THE CHAIR’S ASSESSMENT OF GOVERNMENT PERFORMANCE … · Accomplishment Report ... Table 34: DPWH...

THE CHAIR’S ASSESSMENT OF GOVERNMENT PERFORMANCE

ON THE FIRST YEAR OF THE ARROYO PRESIDENCY

Rep. Danilo E. Suarez Chair • House Committee on Oversight

TURNING POINT:

The Chair’s Assessment of Government Performance

On the First Year of the Arroyo Presidency

House Committee on Oversight

July 2005

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Table of Contents

Table of Contents................................................................................................................................i

Index of Tables..................................................................................................................................vi

NOTE FROM THE CHAIR............................................................................................................viii

An Assessment of Government Performance from July 2004 to June -2005 ......................... viii

Balancing the Budget............................................................................................................. viii

Providing Education for All ......................................................................................................ix

Automating Elections.................................................................................................................x

Decentralization of Progress through Transport and Information Infrastructure.................x

A Just End to the Peace Process ..............................................................................................xi

Healing the Wounds of EDSA 1,2 and 3 ..................................................................................xi

Electricity and Water for All ...................................................................................................xii

Generation of One Million Jobs...............................................................................................xii

Decongesting Metro Manila.....................................................................................................xii

Development of Subic and Clark/DMIA................................................................................ xiii

Medium to Long-Term Concerns ...............................................................................................xiv

TURNING POINT: AN ASSESSMENT OF GOVERNMENT PERFORMANCE ON THE FIRST

YEAR OF THE ARROYO PRESIDENCY........................................................................................1

Introduction....................................................................................................................................1

BALANCED BUDGET......................................................................................................................3

Chapter Summary .........................................................................................................................3

Introduction....................................................................................................................................4

National Government Revenue .................................................................................................5

National Government Expenditures .........................................................................................6

The Policy Objectives.....................................................................................................................8

Action Plan ...................................................................................................................................10

Accomplishments .........................................................................................................................11

NG Fiscal Position....................................................................................................................11

Legislative Measures ...............................................................................................................16

Administrative Measures ........................................................................................................18

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Conclusion ....................................................................................................................................19

Annexes ........................................................................................................................................20

EDUCATION FOR ALL..................................................................................................................23

Chapter Summary .......................................................................................................................23

Background ..................................................................................................................................24

The Administration’s Program for Education ............................................................................25

Classroom/School Building Program ..........................................................................................25

School-building Program..........................................................................................................26

Educational Service Contracting (ESC) under Government Assistance to Students and

Teachers in Private Education (GASTPE)..............................................................................28

Scholarship Program ...................................................................................................................29

CHEd Student Financial Assistance Program for a Strong Republic (SAFE 4 SR)

Scholarship Program................................................................................................................30

Iskolar para sa Mahihirap na Pamilya ...................................................................................30

Personal Computers For Public Schools Project ........................................................................32

Personal Computers for Public Schools Project......................................................................32

Early Childhood Development Program.....................................................................................35

AUTOMATED ELECTIONS ..........................................................................................................38

Chapter Summary .......................................................................................................................38

Background ..................................................................................................................................38

Allotment ..................................................................................................................................40

Accomplishment...........................................................................................................................41

Phase I ......................................................................................................................................41

TOTAL VALIDATED...................................................................................................................41

Phases II and III ......................................................................................................................42

Complementary Initiatives......................................................................................................42

Assessment...................................................................................................................................43

DECENTRALIZATION OF PROGRESS AROUND THE NATION THROUGH THE USE OF

TRANSPORTATION NETWORKS AND THE DIGITAL INFRASTRUCTURE ........................45

Chapter Summary .......................................................................................................................45

Introduction..................................................................................................................................45

Accomplishment Report...............................................................................................................46

Transport Sector.......................................................................................................................46

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Nautical Highway System....................................................................................................46

Accomplishment .......................................................................................................................48

Airport Development................................................................................................................49

Digital Infrastructure Development .......................................................................................53

Digital connectivity through the development and deployment of information

infrastructure........................................................................................................................53

Digital connectivity through on-line delivery of government services and information

critical in developing and enhancing economic, political, socio-cultural and human

capabilities. ...........................................................................................................................54

Promote the use and optimization of ICTs in learning to enable Filipinos to creatively

use ICTs and become world-class knowledge workers through the promotion of creative

ICT use ..................................................................................................................................56

Facilitate the growth and competitiveness of the country’s e-services industry in the

global market through the creation of regional ICT hubs..................................................56

Assessment...................................................................................................................................57

Annex............................................................................................................................................59

A JUST END TO THE PEACE PROCESS ....................................................................................61

Chapter Summary .......................................................................................................................61

Introduction..................................................................................................................................62


Peacemaking and Peacebuilding .............................................................................................65

Continuation of Talks...........................................................................................................65

Initiatives Parallel to Peace Talks.......................................................................................67

Complementary measures to minimize the level of violence arising from armed conflicts

...............................................................................................................................................69

Full implementation of existing final peace agreements ...................................................70

Implementation of an enhanced reintegration, rehabilitation, and amnesty program for

former rebels .........................................................................................................................70

Conflict Prevention and Peace-building..................................................................................71

Rehabilitation and development of conflict areas...............................................................71

Catch-up development program for ARMM and affirmative action agenda for Muslims 71

Devolution (in accordance with RA 9054, the ARMM Organic Act) ..................................71

Inter-connectivity of ARMM constituent-provinces/city.....................................................72

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Improving Human Development Index (HDI) ....................................................................73

Conduct of healing and reconciliation program in conflict-affected areas ............................74

HEALING THE WOUNDS OF EDSA 1, 2 AND 3 ........................................................................76

Chapter Summary .......................................................................................................................76

Introduction..................................................................................................................................76

The Plan .......................................................................................................................................77

Reconciliation and National Unity, and Politically charged cases ........................................77

Reforms in the military............................................................................................................78

PNP Reforms ............................................................................................................................78

Assessment...................................................................................................................................79

Social and economic programs.................................................................................................79

Military and police reforms .....................................................................................................79

Annexes ........................................................................................................................................80

Annex 1: AFP Reforms.............................................................................................................80

Annex 2: PNP Reforms ............................................................................................................84

PROVISION OF ELECTRICITY AND WATER SUPPLY TO BARANGAYS NATIONWIDE...86

Chapter Summary .......................................................................................................................86

Introduction..................................................................................................................................86

Electrification ...........................................................................................................................86

Access to Potable Water...........................................................................................................87

Administration Targets ...............................................................................................................87

Electrification ...........................................................................................................................87

Access to Potable Water...........................................................................................................88


Energization .............................................................................................................................90

Water ........................................................................................................................................91

P3W accomplishment report ................................................................................................91

Patubig Project .....................................................................................................................92

Assessment...................................................................................................................................93

OPPORTUNITIES TO CREATE SIX (06) TO TEN (10) MILLION JOBS BY 2010 ...................95

Chapter Summary .......................................................................................................................95

The Plan .......................................................................................................................................96


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Agri-Business Development.....................................................................................................98

Micro-Finance/Lending ..........................................................................................................100

Tourism...................................................................................................................................102

Mining.....................................................................................................................................103

Housing...................................................................................................................................104

Information and Communications Technology (ICT)...........................................................105

Infrastructure.........................................................................................................................106

Economic Zones ......................................................................................................................108

Apprenticeship .......................................................................................................................109

Assessment.................................................................................................................................109

DECONGESTING METRO MANILA BY FORMING NEW CORES OF GOVERNMENT AND

HOUSING CENTERS IN LUZON, VISAYAS AND MINDANAO .............................................111

Chapter Summary .....................................................................................................................111

Introduction................................................................................................................................112

The Plan .....................................................................................................................................113

Accomplishment Report.............................................................................................................113

Infrastructure Development ..................................................................................................113

Formation of New Government Cores...................................................................................116

Formation of Housing Centers ..............................................................................................117

Luzon ......................................................................................................................................118

DEVELOPMENT OF SUBIC AND CLARK AS THE BEST INTERNATIONAL SERVICE AND

LOGISTICS CENTERS IN THE REGION ..................................................................................121

Chapter Summary .....................................................................................................................121

Introduction................................................................................................................................121

Development Plan......................................................................................................................122

Accomplishment and Assessment .............................................................................................122

Subic Port Expansion and Rehabilitation.............................................................................122

New Container Terminal Construction.................................................................................123

DMIA Expansion and Renovation.........................................................................................124

Subic-Clark-Tarlac Expressway ............................................................................................125

Land Use Plans and Locator Industry Development ...........................................................126

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Index of Tables

Table 1: Revenue and Tax Effort in ASEAN Countries, 1996-2002 ...............................................6 Table 2: Public Expenditures as % of GNP in Selected ASEAN Countries, 1994-1999 ................7 Table 3: Budget Level by Sector (1998 and 2003)...........................................................................7 Table 4: Budget Flexibility Margins.................................................................................................8 Table 5: Programmed Reduction of the Budget ...............................................................................8 Table 6: Programmed Reduction of the CPSD.................................................................................9 Table 7: Consolidated Public Sector Financial Position(2005-2010) ..............................................9 Table 8: National Government Debt (Preliminary) .........................................................................9 Table 9: Expenditure to GDP Ratio..................................................................................................9 Table 10: NG Fiscal Position...........................................................................................................12 Table 11: Comparative Internal Revenue Collections and Goals. ................................................13 Table 12: Taxpayers Compliance Verification Drive(TCVD) 2003-2005 ......................................14 Table 13: Collections from New Measures .....................................................................................15 Table 14: Status Report on Legislative Measures on Revenue Generation .................................17 Table 15: Non-tax Administrative Measure...................................................................................18 Table 16: (Annex 1) The Bureau’s Tax Effort Ratio ......................................................................20 Table 17 (Annex 2): . E-VAT Impact on the CPSD ........................................................................20 Table 18 (Annex 3): Comparative BIR Collection, By Type of Taxes ...........................................20 Table 19 (Annex 4): RATE cases Filed with DOJ ..........................................................................21 Table 20 (Annex 5): Report of Compliance with AO 103..............................................................21 Table 21 (Annex 6): Collection from Fees and Charges ...............................................................22 Table 22: Department of Education Annual Budget .....................................................................24 Table 23: Comparative Basic Statistics in Selected Asian Countries, 2001-2002 .......................25 Table 24: Classroom Shortage by Region, SY 2003-2004..............................................................26 Table 25: Status of Classroom Construction..................................................................................27 Table 26: Number of Classrooms Programmed for Building ........................................................28 Table 27: Summary of Availments and Disbursements................................................................30 Table 28: Summary of PCPS 1 and 2 Projects ...............................................................................33 Table 29: Facts About Early Childhood Education (ECE), SY 2002-2003 ...................................35 Table 30: Status of Releases for COMELECs Election Modernization Program.........................40 Table 31: Allocation of Funds for the Election Modernization Program ......................................41 Table 32:Voter registration and Validation ...................................................................................41 Table 33: Naval Port Development Activities of the Strong Nautical Highway System.............47 Table 34: DPWH June 2004-June 2005 Accomplishment on the Nautical Highway Sytem.......48 Table 35: Medium Term Infrastructure Investment Program, CY 2005-2010 ............................48 Table 36: DOTC/ATO Airport Projects...........................................................................................49 Table 37: Airport Maintenance and Enhancement .......................................................................52 Table 38: Digital Connectivity Accomplishment Report (1)..........................................................54 Table 39: Digital Connectivity Accomplishment Report (2)..........................................................54 Table 40: Accomplishment Report on ICT Use ..............................................................................56 Table 41: Status Report on the Creation of Regional ICT hubs....................................................56 Table 42: Rank and Performance of Selected Countries in Infrastructure Facilities..................57 Table 43: Selected Infrastructure Indicators .................................................................................58 Table 44: Comparative Road Densities and Paved Road ratios of ASEAN Countries ................58

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Table 45: Notes on LCC Operations ...............................................................................................59 Table 46: Selected Road and Bridge Projects in Mindanao...........................................................72 Table 47: Projects in Agri-Sectors ..................................................................................................73 Table 48: Devolution of Centrally Managed Funds.......................................................................81 Table 49: Reduction and Devolution (OPB CY 04-06) ...................................................................82 Table 50: GHQ Savings ...................................................................................................................82 Table 51: Initially Funded Projects from Savings .........................................................................83 Table 52: Grievance and Disciplinary Mechanism ........................................................................83 Table 53: Other Reform Initiatives ................................................................................................84 Table 54: Barangay Electrification Program Indicators ...............................................................87 Table 55: Six-Year Projected Expenditures for the President’s Priority Program on Water ......88 Table 56: Timetable for 2005 Electrification Program ..................................................................90 Table 57: Performance by Franchise As of 30 April 2005 .............................................................90 Table 58: Barangay Electrification Status As of 30 June 2005 ....................................................91 Table 59:MWSS Accomplishment From 2004 to 30 June 2005 ....................................................92 Table 60: Patubig ni Gloria Program Accomplishment Report.....................................................92 Table 61: Employment Prospects, 2004-2010 ................................................................................96 Table 62: Employment Generation Per Sector (2004-2010)..........................................................97 Table 63: Actual Jobs Generated Per Sector (2nd Semester, 2004 to 1st Semester, 2005) ...........97 Table 64: Job Generation Targets by Year.....................................................................................99 Table 65: 2005 Targeted, Validated and Developed Areas by Region ..........................................99 Table 66: Summary of Loan Releases and No. of Borrowers in MicroFinance ..........................101 Table 67: Visitor Arrivals to the Philippines ...............................................................................103 Table 68: Employment Generated from 23 Priority Mining Projects.........................................103 Table 69: Government Shelter Agencies Accomplishment Report .............................................105 Table 70: Projected Jobs to be Generated in ICT ........................................................................106 Table 71: Summary of DPWH Job Road Map Tracking..............................................................107 Table 72: Summary of Jobs Generated ........................................................................................107 Table 73: Summary of Economic Zone total Employment Generated........................................108 Table 74: Status of and Progress Report on Projects for the Decongestion of Metro Manila....113 Table 75: Housing Starts and Completion by Program (July 2004 to May 2005) .....................118 Table 76: Housing Starts and Completion by Program (July 2004 to May 2005) .....................118 Table 77: Progress Report: Subic Port Development (June 2005) ..............................................123 Table 78: Container Port Capacity in Selected Ports ..................................................................123 Table 79: Subic Seaport Statistics (2002-05) ...............................................................................124 Table 80: DMIA Air Traffic, April and May 2005........................................................................125

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NOTE FROM THE CHAIR

n the first year of her presidency (covering the period July 2004-June 2005), President

Arroyo vowed to make significant changes in ten critical areas to achieve a turning point, as

she called it, in the nation’s politics and economy. She vowed to: (1) balance the budget; (2)

provide education for all; (3) automate elections; (4) decentralize progress through transport

and information facilities; (5) push for a just end to the peace process; (6) effect national

reconciliation by healing the wounds of EDSA 1, 2 and 3; (7) provide electricity and water to

the barangays; (8) generate 6 to 10 million jobs; (9) decongest Metro Manila; and (10) develop

Subic and Clark.

A review of government performance in the past year indicates that the President has

delivered eight (08) of these promises. Compliance with her goals in the attainment of peace

has been satisfactory. She furthermore substantially complied with her promise to: balance the

budget, provide education for all, lay the groundwork for national reconciliation, generate the

million jobs, decentralize progress through transport and information facilities, decongest

Metro Manila and develop Subic and Clark.

An Assessment of Government Performance from July 2004 to June -2005

Balancing the Budget

The administration has controlled the deficit through a mixture of conservative spending and

enhanced revenue collection from non-tax sources. As a result, it has registered a lower-than-

I

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program deficit in 2004, and in the first semester of 2005. The exceptional performance by the

Bureau of Treasury (BTr) has in fact bought the administration enough leeway to increase

spending.

To sustain a balanced budget, the major revenue collecting agencies – the Bureau of Internal

Revenue (BIR) and Bureau of Customs (BoC) – must take the BTr lead and increase their

contribution to surpluses in collected revenues. It is noteworthy therefore that while BIR

missed its target by a few percentage point for 2004 and for the first semester of this year, its

collections during these periods were also the highest in recent years. BOC, for its part, has

exceeded its 2004 budget and posted modest collections in the first semester of 2005. (Had the

Implementing Rules and Regulations to the Lateral Attrition Law been issued on time, BIR

and BOC may have met their collection targets.) It is similarly noteworthy that both these

agencies were able to significantly improve revenue performance without revising their targets

– in stark contrast to the past practice when government would quarterly adjust targets

downward to project an image that collection targets are met.

Providing Education for All

Significant headways in closing the shortage in classrooms have been achieved this year by the

administration. The number of classrooms constructed during the period (10,765) exceeded the

Medium Term Philippine Development Plan (MTPDP) target of 7,422 due mainly to the school

building projects financed under Congressional Initiatives and the Priority Development

Assistance Fund (PDAF).

At the same time, the administration has accommodated about 20,000 students in various

scholarship programs offered to needy but deserving students. Moreover, new programs have

been established to fine-tune curricula to the information society as well as to bridge the

educational gap, such as the childhood education program.

In initiating these programs, the administration sought to establish the foundation necessary

to ensure not only universal access but also to upgrade quality of education in the country in

consonance with the need of the changing economy. The challenge of guaranteeing the

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sustainability of these programs without necessarily crowding out the already limited

education funds nevertheless remains.

Automating Elections

Government’s program to ensure credible elections through automation rests on three

components: (1) computerized voters’ registration and the validation of existing voters’ lists; (2)

automation of the counting and canvassing of votes; and (3) automation of data transmission to

speed up the dissemination of election results.

The Commission on Elections (COMELEC) has captured the biometrics of 42% of voters and

may be able to complete voters’ registration and validation in time for the 2007 elections.

However, it has lagged behind the issuance of voters’ ID’s – having released ID’s to only 20% of

the total number of voters nationwide. Moreover, the nullification of its contracts for the

purchase of Automated Counting Machines (ACMs) and Very Small Apperture Terminal

(VSAT) by the Supreme Court because of lapses in bidding raises serious concerns. At the rate

the legal issues relating to these contracts are being resolved, automated elections by 2007 may

yet turn out to be an impossibility.

Decentralization of Progress through Transport and Information Infrastructure

Based on the over-all scope of work, things seem to be on schedule for this agenda item. The

delivery, though, by the government of basic infrastructure facilities pursuant to its twin

objectives of developing the country’s transport and digital information infrastructure still

needs vast improvement.

In the transport sector, under-accomplishment especially in the provision of the facilities for

the Roll-On Roll-Off Transport System (RRTS) is markedly conspicuous. Under-completion of

projects in the port component of this system is at 25%, while that in the road component is

substantially higher.

Similarly, many targets under the four goals enumerated in the Digital Connectivity Plan for

the Information Communications Technology (ICT) sector have been missed.

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A Just End to the Peace Process

The government has pursued two simultaneous programs in so far as the peace process is

concerned: (1) the formulation and signing of comprehensive peace agreements with all rebel

groups and formations by 2010 and (2) the implementation of all final peace agreements signed

since 1986, including provisions for enhanced amnesty, reintegration and mainstreaming of all

rebels.

The present administration has steadfastly pursued peace negotiations with the various rebel

groups despite mounting pressures and obstacles. It perseveres in both formal and informal

engagements with the following: Moro Islamic Liberation Front (MILF), Communist Party of

the Philippines/New People’s Army/National Democratic Front (CPP/NPA/NDF),

Rebolusyonaryong Partidong Manggagawa ng Pilipinas/Revolutionary Proletarian Army/Alex

Boncayao Brigade (RPM-P/RPA/ABB) and Rebolusyonaryong Partidong Manggagawa ng

Mindanao (RPM-M).

Moreover, the collaboration of the government and these groups in areas of mutual concern

provide new avenues for – and has kept open communication channels vital to – negotiating

peace. The government has made modest inroads towards the consolidation of peace in

previously conflict-torn areas. Significant also are the accomplishments in so far as the

implementation of peace agreements is concerned. In fact, the government has almost

completed the reintegration programs for the returnees, and literacy and livelihood programs

for these returnees and their family, among others, remain a priority.

Healing the Wounds of EDSA 1,2 and 3

Social and economic measures were instituted to neutralize the most politically malleable

segment of the population while reforms in the military and police organization were

implemented to pacify adventurism within their ranks. These pursuits, in essence, constitute

the administration’s apparent strategy towards effecting national reconciliation and unity.

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The virtual absence of mass support for current attempts to effect an extra-constitutional

regime change may be indicative of the initial stage towards the “de-fragmentation” of the

polity. At the same time, the neutrality exemplified by military and police organizations in the

midst of these political developments suggests the changing perspective within their ranks of

their constitutional duty and the limits which bound the performance thereof. To what extent,

if ever, the administration’s programs influenced these metamorphoses of sorts is a subject ripe

for a discourse, which however is not within the scope of this undertaking.

Electricity and Water for All

Approximately 60% of barangays targeted for electrification for the period under review have

been connected to the grid. Meanwhile, programs for the provision of potable water have either

failed to take off, or under-achieved its targets. The implementation of the President’s Priority

Program on Water (P3W), for instance, has been derailed by the delay in the release of funds.

similarly, the Patubig Program has very low accomplishment rates, indicating the

government’s failure to reach a significant chunk of households badly needing potable water

supply. Of the 459,037 households identified for project coverage, only 185,390 households or

40% of the target were served.

Generation of One Million Jobs

The government generated 2.85M jobs during the period under review, exceeding its MTPDP

target of 1.6M jobs by 175%, and posting a respectable 97% achievement rate in relation to the

cumulative target of the various agencies involved in job generation which totals 2.9M. The

remaining agenda for the administration is increasing the share of more permanent

employment in its job-generation statistics.

Decongesting Metro Manila

The administration must address certain infirmities in its decongestion plan. Foremost, the

transfer of government offices to the regions – irrespective of the cost it entails – does not

appear to be a significant contributor in solving the congestion problem in Metro Manila.

Second, reliance of infrastructure facilities that connect Metro Manila with its adjoining

provinces will in the long-term lead to the spill over of the congestion problem to these areas.

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Already, statistics indicate that population growth in the regions adjoining Metro Manila is at

5.6% per annum, compared to Metro Manila’s 1%. Estimates place population in this region to

outstrip the metropolis by 2010.

Meanwhile, in the short term, the implementation of infrastructure projects to decongest Metro

Manila has been severely delayed due to, among others, slow negotiations, and certain legal

obstacles. Serious concerns regarding propriety in bidding, awards and project approvals also

seem to push up the cost of decongestion.

The bright spot in the decongestion program is the current effort of the administration to

prioritize the construction of mass transport networks that would connect Metro Manila to the

north, as exemplified by the commitment of the President to fastrack the construction of Line

7, a railway system connecting SM North, Quezon City to San Jose del Monte, Bulacan. Line 7

also adopts an intermodal approach by making San Jose del Monte the hub point of all

provincial routes from the north. Given the lower prices of real estate in the north relative to

the south, this move will make conducive the relocation of people to the regions north of the

metropolis and provide the necessary momentum in the government’s decongestion program.

There is even a possibility that the DOTC will approve the Line 1 extension which connects

Monumento to Bacoor, Cavite. In effect, these two railway projects would achieve the basic

thrust of a mass transport system - that the traveling time of a rich man going to his office

should be the same with that of a poor man going to his workplace.

Development of Subic and Clark/DMIA.

The development of Subic and Clark is intended to exploit emerging trends in the region.

Infrastructure developments in Subic are designed to enlarge the share of the Philippines in

the container traffic, while those in Clark, to facilitate tourist activity and boost local

economies.

To spread the economic advantages from these developments, the administration intends to

further connect Subic and Clark to Tarlac and therefore create a growth corridor. Towards this

end, infrastructure programs are in various stages of conceptualization or implementation.

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While some of these projects suffer delays, slippage is significantly less in magnitude compared

to other infrastructure projects in which the government is involved.

Medium to Long-Term Concerns

The performance of the government in the period under review indicates that the

fundamentals necessary to achieve a turning point are being put into place, some admittedly

more slowly than the others.

