small scale farmers, less than five hectares, and they do not have a unified management strategy. (Sakakibara;90-91)

"[An American adventurer] met with the elders of [a] Muslim village and told them he wanted to turn their cow-grazing land into a coconut plantation.……" (Tiglao, 1999; 63-5) The coconut plantation in the Philippines began from a century ago, right after Spanish left. (Tiglao) Tiglao insists that "the headlong rush into coconut farming in the Philippines early this century has left the country impoverished and underdevelopment." (Tiglao) The more Christian migrated to the Muslim village, the more lands were replaced to coconut plantations, and then, coconut trees dominated in the rural Muslim areas. (Tiglao) While, in 1642, the Spanish colonizers ordered each native to plant 200 of coconut trees for "caulk[ing] their galleons, and its husks," and "making ships' rigging," in 1930, 150,000 hectares, or 5% of arable land, were coconut trees. (Tiglao) Today, three million hectares, a quarter of the country's agricultural land were covered by coconut plantations. (Tiglao)

Until in the 19th century, two everyday commodities, soap and margarine, were made from beef fat, mainly from American. (Tiglao) However blizzards and drought hit in the United States, and the cattle industry received huge damage; therefore, soap and margarine manufacturers used vegetable oils as less-expensive alternates. (Tiglao) Then, coconut has got into the spotlight. European countries took coconuts from their Asian colonies. An American soap manufacturer had its eye on the Philippines, U.S. newest colony. (Tiglao)

Coconut trees were planted with unrecorded speed in the Philippines. The area of coconut plantations overtook that of a more famous export crop, sugarcane by 1930. (Tiglao) After two world wars ended, not only soap and margarine, but coconut oil became popular with advances in chemistry, and coconut oil has become one of the biggest export items in the Philippines. "Until 1970s, coconut oil continued as the country's biggest export product, accounting for 35% of the total." (Tiglao)

Coconut exports bring the Philippines lots of foreign exchange, and it takes very important its income. Coconut planting, however, results in massive deforestation, and due to the fact that coconut trees dominate in certain areas, the ecosystem must be changed. "But perhaps the most destructive legacy of the West's demand for coconut oil is the Philippines' poverty and economic underdevelopment." (Tiglao) Even if the Philippines has got profits from coconut exports, the profits go to traders and exporters, not a third of the country's population, farmers. (Tiglao) Now, "the value of coconut oil has fallen in real terms through the decades, partly as a result of increased production of substitutes such as American and Chinese soybean and cottonseed oil as well as sunflower-seed oil from the former Soviet republics." (Tiglao) Tiglao concludes that "[e]ven now, the country faces tremendous problems that emerged a century ago, because of the West's cravings for soap and margarine." (Tiglao)

As I mentioned before, the nata de coco boom in Japan in 1993 was unforeseen luck for poor coconut farmers. Yet, farmers were eventually at the mercy of the boom. Practically, Japan exploited the developing country, the Philippines where the West has already formed the relationship of exploitation.

This case study about nata de coco shows a good example of the impact of trade which lead to changing environment and culture in the parties concerned. Generally, less developed countries sacrifice themselves for more developed countries. Even the colonial period was over, and almost all colonies obtained independence, the exploitative bond has still remained. The Philippines has given up its rich forest, and then, the Philippines has exported coconut to get foreign exchange. Still, the people are poor as long as the exploitative bond will cut off.

3. Related Cases

COCOA Case
BANANA Case
PHILSUG Case

4. Draft Author:

Hiromi Inoi, Aug. 27, 1999

II. Legal Clusters

5. Discourse and Status:

AGRee and ALLEGE(a)tion

Whether buying nata de coco or not is only customers' choice.

