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 chewy, translucent, indigenous dessert in the Philippines that is very popular in Japan. In 1993, Japanese people, especially young people considered nata de coco a popular dessert, however, its popularity declined because their interest moved to another trendy dessert. Small coconut farmers and those who started manufacturing nata de coco in the Philippines began to export more nata de coco to Japan in 1993. Though Japan imported 90 percent of the Philippines nata de coco, its supply did not meet the demand for the dessert in Japan. About one year later, the product's astonishing popularity quieted. Environmental and unemployment problems arose because of Japan was importing nata de coco from the Philippines. Moreover, the end of the nata de coco boom seemed the best time to focus on the poverty and underdevelopment in the Philippines, whose origin could be dated back to a century ago.

2. Description

A. Introduction

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 big fad in Japan.  However, problems arose because the production of nata de coco could not catch up with its demand in Japan and, after the nata de coco boom in Japan was over, people moved to another dessert from overseas. As a result of this whim, many problems have arisen in the Philippines.

B. Definition

Nata de coco is a chewy, translucent, traditional Philippine dessert which is "coconut gel-product from coconut water by bacterial fermentation-prepared." (Antarindo Trading Web Page) In 1992, this dessert was introduced to Japan through its use in 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 the digestive system, and it is low in calories and contains no cholesterol. Its peak moment of popularity in Japan occurred in 1993. Nata de coco could be found everywhere at that time. Many companies manufacturing nata de coco rivaled each other for new nata de coco products.

C. Positive Conditions

The nata de coco boom in Japan brought a huge impact on the small labor-intensive cottage industry in the Philippines. Nata de coco was usually produced at coconut farmers' houses in the countryside, and it was an indigenous dessert. However, it suddenly became one of the most 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 a 'Miracle Product'. (Metcalfe) The nata de coco boom was a stroke of luck for the Philippines, who had been going through export an economical depression. The cottage industry attracted many Filipino workers to turn over and get into its industry because the way of making nata de coco is simple; it does not take high-tech machinery and a lot of money to produce. The cottage industry added to its factory and labor, and it put its utmost into nata de coco production.  Metcalfe mentions that "[a]t Martinez Nata de Coco in Lucena City, production 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 the people committing crimes were working to make nata de coco. (Metcalfe)

D. Negative Conditions

It is the rule that `the Golden Age' has never been 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 a foreign country. Japanese makers followed the trend and moved their focus to the new dessert. In the Philippines, people might be depressed as they looked at a stack of nata de coco. Its countryside returns to silence as though people had been busy making the "Miracle Product' was a dream. More importantly, the Philippines developed many problems which were not there during the boom. For example, producing nata de coco requires a kind of strong acetic acids. Since nata de coco was made at small private factories in the countryside, people did not pay attention to the effects of the acetic acids, and they discharged it into the soil. That caused dermatitis and soil acidity. (Futakami Jirou's World Web Page) Moreover, the end of the boom uncovered big problems in the Philippines, such as poverty and underdevelopment.

E. Coconut Industry in the Philippines

The Philippines is the largest coconut-producing country in the world. (Sakakibara, 1994: 88) It is said that there are 330 million coconut farmers in the Philippines, which is equivalent to one out of three people in the primary industries engage in coconut farms. (Sakakibara: 40) Price movement easily affects the income of coconut framers and even though a farmer has ten coconut trees, he could earn his bread at one time. (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)

F. History

a. The History of Coconut Plantations
"[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 the 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 Christians migrated to the Muslim village, the more lands were replaced by coconut plantations, and then, coconut trees dominated in the rural Muslim areas. (Tiglao) 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)

b. The Rise of coconut demand
Until in the 19th century, two everyday commodities, soap and margarine, were made from beef fat, mainly from America. (Tiglao) Since blizzards and drought hit in the United States, and the cattle industry received huge damage, soap and margarine manufacturers used vegetable oils as less-expensive alternates. (Tiglao) Then, coconut came into the spotlight. European countries took coconuts from their Asian colonies, and American soap manufacturers had their eyes on the Philippines, the U.S. is 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 became 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)

c. The Root of Poverty and Underdevelopment
Coconut exports bring the Philippines lots of foreign exchange, and it is very important to 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.