The succeeding year will expectedly test the capacity of the Arroyo presidency to overcome

more birthing pains as critical reform measures are put into place to successfully achieve an

“irreversible turning point” in the country’s history and politics. The present political tension

will undoubtedly further aggravate this burden on the President.

The clear challenge posed to the President therefore is how to resist being sidetracked by

empty political noise which hounds her administration presently, and concentrate on the more

difficult task of pursuing reforms in critical areas of the economy.

Specifically, attention must be given to the following:

Establishment of a Gaming Commission to raise funds for the government. One option is to

convert the Philippine Amusement and Gaming Corporation into a National Gaming

Commission. The idea is to consolidate the regulation of gaming - jueteng, lotto, sweepstakes,

casino, cockfighting and horseracing - under one body. It must be noted that jueteng and

cockfighting, to date, do not contribute anything to the tax base and increases the avenues for

graft and corruption. Regulating these games therefore will raise funds for the government and

curb graft. In addition, measures to impose royalty fees of at least P200B to tactical operators

who are invited to put up casinos must be studied.

Waste minimization and elimination of corruption. The MTPDP expenditure program calls for

a reduction in expenditure as a percentage of GDP from 18.8 in 2004 to 18% by 2010. It is

important that expenditure management equally focus on minimizing waste and curbing

corruption rather than across the board cuts on budget items.

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Curbing smuggling. The administration must vigorously advocate for the enactment of an Anti-

smuggling bill that will, among others, classify smuggling as a criminal offense (i.e. economic

sabotage with stiffer penalties). At present, the only penalty meted on smugglers is confiscation

of goods while smugglers get away scot-free. Penalties such as cancellation of business licenses

on permits would pose strong deterrents to smuggling. The Bureau of Customs must closely

watch and curb abuses in freeports, which have become outlets for non-payment of taxes.

Address the issue of contingent liabilities. Contingent liabilities are costs borne by the

Government if a particular event occurs, e.g. default of the debtor. Estimates place the

governments contingent liabilities at P3.1 trillion, including P1.8 trillion for unfunded

liabilities of public pension institutions, P66B for direct guarantees on loans to GOCCs and

GFI’s , P45B for guarantees on risks for BOT projects and P352B on deposit insurance. In this

regard, initiatives to immediately remove automatic guarantee provisions in the charters of

GOCCs, GFI’s as well as those automatically extended to infrastructure projects funded by

BOT must be intensified. (Estimates quoted from Improving Government Performance:

Discipline, Efficiency and Equity in Managing Public Resources, The World Bank 2003)

GOCC Reform. Reforms in the GOCCs must be spelled out and implemented soonest. This

must include the depolitization of rate setting. In 2003, monitored GOCCs accounted for 35% of

the country’s CPSD. Consolidation of agencies with related and /or overlapping functions - say

the possible merging of DBM and DOF - may be worth pursuing. GOCC’s that have been

bleeding government finances dry must be abolished.

Civil Service Reform. An honest-to-goodness reform in civil service must be undertaken.

Personal Expenditures (PE) account for about 35% of the annual national government

expenditures. For other sectors, PE is as high as 90% of sectoral budget (see for instance the

2001 budget of DECS). This is clearly untenable as it crowds out funding for Maintenance and

Other Operating Expenses (MOOE) and Capital Outlay (CO).

Permanent Employment. Support for industries that create more permanent employment, such

as the agri-business sector, must be supported.

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Sustain Financing to Education Programs. Advocacy to maintain – if not increase the

education budget, specially for classrooms construction – must be intensified. Recurring

sources of financing for scholarship programs must also be tapped to ensure their continuity.

Coordination and Support for Locally Managed Education Programs. Closer coordination and

greater support for the early childhood development program should be given. Line

government agencies namely DSWD and the Council for the Welfare of Children, who are the

main proponents of the program, could work with international children’s organizations in

extending support for these programs and the LGUs which fund and manage them.

Greater Use of New Technology for National Security. Satellite technology for easier

monitoring of our national waters – the preferred route of rebels in the transport of arms,

goods, money etc. – may be utilized.

Monitor and Review Livelihood Assistance to Re-Integrees. Government must follow through

with rebel re-integrees to ensure the efficient use of livelihood funds. The entrepreneurship

capacity of these returnees must also be improved.

Amendments to the Procurement Act. The extended bidding period established under RA 7984

has caused delays in the implementation of various infrastructure and school-building

programs. With this new law and given the existing bureaucratic red tape, full implementation

of projects ordinarily commence after almost eleven months from the time the project is

presented for the concerned government agency’s approval. In the meantime, beneficiaries of

the project suffer. Hence, legislative action should be directed at correcting this delay.

Similarly, some contractors have exploited their bidding privileges and participate in such

procedures anticipating to be bought out of the competition by serious bidders. This practice

has become prevalent and is specially resorted to by contractors who do not operate within the

project’s host region and therefore have no qualms about reneging on their contracts, knowing

fully well that they can in any case go into hiding. This practice has also been a source of

undue increases in the cost of projects. Excluding contractors who do not operate within the

project’s host region relatively ensures project completion and will eliminate the need to buy-

out non-serious bidders, bringing down therefore the cost of projects valued at 1M and below.

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Through the institution of these measures, the government would be able to consolidate its

gains and further enhance its capacity to effect changes in key sectors of the economy and in

society at large.

Rep. Danilo E. Suarez Committee Chair

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TURNING POINT: AN ASSESSMENT OF

GOVERNMENT PERFORMANCE ON THE FIRST

YEAR OF THE ARROYO PRESIDENCY

Introduction

he Arroyo presidency (2004-2010), in the words of the President herself, will be the

“irreversible turning point”1 in the country’s history. The importance of the first of this

six-year term is not lost on the legislature – it should be indicative of the President’s

resolve to alter the country’s political, economic and social trajectory.

Congress has the power and duty to review governmental performance pursuant to its implied

constitutional power of oversight.2 The exercise of this power serves the ends of democracy by

providing the necessary institutional check-and-balance, and of efficiency in government.

Pursuant to its mandate,3 the House Committee on Oversight has undertaken an assessment

and review of the government’s performance from the second semester of 2004 to the first

semester of 2005. This review process was traditionally confined to determining the

accomplishment4 of agencies that perform tasks critical to the President’s agenda.5 However,

the President’s commitment to make her term the “turning point” in our unfolding history

requires a modification of this process. Not only must Congress assess government’s yearly

performance vis-à-vis the President’s SONA commitments; it must also assess how such

performance implicate first, the government’s capacity to achieve its medium to long-term

goals as embodied in its Medium-Term Development Plan (MTPDP), and second, the country’s

position in the regional and global economy.

T

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The Committee’s current assessment therefore addresses three focal issues, viz., whether the

agencies performing tasks critical to SONA-identified objectives achieved their targets,

whether the 2004 government performance addresses the key points in the country’s medium-

term development plan, and whether such performance is comparable to that of the key players

in the region.

In addressing these issues, the Committee distilled data provided by different government

agencies and the insights of government experts, bureaucrats, and officers which were

gathered from the numerous public hearings conducted by the Committee. These data,

representing the government’s accomplishment in the period under study, and the

rationalization for such performance, were compared with the performance of the key regional

players and analyzed based on the administration’s medium to long-term goals.

Endnotes

1 State of the Nation Address of her Excellency, Gloria Macapagal-Arroyo. 26 July 2004, House of Representatives 2 Secs. 1, 21, Art. VI, 1987 Constitution 3 House Rules; Committee Rules 4 Agency accomplishment was determined based on annual targets set by the agency and approved by the DBCC. 5 As defined in her Annual SONA

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BALANCED BUDGET

Chapter Summary

The government aims to attain by 2010 – a balanced budget, a Consolidated Public Sector

Deficit at 0.3% of GDP, a Consolidated Public Sector Debt at 75% of the GDP and National

Government debt at 70% GDP.

In 2004, the National Government had an actual deficit that was P10.8B below program. This

was due largely to the over-performance of the Bureau of Treasury, whose actual income (a

non-tax revenue derived primarily from interest income from deposits and investments)

exceeded target by 58.8% or P24B. The excess was substantial to accommodate an increase in

government expenditures over program by P12.6B and cover for the Bureau of Internal

Revenue (BIR), whose collections fell short of target by P8B. The Bureau of Customs (BOC),

like the BTr, also exceeded target by P9.9B thus allowing the national government to perform

better than the deficit goal in 2004.

Probably motivated by the enactment into law of the Lateral Attrition Act in January this year,

the BIR in Jan-May 2005 exceeded collections over the same time period last year by 15%.

Moreover, the BIR posted its highest ever monthly collection of P62.9B in April and exceeded

last year’s April collection by P9.9B or 18.7%. Despite this the BIR, with actual collections of

P221.4B for Jan-May 2005 vis-à-vis a goal of P223,9B, fell short of target by P2.4B for the said

period.

The revenue collection of BOC for Jan-May 2005 fell short of target by P3.4B or a 5.7%

shortfall. BOC’s collections on new tax measures (both administrative and legislative) are

comparatively low. In fact, total collections from new measures were 54% below target.

The income of BTr on the other hand reached P28.5B from Jan-May 2005 over a target of

P16.9B or an excess or P11.6B or 68.4% over target.

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Two measures – the EVAT Law and NPC tariff adjustments – are expected to improve

government’s chances of attaining a balanced budget by 2010 and bringing down to

manageable levels the national and consolidated public sector debts stocks. EVAT proceeds

were envisioned for debt reduction based on the following schedule -- 100% in 2005, 70% in

2006, 60% in 2008 and down to 50% by 2010. The rest of the proceeds were intended to

augment capital outlay. NPC tariff adjustments and privatization meanwhile were intended to

complement the EVAT. The second adjustment in tariffs was approved recently by ERC

enabling the power sector to nearly balance its finances. Also, the privatization of the NPC is

expected to generate an estimated P24B in 2005.

The privatization of NPC and the EVAT will ensure the attainment of a fiscal surplus by 2008.

In addition, NPC’s privatization will streamline the GOCC sector. Unfortunately, EVAT

implementation has been restrained by the Supreme Court. Clearing legal obstacles to its

implementation therefore is an urgent task for the administration.

The same could be said for the resolution of the political crisis. The downgrade of the credit

outlook on the country from stable to negative by Moody’s Investor Service (which followed the

downgrade by Fitch Ratings and Standard and Poor’s) will inevitably raise the borrowing cost

of Manila. Prolonging the political crisis will exact a heavy toll on the economy and adversely

affect the country’s budget and external payments position. Given the large build-up in public

sector debts, this will increase the economy’s vulnerability to shocks.

Introduction

Since 1998, the country’s fiscal deficit has steadily grown and intensified across time and

administrations. That it has reached crisis proportion has been acknowledged by the President

herself in her State of the Nation Address (SONA) last year.

There is a fiscal or budget deficit when government spending (expenditures) exceed its

earnings (income), while a surplus exists when the opposite obtains. When government

expenditures equal earnings, the budget is balanced. Meanwhile, the sum of the deficits

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incurred by the National Government, the Government–Owned and Controlled Corporations

(GOCCs), Government Financial Institutions (GFIs), BSP, SSIs (Social Security Institutions)

and Local Government Units (LGUs) is referred to as the Consolidated Public Sector Deficit

(CPSD).

In the last 20 years, the Philippines registered budget surpluses only in 4 years: 1994, 1995,

1996 and 1997. These surpluses were mainly due to proceeds from privatization which are one-

time and non-recurring in nature. Last year, the National Government Deficit was 3.8% of the

GDP.

According to various studies, a deteriorating revenue collection effort is the major cause of the

ballooning deficit.

Persistent budget deficit results in the build up of debt. Presently, National Government debt

stock is at P3.35 Trillion (76% of GDP) and total public debt is P5.39 trillion (137% of GDP).

Debt build-up in turn increases debt servicing costs. By 2003, debt service payments accounted

for 27% of the country’s total budget. This domino-effect greatly erodes government’s ability to

create jobs, deliver social services, reduce poverty and undertake infrastructure investments.

National Government Revenue

NG revenues come from both tax and non-tax sources. Tax revenues are the most important

source of government income, accounting for 87% of total central government revenue in 1975-

1985, 82% in 1986-1991 and 86% in 1992-1996.1 The Bureau of Internal Revenue (BIR), Bureau

of Customs (BOC) and other offices (CHED, NCCA, LTO) collect these tax revenues. On the

other hand, non-tax revenues come from the income of the Bureau of Treasury (BTr) (primarily

interest on deposits and investments), fees and charges and privatization.

The central government agency primarily tasked with tax collection is the BIR. The Bureau’s

tax effort ratio, defined as the ratio of BIR collection to GDP, stood at 12.45% in 1998. It had

slid down unabated until 2002, at 9.98% before inching upward to 10.01% in 2004. In 2004,

actual total revenue was P699.8B. This is less than 3% of the NG debt stock.

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In a regional setting, our tax collection performance has been very dismal. In 1998, the

Philippines’ tax effort (tax collection as a percentage of GDP) was 15.6, second only to

Malaysia’s 16.0 and higher than Thailand’s 13.5 and Indonesia’s 10.7. Four years later in 2002,

the Philippines’ tax effort of 12.5 was the lowest of the four (04) countries with Indonesia’s

13.1, Thailand’s 14.5 and Malaysia’s 18.5

Table 1: Revenue and Tax Effort in ASEAN Countries, 1996-2002

1996 1997 1998 1999 2000 2001 2002 Total Revenue Indonesia 17.0 18.1 16.4 18.6 16.2 20.8 18.6 Malaysia 23.3 23.5 20.0 19.5 18.1 23.8 23.1 Thailand 19.5 18.6 15.5 15.4 15.2 15.1 16.1 Philippines 18.9 19.4 17.4 16.1 15.3 15.5 14.3 Tax Revenue Indonesia 14.7 16.5 10.7 10.3 9.2 12.8 13.1 Malaysia 19.4 19.8 16.0 15.1 13.8 18.4 18.5 Thailand 17.5 16.5 13.5 13.5 13.6 13.6 14.5 Philippines 16.9 17.0 15.6 14.5 13.7 13.5 12.5 Source: Fiscal Reform Agenda (Manasan(2004)

The revenue effort mirrors the tax effort performance. The Philippines’ revenue effort was 17.4

in 1998 higher than Thailand’s 15.5 and Indonesia’s 16.4 but lower than Malaysia’s 20.0. In

2002, the Philippines had the lowest revenue effort of 14.3 compared to 16.1 for Thailand, 18.6

for Indonesia and 23.1 in Malaysia.

The BIR, in a presentation to the Committee on Oversight, has cited a 2002 PIDS study which

identified the apparent source and cause of the fall of BIR’s effort ratio as Economic structure

(-7.3%), Tax policy (-46.5%) ; and Tax evasion (-46.2%).

National Government Expenditures

Unlike some of its ASEAN neighbors whose public expenditures increased in the 1990’s, the

Public expenditures of the Philippines vis-à-vis its GNP has stagnated, and is the lowest

among the four (04) countries listed below.

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Table 2: Public Expenditures as % of GNP in Selected ASEAN Countries, 1994-1999 1994 1995 1996 1997 1998 1999

Indonesia 16.6 15.1 15.0 18.5 19.3 21.7 Malaysia 24.5 23.1 22.7 20.8 23.4 24.8 Philippines 18.4 17.9 17.9 18.6 18.3 18.8 Thailand 16.5 16.0 16.8 20.7 23.5 25.9

Source: Philippines: Improving Government Performance: Discipline, Efficiency and Equity in Managing Public Resources(2003)

The pattern of stagnating, if not reduced expenditure levels as a percent of GDP – which

unfortunately appears to be the policy being pursued by the administration as gleaned from

the MTPDP – is half the problem arising from insufficient revenues. The other half is the

burgeoning share in the budget of non-discretionary expenditures. Over a 5 year period (from

1998-2003), our debt service payments have grown by over 50% due to an increase of the

national debt. From 18.6% in 1998, debt service accounted for about a third of the total budget

by 2004. In turn, Economic, Social, Defense and General Public Services suffered the cuts

ranging from 8% to 14%.

Table 3: Budget Level by Sector (1998 and 2003)

1998 2003 Economic 24.1% 20.6% Social 32.6% 28.8% Defense 5.9% 5.4% General Public Services 18.8% 17.1% Debt Service 18.6% 28.1%

Source: The Proposed 2005 National Budget, Appropriations Committee Apart from debt servicing, the enlarged share of non-discretionary expenditures in the NG

budget is accounted for by the mandatory Internal Revenue Allotment (IRA) under the 1991

Local Government Code (LGC). The LGC mandates the annual transfer from the NG to the

LGUs of an amount exceeding 10% of the total expenditures. (From 7% in 1992, IRA has grown

to 16% by 2004.)

In terms of budgetary items, government expenditures are largely concentrated on personal

services, which in 2004 captured 33% of the total budget. This limits government’s capacity to

invest in infrastructure and other capital necessary for development. A 2003 State of

Philippine Competitiveness Paper by the Asian Institute of Management, placed the

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Philippines at the lowest rung (#30) in a sample of 30 countries with population of 20 M and

above. The survey underscores the government’s incapacity to provide, among others, the basic

the technological, scientific and physical infrastructure for business.

Table 4: Budget Flexibility Margins 1992 1997 2004 Personal Services 27% 37% 33% Interest 28% 16% 32% Infra 9% 10% 6% IRA 7% 14% 16% Others 29% 23% 13%

Source: The Proposed 2005 National Budget, Appropriations Committee, HOR

The Policy Objectives

The core thrust of the government’s economic reform package is to put public finance on a

sustainable track. It aims to correct the structural defects of the tax system to arrest the

declining tax effort and put it on a growth trajectory, reverse the country’s chronic fiscal deficit

position and break the debt and deficit spiral.

The Medium Term Fiscal Program as contained in the Medium Term Philippine Development

Plan (MTPDP) intends to reduce (1) the budget deficit, (2) the ratio of the CPSD to GDP, (3) the

ratio of Public Sector Debt to GDP, (4) NG debt and (5) the ratio of expenditure to GDP. The

programmed reduction of the other items over the six year period 2004-2010, summarized in

the tables below(with the exception of the ratio of expenditure to GDP), was prepared by the

Department of Finance. (The reduction in expenditure to GDP is clearly spelled out in the

MTPDP.)

1. Balance the National Government budget in six (6) years;

Table 5: Programmed Reduction of the Budget 2003 2004 2005 2006 2007 2008 2009 2010 Deficit 199.9 197.8 180.0 160.0 127.0 79.0 14.0 0 % of GDP 4.7 3.8 3.4 2.7 2.0 1.1 0.2 0

Assumptions on the baseline figures: (1) Sin Taxes– P15B and (2) Admin measures --P20B

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2. Reduce the ratio of the Consolidated Public Sector Deficit(CPSD) to GDP from 6.8% to

3% for the same period;

Table 6: Programmed Reduction of the CPSD 2003 2004 2005 2006 2007 2008 2009 2010 Deficit 199.9 197.8 204 168 103 58 12 +25 % of GDP 4.7 3.8 3.8 2.7 1.5 0.8 0.1 +0.3

Assumptions on the baseline figures: (1) Sin Tax – P15B; (2) Admin measures -P20B; and (3) First Round of Napocor Tariff increase(increase of 98 centavos per kwh resulting in P29.4B in additional revenues)

3. Reduce the ratio of Public Sector Debt to GDP from 136.5% in 2003 to 75% by 2010

Table 7: Consolidated Public Sector Financial Position(2005-2010) 2005 2006 2007 2008 2009 2010 Consolidated Public Sector Debt as % of GDP

93.9%

89.4%

85.4%

82.0%

78.3%

74.8%

Assumptions: (1)VAT at P83.85B effective July 2005 (2) Baseline scenario includes P15B sin taxes and P5B, petroleum import duty and 1st round ERC approved NPC tariff increase (3) Emerging scenario includes NPC 2nd round tariff adjustment of P6B annually effective May 2005 and P3.1 additional GOCC’s deficit due to El Nino projects

4. Reduce NG debt from 95% in 2004 to 70% in 2010

Table 8: National Government Debt (Preliminary) In Billion Pesos

2005 2006 2007 2008 2009 2010 NG Debt(baseline) % to GDP

4,353 81.7

4,679 80.3

5,010 78.6

5,243 76.0

5,457 73.3

5,707 71.2

NG Debt(revised)* % to GDP

4,216 77.7

4,359 71.1

4,405 65.2

4,347 58.2

4,259 51.5

4,168 45.5

Debt reduction/capital outlay

100-0

70-30

65-35

60-40

55-45

50-50

*Assumptions: Baseline with EVAT and NPC privatization

5. Reduce Expenditure-to-GDP ratio from 18.8% to 18% Table 9: Expenditure to GDP Ratio

2004 2005 2006 2007 2008 2009 2010 18.8% 19.8% 19.5% 18.7% 18.6% 18.0 18.0 Source: MTPDP 2004-2010 Assumption: With legislative and administrative measures

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Action Plan

The strategy for the attainment of sustainable fiscal reforms is anchored on several pillars with

parallel efforts on prudent management of expenditures and of the liability portfolio. It consists

of the following initiatives:

1. Legislative Measures to generate revenues and correct structural defects in the tax

system. This includes: indexation of sin taxes, lateral attrition, adoption of Gross

Income Taxation, rationalization of fiscal incentives, general tax amnesty with the

submission of SAL, imposition of tax on telecommunication companies, two-step

increase in the E-VAT rate and increase in road users tax.

2. Tax administration reforms designed to plug the leakages and enhance tax capture and

consequently to enhance tax collection efficiency. For BIR, this involves the use of

presumptive income levels to non-wage income earners (expansion of withholding

system to professionals/traders, benchmarking), institutionalization of on-going

procedural/systems reform (including use of third party information, tax payer

benchmarking), computerization/automation of operating systems and enhancement of

audit programs. For BOC, this consists of measures to strengthen anti-smuggling,

internal audit service (including the purchase of container x-rays for ports), and

modernization of information systems.

3. Key Sector Reforms and Privatization. The action plan calls for enhancing the

regulatory environment of key economic sectors particularly the power sector and

relentlessly pursue the privatization of the National Power Corporation (NPC), San

Miguel shares, PNB, PNOC-EDC and other real estate assets. The sale of NPC’s

generation assets and the Transco concession is on the top of the list of non-tax revenue

generating measures and is likely to bring in $4-5B hopefully putting an end to the

financial drain cause by NPC’s huge deficit.

4. Improved Management of GOCCs. Strong reforms in the management of GOCCs are

being pushed because of their huge contribution to the poor fiscal picture. These reforms

include: (1) expanded monitoring of their performance and reinstitution of GOCC

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performance contracts and (2) appropriate reforms in Social Security Institutions (SSIs)

and GFIs to reduce risk exposure. On the former, the approach includes, depoliticizing

pricing policies and increasing private sector role particularly in the water and rail

transport, hastening the implementation of the GFI -- profitability enhancing programs,

[which includes the disposal of non performing loans (NPLs) and development of new

products and stronger lending policies]. On the latter, financial sustainability of the

SSIs and GFIs is being ensured through appropriate pricing and closer performance

monitoring.

5. Prudent Management of Expenditures. The action plan for expenditures seeks to (1)

rationalize the bureaucracy by focusing on vital/core/functions and improve service

delivery, (2) address governance and structural dysfunctions and (3) improve viability of

GOCCs. It also calls for the passage of a Fiscal Responsibility Bill (which imposes a cap

on debt and the formulation of a 3 year Executive-Legislative Medium Term Fiscal

Accord), the implementation of expenditure Management Reforms (through the recovery

of the cost of delivering public goods and services, and shifting focus on

outputs/outcomes of service delivery rather than bargaining over inputs), full roll-out of

the new payment scheme for all government agencies and roll-out of the E-budget.

6. Improve liability portfolio. For a more prudent management of our liability exposure,

initiatives, to lengthen maturity profile, pursue innovative financing structures to

reduce borrowing cost, diversify currency mix and optimize ODS financing- will be

pursued.

Accomplishments

NG Fiscal Position

In 2004, the national government was able to maintain its fiscal deficit below its goal. With a

program deficit of P197.8B, actual National Government deficit was only P187B, or P10.8B

below program. This was due largely to the Bureau of Treasury which earned for the

government P64.7B. This income – a non-tax revenue consisting of interest income from

deposits and securities – is P24B or 58.8% in excess of its P40.7B programmed income. So

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substantial was BTr’s income that despite the fact that BIR missed its target, and the further

fact that government actually increased expenditures by P12.6B, the deficit still fell below

program.