6. Forum and Scope:

Japan and BILATeral

7. Decision Breadth:

2 (The philippines and Japan)

8. Legal Standing:

Treaty

III. Geographic Clusters

9. Geographic Locations

a. Geographic Domain: Asia

b. Geographic Site: East Asia

c. Geographic Impact: The Phillipines

10. Sub-National Factors:

No

11. Type of Habitat:

TROPical

The climate of the Philippines is tropical and is strongly affected by monsoon (rain-bearing) winds. The climate has two seasons, wet and dry. Although it is not exactly same throughout the country, it is the dry season from December to May. The first three months is cool; the second three months, hot. The rest of the year is the wet season. From June through December, typhoons, which basically come from the southeast often hit in the Philippines. Heavy typhoons frequently cause floods or high winds which lead to perils of life and property. (Encyclopaedia Britannica Online)

IV. Trade Clusters

12. Type of Measure:

SUBSIDY

Philippine's coconut trade has been disputed at World Trade Organization (WTO) twice. Both cases were that the Philippines complained "measures affecting desiccated coconut" toward Brazil. The latest dispute was settled in March 1997. "The Philippines claims that the countervailing duty imposed by Brazil on the Philippine's exports of desiccated coconut is inconsistent with WTO and GATT rules." (WTO Web Page) This dispute resulted in that Brazil won after the Philippines appealed.

13. Direct v. Indirect Impacts:

INDirect

14. Relation of Trade Measure to Environmental Impact

a. Directly Related to Product: Yes: Coconut

b. Indirectly Related to Product: No

c. Not Related to Product: No

d. Related to Process: Yes: Habitat Loss

15. Trade Product Identification:

Coconut

16. Economic Data

The amount of nata de coco export to Japan was a fed was only 314 million dollars a year three years before when nata de coco, but in 1993, it increased sharply, and it reached 836 million dollars only in November, 1993. It was more than 200 times than in 1990. (Yomiuri Shinbun newspaper, Dec. 28, 1993)

"The export of Nata from the Philippines has risen from approximately $1 million per year to more than $26 million per year as of 1993 (see Philippine Daily Inquirer "Agriculture" Vol. 20. March 3, 1994). Nata earned the distinction as among the 30 best hit products among Japanese consumers for 1993." (The University of Texas at Austin Botany Department Web Page)

17. Impact of Trade Restriction:

N/A

18. Industry Sector:

FOOD

19. Exporters and Importers:

The Philippines and Japan

V. Environment Clusters

20. Environmental Problem Type:

  • Habitate Loss

    The Philippines was originally rich in natural rain forests. Coconut planting, however, contributed to massive deforestation. Most part of the forest turned into coconut plantations to earn foreign exchange. "In 1910, forests covered 66% of the Philippines' total land area; now, it's only 20%." (Tiglao) Due to the deforestation, coconut trees have become a dominance of the plants in the Philippines. It has led to destroying biological diversity. Then, it has a bad influence on the ecosystem.

  • Land Pollution

    A kind of strong acetic acids is the necessity for the process of producing nata de coco. Because of the fact that making nata de coco depended on the small cottage industry, owners of the small factories did not dispose of the acetic acids properly. Therefore, the discharge made the soil acidified.

    21. Name, Type, and Diversity of Species

    Name: Coconut palm (species Cocos nucifera)

    Type: plant

    Diversity: Coconut palms thrive best close to "the sea on low-lying areas a few feet above high water where there is circulating groundwater and an ample rainfall." (Encyclopaedia Britannica Online) Small plantations are the main place where most of the world's coconuts are produced. The South Pacific countries sach as the Philippines and Indonesia, are the typical breeding area of coconut palms. (Encyclopaedia Britannica Online)

    22. Resource Impact and Effect:

    HIGH and PRODuct

    23. Urgency and Lifetime:

    MEDium and 100s of years

    "The deforestation rate of the Philippines now pegged at 25 hectares an hour or 219,000 hectares a year. Experts say the country can expect its forests to be gone in less than 40 years." (Honda: Philippines Sugar Case)