G. Conclusion

This case study about nata de coco is a good example of the impact of trade which can lead to changing the environment and culture of people and places. Generally, less developed countries sacrifice themselves for more developed countries. Even when 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 not cut off.

3. Related Cases

APPLE Case
BANANA Case
COCOA Case
COFFEE Case
MALAY Case
PHILSUG Case
PHILWOOD Case
RUBBER Case

4. Draft Author:

Hiromi Inoi (October 11, 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)




Table 1: Coconut

Source: PHILIPPINES Economic Indicators Online, National Economic and Development Autority

1990 1991 1992 1993 1994 1995 1996 1997 1998
Production 11,023,0008,638,0009,384,00011,328,41011,207,00012,183,1209,000,00010,500,00010,492,780
Yield 35,42127,92530,50036,83736,60239,55729,55734,42634,403
Export Coconut Products 503447643532639989730853832
Export Coconut Oil 361299481358475862571673706
Export Copta Meal Cake 545553455367565336



Table 2: Employment

Source: PHILIPPINES Economic Indicators Online, National Economic and Development Autority

1990 1991 1992 1993 1994 1995 1996 1997 1998
Agriculture Employment (%) 46.744.945.345.745.143.442.840.839.2
Umemployment Rate 8.310.59.89.39.59.58.68.710.1

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

    *The Reason of Nata de Coco Boom
    Japanese people tend to seek brand-new things. A certain thing attracts a great deal of public attention for a only limited time. Nata de coco was such a example. Especially foreign desserts become a boom one after another roughly every year. Tiramisu from Italy and Tapioca from 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 comes to out of favor.

    *Who Create a Boom?
    It is ten to one that young women, from high school girls to women in their early 20s, lead these fashions in Japan. They are supersensitive to new products. As a result of this, makers try to catch their attention, and improve products so that women may come to really like them. Once a product comes into vogue, it is given a big space in magazines and news. Then, it becomes more and more popular. After a while, its popularity, however, decreases because of the emergence of other new products.

    26. Trans-Boundary Issues:

    No

    27. Rights:

    Yes

    Coconut farmers have been in severe conditions for a long time. Historically, the surcharge system was enforced under the Marcos Administration in 1973.(Yamamoto: 1992) The system was harsh for coconut farmers. Most of the farmers owned a small-scale of farm; hence, the system had a great influence on them, and their income of the farmers dropped dramatically. 72 percent of the farmers lived below the standard of living in the Philippines. Although the system was discontinued in 1980, farmers still live in poor conditions, because they rely on the market price of coconut for their income. In 1990, the price of coconut oil came to be less expensive than that of soybean oil, which always competes with coconut oil. What is worse, coconut trees have become superannuated; so, the yield has declined recently. (Sakakibara: 90) The poor farmers cannot do anything to their old coconut trees, but just keep extracting the essence.

    Suddenly, in 1993, the demand of coconut became rising, as if it were an saviour of coconut farming. The nata de coco boom in Japan caused the increase of coconut export in Philippines. Many Filipinos launch into the promising industry, the produce of nata de coco, in order to live better life. However, today when the boom is regarded as a frail dream, people lost their job. They have trouble with finding new job while everyone is struggling with unemployment. What is more, even during the boom, many Filipinos faced hard time, since Japanese companies attempted to force them to produce with very low wages.

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

    28. Relevant Literature

    Web Pages
    1. Antarindo Trading, Aug. 25, 1999http://antatrade.hypermart.net/food/natcoco.htm
    2. Encyclopaedia Britannica, "coconut plam," Aug. 25, 1999http://search.eb.com/bol/topic?eu=25000&sctn=1#s_top
    3. Encyclopaedia Britannica, "Philippines Climate," Aug. 25, 1999http://search.eb.com/bol/topic?eu=115081&sctn=2
    4. Futakami Jirou's World, Aug. 25, 1999http://www.gulf.or.jp/~houki/essay/zatubunn/firipin/natadecoco.html
    5. Honda, Yuri, "Philippines Sugar Case," Aug. 25, 1999http://www.american.edu/projects/mandala/TED/philsug.htm
    6. 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
    7. 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
    8. World Trade Organization, Aug. 25, 1999http://www.wto.org

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

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



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