Tax-wise, revenue performance for the year has had mixed results. The BIR fell short of target

by P8B, with its’ actual collection of P468B against the P476B program, while BOC exceeded

its target by P9.9B, with actual collections of P122B against its P112.6B target.

In the first 5 months of 2005 (Jan-May), the NG registered a deficit level of P67.7B vis-à-vis a

program of P86.7B. Again, it performed better than the deficit goal by P18.9B or 21.8%, due

mainly to the performance of the BTr (which exceeded its target by P11.6B or 68.4%). Both the

BIR and BOC missed their targets contributing to a tax revenue shortfall of P5.8B.

Table 10: NG Fiscal Position

Million Pesos 2004 Jan-May 2005

2004 (Full Year) Jan-May 2005 Program Actual Variance Program Actual Variance

Revenues 676,412 699,768 23,356 321,007 322,347 1,340 Tax Revenues

596,408 598,014 1,606 286,396 280,693 (5,703)

BIR 476,306 468,177 (8,129) 223,875 221,421 (2,454) BOC 112,580 122,471 9,891 59,242 55,831 (3,411) Others 7,522 7,366 (156) 3,279 3,441 162 Non-Tax 80,004 101,680 21,676 34,611 41,654 7,043 BTr 40,735 64,690 23,955 16,964 28,569 11,605 Others 39,269 36,990 (2,279) 17,647 13,054 (4,598) Grants 0 74 74 0 31 31 Expenditures 874,227 886,825 12,598 407,691 390,104 (17,587) Surplus/(Deficit) (197,815) (187,057) 10,758 (86,684) (67,757) 18,927

Source: Department of Finance

Bureau of Internal Revenue (BIR). In 2004, the BIR had actual collections of only P468B, P8B

short of the goal of P476B. During the Jan-May period in 2005, BIR only collected P221.4B,

P2.45B short of its P223.9B. The shortfall is evident in taxes on net income (-P2.48B), Value

added taxes (-P5.9B) and other taxes (-P1.2B), as shown by the table below.

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Table 11: Comparative Internal Revenue Collections and Goals. January-May 2005-2004

In Million Pesos TAX CLASSIFICATION Collection Goal Variance % Total P221,420.02 P 223, 874.96 (2,454.93) (1.13) Taxes on Net Income and Profit

P137,123.81 P139,602.51 (2,478.70) (1.78)

Excise Taxes P24,842.27 P21,339.02 3,503.25 16.42 Value Added Taxes P33,097.20 P39,069.98 (5,972.79) (15.29) Other Percentage Taxes P16,124.69 P12,414.17 3,710.52 29.89 Other Taxes P10,232.06 P11,449.28 (1,217.22) (10.63)

Source: BIR

Despite the shortfall vis-à-vis the over-all target, the BIR registered surplus collections in

excise tax and other percentage taxes, in the amount of P3.5B and P3.7B, respectively.

Moreover, its collection in Jan-May 2005 is 15% greater than its collection for the same period

last year. With the exception of VAT, increased collections during this period were evident in

net income and profits (19.19%), excise tax (2.13%), other percentage tax (5.72%) and other

taxes (1.70) (see Annex 3). The improved performance in these areas has been achieved after

the signing of the Lateral Attrition Act into law in January 2005.

To achieve its targets for the year and in the medium term, BIR must improve its tax

administration to achieve incremental increases in collection. It has so far committed to

implement the following administrative measures: (1) Third Party Information RELIEF

System; (2) Expansion of Automated Services -EFPS; (3) Tax Compliance Verification Drive

(TCVD) using mobile technology in Tax Mapping Computerization; (4) Special Projects on

select industries; and (5) Special projects on professionals.

To date, the BIR has filed tax evasion and smuggling cases. It has filed 18 cases as a result of

lifestyle checks through RIPS (Revenue Integrity Protection Service) and as of June, 16, 2005,

23 RATE (Ran After Tax Evaders) cases were filed with DOJ (Annex 4). It has also

implemented the Tax Payers Compliance Verification Drive (TCVD) two (02) years ago with

the objective of improving “taxpayer compliance.” After the first 8 months of TCVD, the

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percentage of establishments with violations to total establishments decreased by 16

percentage points. To date, decrease in non-compliance is 23.5 percentage points.

Table 12: Taxpayers Compliance Verification Drive(TCVD) 2003-2005

As of May 2003

As of Dec 2003

As of Dec 2004

Jan-Apr 2005

Establishments visited

30,520 221,193 401,841 426,962

Establishments with violations

28,528

171,353 287,857 301,010

Percentage of establishments w/ violation to total establishment visited

93.5% 77.5 %

71.03% 70.50%

Source: BIR

Bureau of Customs (BOC). The BOC in 2004 exceeded its target by P9.8B. It’s actual collection

was P122.4B vis-à-vis a target of P112.5B. In 2005, the target was raised to P151.18B,

representing a 34.3% increase. From the total 2005 target P151.18B, P134.95B will be sourced

from existing measures and P16.24B is expected to be generated from the new revenue

measures.

The BOC is relying on new revenue measures for 2005. These are EO 336 (on tariff

adjustments signed in July 23, 2004 which raised import duty on crude petroleum oils and

refined petroleum products starting 2005) and excise taxes on cigarettes, alcohol and motor

vehicles. It is also committed to implement administrative measures that will improve

assessment and collection, increase law enforcement efforts, strengthen internal audit, expand

super green lane, and expand computerization.

The over-all performance of the BOC from January to May 2005 is worrisome. Its actual

collection of P55.8B, while 11.3% higher than that of last year, actually fell P3.4B or 5.8% short

of its P59.2B goal. Apparently, both the administrative and legislative measures put in place

failed to boost its collections. In fact, collections pursuant to its administrative measures fell

short of target by 88%, totaling only P171M compared to a target of P1.4B. Collections

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pursuant to the legislative measures are also short by 88% (for excise tax on cigarettes) and

82% (for alcohol).

Table 13: Collections from New Measures January-May 2005

In Million Pesos DEVIATION TARGET ACTUAL AMOUNT % Administrative Measures 1,371 171 (1,200) -88% Additional Duty on EO 336 1,959 2,199 240 12% Legislative Measures: Excise tax on Cigarettes

1,136 140 (996) -88%

Excise Tax on Alcohol

1,803 333 (1,470) -82%

Excise Tax on Motor Vehicles

92 106 14 15%

Total 6,362 2,941 (3,413) -54% Source: BOC

The anemic collection from the new revenue measures must be offset through beefed up

operations, e.g. curtail smuggling at all costs, otherwise BOC will never be able to offset its

dismal performance, much less reach its target.

DBM (Disbursement Performance). In 2004, government exceeded its programmed spending by

about P12.6B. The additional disbursements were due to:

(1) Additional subsidies to GOCC’s in the social services and utilities sector(P3.1B);

(2) Higher requirements for the conduct of elections (higher per diems for personnel

involved in the electoral exercise) P2.4B;

(3) Higher repayments on advances for agrarian reform landowners’ compensation made

by LBP (P3B);

(4) Larger payments for pensions and retirement benefits of policemen (P1.4B);

(5) Accelerated capital spending made possible by the adoption of a new payment scheme in

DPWH; and,

(6) Settlement of accounts payable to normalize the lag to at most 2 months for the public

works projects and 1 month in the case of the rest (P 18.4B)

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Increased spending however did not affect the deficit outturn due to the surplus in revenue

collection.

The disbursements for Jan-April 2005 of P315.6B reflect an increase of 7.6% or P22.4B over the

corresponding P293.1B level last year. This represents 65.5 per cent of the first semester

disbursement program. This is accounted for by:

(1) 22.6% or P21B increase in interest payments (including P8B for NPC debt assumed

by the NG starting December 31, 2004);

(2) 7.9% increase in personal services due to productivity incentive given in February,

payment of retirement gratuities of policemen and soldiers, increase in the number

of pensioners, and the funding requirements for teaching positions created in 2004;

and

(3) Internal Revenue Allotment(IRA) by virtue of the Local Government Code and prior

year’s claim for RA 7171 in the Virginia tobacco producing provinces.

Legislative Measures

Eight (08) measures have been identified as essential for the attainment of a balanced budget.

To date, three (03) of these have been enacted into law. These are RA 9334 on the Indexation of

Excise Tax in tobacco and liquor; RA 9335 or the Lateral Attrition Law; and RA 9337 on

Restructuring of the VAT System.

The Sin Tax and E-VAT Laws are measures designed to reform the tax structure. The former is

expected to bring in P15B in 2005 while the latter has a half-year impact of P19.8B at 70%

collection efficiency. In succeeding years, the E-VAT is projected to realize revenues to the tune

of P83.9B (2006), P84.7B (2007), P97.4B (2008), P58.5B (2009) and P57.2B (2010). E-VAT

proceeds will be used for debt reduction based on the following schedule: 100% in 2005, 70% in

2006, 65% in 2007, 60% in 2008, 55% in 2009 and 50% in 2010. Proceeds net of those allocated

for debt reduction will be used for capital outlay.

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Table 14: Status Report on Legislative Measures on Revenue Generation STRATEGIES ACTIVITIES STATUS Incremental Revenue

Indexation of sin taxes;

Indexation of Excise Tax on tobacco and liquor or RA 9334 was signed into law on December 20, 2004

In 2005, P15B and P29.48B from 2005-011 Cigarettes- P15.79B Fermented Liquor – P11.50B Distilled Spirits - P2.19B

Optimum performance in revenue collection through grants of special incentives and Lateral Attrition;

Lateral Attrition Law (RA 9335)was signed into law on January 25, 2005

The “fear factor” engendered by the measure is expected to raise significant increments in revenue collection2

Two step increase in the EVAT rate;

Restructuring of the VAT System(RA 9337) was signed into law on May 2005

P28-P31B in 2005. Thereafter, P97 to 105B

Rationalization of Fiscal Incentives

HB 3295 was approved on Third Reading , HOR, on 17 January 2005

BOI estimated a revenue savings of about P4.8B.

Grant general amnesty with submission of statement of assets, liabilities and and networth(SALN)

HB 2933 was approved on Third Reading on 14 December 2004; SB 1325 of Sen. Recto is pending with the Committee on Ways and Means

P16B

Imposition of tax on telecom-munication companies;

Pending House Committee on Ways and Means

Gross Income Taxation;

Pending House Committee on Ways and Means

Increase the road user’s tax; and

1. Legislation of new tax measures to generate revenues and correct structural defects

Expansion of the coverage of luxury goods

Approved Committee level

P143-160M

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Administrative Measures Several administrative measures have been implemented by government agencies. In the

medium term, incremental increases in government revenues will largely rely on the effective

implementation of these measures. Some of these are:

1. Austerity Program (Applicable to all Government Agencies and Instrumentalities). The

government’s austerity program has been implemented via (a) Administrative Order

(AO) No. 103; and (2) AO No. 117. AO 103, issued August 31, 2004, which generated an

estimated savings of P3.5B.(Annex 5) Among the measures adopted were the following:

suspension of selected expenditure items such as travels (foreign and local), purchase of

motor vehicles and advertisements; reduction by at least 10% of services of non-

permanent (e.g. consultants); suspension of tax expenditure subsidies; adoption of a

scheme for non-cash compensation of overtime services rendered; strict prioritization of

capital expenditures and realignment or use of savings to fund capital programs under

the 10-pt. agenda; and strict compliance with the Government Procurement Reform Act.

Administrative Order 117 called for government offices to implement a four-day work

week in April and May resulting in an estimated savings of P144M due to savings in

government electricity and fuel consumption.

2. Incremental Cash Flows. The government expects to generate P17.36B in 2005 from

privatization of GENCOs/Transco (PSALM); P1.83B from the sale of Malampaya;3 and

payments from the sale of the Masinloc plant.4.

3. Fees and Charges. Fees and Charges are significant sources of alternative revenue

(other than taxation). EO 197, S. 2000 and EO 218, S. 2000 directed all government

agencies to increase their fees and charges by not less than 20%. To date, there is 67%

compliance rate for EO 197. Collection from fees and charges reached P19.5B in

2004.(Annex 6)

Table 15: Non-tax Administrative Measure Increase in Fees and Charges

No. of NGAs collecting fees and charges 132 No. of NGAs which complied with EO 197(Jan 15, 2000)

CY 2000 CY 2001 CY 2002-2004

44 35 9

88

% of Compliance 67%

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Conclusion

While the National Government has been posting deficit levels that are below goals in 2004

and in the 1st half of 2005, the efforts largely fell on the shoulders of the Bureau of Treasury.

Our two prime revenue collection agencies, namely the BIR and BOC, have to flex more muscle

to attain their revenue targets. The BOC in the 1st half this year had a 54% actual collection

rate on new measures vis-à-vis targets. The BIR, which showed a great collection performance

in April this year, still fell short of its target.

On fees and charges, the compliance rate of national government agencies on EO 197

(increasing fees and charges) is only 67%. There is still room to navigate and exact better

compliance for increased collection.

The baseline scenario used in the computation of the program reduction of deficits and debts

over the years 2004 up to 2010 depends so much on the sin taxes of P15B. The administrative

measures of P20B and the 1st round of NPC tariff increase. The emerging scenario includes the

second round of tariff adjustment. Also crucial in the whole simulation exercise is the

privatization of NPC. The EVAT and NPC privatization will accelerate the achievement of a

fiscal surplus.

The achievement of our policy objectives rely on the team effort of all revenue collection

agencies. Failure to meet the assumptions (namely, assumed revenues from each measure)

spelled out in each policy objective attenuates the government’s whole fiscal program.

Finally, it is in the interest of the country that the Temporary Restraining Order (TRO) on the

EVAT is lifted immediately and the political turmoil resolved soonest. The recent credit

downgrade from stable to negative on the outlook on the Philippines by Moody’s Investor

Service – the third downgrade in three days, after Fitch Ratings and Standard & Poor’s --

translates to higher borrowing costs for Manila. The current situation does not jive with the

assumptions on key macroeconomic variables used in our fiscal program . If things worsen, it

would be very difficult to arrest the downturn.

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Annexes

Table 16: (Annex 1) The Bureau’s Tax Effort Ratio Source and Cause of Its Fall • 1997-2002

Economic Structure

Tax Policy Increased Evasion

BIR -7.3% -46.5% -46.2% Excise Tax -20% -70% -10% Income Tax 0.0% -50% -50% VAT 0.0% 0.0% -100% PIDS 2003

Table 17 (Annex 2): . E-VAT Impact on the CPSD (Preliminary)

In Billion Pesos 2005 2006 2007 2008 2009 2010 Surplus/(Deficit)* VAT Incremental IRA

(203.9) 19.8

(168.1) 58.7

(103.2) 55.0

(57.6) 58.5

11.7 32.2 (22.0)

24.9 28.6 (22.2)

Emerging CPSD Before NPC Tariff Adjustments

(184.1)

(109.4)

(48.2)

0.9

21.9

31.3

2nd Round NPC Tariff Adjustments

3.1

6.4

6.4

6.4

6.4

6.4

Emerging Surplus/(Deficit)

(181.0) (103.0) (41.8) 7.3 28.3 37.7

CPSD to GDP(%) (3.3) (1.7) (10.6) 0.1 0.3 0.4 Assumptions: (1) EVAT (2)Second adjustment recently approved by ERC (3)NPC privatization – P24B in 2005

Table 18 (Annex 3): Comparative BIR Collection, By Type of Taxes January-May, 2005 vs. 2004

In billions 2005

2005 Per cent

growth Variance

BIR 221.5 193.2 14.6 28.17 Net Income and Profits 137.1 117.9 16.3 19.19 Value Added Tax 33.1 33.7 -1.7 -0.57 Excise Tax 24.8 22.7 9.4 2.13 Other percentage taxes 16.1 10.4 55.0 5.72 Other taxes 10.2 8.5 19.9 1.70

Source: BIR

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Table 19 (Annex 4): RATE cases Filed with DOJ

As of June 16, 2005 Name of Tax Payer Date Filed 1 Mendez Medical Group March 10, 2005 2 Fitness by Design March 10, 2005 3 MGen. Carlos Garcia, et al March 17, 2005 4 Paul Asi Taulava March 17, 2005 5 Excellance Weaving Mills March 31, 2005 6 PT and T March 31, 2005 7 ITALCAR Philippines Inc. Apr 7, 2005 8 Ramon Herrera Apr 7, 2005 9 Richard Gomez April 14, 2005 10 Edgardo and Ms. Isabel Yambao April 14, 2005 11 Regine Velasquez Apr 21, 2005 12 Columbia Sports Phils. Inc. Apr 28, 2005 13 Harte Beets Entertainment Corp. May 5, 2005 14 Eliseo Co May 12, 2005 15 College Assurance Plans Inc. May 12, 2005 16 Comprehensive Annuity Plans and Pension

Group May 12, 2005

17 Judy Anne Santos May 19, 2005 18 Nitoka Industrial Corp. May 25, 2005 19 Chiatsing Cardboard Corp. May 25, 2005 20 Gloria F. Tayuy June 3, 2005 21 Benjamin and Gloria Kintanar June 3, 2005 22 Pine River International Corporation June 9, 2005 23 DHY Realty and Development Inc. June 16, 2005

Source: BIR

Table 20 (Annex 5): Report of Compliance with AO 103 As of November 25, 2004

Department Amount 1. DPWH 90,245,780 2. DTI 21,083,610 3. DILG 11,314,000 4. DOT 12,312,875 5. NEDA 4,530,000 6. DAR 6,603,519 7. DOTC 14,781,122 8. DOST 6,323,000 9. DND 27,447,000 10. DOE 4,346,126 11. DA 1,786,096

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12. DOJ 3,490,000 13. DOLE 5,440,000 14. DFA 510,000 15. DepEd 980,000 16. DSWD 2,770,000 17. OPS 470,000 18. DOF 4,010,000 19. DOH 500,000 20. CONGRESS 50,000,000 21.OEO’s 41,605,000 Sub-Total(NGAs) 310,548,128 GOCCs(36) 3,161,130,000 Grand Total(NGAs, GOCCs) 3,471,678,128

Source: PMS Report on the 10 point Agenda

Table 21 (Annex 6): Collection from Fees and Charges (In Millions)

TOTAL P85,582 Per Year 2000 14,786 2001 13,780 2002 18,807 2003 18,634 2004 19,575

Estimated annual incremental yield from pending revisions

P4,379

Source: PMS Report on the 10 Point Agenda

Endnotes 1 Manasan. Fiscal Reform Agenda: Getting Ready for the Bu,py Ride Ahead. Paper presented in the Legislative Agenda Planning Conference (September 23, 2004) 2 Conservative estimates place incremental revenue at P5-10B 3 Proceeds have been remitted to BTr since 2002 and it amounted to P1.631B in 2004 4 The Masinloc plant was sold at US$561.74M. The government shall receive a 40% (US$222.8B) downpayment from the winning bidder, YNN Pacific Consortium Inc., upon Financial Closing, which is dependent on a number of conditions precedent, including the Creditors” consent. The balance will be paid in the next 7 years, using a deferred payment facility at 12% interest rate

EDUCATION FOR ALL

Chapter Summary

The number of classrooms constructed during the period (10,765) exceeded the Medium Term

Philippine Development Plan (MTPDP) target of 7,422. However, more than half of this

number is accounted for by school building projects financed under Congressional initiatives

and Priority Development Assistance Fund (PDAF) which have not been included in the setting

of the MTPD target. If classroom targets under these programs are included, the government’s

accomplishment rate is only 65%.

Using this revised target, the total number of classrooms to be built should be 16,602. Of this,

6,915 and 9,687 classrooms are to be constructed under the regular school building programs

and other school building programs, respectively. Based on these targets, government

accomplishment is only 48% under the regular school building program and 77% under other

school building programs.

Meanwhile, the government’s scholarship programs suffer from dissipation of funds and have

no immediate source of financing. The sustainability of these programs is therefore seriously in

doubt.

Finally, new programs established by the administration to fine-tune curricula to the

information society as well as to bridge the educational gap, such as the childhood education

program, confront serious problems in funding. The government’s program to link barangays

and schools into an information network for instance is undermined by shortage in computers.

In fact, the seemingly wider coverage of the government’s computerization program has been

achieved by decreasing the number of computer units being delivered to public schools,

resulting in very limited access and high usage density. Meanwhile, upgrading the skills of

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teachers for the government’s early childhood education program further crowds out the

already limited budget for basic education.

Background

The provision of education is a constitutional priority. Funding for the sector therefore has

always been preferred over others.

In the past 5 years, the budget for education has been on a mild seesaw, recording a decline in

2001, followed by a big 17% increase the following year. Budget for the schoolbuilding program

has remained steady at P2 B annually until this year when it was cut by half to P1 B.

Table 22: Department of Education Annual Budget In Million Pesos

Particulars 2001 2002 2003 2004 2003 Total Appropriation 82,994.82 97,290.94 98,306.74 101,242.91 103,629.59 a. Programs 79,288.01 92,907.40 93,957.63 96,770.17 99,208.48 b. Projects 1,655.34 2,352.04 2,320.91 2,425.53 3,375.50 c. School-Building Program

2,000.00 2,000.00 2,000.00 2,000.00 1,000.00

d. Attached Agencies

51.48 31.50 28.19 47.23 45.61

Automatic Appropriation

6,618.62 8,005.98 8,174.42 8,277.05 8,412.96

Total Obligations 89,613.44 105,296.92 106,481.15 109,519.97 112,042.54 Growth YoY (Appropriation)

-1.91 17.50 1.12 1.85 2.30

Source: DepEd

However, the country’s population growth – at 2.3% per year – outstrips the rate of increase in

the budget of the education sector. As a result, the country’s public expenditure per student (as

a % of GDP per capita) is among the lowest in Asia: expenditure per student in the primarily

level is the 4th lowest in the region; in secondary education, the 3rd lowest; and in tertiary,

second to the lowest.

In terms of primary pupil-teacher ratio, the country has among the highest at 35:1. See table

below for details.

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Table 23: Comparative Basic Statistics in Selected Asian Countries, 2001-2002 Public Expenditure per Student

% of GDP per capita Country

Primary Secondary Tertiary

Primary Pupil-Teacher Ratio

Cambodia 7.4 6.2 42.0 56 India 13.7 23.0 85.8 40 Indonesia 3.7 7.3 21.0 21 Japan 21.4 21.0 17.2 20 Korea, Rep. 18.4 16.8 7.4 32 Lao PDR 9.1 10.2 94.5 30 Malaysia 17.0 27.5 83.5 20 Thailand 15.9 13.0 31.0 19 Philippines 11.8 9.4 13.9 35 Source: 2004 World Development Indicators

Given the very constrained resources available for the sector, greater efficiency in the

utilization of these funds becomes an imperative.

The Administration’s Program for Education

Under the MTPDP 2004-2010, government is approaching the education sector on 4 fronts, as

follows: (1) a school building program designed to address the perennial classroom shortage, (2)

a scholarship/subsidy program for poor students intending to pursue education or training

beyond the primary and secondary schools; (3) schools’ computerization and information

technology (IT) literacy project; and (4) an early childhood development program.

Classroom/School Building Program

The Philippine education system has been hounded for years by the inadequacy of

infrastructure facilities conducive for learning. As a consequence, ‘classes under trees,’

oversized classes of 80 to 100 students, 3-shift class-days which start at sunrise and end at

dusk are but some of the features of the country’s educational system. The enormous backlog in

classrooms has forced these unorthodox methods upon the Department of Education (DepEd) if

only to salvage the Filipino youth from illiteracy.