    24. Substitutes:

    LIKE

  • Nate from Strawberry juice by Acetobacter xylinym

    Nata of nata de coco make from strawberry juice instead of coconut milk. "Nata de coco is a pellicle which is formed by a species of Acetobacter on the surface of coconut milk medium." The nata needs several ingredients: strawberry juice, Acetobacter sp. NA-2, which is a bacterial strain, glucose and acetic acid. ─Investigation by Hiroshi Nakayama, Kazuo Mochizuki, Toshihiro Suzuki, Shingo Dohi, Atsuhiro Kato and Susumu Tanifuji (Shizuoka Industrial Research Institute Web Page)

    VI. Other Factors

    25. Culture:

    Yes

    Japanese people tend to seek for brand-new things. A certain thing attract a great deal of public attention for a only limited time. Nata de coco was a such good example. Especially foreign desserts become a boom one after another roughly every year. Tiramisu from Italy and Tapioca southern countries are such desserts. During the boom, people, the media and makers make much of the thing. Yet, after the boom is gone, the thing in favor right before come to out of favor.

    26. Trans-Boundary Issues:

    No

    27. Rights:

    Yes

    In 1973, the surcharge system was enforced under the Marcos Administration. (Yamamoto: 1992) The system was harsh for coconut farmers. Most of the farmers owned a small-scale of farm; hence, their income of the farmers dropped. 72 percent of the farmer lived below the standard of living in the Philippines.

    Although the system was discontinued in 1980, farmers is still living under the poor condition. They rely on the market price of coconut for their income. In 1990, the price of coconut oil came to less expensive than that of soybean oil. What are worse, coconut trees has become superannuated; so, the yield has declined recently. (Sakakibara; 90)

    Due to the nata de coco boom in Japan, many Filipinos launch into the produce of nata de coco in order to live better life. Today when the boom seems a frail dream, however, people have lost their job. They have trouble with finding new job while times are hard.

    The most essential problem, however, is the structure of North-South Gap. The developed countries exploit the developing countries. Always, crops and raw materials the developing countries export are cheaper than what developed countries export, like cars and computers. This structure makes poor people poor.

    28. Relevant Literature

    Web Pages
  • Antarindo Trading, Aug. 25, 1999http://antatrade.hypermart.net/food/natcoco.htm
  • Encyclopaedia Britannica, "coconut plam," Aug. 25, 1999http://search.eb.com/bol/topic?eu=25000&sctn=1#s_top
  • Encyclopaedia Britannica, "Philippines Climate," Aug. 25, 1999http://search.eb.com/bol/topic?eu=115081&sctn=2
  • Futakami Jirou's World, Aug. 25, 1999http://www.gulf.or.jp/~houki/essay/zatubunn/firipin/natadecoco.html
  • Honda, Yuri, "Philippines Sugar Case," Aug. 25, 1999http://www.american.edu/projects/mandala/TED/philsug.htm
  • Shizuoka Industrial Research Institute, "Nate Production from Strawberry juice by Acetobacter xylinym," Aug. 25, 1999http://www.s-iri.pref.shizuoka.jp/s8/s8_40/s8_40_10.htm
  • The University of Texas at Austin Botany Department,"POSITION PAPER Microbial Cellulose:A New Resource for Wood, Paper, Textiles, Food and Specialty Products," Aug. 25, 1999http://www.botany.utexas.edu/facstaff/facpages/mbrown/position1.htm
  • World Trade Organization, Aug. 25, 1999http://www.wto.org

    Books
  • Metcalfe, Tim. "Philippines gets its just dessert," Asian Business vol.30 (1994): 76
  • Sakakibara, Yoshio. Economic Development in Philippines. Tokyo: Nihon Hyoron Sha, 1994
  • Tigla, Rigoberto. "Roots of poverty," Far Eastern Economic Review vol. 162 (1999): 63-65
  • Yamada, Ikumi. "Coconut," ed. Ishii, Yoneo. The dictionary of the Philippines. Tokyo: Dohosha, 1992

    Newspaper
  • Yomiuri Shinbun, Dec. 28, 1993 (http://www.yomiuri.co.jp/yomidas/konojune/93/93r8a.htm)



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