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The Arroyo presidency promised “a school in every barangay” to ensure that children do not

have to walk several kilometers just to go to school. The promise was also meant to address the

shortage of classrooms in the country which, as the table below shows, is acute and cuts across

regions:

Table 24: Classroom Shortage by Region, SY 2003-2004 Region Classroom Shortage

I 379 II 885 III 601 IV – A 1,193 IV - B 983 V 1,370 VI 880 VII 1,166 VIII 1,504 IX 1,029 X 862 XI 622 XII 872 CARAGA 804 ARMM 1,029 CAR 352 NCR 1,149 Grand Total 15,680 Source: MTPDP 2004-2010, Annex 18

The remedy proposed by the administration adopts a two-pronged approach: first, construction

of 3,000 school buildings or 6,000 classrooms per year and second, provision of additional

50,000 Educational Service Contracting Program (ESP) vouchers annually, starting 2005

under the Government Assistance to Students and Teachers in Private Education (GASTPE)

Program. These approaches form part of the administration’s “Education for All” Agenda which

will be implemented between now and 2010.

School-building Program

Accomplishment under the school building program is as follows:

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Table 25: Status of Classroom Construction

July 2004 – May 2005 Particulars Planned Actual % of Accomp

1. Regular School Building Program

DPWH, 2004 4,211 3,197 76 DPWH, 2004 2,704 138 5 2. DepEd FAP’s a. Third Elem Ed Project (TEEP)

1,527 1,019 67

b. Social Exp Mgt Proj II (SEMP II)

355 255 72

3. Other SBP, 2005 a. CGMA 315 137 43 b. DTI-NDC 183 183 100 c.1 Congressional Initiative (PDAF for CY 2003)

4,033 3,779 94

c.2 Congressional Initiative (PDAF for CY 2004)

1,100 827 75

c.3 PDAF of Sen. Drilon (remaining projects)

580 430 74

d. FFCCCII 452 452 100 e. Adopt-a-School 157 10 6 f.1 CY 2003 SONA School-less Bgys

319 260 82

f.2 CY 2004 SONA School-less Bgys

264 78 30

Total Planned RSBP 6,915 3,335 48 Total Planned, Other SBP 9,687 7,430 77 Grand Total 16,602 10,765 65

Source: DepEd, as of May 15, 2005

Classrooms constructed. 10,765 classrooms were constructed during the period, exceeding the

target of 7,422 under the MTPDP. However, more than half of this number is accounted for by

school building projects financed under Congressional initiatives and Priority Development

Assistance Fund (PDAF) which have not been included in the setting of the MTPD target. If

classroom targets under these programs are included, the government’s accomplishment rate is

only 65%.

Using this revised target, the total number of classrooms to be built should be 16,602. Of this,

6,915 and 9,687 classrooms are to be constructed under the regular school building programs

and other school building programs, respectively. Based on these targets, government

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accomplishment is only 48% under the regular school building program and 77% under other

school building programs.

Construction Period. The administration’s under-accomplishment in its school-building project

can be traced to, inter alia, unreasonable delays in the release of construction funds. On the

average, DBM takes about nine (09) months to release the budget for PDAF projects.

Construction Cost. For SY 2005-2006, a 2-classroom school building has a project cost of

P418,000. This is projected to increase to P436,810 in SY 2006-2007 and P449,914 in SY 2007-

2008. This translates to P1.25 B for this year and P1.31 B next school year. This means

government will be increasingly required to put more resources into the construction of school

buildings alone.

Educational Service Contracting (ESC) under Government Assistance to Students and Teachers in Private Education (GASTPE)

The government has also implemented the ESC under the GASTPE to address the classroom

shortage. Under this program, 50,000 additional slots in private high schools are allotted by

the DepEd for high school students who cannot be accommodated in public high schools.

Through this program, the DepEd intends to reduce classroom shortage in secondary schools

from 3,203 in SY 3005-96 to 1,150 in SY 2006-07, and to eliminate the gap in 2007-08, as

summarized in the table below:

Table 26: Number of Classrooms Programmed for Building SCHOOL YEAR 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Enrolment 17,362,093 17,652,992 17,987,991 18,350,080 18,733,112 19,136,921 Shortage at beg of SY 17,873 8,684 3,203 1,150 0 0 Class size 50 50 50 50 50 50 Requirements due to enrolment increment

3,233 3,515 4,438 4,499 4,509 4,955

Classrooms to be provided 7,422 7,996 5,491 4,875 4,746 4,490 Regular SBP 5,000 4,785 4,579 4,445 4,316 4,190 FAPS (TEEP and SEDIP) 1,901 2,112 496 0 0 0 Other SBPs 521 1,099 416 430 430 300 Expansion of GASTPE-ESC 1,000 1,000 1,000 1,000 1,000 Shortage at end of SY (@ 2 shifts)

8,684 3,203 1,150 0 0 0

Inflation rate 4.5% 4.5% 3.0% 3.0% 3.0% Cost per classroom (P) 400,000 418,000 436,810 449,914 463,411 477,313

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Funding Reqt, Regular SBP (P’mn)

2,000.00 2,000.13 2,000.15 1,999.87 2,000.08 1,999.94

Funding requirement for the remaining shortage at the end of SY (P’mn)

3,473.6 0.0 0.0 0.0 0.0 0.0

Source: MTPDP 2004-2010, Table 18-5, p.201

Based on 6-year program (2004-2010), DepEd will actually need to construct only 5,491; 4,875;

4,746; and 4,490 classrooms for the years 2006 – 2010, respectively, considerably less than the

6,000 annual target for the same period because of the complementary GASTPE program.

(DepEd’s figures already take into consideration the projected enrolment increment per year.)

Under the expanded GASTPE, the government spends about P200 M per year by giving each

student an annual subsidy of P4,000. This amount is the same as the budget for the

construction of approximately 1,000 classrooms that would have been required to accommodate

the students under the program in public schools. From this standpoint therefore, government

should be indifferent between subsidy costs under the program and construction costs for

classrooms. The program however allows the government to save on benefits and other costs

which would have been borne in the hiring of additional teachers to accommodate the

increasing enrollment in the public schools system. Moreover, GASTPE also enables

government to help private schools with low enrollment population.

Scholarship Program

The scholarship programs are intended for poor but deserving students who want to pursue

college or technical/vocational degrees after high school. The government has three (03) major

scholarship programs: the Student Financial Assistance Program (SAFE 4 SR) supervised by

the Commission on Higher Education (CHEd); the Iskolar ng Mahirap na Pamilya (IMP)

supervised by both the CHEd and the Technical Education and Skills Development Authority

(TESDA); and the Technical Vocational Education and Training (TVET) solely administered by

TESDA.

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CHEd Student Financial Assistance Program for a Strong Republic (SAFE 4 SR) Scholarship Program

SAFE 4 SR is a study now, pay later scholarship scheme under CHEd.1 It supports 3rd or 4th

year graduating college students. Loan amounts range from P4,000 to as much as P8,000 per

semester per student. The seed money for the program of P100M was put up by the Philippine

Amusement and Gaming Corporation (PAGCOR) and Philippine Charities Sweepstakes Office

(PCSO).

Table 27: Summary of Availments and Disbursements SY 2003-2006

School Year (SY) Grantees Disbursement 2003-04 31,300 200,000,000 2004-05 17,401 100,000,000 2005-06 136* 1,095,525

Total 48,837 301,095,525 Source: CHEd * Projection only since reports from partner-schools are not yet in.

For SY 2003-04 and 2004-05, a total of 48,701 students availed of the program, with total

disbursements amounting to P300 M.

Under the program, students apply with the State University or College (SUC) of their choice.

The SUC then submits the list of students under the program to CHEd which pays for the

students’ tuition fees. Students enrolled under this program are required to repay the loan two

years after graduation. Loans P4,000 and below are payable in 5 years; those over P4,000 to

P8,000 are payable up to a maximum of 10 years. The school acts as the collection agent of

CHEd. Student loan borrowers are scheduled to start paying their loan in SY 2006-2007. The

collections shall form part of the revolving fund, which shall be re-lent to succeeding students.

Iskolar para sa Mahihirap na Pamilya

In the summer of 2004, PGMA distributed 1,979 Certificates of Educational Assistance (CEAs)

to poor families in regions namely I, III, IV-A, VI, and X. These certificates, which function like

pre-need educational plans, entitle the beneficiary to financial assistance amounting to

P5,000/semester and can be used to enroll in any 4-year course at SUCs. If the tuition is less

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than P5,000 per semester, the student may monetize the certificate and use the balance to buy

books and other school materials. For SY 2004-05, 74 certificates were used by CHEd

beneficiaries and 56 by TESDA scholars.

Sustainability of the Programs. The financial sustainability of the SAFE 4SR and the IMP is

unclear. The seed fund of the SAFE 4SR is only P300 M which to date has already been fully

disbursed. Unless CHEd is able to get more funds immediately, sustainability of the program

in the short term is doubtful. Likewise, repayment is expected to start only next year.

Assuming that half of the students will start paying, and assuming further that they will pay it

over a 5-year period, this means that the maximum amount that CHEd can expect to get back,

for re-lending to other students, is only P20 M. At P8,000 per student, this translates to only

2,500 students, a far cry from the number of beneficiaries CHEd was able to serve in prior

years.

Meanwhile, the IMP certificates are not covered by a special budget, but are taken from the

regular budget of CHEd and TESDA, which is already committed to other programs. There are

plans to issue additional CEAs this year as part of PGMA’s Education for All Program. If so,

this should be properly coordinated with DBM or funded by the President’s Social Fund.

Otherwise, the other programs and projects of both CHEd and TESDA may suffer because of

any ensuing budgetary realignments.

Realignment of Education with the Needs of the Economy. While it is commendable that

government’s higher education institutions provide scholarship programs for deserving but

needy students, it is also imperative that these institutions promote degrees or courses that are

actually needed or in demand. A case in point is the huge demand for telephone operators in

call centers, the country’s fastest growing sector. An important qualification for telephone

operators is their proficiency in the English language as most of these service foreign clients.

This calls for the heavier emphasis in English, a policy that is quite contrary to the existing

one where more subjects are now taught in Pilipino (e.g. Sibika as against Social Studies in the

past) rather than English. Perhaps school officials should assess the need to increase the

number of hours devoted to English/Language subject in school.

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It is imperative that government policy makers and planners conduct an assessment of the

projected jobs to be created in the economy; from there, it can promote these areas by making it

attractive to students through specialized scholarship programs, etc.

Personal Computers For Public Schools Project

The Personal Computers for Public Schools Project is intended to provide all public high

schools with computers and internet connectivity by 2010

Personal Computers for Public Schools Project

The Philippines has competitive advantage in the IT services sector. It is second only to India

as the largest producer of computer services in Asia and is ranked # 4 worldwide in the

category “Knowledge Jobs” in the 2002 Global New Economy Index by US-Based Meta Group

Research. To ensure that the country maintains – if not improves on – this advantage, the

Department of Trade and Industry (DTI) conceived of the Personal Computers for Public

Schools Project (PCPS Project) to promote the need to incorporate IT in the basic levels of

education by providing computers to public high schools.

In 2001, the country had a total of 5,521 public high schools, of which 2,879 or 52% had no

computers. The government, thru the DTI tapped into the Government of Japan’s Non-Project

Grant Aid to fund the PCPS Project. The project has gone through two (02) phases since then,

reaching 2,228 public high schools nationwide, distributing a total of 32,240 computers. It has

also trained 24,389 teachers on the use of computer technology as a tool for teaching and

learning, and on basic PC operations, troubleshooting and preventive maintenance.

A summary of the government’s accomplishment under PCPS 1 and 2 is as follows:

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Table 28: Summary of PCPS 1 and 2 Projects Luzon Visayas Mindanao Total

Number of Recipient Schools PCPS 1 (Jun 01-June 03)

534 228 234 996

PCPS 2 (Jun 03 – Dec 05)

63 341 258 1,232

Total 1,167 569 492 2,228 Number of PCs Distributed PCPS 1 10,680 4,560 4,680 19,920* PCPS 2 6,330 3,410 2,580 12,320** Total 17,010 7,970 7,260 32,240 Number of Teachers Trained Intel Training 502 231 208 941 Re-echo of Inter Training

9,348 4,460 4,660 18,468

Supplier’s Training

2,670 1,140 1,170 4,980

Total 12,520 5,831 6,038 24,389 Source: DTI * 20 PCs distributed per school ** 10 PCs distributed per school Note: Each package consists of 20/10 desktop computers, 2 printers, 1 external modem, 1 external CD-ROM and updated software.

As of June 2005, the project has reduced the computer backlog in schools from 52% to 7.5% (to

date, the number of schools without computer laboratories is down to 414).

Limited Access. Feedback reaching Congressional members suggests that computer backlog

may in fact be bigger than reported.2 It was also observed that not all computers were inside

the computer laboratories. A number were inside the Principal’s office or teachers’ room,

denying students access to these. Moreover, the reduction in the number of computer units for

Phase 2 (only 10 PCs were distributed per school under this phase as opposed to the 20 PCs

under Phase 1) to extend the reach of the program to more schools further limits student access

to computer facilities.

The Science Education Institute (SEI) Project of the Department of Science and

Technology (DOST ) could complement efforts to reduce this backlog. The SEI seeks to provide

100 schools with computers and multi-media kit for teaching science and mathematics in

schools. Each package (notebook PC, LCD project/screen and sound system) will cost P120,000.

Based on DOST’s prepared schedule, the bidding of equipment should be completed by July 30,

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2005 and delivery of equipment (1st batch) shall be from August – September, 2005; the 2nd

batch is scheduled in October 2005.

Procurement of the computers is underway; however, of the P16 M allocated for the project,

only P4.7 M has actually been released. Given DBM’s release record this year and

government’s tight fiscal position (especially with the TRO on EVAT implementation), it is

highly probable that it is all that will be released this year. In fact, the bidding process started

earlier is now suspended due to the delay in the release of funds.

Usage. The DTI conducted a survey of recipient schools in Phase 1 to determine the impact of

the program.3 817 or 82% of the recipient schools participated in the survey. The study noted

that the computers provided under the project were used mostly for the Technology and Home

Economics (T.H.E) subject, using the curriculum developed by DepEd. However, because of the

limited number of PCs, most schools prioritized/limited the use of the computers to 3rd and 4th

year students. Based on the survey, for the first SY, 223,792 students had access to these

computer facilities, with each averaging usage of 9.22 hours per week.

Teachers, on the other hand, used the computers in the preparation of the grades, reports,

exam papers, lesson plans, development of instructional materials and other administrative

tasks. Teachers in Luzon, Visayas and Mindanao averaged 3.96, 3.11 and 4.52 hours per week,

respectively.

Connectivity. Connectivity or access to internet is also a problem. As of June 2005, only 434

schools or 9% have internet access while 513 or 15% have networked PCs. In fact, among the

problems raised by survey respondents for Phase 1 was access to telephone lines. Likewise, one

of the recommendations of the respondent schools was for the incorporation of a budget for

maintenance and operation of computer laboratories to the regular budget of the DepEd to

ensure the program’s sustainability.

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Early Childhood Development Program

RA 8980 or the Early Childhood Care and Development Act (ECCD) was passed in 2000 in

recognition of the importance of pre-school education for children. It promoted the setting up of

day care centers in barangays all over the country.

The day care centers served primarily to improve the socialization skills of children. There was

no formal curriculum being followed to teach the children basic skills such as reading and

writing. The centers, run by LGUs, were also not very selective in the hiring of day care

workers, with most of them having only high school diplomas.

In August 17, 2004, the President issued EO 349 which provides that government will incorporate pre-school in the education ladder to encourage early childhood development. Changes will start to be institutionalized this school year 2005-2006 with the launching of the

Pre-School sa Bawat Barangay: Paghahanda sa Grade One (National Pre-School Education

Program) last June. Under the program, 5-year olds will be segregated from the rest of the

children at the day care centers and organized into a class where formal pre-school program

shall be given them, in preparation for their entry to Grade 1. As of SY 2002-03, only about

23% of 5-year old children were not being served by the barangay day care centers.

Table 29: Facts About Early Childhood Education (ECE), SY 2002-2003 Particulars Number (in ‘000) Percentage (%)

Total Number of 5-year olds 2,200 100 No. of 5-year olds being served by: 1,688 77 A. Formal Pre-Schools LGUs/PTCAs 409 19 Private Preschools 331 15 DepEd 42 2 Education Service Contracting 24 1 B. Day Care Centers 882 40 Total No. Not Yet Served 512 23

Source: MTPDP 2004-2010

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Targets:

Under the National Pre-School Education Program, the government aims to fulfill the

following by 2010:

1. Preschool as a prerequisite to Grade 1 and a part of the education ladder;

2. Provision of ECE services by existing barangay day care centers, established by

every LGU;

3. Expansion of ECCD programs to reach all 5-year old children, with priority to

children in the poorest households; and

4. Adoption of the Standard School Readiness Assessment Checklist, which

identifies development delays of a child for appropriate early intervention and

monitor a child’s development in seven domains – gross motor skill, fine motor

skills, self-help, receptive language, expressive language, cognitive skills, and

social and emotional coping skill, and School Readiness Tool, which measures the

cognitive and mental functioning of the child and covers three subject areas in

reading, writing and mathematics.

Initially, DSWD targets 234 new pre-schools to be established in barangays without day care

centers and pre-schools to cover 11,700 children. For those with existing day care centers, the

program shall be implemented in 2,170 barangays to serve approximately 54,250 5-year old

children. So far, DSWD has accredited 26,224 day care centers, together with 6,208 day care

workers.

The various agencies involved in ECE, led by the Council for the Welfare of Children, has

initially identified 30 provinces where the program shall be pilot-tested this school year. As of

July 2005, DSWD has conducted orientation seminars with partner LGUs in 4 regions, namely

VI, VII, VIII and XII. The rest of the target 11 regions comprising of 30 provinces will still have

to be scheduled. This means that for this school year, the new curriculum will be conducted

only in these 4 regions.

Teaching Skills. The implementation of the new curriculum will need the re-assessment and

overhaul of the skills of existing day care workers. It is a fact that at present, most day care

workers are only high school graduates. With the new standardized curriculum, however, the

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teachers will need more formal teaching skills. This means hiring day care teachers who are

graduates of education courses or for those currently employed at the centers, additional

trainings to enable them to face the new demands.

Funding. Expenses in the operation of day care centers are shouldered by the LGUs, so the

cooperation of local officials is crucial.

Two weeks before the opening of SY last June, DepEd, in coordination with DSWD, adopted

and administered the School Readiness Assessment Tool for new Grade 1 entrants. This test

aims to determine how ready the children are to enter Grade 1. Those who fail the readiness

test shall be given remedial classes using the Early Childhood Experience Curriculum, an 8-

week curriculum that aims to develop in the children the minimum basic skills necessary to

face the challenges of Grade 1.

The program is very new, starting only this year, so it is not yet possible to do an assessment of

its impact. What is important perhaps is to check whether LGUs include the projected

expenses in their budget next FY, as it will spell the difference whether the project will really

take off or not.

1 The money is under the Higher Education Development Fund of CHEd 2 Half of the committee members present during the deliberations noted that schools in their districts still do not have computer laboratories. 3 Results of the impact survey for Phase 2 are not yet published.

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AUTOMATED ELECTIONS

Chapter Summary

Government’s program to ensure credible elections through automation rests on three

components: (1) computerized voters’ registration and the validation of existing voters’ lists; (2)

automation of the counting and canvassing of votes; and (3) automation of data transmission to

speed up the dissemination of election results.

The Commission on Elections (COMELEC) has captured the biometrics of 42 % of voters and

may be able to complete the registration of voters and validation of voters’ lists in time for the

2007 elections. However, it has lagged behind the issuance of voters’ ID’s – having released

ID’s to only 20% of the total number of voters nationwide. Moreover, the nullification of its

contracts for the purchase of ACMs and VSAT by the Supreme Court because of lapses in

bidding raises serious concerns. At the rate the legal issues relating to these contracts are

being resolved, an automated elections by 2007 may yet turn out to be an impossibility.

Background

Several Asian countries – including Japan, Taiwan and Hong Kong – are also in the process of

automating elections and most of them have already pilot-tested their systems. India and

Korea meanwhile already enjoy the benefits of automated elections. India applied electronic

voting and counting in its May 2004 elections. It finished the canvassing of votes and

proclaimed election winners in two days after the actual casting of ballots.

In contrast, our own electoral system continue to rely heavily on the manual tallying and

canvassing of votes, making election outcomes vulnerable to control and manipulation. To

address the issue, RA 8436 or the Election Modernization Act was passed in 1997, authorizing

COMELEC to use an automated system for the counting and canvassing of votes. The law

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provided for, inter alia, the generation of a national computerized voters’ list, the use of a

voter’s identification card system and the automation in the counting and canvassing of votes.

Pursuant to this law, COMELEC formulated an elections automation program with the

following components:

1) Registration and Validation of Voters (Phase I) – which consists of two stages: first, updating of voter’ list and second, cleansing of said list, through the use of

biometrics technology;

2) Automated Counting and Canvassing (Phase II) - which require the

institutionalization of a system of electoral canvassing where human intervention is

lessened, thereby minimizing – if not totally eradicating – electoral fraud; and

3) Electronic Transfer of Election Results (Phase III) – which require setting up a

system of electronic transmission that will allow immediate consolidation and

dissemination of election results from all over the country.

Phase I of the project requires the continuing registration of voters and the validation of

already registered voters through the use of Data Capturing Machines (DCMs). These

Machines register the biometrics data of applicants and voters alike. Based on these biometrics

data, and specially through the use of an Automated Fingerprint Identification System (AFIS),

COMELEC will be able to identify double/multiple registrants. This phase of the project also

includes the printing and distribution of voters’ IDs, voters’ registration records, and

computerized voters lists.

Phase II meanwhile involves the bidding out and procurement of (1) automated counting

machines (ACM’s),1 and (2) ballots and ballot boxes, and preparations for the operation of such

ACMs.2

Finally, Phase III requires leasing Very Small Aperture Terminals or VSAT equipment3,

preparations for and the provision of services to National Consolidation Centers (including the

delivery of software licenses for the consolidation of votes), and project management.4

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Simultaneous with its automation program, COMELEC has proposed legislative measures and

coordinated with sectoral groups to ensure clean and honest elections. It has advocated for

amendments in election laws which will compel all voters to validate their registration. This

measure the Commission intended as a complement to its Modernization Program. It has

further initiated consultations with citizens groups for its information campaign. It has drafted

a Voters’ Education Campaign Plan and conducted initial coordination with DepEd and CHED

for the drafting of a curricular framework for voters’ education in elementary and high schools.

Allotment

The Government allocated P3 billion for COMELEC’s comprehensive electoral modernization

program through EO 172 and EO 175. The sources of funds are shown below.

Table 30: Status of Releases for COMELECs Election Modernization Program (As of August 2003)

RELEASES PARTICULARS DBM PROPOSED FUNDING SOURCE

AMOUNT SARO NCA

EO No. 1725 Continuing appropriation for the Modernization of the Electoral system Project

1,800,000 1,800,000

FY 2003 built-in appropriation for the COMELEC’s Modernization Program (P100M) and upgrading of voters’ database (P250M)

350,000 350,000 350,000

EO No. 1756 E-Government Fund – RA 9206

850,000 850,000 850,000

GRAND TOTAL 3,000,000 1,200,000 3,000,000 Source: DBM (Note that the continuing appropriation of the Election Modernization program is chargeable against released allotment. No SARO is required for this amount.)

Of the P3 billion budget for the Election Modernization Program, P1 billion was allocated for a

Voters’ Validation System, P1.7 billion for the purchase of ACMs and for other programs

related to the automated counting and canvassing of votes, and P300 million for automated

consolidation/transmission, as shown below.

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Table 31: Allocation of Funds for the Election Modernization Program Program Budget (Php)

Voters Validation System 1,000,000,000 Automated Counting and Canvassing 1,700,000,000 Electronic Data Transfer of Election Results 300,000,000 TOTAL 3,000,000,000

Accomplishment

Phase I

To date, COMELEC has already captured the biometrics of 18.25 million voters’ both locally

and abroad. This is 42% of the 43.9 million registered voters which the Commission targeted

for registration under stage 1 of Phase 1 of the automation project. So far, the Commission

discovered 866, 887 double/multiple registrants based on algorithmic matching, 20,245 possible

under-aged voters, and 436, 276 voters with incomplete mandatory data. The Commission also

detected 130,000 double/multiple registrants in ARMM alone using the AFIS. Notably, 95% of

these were found out to have intentionally registered in various names. In order to discourage

such actions, COMELEC filed 8,940 cases in its Law Department for prosecution.

The table below summarizes the number of registered voters validated by the COMELEC per

region.

Table 32:Voter registration and Validation REGION REGISTERED VOTERS TOTAL

VALIDATED NCR 5,926,610 3,573,027 CAR 761,981 72,599 I 2,323,597 190,548 II 1,497,820 558 III 4,952,348 2,723,048 IV-A 5,531,539 3,183,727 IV-B 1,191,663 37,928 V 2,432,348 108,441 VI 3,603,372 1,906,641 VII 3,304,270 1,383,153 VIII 2,079,037 28,124 IX 1,660,334 468,712

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X 2,050,464 969,097 XI 2,138,980 839,773 XII 1,871,383 1,201,264 ARMM 1,067,893 1,074,973 CARAGA 1,161,918 127,434 OAV 363,790 360,952 GRAND TOTAL 43,919,347 18,249,999

Source: COMELEC, Planning Dept

.

COMELEC has also finished printing the registration records and ID’s of 8.76 million voters,

roughly 20% of the registered number of voters nationwide. (Of the ID’s issued, 94,945 were

returned for corrections. So far, COMELEC already corrected 77 % or a total of 73,368 returned

ID’s).

Phases II and III

For Phase II of the program, the Commission was able to procure in 1991 ACMs. Meanwhile,

for phase III, the Commission entered into a contract with Philippine Multimedia System Inc

(PMSI) for the transmission, consolidation and dissemination of election results using the

VSAT’s. These satellite dishes were installed in key locations throughout the Philippines with

the ratio of 1 VSAT per town, supposedly, for the 2004 elections.

On the 13th of January 2004, the Supreme Court enjoined the use of ACM’s and VSAT’s due to

irregularities in the bidding process. The ACMs are now kept in storage at COMELEC’s

Macilite Facility.7

Complementary Initiatives

As for the Commission’s legislative reforms and information campaign drive, the former is now

the subject of twenty-three (23) bills for discussion in the Committee on Suffrage and Electoral

Reforms while the latter has been initiated but was also stopped because of the SC decision.

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Assessment

Under the MTPDP, the country should be enjoying the benefits of automated elections by

2007.8 However, the present performance of the COMELEC beclouds this possibility.

COMELEC may be able to accomplish voter’s automated registration. If it has so far captured

the biometrics of 42% of all registered voters, there is little doubt that it can hasten the

registration of the remaining 58% from now until 2007. But COMELEC seems to lag behind

schedule in the following areas:

1) Issuance of registration records and IDs. The Commission has only issued ID’s for 20%

of the registered voters. With barely 23 months before the 2007 elections, COMELEC

still has to issue IDs for 80% of the registered voters – or to about 3.4% of the registered

voters per month (more than double the monthly number of ID’s it issued for the year

under review).

2) Ac quisition of VSATs and ACMs. Around P2 Billion has been allotted and disbursed by

the government for the acquisition of ACM’s and VSATs. However, due to irregularities

in the bidding process as found by the Supreme Court, the state was deprived of the

benefits of automated elections in 2004. At the rate the legal issues involved are being

resolved, grave doubts arise regarding the possibility of having an automated system of

counting and canvassing of votes for the 2007 elections.

Endnotes

1 The ACMs are stand-alone machines. With the use of appropriate ballots, they could count votes and consolidate the results immediately with minimum human intervention. They also have provisions for audit trails and adequate security measures. 2 NEDA, Strategic Planning Matrices, MTPDP 3 The VSAT allows the almost instantaneous consolidation of results by eliminating the need to physically transport election returns from precincts to the municipal or city canvassing centers; and eventually to the national canvassing center. 4 NEDA, Strategic Planning Matrices, MTPDP 5 Issued Jan. 24, 2003, the EO orders DBM to allot P2.5 B for the Automated Election system starting the 2004 National and Local elections 6 Issued Feb. 10 2003, the EO mandates the DBM to allocate an additional amount of P500 Million for the Automated Election system 7 ON December 9, 2004, COMELEC filed a motion with the Supreme Court for leave to use the ACMs in the upcoming ARMM elections. The motion was denied by the SC with finality.

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8 See NEDA, Strategy Planning Matrices, 2004-2010

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DECENTRALIZATION OF PROGRESS AROUND THE

NATION THROUGH THE USE OF TRANSPORTATION

NETWORKS AND THE DIGITAL INFRASTRUCTURE

Chapter Summary

The administration’s infrastructure program is intended to disperse economic opportunity

throughout the country. At the core of its transport infrastructure plan are two major projects –

the development of the Roll on, Roll off Transport System (RRTS) which seeks to interconnect

the islands through a nautical highway system and the improvement of airport facilities

nationwide Similarly, government’s Information and Communications Technology (ICT) project

is hinged on the connectivity of various government agencies and instrumentalities and

communities, and the establishment of ICT hubs to promote investments in the sector.

However, the delivery by the government of basic infrastructure facilities pursuant to these

objectives needs vast improvement. In the transport sector, under-accomplishment especially

in the provision of the facilities for the RRTS are markedly conspicuous. Similarly, many

targets under the four goals enumerated in the Digital Connectivity Plan for the ICT sector

have been missed.

Introduction

Investment in modern infrastructure and information and communication technologies is

necessary for economic competitiveness.1 Scarcity in road networks creates inefficiency in the

transport of goods, increases business costs and adversely affects economic activity. An

unreliable information infrastructure also has the same effect. Moreover, the development of

regional economies, the adoption of an export orientated growth strategy as well as the

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emergence of the information management industry render necessary a strong and efficient

information infrastructure.

The absence of efficient national transport and information infrastructures preserve the

unequal distribution of economic wealth, specially for a country like the Philippines where

economic growth markedly differ across the geographic regions. Under these circumstances,

investments in transport and information infrastructure have a two-fold function: first, to

maximize economic opportunities, and second, to disperse such benefits evenly, throughout the

nation. These factors inform the assessment of the committee in this segment of the report.

Accomplishment Report

Transport Sector

The development activities undertaken by the Arroyo administration in the transport sector

are oriented towards the establishment and upgrading of (1) the nautical highway consisting of

an inter-modal transport system and (2) airports to serve as gateways to regional centers and

major tourism destinations.

Nautical Highway System

A cornerstone program of the government in the transport sector is the Strong Republic

Nautical Highway System (SNRH) which connects the country’s major islands thru the Roll-

On/Roll-Off Transport System (RRTS). This system, popularly known as RoRo, consists of three

major nautical highways: the Western, Central and Eastern Nautical Highways2 which

interconnect the existing road networks in the islands of Luzon, Visayas and Mindanao.

The RoRo system has reduced transport costs from Mindanao to Luzon by 30% for goods and by

40% for passengers. The system has also reduced travel time by 10 hours.

The RRTS system however is far from complete. Ports development, one of the two major

components of the system, remains incomplete as the table below shows.

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Table 33: Naval Port Development Activities of the Strong Nautical Highway System RRTS Corridors Actual

accomplishment Status

Western Nautical Highway - located in the western seaboard trunk route from Manila to Dipolog (northwestern tip of Mindanao); it connects to the central trunk route at Cebu City (Central Visayas) passing through the RoRo ports of Calapan, Roxas in Mindoro Oriental; Caticlan, Aklan; Iloilo City, Iloilo; Bacolod, Negros Oriental; Dumaguete, Negros Occidental; Dipolog, Zamboanga Norte.

Launched June, 2003.

Phil. Ports Authority has improved different ports and terminals in the area.

All ports in the Western highway system are already RoRo capable with ferries and shipping company plying the route on a regular schedule.

Central Nautical Highway - connects Donsol, Sorsogon to Balingoan, Misamis Oriental, passing through Central Visayas and connects to the East-West trunk routes at Cataingan, Masbate and San Carlos City

11 of the 14 ports are RoRo capable, 4 of the 7 routes with regular shipping company plying the routes:

All seaports are RoRo capable, except the Ports of Placer, Aroroy in Masbate and Pilar in Sorsogon which will be upgraded starting 2005

Eastern Nautical Highway - Eastern sea link connects Biliran, Leyte to Surigao City (northwestern tip of Mindanao) and connects to the Central trunk route at Cataingan, Masbate.

2 of the 4 ports are RoRo capable (These are the Lipata Port in Surigao and Liloan in Southern Leyte)

For upgrading with construction of RoRo ramps in Naval Prot in Biliran, Leyte and Cataingan Port in Masbate to commence in 2005.

Source: DOTC

It is estimated that about 72% of the identified ports for the RRTS system are at present RoRo-

capable. While not entirely impressive, this achievement record seems respectable.

Accomplishment in the construction, upgrading and development of the road component of the

RRTS is however dismal. Only 169.34 km or 8% of the planned 2,187.2 km of road has been

constructed, upgraded or/and developed as part of the RRTS.3

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Table 34: DPWH June 2004-June 2005 Accomplishment on the Nautical Highway Sytem Particulars Target Length

(km) Actual

accomplishment (Km)

Accomplishment (%)

Western nautical highways 1185.2

95.45

8

Central nautical highways 488.6

14.07

2

Eastern nautical highways 513.4

59.82

12

Total 2187.2 169.34 8

Funding. Funding remains the major obstacle to the development of the RRTS. A RoRo ramp, a

basic facility of the system, costs Php 6-10 million per piece. The road-infrastructure

component of the system further compound its budget requirement, as shown below:

Table 35: Medium Term Infrastructure Investment Program, CY 2005-2010 Investment requirement (in million pesos) Project

2005 2006 2007 2008 2009 2010 Total

Highways 22,631 25,153 27,974 26,879 28,922 28,179 159,738

Source: DPWH presentation to the Committee on Oversight on June 27, 2005

Because of the inadequacy of funds, as well as the slow budget releases, the government has

been constrained to adopt interim measures such as the use of landing crafts (LCT) and boats

with outriggers to connect ports into the RRTS. In the long term, the government is looking at

partnership with the private sector for the financing, construction and development of the

RRTS infrastructure.

In line with this thrust, the government agencies concerned have taken the initiatives to

attract private sector participation in the RRTS project, such as:

1. The issuance of PPA Administrative Order No. 03-2004 on December 15, 2004. The

Order provides for the creation of Special Bids and Awards Committee tasked to

prepare the Terms of Reference for privatization of RRTS Terminal System. To date,

PPA Port Management Offices were given instructions to create SBAC for this purpose,

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and has already identified 20 government ports/facilities which may be privatized (15 in

Luzon, 3 in Visayas and 2 in Mindanao);

2. Through the enactment of RA 9295 and issuance of its IRR, the domestic shipping rates

were deregulated and routes were opened to qualified operators; and

3. The liberalization of policies in the shipping industry through reduction of government

regulatory activities and the grant of investment incentives to deserving operators.

Airport Development In addition to road linkages, the government has focused on the construction, upgrading and

development of airports. These efforts are intended generally to promote and accelerate

economic growth, and specifically to boost the country’s tourism industry.

Development and Upgrading. The following airports have been identified to be developed for

purposes of tourism: Laoag International Airport, San Fernando Airport, Diosdado Macapagal

International Airport, Busuanga (Coron) Airport, Davao International Airport, New Iloilo

Airport, New Bacolod (Silay) Airport, Mactan-Cebu International Airport, Panglao Airport,

upgrading of Caticlan Airport and development of new El Nido Airport. The table below

summarizes the extent of work accomplished in their development:

Table 36: DOTC/ATO Airport Projects Airport Project/Activity Funding

Source/ Amount

Status

Diosdado Macapagal International Airport

For upgrading to improve operation as an International airport

Procured design consultant Jan-April 2005 Design development and documentation from May to October 2005 Procurement of civil works from Nov 2005 to Feb 2006

New Bacolod (Silay) Airport Development Project

Construction of an airport at a new site complete with all necessary facilities conforming to international standards

Project cost: Php 4.437 B

Schedule: August 2004 to January 2007 Overall accomplishment as of March 2005 is 2.5% with major activities on site development

Iloilo Airport Development Project

Construction of an airport at a new site in Sta. Barbara/Cabatuan

Project cost: PhP 6.187 B

Operational by December 2006 6.19% accomplishment as of March 2005

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area, complete with all necessary facilities conforming to international standards Aims to upgrade air transport service and meet the present and future air traffic demand of the airport

Proposed Panglao Airport Development Project

Construction of a new airport in Panglao Island, complete with the required landside and airside facilities and the provision and commissioning of various navigational aids The project will support the tourism industry in Region VII, more particularly the Province of Bohol

Project cost: PhP 2.711 B

Completed feasibility study and advance engineering study Environmental Certificate has been issued 91% completed the Parcellary survey and identification of lot owners to be effected by the reoriented alignment of project Detailed Engineering (DE) Design (PTA to provide Php 200 M to cover DE and acquisition of 302 lots affected by the project) Project implementation is from 2006-2008

Development of Busuanga (Coron) Airport

Immediate improvement to support the safe operations of current aircraft (Let 410-UVP) Medium Term Devt- to accommodate larger aircraft (DASH-7) Long Term Devt- to accommodate wide body Jet aircraft (B737) Continuation of concreting of taxiway and upgrading of apron. -Continuation of construction of adm. Bldg. Concreting of apron (re-aligned from feasibility studies) -Concreting of apron and taxiway

Project cost: PhP 1.068 B GAA 2003 PhP 2M GAA 2003 PhP 0.50 M C1 2003 PhP 8.50M GAA 2004 PhP2M

Construction on-going On-going development study CY 2010 and beyond Bidded out on 13 July 2004 Contractor received -NTP on 01 Feb. 05 On-going 34.52% accomp. NTP received on 15 Dec 04. On-going 95.99% accomp. Plan under revision Advertised on 4and11 Nov 2004. Eligibility statements under

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evaluation.

Bulan Perimeter fencing on the west portion of the runway Improvement of terminal building Security fencing

MOOE MOOE MOOE

Completed Feb 05 For preparation of program work For preparation of program work

Bagabag Continuation of concreting of existing runway Rehabilitation of terminal building

GAA 2004 PhP 2M GAA 2004 – Php 0.50 M

Pre bid on 17 Feb. 05 Bid out on 01 March 05 Under bid evaluation Pre-bidding on 10 Feb 05 Bid out on 01 March 05 Under bid evaluation

Catbalogan Improvement of terminal building Perimeter fencing

MOOE MOOE

For preparation of program of work For preparation of program of work

Caticlan Const. Of drainage canal Improvement of Airport

GAA 2004 LocGov Social Equalization Fund PhP40M

For advertisement. On-going

Kalibo Continuation of expansion of VPA incl. Provision of drainage system

GAA 2004 Php1.0M

-Plans for concurrence

Lingayen Improvement of VPA MOOE For preparation of program work Maasin Improvement of

terminal building Perimeter fencing

MOOE MOOE

For preparation of program work For preparation of program work

Siargao Improvement of airport (II)

GAA 2005 PhP1M

For preparation of program work

For the first quarter of 2005, the Air Transportation Office (ATO) also undertook the following

maintenance and airport enhancement programs:

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Table 37: Airport Maintenance and Enhancement Airport Accomplishment

Area II : Laoag, Bagabag, Tuguegarao, Baguio, Vigan

Rehabilitation and improvement Refurbishing and repainting of the terminal building, concreting of the vehicular parking are, construction of 2-Storey building for duty free shop

Area III : Puerto Princesa Funding of additional monoblock chairs at the pre-departure area, installation o collapsible tents and waiting sheds for the well wishers, maintenance of air-conditioning facilities and parking area

Area IV : Legaspi, Masbate, Virac No long queing during check-in due to fast service, clean rest rooms and good ventilation, landscaping and beautification of airport

Area V : Bacolod, Iloilo, Antique, Kalibo, Roxas

Maintenance and rehabilitation of existing airport, installation of baggage carousel at the arrival area and x-ray machine in Roxas, provision of public comfort rooms and waiting shed

Area VI : Tacloban Improvement of the terminal and VIP buildings Area VII : Zamboanga Rehabilitation of the paging system,

surveillance camera installation and beautification of the airport

ATO also completed its Airways Navigational Facilities Modernization Project III under which

it established Air Navigation and Air Traffic Control Facilities in twenty five (25) selected

airports and sites nationwide. The project cost PhP 1.9 B.

Re-classification of Airports. There are 11 national airports approved for upgrading based on

evaluation criteria: Davao, Gen. Santos, Puerto Princesa, Butuan, Dipolog, Kalibo, Tagbilaran,

Caticlan, Camiguin, Pinamalayan and Catbalogan.

Non-Infrastructure Components. In addition to the provision of adequate infrastructure

facilities, the government has also instituted air policy reforms towards the calibrated

liberalization of the aviation industry.4

Pursuant to these reforms, the Civil Aviation Board (CAB) has authorized the entry of Low

Cost Carriers (LCC). LCCs – also referred to as “no-frills airlines” -- offer low fare rates by

eliminating many traditional passenger services/amenities. The operation of these LCCs in the

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country started in April 2005. Presently LCC airlines land at the Diosdado Macapagal

International Airport and the Subic International Airport.5 The CAB has also issued a total of

15.1 million seat entitlements. Of these, less than 50% -- or about seven (07) million -- are

utilized. The low turn-out of entitlement could be attributed to lack of tourist facilities in the

country.

Digital Infrastructure Development

The government intends to interconnect the countryside and the isolated regions of the country

through a digital infrastructure facility. Under the Digital Connectivity Plan, all cities and

provincial capitals should have access to the internet by 2005; 1st, 2nd, 3rd Class Municipalities

(about 30% of total municipalities) by 2007; and all 1,501 municipalities by 2010. Thirty

percent (30%) of all public high schools (about 1,500) are also expected to have computer

laboratories with access to the internet by 2005, 65% by 2007 and 100% (or about 4,800) by

2010.

The Digital Connectivity Plan has four objectives: first, to develop and deploy information

infrastructure through communities; second, to complement digital connectivity with the on-

line delivery of government services and information; third, to promote the use and

optimization of ICTs in learning, and fourth, to facilitate the growth and competitiveness of the

country’s e-services industry in the global market through the creation of regional ICT hubs.

The government’s accomplishment in relation to these goals is summarized below.

Digital connectivity through the development and deployment of information infrastructure

Except for the development of Broadband Deployment Plan and Strategy for the Philippines,

none of the activities under the Digital Connectivity Plan has been achieved by the

administration. Under-accomplishment range from 25% of target to 100% (see table below)

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Table 38: Digital Connectivity Accomplishment Report (1) Program/

Project/Activities Targets Actual accomplishment

Community e_Center /e-LGU CeC Project

Establish CeCs in 214 cities and municipalties nationwide by 2006

48 CeCs established; 19 under establishment; 67 slots for/on-going evaluation as possible CeC recipient/beneficiary; and 92 being constructed (22%)

Knowledge Networking for Enterprising Agricultural Communities

Facilitate connectivity of 80 Farmers Into Technology (FIT) Centers

Being established; assessment of network connections completed (0%)

Development of Broadband Deployment Plan and Strategy for the Philippines

Finalized broad band deployment strategy by March 2005

Study completed (100%)

Establish nationwide access to telephony : Upgrading of the Telepono sa Barangay Projects into Community e-Centers

347 Barangays covered by 2005 (Phase 1) 2,227 clustered barangays covered by 2005 (Phase 1A)

257 barangays completed (Phase 1) (75%) 1,261 barangays completed (Phase 1A) (57%) Installed 6,802 telephone handsets and payphones in 1, 518 rural barangays

Digital connectivity through on-line delivery of government services and information critical in

developing and enhancing economic, political, socio-cultural and human capabilities.

Activities under these program are in various stages of completion, as shown by the table

below.

Table 39: Digital Connectivity Accomplishment Report (2) Program/


e-Government Development : e-Govt portal –one-stop electronic gateway for government services and information,

Establish linkages with government agencies for accessing inline government services; Developing a portal as gateway for accessing government services and transactions

8 priority agencies identified bidding for the payment gateway completed business development framework being developed e-Payment Gateway application being developed

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business sector-interagency database linkages (NSO, GSIS, SSS, PhilHealth, LTO) e-LGU development Establish the e-LGU

systems: -e-Real Property Tax System (RPTS) -e-Business Permits and Licensing Sys (BPLS) -e-Treasury Operations Management Systems (TOMS) Build capability of 250 LGUs in using and managing the systems Establish web presence of LGUs

Installed e-Real Property Tax System for 132 LGUs, conducted training for 403 LG officials Assisted IS planning of 332 LGUs; Change management and technical training for 507 LGUs Stage 1 = 1,354 LGUs ; Stage 2 = 255 LGUs; Stage 3 = 67 LGUs

e-Learning for Basic Education

Development of digital content, starting 2005 for Math, Science, English, Social Studies and Filipino subjects Installation of e-Learning modules in school Creation and maintenance of an educational portal that will provide access to e-learning modules by the 2nd quarter of 2006

Planning stage Exploratory discussions with various groups for possible tie-ups

Provide industry specific solutions for MSMEs; Provide MSME friendly payment schemes

Still being identified

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Promote the use and optimization of ICTs in learning to enable Filipinos to creatively use ICTs

and become world-class knowledge workers through the promotion of creative ICT use

Similarly, the programs under this goal are in various stages of completion.

Table 40: Accomplishment Report on ICT Use Program/ Project/Activities Targets Actual accomplishment

Computer literacy Training Programs through Conduct of Educators Trainings to relevant stakeholders

For CY 2005: Executive conference, Lab Management Training, ICT Literacy training, Project Sustainability Training

Conducted ICT awareness conferences and ICT literacy trainings benefiting 2,925 school, superintendents, principals, teachers and school staff

Equality Program To implement projects that will enable partner SUCs to serve as local ICT experts/consultants in their respective areas Target for SUC ICT Training at least 300 trainees/year

Program was launched during the 2nd Annual SUC Conference (April 2005)

Promote e-Commerce Awareness for MSMEs through: Training of advisors and Conduct of ICT awareness seminars and training for MSMEs

Still being identified

Facilitate the growth and competitiveness of the country’s e-services industry in the global

market through the creation of regional ICT hubs

Meanwhile, the government has either identified or declared certain areas as ICT hubs.

However these activities, by themselves, do not necessarily address the targets identified under

the Digital Connectivity Plan.

Table 41: Status Report on the Creation of Regional ICT hubs Program/


Philippine Cyberservices Corridor

Generate demand for Philippine cyberservices

Declared 8 areas as ICT hubs: -(Pasig, Ortigas,-Makati City,-UP, Ateneo, Eastwood,-Alabang, Paranaque, Filinvest

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Served by a $10B high bandwidth fiber backbone and digital network Establish Regional hubs for syberservices locators

Encourage franchise model for cyberservices entrepreneurs -

-Univ Belt Area, Subic and Clark, Cebu-Asia Town Park, Davao Identified 9 regional areas as potential ICT hubs: Leyte, Camarines Sur, Pangasinan, Iloilo City, Baguio City, Davao, Zamboanga, General Santos, Cagayan de Oro

Assessment

Recent studies underscore the poor performance of the country in the provision of basic

infrastructure. The ADB World Competitiveness Report (2001) ranked the Philippines among

the lowest in a field of 49 selected countries in terms of basic infrastructure competitiveness6.

In a similar survey conducted by the IMD in 2003, the Philippines ranked 26th among 30

countries – 14 notches below its 12th ranking in 1999. The country also placed 68th among 75

countries ranked by the World Economic Forum (WB, 2003) based on infrastructure quality.

In the region, the country lags behind Indonesia, Malaysia and Thailand as shown by the

tables below.

Table 42: Rank and Performance of Selected Countries in Infrastructure Facilities Indicators RP Indonesia Malaysia Singapore Thailand

Overall infrastructure maintenance and development

47 40 18 1 25

Density of road network 45 37 38 2 42 Density of railroads 42 411 37 47 35 Number of passengers carried by air transport companies

39 31 22 20 19

Investment in telecommunications 9 29 7 14 42 Telephone lines per 1,000 inhabitants

47 48 38 23 46

Cellular subscribers per 1,000 inhabitants

43 48 33 19 45

International telephone costs 31 46 42 16 39 Water transport infrastructure 46 41 22 3 33 Total indigenous energy production 28 5 6 49 25

Source: Infrastructure Development: Experience and Policy Options for the Future, Llanto, G., PIDS, 2004

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Table 43: Selected Infrastructure Indicators Country Roads Paved

(% Total Roads)

Electric Power Trans and Dist’n Losses (%

Of Output)

Cost of Phone Call to the US (US $ 3/mins)

Internet Users

Indonesia 46.3 11.3 4.2 4.0 Korea 74.5 5.2 1.7 24.0 Malaysia 75.8 8.0 2.4 6.5 Philippines 21.0 14.0 4.8 2.0 Thailand 97.5 7.9 1.5 3.5

Source: CPBD, “Towards a Robust and Broad-Based Growth”, July 2004

Table 44: Comparative Road Densities and Paved Road ratios of ASEAN Countries End of 2000 Country Road density (km/sq km)

Paved Road Ratio

Philippines 0.67 0.21 Indonesia 0.19 0.47 Malaysia 0.20 0.74 Thailand 0.42 0.82 Vietnam 0.46 0.35 Source: Infrastructure Development: Experience and Policy Options for the Future, Llanto, G., PIDS, 2004

Against this backdrop, the administration has crafted an infrastructure development plan

focused on two imperatives: (1) the establishment of an inter-island transport system that

would link the disparate regions of the country and facilitate trade and tourism and (2) the

rolling out of digital infrastructure to connect the different levels of government, as well as the

constituencies they serve, and to jumpstart economic activity and growth in the information

technology sectors.

The completion of these programs however has been very much retarded. Accomplishment for

various components of these programs ranges from modest to poor. Because of this, the various

regions of the country continue to lose out on much needed investments – both from local and

foreign capitalists who are willing to funnel their resources in more competitive areas in the

ASEAN region.

The urgency of closing the infrastructure gap is most felt in the ICT sector. Already, key

players in Asia and the ASEAN region are beefing up their ICT capacity. Unless the

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government is able to roll out and complete its infrastructure projects post haste, the country

may lose its current advantage in this sector.

Annex

Table 45: Notes on LCC Operations Airlines Route Schedule Air Fare Air Asia Berhad -Kota-Kinabalu-

Clark -Kuala Lumpur-Clark

-3 flights per week for KK -7 flights per week for KL

-PhP 1,200.00 -US $69.00

Tiger Airways -Singapore-Clark -Initially 3 flights per week -5 flights per week starting June 6, 2005

Thai Air Asia -Bangkok-Clark -Macau-Clark

-7 flights per week per City -To start operations on July 2005 -To start operations on October 2005

Endnotes

1 Llanto 2000 2 There are on-going feasibility studies on eighteen (18) missionary routes identified under the SNRH1 study conducted by the Maritime Industry Authority (MARINA) and JICA. Funding for these projects would possibly come from DBP. 3 This excludes the 1,267 kilometers of farm-to-market roads built and improved under the various programs of the Department of Agriculture and Department of Agrarian Reform. It should also be noted that in 2001, 1,300 kilometers of national roads were improved or constructed and 19,771 lineal meters of bridges along the Bohol Circumferential Road, Pan-Philippine Highway, West Leyte Roads, Kennon Road and Rosario-Pugo-Baguio Road were built. 4 The government has opted for a gradual and orderly removal of regulatory restraints, instituting in the meantime safety nets to protect vital state interests.

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5 For a list of LCCs operating in the country, see Annex 6 Llanto, G., Infrastructure Development: Experience and Policy Options for the Future, 2004

A JUST END TO THE PEACE PROCESS

Chapter Summary

The government has pursued two simultaneous programs in so far as the peace process is

concerned: (1) the formulation and signing of comprehensive peace agreements with all rebel

groups and formations by 2010 and (2) the implementation of all final peace agreements signed

since 1986, including provisions for enhanced amnesty, reintegration and mainstreaming of all

rebels.

The present administration has steadfastly pursued peace negotiations with the various rebel

groups despite mounting pressures and obstacles. It perseveres in both formal and informal

engagements with the following: Moro Islamic Liberation Front (MILF), Communist Party of

the Philippines/New People’s Army, National Democratic Front (CPP/NPA/NDF),

Rebolusyonaryong Partidong Manggagawa ng Pilipinas/Revolutionary Proletarian Army/Alex

Boncayao Brigade (RPM-P/RPA/ABB) and Rebolusyonaryong Partidong Manggagawa ng

Mindanao (RPM-M).

Moreover the government’s collaboration with these groups in areas of mutual concern

provides new avenues for, and has kept open communication channels vital to, peace

negotiations.

The government has made modest inroads towards the consolidation of peace in previously

conflict-torn areas. Significant also are its accomplishments in so far as the implementation of

peace agreements is concerned. In fact, the government has almost completed the reintegration

programs for the returnees. Literacy and livelihood programs for these returnees and their

family, among others, remain among its priorities.

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Introduction

The Philippines has had one of the longest protracted armed conflicts in Asia. These conflicts,

stemming from, among others ideological and ethnic differences, have adversely affected the

country’s growth potential.

Through the years, the government sought to address these internal conflicts through various

means, including negotiations for peace. At present, the government has concluded final peace

agreements with the Moro National Liberation Front (MNLF)1 and with the Cordillera People’s

Liberation Army (CPLA).2 The government also has either entered into peace agreements or

continues to negotiate for peace with the following rebel groups: Moro Islamic Liberation Front

(MILF), Communist Party of the Philippines/New People’s Army/National Democratic Front

(CPP/NPA/NDF) Rebolusyonaryong Partidong Manggagawa ng Pilipinas/Revolutionary

Proletarium Army/Alex Boncayao Brigade (RPM/RPA/ABB),and the Rebolusyonaryong

Partidong Manggagawa ng Mindanao (RPMM).3

The conclusion of hostilities and strengthened peace building are among the present

administration’s priorities. The President has in fact formulated a 7-Point Strategic Action

Plan to achieve sustainable peace throughout the country, and especially in Mindanao. The

Plan consists of two components: peacemaking and peacekeeping, and conflict prevention and

peace building.

The peacemaking and peacekeeping component of the plan aims to reduce the level of violence

and permanently end the internal armed conflicts with all insurgents/secessionist groups. This

involves the following:

1. Continuation of peace talks and conclusion of final peace agreements with rebel groups - includes the conduct of confidence building measures, adoption of interim

or humanitarian ceasefire mechanism, and negotiations on the substantive agenda

constituting reforms to address the roots of the armed conflict. The final peace

agreement will also involve a political settlement and an agreement on the final end

of hostilities and disposition of forces;

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2. Complementary measures to reduce the level of violence arising from internal armed conflict – by encouraging, recognizing, respecting, and supporting

peacekeeping initiatives by civil society or local government units (LGUs); utilizing

traditional or indigenous mechanisms for conflict settlement in conflict-affected

indigenous communities; and using information education to promote nonviolent

means of conflict resolution;

3. Completion and implementation of existing final peace agreements - initiatives in

this regard include the establishment of the Amnesty and Reintegration

Commission (ARC) in lieu of the National Amnesty Commission. The ARC shall be

placed under the supervision of the Office of the Presidential Adviser on the Peace

Process (OPAPP) and shall integrate the management of all national programs and

services for former combatants and work closely with concerned LGUs to take a

leading role in the reintegration program in their own localities;

4. Implementation of enhanced and integrated reintegration, rehabilitation and amnesty program to mainstream former rebels into society - particularly the

program provided in the (a) Government of the Republic of the Philippines (GRP)

and the Moro National Liberation Front (MNLF) Peace Agreement of 1996, and (b)

GRP-Cordillera People’s Liberation Army (CPLA) Peace Agreement of 1986. The

former shall involve the full implementation of Republic Act (RA) 9054, or the new

Organic Act for an expanded ARMM; and the provision of livelihood/direct

development assistance to unserved MNLF state commands and Bangsamoro

women’s cooperatives.

Conflict prevention and peacebuilding, on the other hand, is designed to rehabilitate and

develop conflict-affected areas, remove major sources of grievance and heal the wounds of

internal conflict. This involves the following:

1. Rehabilitation and development of conflict-affected areas – Under the plan, the

government will identify priority areas for accelerated barangay-focused

rehabilitation and development to be undertaken and completed by 2010. The MILF-

affected areas identified under this program include Sultan Kudarat, the perimeter

towns of the former Camp Abubakar, North Cotabato, Maguindanao, Zamboanga

Peninsula and Bukidnon;

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2. Catch-up development program for Muslim Mindanao and affirmative action-agenda for Muslims - this program is focused on the following: (a) completion of the

devolution of national agencies to the ARMM in accordance with RA 9054; ( b) budget

reform to enhance fiscal autonomy; ( c) completion of infrastructure for

interconnectivity of ARMM-constituent provinces and city and of affirmative action

roads to provide access to remote conflict-affected areas; ( d) catch-up plan for health

and education to raise the Human Development Index; (e) filling up of all vacancies

and support for effective operation of Shariah courts; (f) land tenure improvement

for actual occupants; (g) enhanced agricultural productivity program; (h) support for

the implementation of “The ARMM Special Economic Zone Act of 2003”; and (i)

holding of peaceful, orderly and meaningful elections in the ARMM in August, 2005,

and, August, 2008, in accordance with RA 9333.

3. Conduct healing and reconciliation programs in conflict-affected areas – which

includes the conduct of community-based inter-faith and inter-cultural peace

education and advocacy campaigns; trauma counseling and rehabilitative services

for displaced families, especially women and children who are victims of armed

conflict; and holding of community rituals and traditional practices for cleansing,

healing, and reconciliation.


The quest for peace has remained elusive. The President’s peace program in fact acknowledges

that peace cannot be attained instantly; instead, it is focused on achieving a “just end” to the

peace process.

What constitutes a “just end” however is not easily discernible. A survey of the activities under

the peace agenda suggests however that the long-term goal is focused on the re-integration of

rebels and similar groups into the social mainstream, and the creation of social conditions that

will dissuade the re-emergence of groups of similar persuasion.

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Peacemaking and Peacebuilding

Continuation of Talks

The attainment of peace is, foremost, a process. Government accomplishment in this aspect is

therefore hard to quantify, and harder still to assess.

However, the continuity in talks and negotiations is in itself an achievement of sorts, ensuring

an open channel for communication and understanding between the parties to the conflict. In

this sense, government performance can be said to be relatively successful. The government

has in fact continued to hold exploratory talks with the MILF and the CPP/NPA/NDF.

Moro Islamic Liberation Front (MILF). During the period under review, at least three

exploratory talks between the GRP and MILF were held: the Sixth Round was conducted on

December 20-21, 2004 in Kuala Lumpur, Malaysia; the Seventh Round was held on 18-20 April

2005 in Port Dickenson, Malaysia; and the Eight Round was conducted in June 20-21, 2005 in

Kuala Lumpur, Malaysia.

During the Sixth Round, the following were achieved:

1. The establishment of the Ad Hoc Joint Action Group (AHJAG) which is tasked to isolate

and interdict criminal elements operating in areas near and within MILF communities;

2. Signing of the guidelines to govern the accreditation, participation, and conduct of

observers to the GRP-MILF Formal Peace Talks; the activation their respective

technical committees and setting up of technical working groups on issues for joint

resolution (e.g. ancestral domain); and

3. Completion of the phased redeployment of AFP troops from Buliok Complex,

Maguindanao, and the dropping of charges filed against MILF leaders and members.

During the Seventh Round, both panels continued dialogue to exhaust consensus points in

certain issues (e.g. concept, territory and resources). Other issues, such as governance, were

agreed to be taken up in the next rounds of informal talks. During this round, the panels also

committed to strengthen the operations of AHJAG. The MILF also assured the GRP that the

recent hostilities in Mindanao would not affect the peace talks.

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In the Eight Round, both panels agreed to extend the AHJAG operations for one more year,

from 21, 2005, and its amend guidelines in the succeeding deliberations. They also agreed to

forge clear negotiating parameters and principles on the strand of governance of the ancestral

domain issue.

National Democratic Front (NDF). Despite the indefinite postponement of formal peace talks

between the GRP and the NDF,4 both panels continue to keep communication lines open

through the facilitative assistance of the Royal Norwegian Government.5 In fact, both “informal

and discreet communication”6 and formal talks7 have been conducted, resulting in the

following:

1. commitment to address the root causes of the armed conflict by adopting social,

economic and political reforms and thereby laying the ground for a just and lasting

peace;

2. agreement to adopt the ten signed agreements as the framework and foundation of the

talks;

3. agreement to accelerate work for the negotiation on socio-economic reforms and on

political and constitutional reforms;

4. conclusion of negotiations on the introductory chapters of the draft Comprehensive

Agreement of Socio-Economic Reforms (CASER);

5. formation of the Joint Monitoring Committee (JMC) which is the interim body to

monitor the implementation of the Comprehensive Agreement on Respect for Human

Rights and International Humanitarian Law (CARHRIHL);

6. agreement to undertake an information campaign on the fundamental principles

enshrined in the Hague Joint Declaration, the Joint Agreement on Safety and Immunity

Guarantees (JASIG) and the CARHRIHL, specially as they relate to the terrorist-

listing;

7. agreement to continuously pursue confidence-building measures to provide a favorable

atmosphere for the talks.

Rebolusyonaryong Partidong Manggagawa ng Mindanao (RPMM). Since November 2003,

several rounds of barangay consultations8 have been held in Mahayahay, Sultan Naga

Dimaporo to pave the way for peace negotiations with the RPMM, and the signing of a peace

agreement tentatively set in July of 2005.9 Development projects have also been implemented

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in barangay Mahayhay, Sultan Naga Dimaporo, the first barangay consulted and the only one

with existing packaged needs assessment report.

The second round of formal talks between the government and RPMM is set on July 2005

during which the Agreement on Cessation of Hostilities is expected to be signed.

Initiatives Parallel to Peace Talks.

Aside from formal and informal talks, the government has engaged in issue-specific

collaboration with the parties to the conflict to strengthen the chances for peace. These parallel

initiatives provide venues for negotiations, or encourage or reinforces joint cooperation in the

implementation of agreements.

GRP and MILF. Between the GRP and MILF, the following initiatives have been undertaken:

1. The Joint GRP-MILF Committee on the Cessation of Hostilities (CCCH) has been

conducting monthly meetings to discuss issues and ensure the implementation of the

ceasefire agreement on the ground. It focuses on the management of: (a) Monitoring

Posts10 and (b) Local monitoring teams (LMT).11

2. The GRP-AHJAG. On April 23, 2005, the GRP-AHJAG formally endorsed the list of

wanted persons in Davao City. The document contains a declassified list of 21 wanted

personalities with standing warrants of arrest and a classified list of 33 Jemaah

Islamiyah (JI) elements operating in Mindanao.

3. The existence of Monitoring Teams (MTs). There are currently 64 International MTs

assisting in monitoring the GRP and MILF Agreement of Peace signed by both Parties

on June 22, 2001. It is composed of representatives from Malaysia (50), Brunei

Darussalam (10) and Libya (4), who are currently deployed in the cities of Cotabato,

General Santos, Zamboanga, Davao and Iligan. A civil-society led Bantay Ceasefire is

also monitoring the implementation of ceasefire agreements.

4. Joint Needs Assessment and Capability Building Activities. The GRP and MILF jointly

conducted a needs assessment program in the target areas: human development, rural

development, finance and private sector, and governance and institutions. Both have

also agreed to support the Bangsamoro Development Agency (BDA) through capability

building activities and assist internally displaced persons. The BDA submitted an

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initial list of 135 personnel who will avail technical training programs in Kuala

Lumpur.

5. Consultations, workshops and focus group discussions. A series of these activities have

been conducted concerning the drafting of the Final Peace Agreement Framework.

GRP and NDF. The GRP and NDF are engaged in the following collaborative work:

1. Both GRP and NDF continue to monitor the implementation of the Comprehensive

Agreement on Respect for Human Rights and International Humanitarian Law

(CARHRIHL) through the Joint Monitoring Committee on CARHRIHL;

2. Agreement relating to the release of alleged political offenders (APOs). Since 2001, the

Government has released a total of 123 out of 148 APOs;

3. The Human Rights Compensation Act (HRCA) of 2005 was certified as priority

administration bill to ensure the indemnification of human rights victims

GRP-Rebolusyonaryong Partidong Manggagawa ng Pilipinas/Revolutionary Proletarian

Army/Alex Boncayao Brigade (RPMP/RPA/ABB). The GRP and the RPM/RPA/ABB are

involved in the following:

1. Development Projects. The RPMP/RPA/ABB has identified 142 barangays nationwide as

priority for delivery of development projects and services as a major confidence-building

measure of the peace agreement; development projects through KALAHI have also been

launched in 17 barangays of Iloilo, Aklan, Negros Occidental and Oriental, and a total of

Php 5.94M has been released to the Reform and Peace Movement in the Philippines

(RPMP) Foundation, RPMP/RPA/ABB’s conduit organization undertaking community

development.

2. Monitoring of livelihood projects facilitated by the RPMP Foundation. This was began in

May 2005; another Php 9.5 Million in development projects is being implemented.

3. Agreement relating to the release of APOs. Out of the 315 alleged political

offenders/political prisoners (APOs/PPs), 145 were released and 11 were endorsed to

Malacanang for release. A total of 107 released APOs/PPs have been provided with

immediate assistance at PhP 10,000.00 each while 102 APOs/PPs were provided with

micro-enterprise/livelihood assistance amounting to PhP 3.003 M (57 from Negros, 24

from Mindanao, 21 from Luzon). Several APOs/PPs consultation workshops have been

conducted in various provinces, in preparation for the livelihood assistance.

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4. Utilization of the Reintegration Fund. Preparations to acquire the 2nd tranche of the

Reintegration Fund (PhP 5 million for utilization) are being done, with ocular inspection

of ongoing livelihood projects and consultative conferences.

5. Immunity. To further clarify and improve relations of the GRP and RPMP/RPA/ABB

forces at the local level, several documents have been drafted for agreement. Leaders

from both panels are presently finalizing the draft Protocol for Arrest. The DENR has

presented its draft Guidelines Governing the Tapping of Assistance of RPMP/RPA/ABB

in the Protection of Forest and Marine Resources. The PNP is leading the crafting of the

safety and immunity guarantees for RPMP/RPA/ABB members.

6. Out of the 57 Special Permit to Carry Firearms Outside of Residence (SPTCFOR) and

Special License applications submitted by RPMP/RPA/ABB, 42 are ready for ballistic

testing while the rest are still undergoing records check.

7. Regular meetings by the various Local Monitoring Teams (LMTs) are being conducted

to improve their work systems and coordination. Peace agreement orientations were

likewise provided to municipal/city mayors and barangay chairpersons in conflict-

affected areas in Negros Oriental in relation to the peace agreement between the GRP

and the RPMP/RPA/ABB.

8. Several Local Technical Working Group Coordination Meetings on Cessation of

Hostilities of Panay and Negros, with PNP and AFP local commanders were held to

improve the work systems of the Local Technical Working Group (LTWG).

9. The 12th JEMC (Joint Enforcement and Monitoring Committee) Meeting was held in

Davao City last May 18-20, which included a road mapping workshop on the peace

process with RPMP/RPA/ABB.

Complementary measures to minimize the level of violence arising from armed conflicts

Government’s program in so far the minimization of violence is concerned has zeroed in on the

expansion and strengthening of peace zones. Support was given to the Peace Executive Council

(PEC) in Mountain Province for the implementation of projects in line with their proposed

expansion of peace zones. “Moral support” to existing civil society-led sanctuaries and spaces

for peace in Mindanao, particularly in Pikit, Cotabato, and other areas of Central Mindanao

were also extended. Initial (preparatory) steps were also undertaken towards the formulation

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of guidelines in the provision of support to peace zones, as well as guidelines in the conduct of

localized peace talks Full implementation of existing final peace agreements

The government continues to honor its commitments under the peace agreements signed with

the MNLF and the CPLA, specifically in so far as the reintegration of former rebels (for a

detailed discussion of this, please see below), and the provision of socio-economic benefits to

these returnees are concerned. Parties to the peace agreement meanwhile have taken

substantial steps towards the full demobilization and disarmament of MNLF and CPLA

members.

Implementation of an enhanced reintegration, rehabilitation, and amnesty program for former

rebels

Reintegration, rehabilitation and amnesty programs are simultaneously being implemented by

the government pursuant to the terms of the different final peace agreements it has entered

into. Integration of former rebels into the Armed Forces of the Philippines (AFP) and Citizens

Armed Forces Geographical Units (CAFGUs) continue to date.12

Rehabilitation programs meanwhile consist of the provision of emergency and livelihood

assistance, and scholarship programs for returnees. As of December 2004, a total of 39,793

former rebels (FRs) were granted Emergency Assistance13 amounting to P76.23M; 38,014 FRs

were provided with livelihood assistance in the amount of P306.8M; and 216 were admitted

into the Scholarship Program for Rebel Returnees for the SY 2004-2005.

The government is currently studying the possibility of an amnesty program for surfacing

rebels.

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Conflict Prevention and Peace-building

Rehabilitation and development of conflict areas

Through the ARMM Social Fund - Project Community Development Assistance Component,

local capacities building of 127 barangays in planning, development and in the implementation

of community-based projects have been undertaken.

The government has also identified for development assistance 500 AFP priority barangays

and 100 peace agreement-areas in CAR, Region 3, 4, 5, 6, 7 ,8, 9, 10, 11, and CARAGA under

the KALAHI PARA SA KALAYAAN Project for CY 2005.

Various multi-donor assisted funds are being mobilized to rehabilitate and develop conflict

areas. These include the GOP-Word Bank funded ARMM Social Fund for Peace and

Development, the UN Multi-Donor and its successor funds, the European Union-UNDP Fund

for Rehabilitating Internally Displaced Persons, and the Mindanao Social Fund.

Catch-up development program for ARMM and affirmative action agenda for Muslims

The integrated development of ARMM has been undertaken by the government through the

completion of the devolution program, and the implementation of inter-connectivity, and social

welfare projects.

Devolution (in accordance with RA 9054, the ARMM Organic Act)

At present, the functions of DOST, DTI, TESDA, NEDA have been devolved to the Regional

Government, while the terms and conditions for devolution are being finalized for the following

agencies/offices: PNP, BJMP/BFP, DILG, DPWH, DAR, DENR, CHR, DEPED, DOH, DA,

CHED, NCIP, DOE/NEA, DBM, DOF, DOTC, DOLE, CDA, DOT, POEA, OPS, PSC and NIA.

The creation of counterpart regional agencies for NHA and HLURB has been recommended to

the Regional Legislative Assembly. Requests are also being made for the establishment of

ARMM extension offices for the HGC, NHMFC, GSIS, SSS, HDMP (Pagibig)

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Inter-connectivity of ARMM constituent-provinces/city

The President identified key infrastructure projects to be implemented in the new term. These

include “affirmative-action” projects aimed at promoting peace and development in the conflict

areas. Among these are the 13 major road and bridge projects totaling P3.87 billion which are

being implemented or are in the pipeline for Mindanao.

Table 46: Selected Road and Bridge Projects in Mindanao Location Budget Status

Malabang, Dobliston-Kapatagan-Molave Road and Monte Alegre-Tukuran Road, Lanao del Sur, Lanao del Norte and Zamboanga del Sur

P650M Ongoing; for completion by 2006

Awang-Upi-Lebak-kalamansig Road, Maguindanao Roads

P47M Detailed engineering is ongoing and project will be implemented in 2007-2009

Basilan, Sulu, Lanao del Sur and Maguindanao Roads

P140M For completion by 2005-2006

Pagadian-Zamboanga Road P300M Ongoing for completion by 2006 2nd Magsaysay Bridge and Butuan City Bypass

P500M Completion by 2008

Surigao-Davao Coastal Road, Surigao del Sur and Davao Oriental

P562M Ongoing, particulary the Bacuag-Claver Section

Rural Road Network Compostela Valley CARAGA

P180M P67M P113M

Detailed engineering completed and project for implementation by November 2006

Road Structural Overlay Region IX Pagadian-Ozamis Road, Tangub City (2nd District)

P31M P13M P18M

Completed

Bridge Replacement Region IX Region X Region XI Region XIII

P260M P104M P 60M P 22M P 74M

In various stages of Implementation

Detailed engineering for 11 bridges in Surigao del Sur, Agusan del Sur and Agusan del Norte

P56M

Completed

Rehabilitation of Bridges along National Roads

Sultan Kudarat ARMM Lanao del Norte Davao Oriental

P117M

P15M P30M P20M P52M

For completion in 2005-2006

Rehabilitation of Bridges along National Roads

Region XIII

P32M Construction ongoing

Other roads and bridges in Mindanao P500M Construction ongoing *Data submitted by PMS

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Improving Human Development Index (HDI)

Health. The government’s efforts in the area of health are concentrated on the rehabilitation

and improvement of the health infrastructure in Mindanao, and universal enrolment in health

insurance for ARMM households.

Presently, the government through the ARMM Social Fund Project (ASFP) is funding four

hospitals for Peace and Development. These are: Buluan District Hospital, Datu Blah Sinsuat

District Hospital, Pangutaran District Hospital, and the Sulu Provincial Hospital. The ASFP

will also be tapped to fund the rehabilitation and expansion of the Lamitan District Hospital.

Meanwhile, the Philhealth committed to work for universal enrolment of ARMM households

and the phased accreditation of all providers to promote upgrading of rural health units and

hospitals in the ARMM.

Justice. Five (5) Shariah District Courts and fifty-one (51) Shariah Circuit Courts were

established. 1 District court and 19 Circuit Courts are occupied.

Land Tenure. 14 major on-going Plans, Actions, Programs (PAPs) and two (2) completed PAPs

on land tenure improvement are being implemented by the National Commission on

Indigenous Peoples (NCIP) and DLR. These projects are concentrated in the provinces of

Zamboanga del Norte, Bukidnon, North Cotabato, Zamboanga del Sur and Compostela Valley.

Agriculture. Agri-related programs and project implemented in ARMM since 1996 cover the

following sectors:

Table 47: Projects in Agri-Sectors Sectors Number of Projects a. Livestock; 14 b. Production of High Value Crops; 6 c. Crop Production Assistance; 14 d. Post Harvest Development Services; 16 e. Irrigation Facilities; 2 f. Farm Machineries; 1 g. Research Development; and, 10 h. ODA-Funded Projects 12

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Most of the projects are on the provision of post harvest facilities, livestock assistance, and crop

production assistance.

Twelve (12) projects were funded under the Official Development Aid (ODA). The most number

of projects were implemented in the provinces of Maguindanao and Lanao del Sur, comprising

about 70 percent and 46 percent of the total number of projects, respectively. On the other

hand, the province of Basilan has the least number of interventions, totaling only about 12

projects or 14 percent of the total.

Conduct of healing and reconciliation program in conflict-affected areas

The Government, through OPAPP is working closely with faith-based organizations for the

conduct of a National Interfaith Dialogue in September 2005, to be participated in by leaders of

major religious groups in the country. It also facilitated the convening of the Yogyakarta Group

on Interfaith Dialogue on February 17, 2005 and continues to provide national support in

preparation for the National Interfaith Summit in September 2005. Financial assistance to the

Bishop-Ulama Conference is also being given.

Endnotes

1 Peace Agreement signed in 1996 2 Agreement signed with the GRP in 1986 3 Former Secretary Teresita Quintas Deles (Presidential Assistant on the Peace Process) gave an estimate of the body count of each rebel group as follows: MILF – 13,000; CPP/NPA/NDF – 8,000; RPM/RPA/ABB – 500; RPMM – 500. 4 Formal peace talks have not resumed since August 2004 when the NDF unilaterally postponed the talks due to the renewal of the terrorist listing by the U.S. 5 The Norwegian government is Third Party Facilitator for the Talks 6 In December 2004, representatives from GRP and NDF conducted informal and discreet talks in The Netherlands. The GRP offered a ceasefire proposal to create a peaceful environment for the conduct of the talks in light of the increasing incidents of violence on the ground, but this proposal was rejected by the NDF 7 GRP and NDF conducted three rounds of formal talks in February, April and June 2004 in Oslo, Norway which resulted in the signing of the First and Second Oslo Joint Statements, as well as the separate issuance of the Panel Communiqué 8 60 barangays have undergone participatory research analysis-barangay development planning which is led by the Independent Secretariat to the Peace Process, Balay Mindanaw. Future consultations for the remaining 40 barangays are set for June to July 2005. The GRP Panel, led by Panel Chair Quijano, has conducted a number of briefings with different stakeholders and peace constituents. The most recent briefings were held last December 2, 2004 with the Regional Kalahi Convergence Group-IX and February 9, 2005 with the Southern Command. The GRP

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local secretariat also briefed the Regional Kalahi Convergence Group-X last May 5 on the peace process with RPMM. A training workshop on the consultation for the three secretariats and volunteers were conducted and regular Secretariat skill-building activities to strengthen the technical capacities of GRP and RPMM Secretariats as well as Balay Mindanaw have been held. Development projects are being implemented and monitored in Brgy. Mahayahay, Sultan Naga Dimaporo. Mahayahay is the first barangay consulted and the only one with existing packaged needs assessment report. 9 The second round of formal talks is set for July 2005 where the Agreement on Cessation of Hostilities (ACH) is expected to be signed between GRP and RPMM. The GRP Technical Working met on April 14, 2005 to discuss the one-page draft ACH as well as the emerging Implementing Guidelines on Cessation of Hostilities draft. The Joint GRP and RPMM Technical Working Groups are working now to produce a reconciled version of the cessation of hostilities drafts. 10 Volunteers from both the MILF and the government are stationed in permanent posts placed in conflict- affected areas 11 These teams go around the community to monitor the ceasefire. Joint CCCH and LMT monitoring posts are being established in the provinces of Maguidanao, Lanao del Sur and Lanao del Norte 12 In so far as the CPLA is concerned, a total of 264 and 528 former members have already been integrated into the AFP regular force and the Citizens Armed Forces Geographical Unit (CAFGU), respectively. 13 From 2004 to May 31, 2005, a total of 820 FRs were granted Emergency Assistance amounting to 2.1M, while 1 FR was provided with livelihood assistance in the amount of P9.446M.

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HEALING THE WOUNDS OF EDSA 1, 2 AND 3

Chapter Summary

Social and economic measures were instituted to neutralize the most politically malleable

segment of the population while reforms in the military and police organization were

implemented to pacify adventurism within their ranks. These pursuits, in essence, constitute

the administration’s apparent strategy towards effecting national reconciliation and unity.

The virtual absence of mass support for current attempts to effect an extra-constitutional

regime change may be indicative of the initial stage towards the “de-fragmentation” of the

polity. At the same time, the neutrality exemplified by military and police organizations in the

midst of these political developments suggests the changing perspective within their ranks of

their constitutional duty and the limits which bound the performance thereof. To what extent,

if ever, the administration’s programs influenced these metamorphoses of sorts is a subject ripe

for a discourse, which however is not within the scope of this undertaking.

Introduction

The Philippines has perilously tested the legal bounds of democracy. Since 1986, three popular

uprisings have already been waged, two successfully, to force out of power a sitting President.

However justified or legitimate their ends are, these initiatives undermine constitutionally

established processes for regime change. More importantly, they widen the divisiveness of the

polity and mount significant obstacles to effective governance.

The divisiveness resulting from these initiatives have become more pronounced recently.

Serious attempts are again being waged to force out of office the present administration

through mass action. These attempts rely mainly on, and further aggravate, the

fractionalization of the Philippine polity.

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Unfortunately, the costs of these exercises are underwritten neither by the political forces that

reign on the current regime nor by those who seek to change it. In the end, they adversely

impact on the economy, and are borne by the people who are forced into abject poverty by the

economic reverses they generate.

The Plan

The Arroyo administration has sought “a principled national reconciliation,” attempting to

engage all segments of society in a new government of political reform and economic change.1

Towards this end, it sought to pursue the following initiatives:2

1. the compensation to victims of human rights violations during the Marcos regime;

2. methods for reconciliation and national unity;

3. reforms in the military; and

4. response to threat groups that continue to confront the security of the nation.

Reconciliation and National Unity, and Politically charged cases

Early on, the Arroyo presidency has been confronted with the difficult task of forcing

reconciliation and national unity without compromising the interests of justice and the rule of

law. The trials of former Presidents Ferdinand Marcos and Joseph Ejercito Estrada remain

politically charged, and their prosecution by the state had the potential of alienating political

families, factions and their constituency.

Estrada Cases. Former President Joseph Estrada faces four (04) cases of plunder and perjury

which were filed at the Sandiganbayan in 2001. The prosecution has presented 73 witnesses

while the defense has so far presented 54.

Marcos Cases. The estimated value of the sequestered assets believed to be owned by the

Marcos family amounts to P223B. Of this, only P53.1B or less than 25% has been recovered

from 1993-2004. Meanwhile, from 1986-2001 P23.2B worth of Marcos assets have been

surrendered to the government. Total asset recovery as of last year stood at P76.3 Billion.

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More than 180 civil cases against the Marcos family and associates remain pending in various

administrative bodies. Meanwhile, the Sandiganbayan hears 39 “banner” cases against the

family, nine (09) of which involve various foundations allegedly used as conduits for ill-gotten

wealth. Regional Trial Courts hear six (06) cases.

Reforms in the military

Military adventurism appears to have resurfaced as made manifest by the “Oakwood mutiny.”

The Arroyo administration has responded to this phenomenon by creating the Feliciano

Commission mandated to investigate alleged malpractices in the military which instigated the

failed coup.

Updates on the Commission’s report reveal that significant reform measures need to be

instituted as regards, among others: (1) the Armed Forces of the Philippines’ (AFP)

Procurement System, (2) Grievance and Disciplinary Mechanism, and (3) Housing/Squatting

and Health Benefits and Medical Services (for a detailed report of these reforms, please refer to

Annex 1).

PNP Reforms

The PNP leadership has undertaken reforms parallel to those in the military. These measures

are intended to improve the institutional image of and restore public trust in the PNP. They

include:

1) an Anti-corruption Plan;

2) programs and projects towards the enhancement of administrative and operational

capabilities; and

3) improvement of infrastructure and upgrading of equipment or the “hardware” of the

organization.

(For a detailed report of reforms in the PNP, please refer to Annex 2)

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Assessment

The President assumed power with a mandate to govern an already divided polity.

Unfortunately the duty of prosecuting politically charged cases, deepens the fractionalization of

the polity. At the same time, the pivotal role played by the military in previous regime changes

as well as the Oakwood mutiny affirmed the politicization of the armed forces, raising the

specter of military adventurism.

No clear-cut solutions are readily available for problems of this complexion. Apparently, the

administration’s approach was to augment its social and economic programs that sought to

pacify the politically restless rung of the social strata with reforms in the military and police

forces.

Social and economic programs

Reports on and assessments of the achievements of the government in relation to its social and

economic programs specifically targeted for the poor are scattered in this work. Whether

government performance in this regard affects in any meaningful way the pacification of

political unrest is however a theoretical uncertainty.

Interesting however is the virtual absence of mass support for the most recent attempt to force

a regime change. Whether this could be taken as being indicative of, among others, the

neutralization of divergent political constituencies is an issue ripe for discourse. Suffice it to

say however that the experience suggests an emerging consensus among the most politically

malleable segment of the population to course their discontent through constitutionally

sanctioned processes and institutions.

Military and police reforms

The administration has aggressively pursued reforms in the military and the national police.

These reforms – some of which are offshoots of military adventurism while others were

pursued under legislated modernization programs – are in various stages of implementation.

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While allegations of politicization still hound both the military and the national police, the

stance these organizations have taken in the present political tension had had a calming effect.

More importantly, it manifests the altered appreciation of these organizations of their role in

the politics of the nation and their refusal to outstep the bounds of their power under the

prevailing legal order.

The influence of the administration and its programs in these metamorphoses is not easily

ascertainable. Significant however is the fact that these changes transpired in conjunction with

the invigorated efforts of the administration to precisely achieve this result.

Annexes

Annex 1: AFP Reforms

Procurement System Reforms. Reforms in the Procurement System of the AFP have two-fold

aims: first, the effective decentralization and reduction of Centrally Managed Funds (CMF),

and second, the institution of control measures. These measures are being implemented for the

optimal utilization of limited resources. Towards these ends, the following policies have been

adopted:

1) Bids and Awards management has been lodged with the DND for procurement in excess

of P50M and the AFP for procurement P50M or less;

2) Grant of cash advance of P50,000 per rifle company per quarter to provide for emergency

procurement in the operational area;

3) Authorization to the Chief of Staff to hire civilians to perform non-combat duties. This

was included in the GAA to avoid the prevalent practice of utilizing appropriated MOE

funds for the pay and allowances of AFP civilian personnel not in the regular plantilla;

4) Decentralization in the appointment of Special Disbursing Officers (SDOS) from the

Secretary of National Defense (SND) to the Chief of Staff of the Armed Forces of the

Philippines (CSAFP) and the major service commanders;

5) Prohibition against transactions with relatives;

6) Prosecution of erring officers both in courts and administrative bodies;

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7) Rotation of Finance/Procurement Officers – tenure limits to comptroller, logistics, and

procurement officers for a minimum of two (2) years or a maximum of four (4) years.

SDOS shall have a minimum of three (3) years and maximum of five (5) years.

The table below confirms the devolution of funds for centrally managed items (CMIs),

instituted to provide support to the unified commands (UCs), and AFPSSUs.

Table 48: Devolution of Centrally Managed Funds Reduction and Devolution (OPB CY 04-05)

Particulars CY 2004 CY 2005 Variance Personal Services 3,420.20 1,058.96 (2,361.24) MOE Direct Support Fund 454.62 503.02 55.80 Fixed Expenditures 497.74 562.06 64.32 Enhancement Program 82.25 102.00 19.75 Provision for Other Mandated

Tasks - 40.00 40.00

Functional Program Allocation of 156.16 123.01 (32.36) Centrally Managed Fund (CMF) Capital Outlay 59.28 10.00 10.00 Key Budgetary Items Reservist and Retirees Affairs (RRA)

59.67 36.24 23.43

Exercise Balikatan 96.30 96.30 - Self Reliant Defense Posture

(SRDP) 17.45 18.84 1.39

CAFGU, CPLA, MNLF Fund 1,628.12 - (1,628.12) CMF from Major Services 258.04 - (258.04) Total 6,730.03 2,550.43 (4,124.35) Source: AFP

The decentralization of the pay and allowances to the major services except for members of the

technical services which is retained at GHQ has resulted to MOE 01 funds being managed by

the major services.

The budget of the General Headquarters (GHQ) will consist of less budgetary items as

indicated on the table below, other Key Budgetary Items (KBIs) still appearing in 2005 and

devolved to the major services will not be included in the 2006 budget.

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Table 49: Reduction and Devolution (OPB CY 04-06)

Particulars CY 2004 CY 2005 Cy 2006 Personal Services 3,420.20 1,058.96 1,058.96 MOE Direct Support Fund 454.62 503.02 503.02 Fixed Expenditures 497.74 562.06 562.06 Enhancement Program

82.25 102.00 102.00

Provision for Other Mandated Tasks

-

40.00 40.00

Functional Program Allocation 156.16 123.01 123.01 Centrally Managed Fund (CMF) 59.28 - - Capital Outlay 10.00 10.00 Key Budgetary Items Reservist and Retirees Affairs (RRA)

59.67 36.24 36.24

Exercise Balikatan 96.30 96.30 96.30 Self Reliant Defense Posture (SRDP)

17.45 18.84 20.93

CAFGU, CPLA, MNLF Fund 1,628.12 - - CMF from Major Services 258.04 - - Total 6,730.03 2,550.43 2,552.52 Source: AFP

Despite the devolution, the GHQ still generated around P316.41M in savings as shown in the

table below:

Table 50: GHQ Savings (In Million Pesos)

CY 2004 Cy 2005 (1st Qtr)

Total

Personal Services 100.00 *95.73 195.73 MOOE - 50.68 50.68 Balikatan Funds - 70.00 70.00 Total 100.00 216.41 316.41 Source: AFP

*Php 74M was utilized to pay terminal leave benefits of military and civilian personnel to be reimbursed from DBM

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The MOE savings generated will be utilized for various projects such as repair on Government

Quarters, Camp Aguinaldo, UCS, AFPWSSUs repair of equipment and facilities and other

activities as shown in the table below.

Table 51: Initially Funded Projects from Savings

(In Million Pesos) UNITS RQMT RELEASES Repair of Gov’t. Quarters (GHQ,AFPWSSUs, UCs) 32.00 1.90 Equipment and repair of facilities (AFPCIG) 15.00 10.01 Repair of Cadet Barracks (PMA) 23.50 11.50 Repair of AFPCGSC Facilities 7.00 5.90 Rpr/Landscaping of Fenced Area at Gen. Enrile Ave.

19.27 6.20

GHQ EP Mess Hall 1.16 1.16 Installation of GHQ Security Fence 1.17 1.17 Repair of Air Education and Trng. Command Facilities

3.00 3.00

Repair of MP BN Hqs Barracks at Gate 3,4,5 and 6 .99 .99 Repair of Cathedral 2.00 1.00 Total GHQ, UCs and AFPWSSUs 105.09 42.83 Source: AFP

Reforms in Grievance and Disciplinary Mechanism. Earnest efforts have been exerted for the

disposition of cases involved in the Oakwood incident. The following is the status of disposition

of the personnel involved therein. It should be noted that 182 respondents have entered into

plea bargaining.

Table 52: Grievance and Disciplinary Mechanism

Status of Military Personnel Involved In Oakwood Incident Disposition

OFFICERS EP TOTAL Charged (108) (196) (304)

Before Civil Court 29 2 31

GCM 79 194 273 PI (DOJ) 17 0 17 Released 126 52 178

Total 251 248 499

Housing, Health and Social Welfare Programs. The AFP instituted on-base and off-base

housing programs to address housing shortage for military personnel. Currently, 34% of the

demand of 7,000 military personnel for on-base housing has been met. For this year, 463 on-

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base housing units have been earmarked. Of this, 36 quarters for officers and 162 quarters for

enlisted personnel for CY 2004-2005 have been completed while 265 are on-going or under

construction. Meanwhile, under its off-base housing program, a total of 660 housing units have

been earmarked at Riego de Dios, Tanza Cavite; Bonifacio Heights, Makati City and Kawal

Kalinga in Tarlac for military personnel.

Moreover, AFPCES has expanded and improved its service. The revenue of AFPCES has

increased considerably. With the patronage it is gaining, it has been able to reduce the mark

up of its prices from 7% to 4% as shown in the table below.

Table 53: Other Reform Initiatives AFPCES sales

(In Million Pesos) YEAR SALES INCREASE 2002 157.6 2003 164.8 4.3% 2004 427.9 160.0% Expansion of services and management reform of AFPCES -7% TO 4% reduction in price mark up

Annex 2: PNP Reforms

Anti-Corruption Plan. The PNP has established an integrity circle in police regional offices

composed of PNP personnel and members of the community who are known for their integrity,

honesty and professionalism and who are willing to help fight the forces of graft and corruption

in the PNP. Also, honesty teams are conducting lifestyle check on the PNP personnel. A

directive was crafted to stop unauthorized use of carnapped vehicles by PNP personnel and

created an Anti-Kotong Task Force.

The PNP also formally organized a School for Values and Leadership. From March 15, 2005,

the School reported that 112 policemen had graduated: 33 graduated in a training center in

Subic, Zambales; 40 underwent training in ARMM; and 39 graduated in PRO CALABARZON.

The rationalization of the qualification standards for initial appointment in the PNP and

standard rating system in the evaluation of applicants has also been put in place. The

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Training Service and In Service Training Management facility of the PNP to enhance and

accelerate the professionalization of the PNP personnel have also been adopted.

Test Development Programs for PNP recruits and the amendment of pertinent issuances on

mandatory training, including the accreditation of PNP in-service training by the Philippine

Public Safety College, were also developed. The PNP Education and Training Board was

created to evaluate the applicants for foreign schooling. The PNP Eligibility Lists System to

ensure that only competent and qualified personnel shall be assigned to different PNP units

has also been drafted.

Administrative and Operational Efficiency. Transparency measures in the collection and

utilization of PNP Trust Receipts Funds have been instituted. Along this line, the PNP

Internal Audit Unit was activated to achieve efficient and effective fiscal administration.

Infrastructure and Equipment. The PNP Five Year Information Systems Strategic Plan was

finalized, which covers the development of the PNP communication system and software and

database to aid police investigators in handling cases. Computerization of payroll, licensing

and clearance were given priorities to eliminate red tape and to account personnel in the

payroll list.

Endnotes

1 PMS. _______ 2 See National Security Meeting, September 2004

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PROVISION OF ELECTRICITY AND WATER SUPPLY

TO BARANGAYS NATIONWIDE

Chapter Summary

Approximately 60% of barangays targeted for electrification for the period under review have

been connected to the grid. Meanwhile, programs for the provision of potable water have either

failed to take off, or their targets were not achieved. The implementation of the President’s

Priority Program on Water (P3W), for instance, has been derailed by the delay in the release of

funds. Meanwhile, the Patubig Program has very low accomplishment rates, indicating the

government’s failure to reach a significant chunk of households badly needing potable water

supply. Of the 459,037 households identified for project coverage, only 185,390 households or

40% of the target were served.

Introduction

Insufficiency in the supply of electricity and lack of access to potable water are persistent

problems in the country. Privatization early in the decade, touted as the panacea to these

problems, has not generated the momentum required to hasten the establishment of the

necessary water and electricity networks throughout the country. Today, a critical number of

barangays remains deprived of these basic resources. Families continue to suffer from, among

others, the resulting health risks while communities continue to be locked in economic

isolation.

Electrification

In 2001, RA 9136 otherwise known as the Electric Power Reform Act (EPIRA) was passed. The

EPIRA laid down the privatization strategy for the National Power Corporation (NPC) and

restructured the electric power industry into three (03) sectors: generation, transmission and

distribution. The EPIRA sought primarily to enlarge private sector involvement in these

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sectors and encourage competition to attain better public service delivery. It reserved to the

government a moderate authority to regulate the industry to ensure consumer welfare, as well

as the provision of electricity to missionary areas, or those where the provision of electricity is

not commercially-viable.

Access to Potable Water

Potable water in the country is inadequate and its provision, unequal. The supply of potable

water is insufficient to meet increasing demand because of, among others, unabated water

pollution, the deforestation of forests and the destruction of watershed catch-basins1. This year,

the supply problem has been aggravated by the occurrence of the El-Nino phenomenon. Water

distribution meanwhile is plagued with the absence of the necessary infrastructure to reach

elevated as well as missionary areas where shortage in supply remains acute.

Administration Targets

Electrification

By 2008, the Arroyo administration envisions to electrify all 41,845 identified barangays

nationwide. At the end of 2004, 3,182 barangays remained unenergized. Annual targets for

electrification therefore from 2005 to 2008 were set as follows:

Table 54: Barangay Electrification Program Indicators Year Number of

barangays for electrification

Total/cumulative Energization level

2005 1,057 39,820 94.9% 2006 1,058 40,878 97.5% 2007 553 41,431 98.8% 2008 514 41,945 100% Total 3,182 Source: DOE Accomplishment Report 2004-2005

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Access to Potable Water

The administration launched its “President’s Priority Program on Water” or P3W which targets

to provide potable water to 210 communities within the National Capital Region (NCR) and

432 waterless municipalities outside Metro Manila.2 P3W is spearheaded by the NAPC and

DPWH, and costs about P4B. It will run from 2005 to 2010.

By 2010, the administration expects to achieve the following: (1) a 50% increase in access to

water supply and sanitation services; (2) 20% reduction of diarrhea incidence; c) 20%

improvement in access of the poor to water supply and sanitation; and d) 100% sustainable

operation of all water supply and sanitation projects constructed, organized, and supported by

the program.

For 2005, the following areas have been identified as priority areas for the P3W water projects:

1) Bantayan Island municipalities (with German Agency for technical cooperation);

2) Liloy in Zamboanga (with LGU);

3) Peace agreement areas in Mindanao3;

4) Sulu area (with PBSP/PEF);

5) Kalahi-CIDSS areas; and

6) Municipalities with water districts.

A total of P4B for the implementation of the program will be sourced from the budget of the

Department of Public Works and Highways. For CY 2005, PhP 100 Million from the DPWH

budget has been allotted to the “Kalayaan Barangays” project.

Table 55: Six-Year Projected Expenditures for the President’s Priority Program on Water Number of facilities

Number of Households

TOTAL Year Funding (in

million PhP)

Level I Level II Level I Level II No. of facilities

No. of Households

2005 500 1,200 270 18,000 27,000 1,470 45,000 2006 500 1,200 270 18,000 27,000 1,470 45,000 2007 500 1,200 270 18,000 27,000 1,470 45,000 2008 700 1,684 380 25,260 38,000 2,064 63,260 2009 800 1,925 434 28,875 43,400 2,359 72,275

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2010 1000 2,411 546 36,165 54,600 2,957 90,765 TOTAL 4,000 9,620 2,170 144,300 217,000 11,790 361,300

LGUs shall have the responsibility in the actual implementation of the P3W projects, closely

coordinating and cooperating with Water Districts, Non-Government Organizations, private

sector and other national agencies. These LGUs will develop plans and implement programs

that will address the water access gaps in their respective municipalities. Project activities

include:

1) Construction of new Level I or Level II water supply system;4

2) Rehabilitation of existing Level I water supply system to Level II;

3) Upgrading of existing Level I water supply system to Level II;

4) Technical and non-technical training for managers and support a staff of existing water

associations;

5) Support for new and innovative technologies for water supply delivery and sanitation

services;

6) Expansion of existing systems to additional service areas;

7) Water source development preparatory for Level III (full waterworks/direct pipe connection

to household) systems; and

8) Construction of Ecological sanitation projects such as dry sanitation systems for solid waste

disposal, wetlands to efficiently manage wastewater disposal, and biogas plants to

maximize use of septage. [MWSS concessionaires for the past two years has devised a new

model of providing sewerage system through a community approach model using an

interceptor or the small sewerage system or STP which is not as expensive as the

traditional sewerage construction lines along the streets. Corollary to this, customers of

MWCI and MWSI paying 10% for sanitation are offered free septic tank dislodging

services.]

Aside from P3W, the government initiated in 2003 the PATUBIG ni PGMA PROGRAM which

seeks to augment water shortage supply in Metro Manila with piped-in water. This program is

implemented by the MWSS and its concessionaires, with funding from the PAGCOR.

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Energization

From July to December last year, electrification programs in 521 barangays were completed,

accomplishing the government’s electrification target for the period. This semester, the

administration’s electrification drive seems to have lost steam – of the 1,057 barangays

identified under the government’s energization project for the entire year, only 191 have been

energized during the first semester, accounting for about 18.07% of the target. In sum,

government’s accomplishment record in energization for the period is off target by

approximately 30%.

Table 56: Timetable for 2005 Electrification Program On-going/Target Completion Date

Agency 2005 Target

Completed/Energized Projects

3rd Quarter 4th Quarter NEA/Ecs 221 24 50 147 DOE(EBP) 68 5 29 4 DOE(ER 1-94) 73 7 50 16 PNOC-EDC 98 ` 19 78 IPPs 303 82 29 192 NPC-SPUG 113 - 103 10 QTPs/NPC-SPUG

179 2 177

PIOUs 2 2 TOTAL 1,057 121 280 656

Note that private sector-led electrification that were undertaken by franchise holders are

counted as government’s accomplishment. Note further that through this initiatives, 38,885

barangays have been electrified as of April 2005 (see table below).

Table 57: Performance by Franchise As of 30 April 2005 Franchise Holder

Coverage % to the coverage

Electrified/ completed

Remaining unelectrified barangays

% electrification level

119 ECs

36,018 86 33,072 2,946 91.82%

Meralco 4,317 10 4,243 74 98.29% 24 PIOUs/ LGUs/Others

1,610 4 1,570 40 97.52%

Philippines 41,945 100 38,885 3,060 92.70%

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The dismal performance registered by the government suggests that the energization drive has

slowed down. As of June 2005, backlog is at 2,991 barangays, more than half of which are

found in the Mindanao area.

Table 58: Barangay Electrification Status As of 30 June 2005 Target Accomplishment %Accomplishment Backlog

Luzon 20,476 19,827 96.83% 649 Visayas 11,443 10,692 93.44% 751 Mindanao 10,026 8,435 84.13% 1,591 Total 41,945 38,954 92.8% 2,991

The following obstacles slowed down the government’s energization drive:

1) Funding. The government cannot afford the cost of including barangays into the grid

system. Current estimates suggest that about PhP 1.38 B per 3.3 km distribution lines will

be needed to include barangays into the grid system. Moreover, funding releases have

always been delayed slowing down program accomplishment. For this tear, the delay in

funding releases has resulted in the suspension of certain on-going projects.

2) Peace and Order. The problem in peace and order is specially acute in Mindanao. This has

hampered the implementation of the projects. Moreover, there has been reports of pilfering

in some areas where electrification has already been in place.

In response to problems in funding, the administration is pursuing an off-grid program which

include, among others:

1) The Solar Home System. This system provides independent energy unit per house. It costs

about PhP 1.5 million for at least 35 households.

2) The Mini-Hydro, Micro-Grid system and the small wind and micro-Diesel Genset. This

system costs about PhP 3.5 million and serves at least 150 households. In Ilocos,, wind

power system has been installed, generating around twenty-five (25) megawatts of

electricity.

Water

P3W accomplishment report

On December 20, 2004 a memorandum of agreement between NAPC and DPWH was signed for

the utilization of DPWH’s P500 million annual allocation for waterless municipalities for the

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various water projects outside Metro Manila. To date however, the fund has not yet been

released.

Patubig Project

Accomplishment of MWSS concessionaires in its piped-in project vary. The MWCI has covered

50% of its target communities but provided piped-in water services to only 25% of the number

of households targeted for the year. The MWSI, on the other hand, had a higher

accomplishment rate in terms of communities covered (95% of target) and households served

(at 88% of target). The accomplishment of these concessionaires is reported below.

Table 59:MWSS Accomplishment From 2004 to 30 June 2005 2004- 2005 MWCI (Manila Water) Target Completed Balance Sitios/communities 24 12 12 Households 29,907 7,379 22,528 Project cost Php 1,015 M MWSI (Maynilad Water) Target Completed Balance Sitios/communities 41 39 2 Households 10,524 9360 1164 Project cost PhP 201 M

For this year, government agencies sought to provide water to 459,037 households under the

Patubig program which remains uncovered by the piped-in project. Of this number, only

185,390 households or 40%5 of target were served by these agencies.

Table 60: Patubig ni Gloria Program Accomplishment Report Agency Municipalities Barangay Target Households Actual HH served DBP 14 284 23,156 17,902 LBP 235 196,746 65,904 DLR 65 68 15,006 DSWD KALAHI-CIDSS

210 45,949 40,195

LWUA 128 169,536 45,274 DILG 12 16 13,755 6,028 DPWH 31 99 9,885 10,087 PAGCOR 79 321,681

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Assessment

The government has been underperforming in both its electrification and energization, and

water programs for the period under review.

In the government’s energization program, the nosedive in accomplishment is worrisome –

during the first semester last year, about half of the full year target has been accomplished

whereas this semester, only 18.07% of the current year target has been met. Coverage wise, the

expansion of the program to include sitios has been advocated. NEA estimates that 300-

800,000 sitios need to be energized.

As regards the water sector, two observations stand out: first, the sluggish implementation and

completion of both the Patubig Program and the P3W and second, the virtual absence of the

sanitation component in these programs.

Tapping new sources of financing is an urgent task for the government. The current funding

estimates cover only 50% of the 432 municipalities identified for the project. Moreover, because

the program is intended to serve missionary areas, cost recovery is virtually nil. Greater

innovation in mobilizing and optimizing funding for this projects is therefore needed.

Endnotes

1 See Medium Term Philippine Development Plan 2004-2010 2 Less than fifty percent (50%) of the households in these 432 municipalities have no access to potable water. 3 The peace-agreement areas covered by the program include the Kalayaan barangays which form part of the identified 500 conflict areas those from the 100 peace areas handled by OPAPP and DND. 4 As defined by NAPC, access to water supply is categorized according to levels of service as follows: Level I - (point source) – adaptable in rural areas; this is a protected well with an outlet but without distribution system. Level I facility normally serves an average of 15 households, wherein the farthest user should not be more than 250 meters from the point source. Level II – (communal faucet system or standpost) – a system composed of a source, a reservoir, a piped distribution network, and 2 or more communal faucets. Usually, one faucet serves 4 to 6 households,

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where the farthest user is not more than 25 meters from the communal faucet. Suitable for rural and urban areas where houses are densely clustered. Level III – (waterworks system or individual house connections) – a system with a source, a reservoir, a piped distribution network and household taps. Generally suited for densely populated urban areas. The house has service connection from the system. 5 Since PAGCOR and DLR did not provide any targets, the figures in their accomplishment report have not included in this computation.

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OPPORTUNITIES TO CREATE SIX (06) TO TEN (10)

MILLION JOBS BY 2010

Chapter Summary

The government seeks to create 9.7 to 11.5M from 2005-2010. These jobs are to be generated in

the following sectors: infrastructure, microfinance, tourism, agribusiness land development,

housing, exports, ICT and mining.

Under the MTPDP, the administration sought to create 2.1M jobs for the period under review.

The revised plan of the agencies involved in job generation however adjusted this target to

2.9M jobs. The government was able to generate for the period under review 2.85M jobs --

175% of its MTPDP target and 97% of the revised targets.

This exceptional achievement must however be qualified. First, it is clear that the employment

created under this program is largely seasonal or contractual work and not permanent in

nature. In fact 74% or 2.1 million of the jobs generated range in duration from a high of 90

man-days to a low of 10 man-days per year. Second,, the unusual volume of jobs created in the

2004 may be attributed to the after-effects of the elections.

If government wants to seriously address the unemployment problem, it must go beyond short-

term, stop-gap measures. The poverty problem will not be addressed by providing people with

irregular jobs. Government must therefore re-orient its strategy and focus on sectors that can

provide long term sustainable jobs.

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The Plan

The MTPDP projects that government will generate 9.7 to 11.5 million jobs between 2005 and

2010, or 1.4 – 1.6 million new jobs per year. This projection is based on the assumption that the

domestic economy will grow at the rate of 7% annually.

Under the plan, the services sector is expected to account for 60% of the total jobs to be

generated, followed by the agriculture and industry sectors. The table below identifies the key

agencies involved in job generation, and projects sectoral employment as follows: tourism 3.0

million, agribusiness 2.8 million; housing 1.0 million, ICT 0.8 million, exports 0.7 million and

mining 0.2 million. The plan also projects an average of 1.0 million OFWs to be deployed

annually.

Table 61: Employment Prospects, 2004-2010 (in ‘000)

Net Job Creation Year

Agriculture Industry Services Total 2003 (Actual) 81 144 341 566 2004 (Jan, Apr, Jul) 187 237 810 1234 2005 290-331 174-212 565-713 1,029-1,256 2006 298-340 249-291 717-896 1,263-1,527 2007 297-342 265-312 818-1016 1,380-1,669 2008 309-355 299-351 894-1,114 1,502-1,821 2009 321-370 333-391 941-1,184 1,594-1,945 2010 320-371 366-431 1,009-1,279 1,695-2,081 2004-2010 (Total)

2,021-2,295 1,923-2,225 5,753-7,012 9,697-11,532

2004-2010 (Average)

289-328 275-318 822-1,002 1,385-1,647

Source: MTPDP 2004-2010, Table D

Given the 3.5% labor force growth rate per year, the targets set are not intended to decrease

unemployment in the country. Rather, accomplishment of these targets will merely preserve

unemployment rate at 8.9% by 2010. If viewed from this light, it becomes imperative that

government achieves this target, if only to ensure that the poverty situation will not worsen.

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Employment generation is projected to come from eight (8) sectors, identified in the table below

with the corresponding number jobs each is expected to generate from 2005 to 2010.

Table 62: Employment Generation Per Sector (2004-2010) Sector No. of Jobs Agribusiness Land Development Microfinancing/SME Lending Tourism Mining Housing ICT Infrastructure Economic Zones

2,871,525 3,000,000 3,000,000 44,318 1,063,037 688,250 3,466,392 700,000

Source: Submissions from various agencies involved, including PMS, DA, DENR, National Shelter Program, DPWH, NAPC, DOT, PEZA, CICT.


As of June 2005, the eight (8) sectors directly involved in government’s employment drive have

chalked up a 97% accomplishment rate vis-à-vis their full year target. The housing group

achieved a 227% accomplishment rate. The other sectors that attained over a hundred percent

accomplishment rate are the infrastructure group (120%), PEZA (117%) and microfinance

(113%).

The table below summarizes of actual jobs generated per sector versus their target for the year

and their accomplishment rates.

Table 63: Actual Jobs Generated Per Sector (2nd Semester, 2004 to 1st Semester, 2005) Sector Total Jobs

Generated Target for the

Year Accomplishment Rate

(%) Agri-business Land Dev’t

135,314 600,478 22,53

Microfinance 569,043 500,000 113.81 Tourism 339,448 500,000 67.89 Mining 4,510 7,386 61.06 Housing 454,790 200,000 227.40 ICT 41,000 43,250 94.80 Infrastructure 1,173,394 974,634 120.39 PEZA 136,511 116,667 117.01 Total 2,854,010 2,942,415 97.00

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The jobs generated under the program however do not provide permanent employment. Note

that employment in the housing and infrastructure groups are project-based, i.e. co-terminus

with the duration of the project. For instance, in the infrastructure group, each job is only

equivalent to 10-man days.

The agriculture sector is the worst performer among the sectors, with an accomplishment rate

of 22.5%. Apparently, the relatively long gestation period required to start an agribusiness

venture (after area identification, DA validation of the land is required before funds may be

raised for such ventures) slowed down the generation of jobs in the sector. The mining and

tourism sectors have also performed below expectations, with 61% and 68% accomplishment

rates, respectively.

As for the ICT group, it is noteworthy that the figures are those obtained as of March 2005;

hence, the group could still improve achieve its target should data for April to June 2005 be

included (once they become available).

Agri-Business Development

The agriculture sector is projected to account for about 20% of the total jobs to be generated in

the next 5 years. These jobs are expected as a result of the development of agricultural lands.

Under the plan, the development of about 2 million hectares of land will generate 2.87 million

jobs.

It should be noted however that these jobs, as defined by the DA, lasts for 90 days per year,

coinciding with the crop-production period. As such, a person in the agri-business sector is

considered employed if he has worked for at least 90 man-days for the whole year.

The table below lists the projected number of jobs per year based on the lands slated for

agricultural development.

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Table 64: Job Generation Targets by Year 2005-2010

Year Area (has.) Covered No. of Jobs Projected 2005 357,650 600,478 2006 400,570 557,988 2007 408,580 559,517 2008 367,220 472,897 2009 293,770 417,407 2010 219,610 263,238 Total 2,047,400 2,871,525

For 2005, the DA is targeting 357,650 hectares to generate 600,478 jobs. It expects coconut and

coconut-related products to account for 43% of total area to be developed, followed by high

value crops at 37% and corn at 13.64%. By area, Mindanao accounts for about 50% of new

lands, followed by Luzon at 33% and Visayas at 17%.

As of June 30, 2005, the DA has validated areas in excess of the target. However, only 73,925

hectares (21% of target) has actually been developed. As a result, only 135, 314 jobs were

generated in the sector not even a fourth of its target. It is highly unlikely that the sector can

reach its target of 600,000 for the whole year.

Table 65: 2005 Targeted, Validated and Developed Areas by Region (As of June 30, 2005)

Region Target Areas Validated Areas Developed Areas Area (ha.) No. of

jobs Area (has.)

No. of Jobs

Area (has.)

No. of Jobs

CAR 6,932 8,382 7,005 8,541 1,034 1,593 I 5,747 11,071 6,656 18,831 2,136 7,557 II 7,585 19,319 10,853 22,514 6,119 10,030 III 25,851 46,367 17,913 37,429 4,152 7,610 IV-A 43,850 56,241 55,250 74,155 5,877 8,327 IV-B 17,140 28,975 17,866 27,339 1,294 4,271 V 11,541 17,457 13,103 18,372 847 1,261 VI 25,021 36,568 27,795 41,456 2,458 2,635 VII 12,919 19,758 13,516 19,073 831 2,641 VIII 21,896 35,737 59,348 68,925 4,372 10,076 IX 18,495 39,337 30,668 50,058 4,607 7,445 X 20,452 33,796 20,475 31,232 14,516 18,875 XI 33,374 58,365 55,212 86,582 2,635 5,790 XII 45,001 76,485 45,107 79,260 10,841 23,421

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XIII 20,971 35,516 20,898 33,516 3,373 5,840 ARMM 40,875 77,104 40,663 73,436 8,753 17,942 Total 357,650 600,478 442,330 690,629 73,925 135,314 Validated v. Target (%)

123.68 115.01

Developed v. Target (%)

20.67 22.53

Source: DA

Aside from DA, two other agencies are tasked to generate jobs under the agribusiness circle,

namely DLR and NCIP/DENR. The DLR targets 764,452 hectares while NCIP/DENR targets

604,143 hectares. However, both agencies are still only at the area validation stage which does

not create employment.

Micro-Finance/Lending

The Arroyo Administration (2001) has utilized microfinancing as a measure to alleviate

poverty and generate employment among the poor. Microfinance seeks to provide financing to

the “unbankable” sector of society, following the Grameen Bank approach in Bangladesh.

Under the program, government agencies work in conduit with non-government organizations

that identify and organize target beneficiaries for purposes of re-lending capital for business.

Unlike in the past when microfinance program offered subsidized rates, government agencies

now charge micro borrowers market rates. However, repayment schemes are non-commercial,

with collection being done as often as everyday, depending on the cash flow of the business

concerned. Likewise, group pressure is employed among the members to ensure that they pay

their amortization on schedule.

The microfinance group was given a target of 500,000 new jobs per year or 3 million from 2004

to 2010. The target is based on the assumption that at least 1 job is created for every loan

release, irrespective of the value of the loan. There are six (6) agencies involved in the program

led by the LandBank, which accounted for 74% of total loan releases for the period under

review, followed by the Quedancor (16%) and People’s Credit and Finance Corporation (PCFC

9%). The others include UCPB-Cocofinance, Small Business Guarantee and Finance

Corporation (SBGFC) and Technology and Livelihood Resource Corporation (TLRC). See Table

below for details.

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Table 66: Summary of Loan Releases and No. of Borrowers in MicroFinance July 2004-March 2005

Agency No. of Borrowers

% to Total Loan Released (P’mn)

% to Total

PCFC 297,423 52.27 1,115.25 8.79 CocoFinance 13,805 2.43 111.71 0.88 TLRC 2,520 0.44 2.00 0.02 Quedancor 63,440 11.15 2,041.12 16.08 LandBank 188,284 33.09 9,393.66 74.00 SBGFC 3,571 0.63 29.89 0.24 Total 569,043 100.00 12,693.62 100.00 Source: NAPC Monitoring Report of the SONA Commitment, July 2004 – March 2005

In terms of number of borrowers, PCFC accounts for over half of the total number of

borrowers/employment generated because it concentrates its resources principally to micro

borrowers (or those borrowing as low as P2,000 to as much as P150,000). Quedancor and

LandBank, on the other hand, also lend to Small and Medium Enterprises (SMEs), where loan

amounts are over P150,000 per borrower.

Microfinance agencies usually work with conduits in the delivery of credit to the poor. These

may be non-government organizations (NGOs) as with PCFC or rural banks (in the case of

LandBank). Borrowers are not required to put up collateral to cover their loans. What is

noteworthy among these agencies is that despite the fact that their conduits charge market

rates, repayment rate of borrowers is respectably high at 98.82% for PCFC and 90 to 93% for

Quedancor. Moreover, these agencies are self-sustaining – i.e. they are able to pay for their

operations from income derived from service fees and interest charges. They do not get

appropriation from government to run their operations.

It is also noteworthy that this group is estimated to have generated 569,043 jobs in the last 9

months (July 2004 – March 2005), already over its target of 500,000 for the whole year.

Jobs created under this sector is considered regular. In fact, since most of these involve the

operation of sari-sari stores, jobs here extend beyond the number 8-hour work day, starting as

early as 5 in the morning and ending as late as 9 in the evening. Moreover, since a number of

the beneficiaries are women, it also helps in the empowerment of this special group, enabling

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them to generate additional income for the family while making them part of a productive

society.

Tourism

The tourism sector is expected to contribute 3 million jobs in the next six (6) years or about

500,000 jobs per annum. This assumes that visitor arrivals will post double-digit growth

annually, or in absolute terms, from 2.29 million visitors in 2004 to 5 million visitors by 2010.

A study done by McKinsey commissioned by the DOT showed that regardless of duration of

stay, 1.22 jobs are created for every tourist arrival. Tourist arrivals are based on the

arrival/departure cards from the Bureau of Immigration. The number of new jobs is computed

as the increase in the number of tourist arrivals for the period vis-à-vis the same period in the

previous year multiplied by 1.22.

The DOT has classified travel destination into three: (1) major destinations

(Cebu/Bohol/Camiguin, Palawan, Manila plus Tagaytay and Davao) (2) minor destinations

(Vigan/Laoag and Clark/Subic) and (3) special interest destinations as Baguio/Banaue and

Boracay.

The country’s major tourism market is still the US, which accounted for the biggest share of

our visitors at 20.7% in 2004, followed by Japan (17%), Korea (6.6%) and China (14.2%).

The table below shows that for the period under review, the sector generated 278,236

additional visitors vis-à-vis the previous year, which translates to 339,448 jobs. This figure is

only 68% of the annual target of 500,000 jobs, implying that the sector may not meet its first

year target unless visitor arrivals post a big increase during the months of May and June.

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Table 67: Visitor Arrivals to the Philippines 2003-April 2005

Period Arrivals New Jobs Jul-Dec 2003 953,613 Jul-Dec 2004 1,150,835 Inc (Dec) 197,222 240,611 Jan–Apr 2004 771,569 Jan–Apr 2005 852,583 Inc (Dec) 81,014 98,837 Total Inc (Dec) 278,236 Total Jobs Generated 339,448 % to Target 68%

Source: DOT

Mining

Geological estimates show that the country is highly mineralized, with mineral resources cover

of about 9 million hectares or 30% of the total land area. Of this, however, less than half a

million hectares or only 5.5% of total identified area is under exploration.

Government is pushing for the revival of the mining industry, with the issuance of EO 270.

Under the plan, government will pursue and assist in the development of 23 large-scale mining

projects which is estimated to bring in US $4.0 – 6.0 billion investments, Php 5.0 – 7.0 billion

in taxes and provide 210,000 direct and indirect employment.

Below is the list of 13 of the 23 identified large-scale projects. As of May of this year, only 13

have started operations/started hiring people. Ten (10) projects are still in the pre-operating

stage and are not expected to contribute to employment generation in the first half of this year.

Table 68: Employment Generated from 23 Priority Mining Projects

Jobs Generated Project

Jul-Dec 2004 Jan-May 2005 1. Palawan Nickel Project 467 455 2. Rapu Rapu Polymetalic Project 1,028 410 3. Canatuan Gold Project 450 250 4. Teresa Gold Project 0 52 5. Akle Cement Project 0 40 6. Sto. Tomas II Copper Expansion Project 0 186

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7. Adlay-Cagdianao-Tandawa Project 20 30 8. Didipio Copper Gold Project 49 2 9. Toledo Copper Project 0 269 10. Tampakan Copper Project 218 176 11. Masbate Gold Project 83 108 12. Direct State Dev’t Fund 0 36 13. Hallmark Nickel Project 0 181 Total 2,315 2,195

Source: DENR

With 4,510 employment generated from July 2004 to March 2005, the mining sector is only

61% of its full year target. It is noteworthy, however, that this figure comes only from 13 to the

23 mining companies to be revitalized.

Housing

The housing sector, characterized as labor-intensive, is expected to contribute 1 million jobs in

the next six (6) years. Constructing a low-cost housing unit requires an average of eight (8)

persons working for three (3) weeks or a total of 124-man days. Moreover, it is seen as one of

the major contributor to spur economic growth because it has a high multiplier effect of 16.6

times.

For the period 2005-2010, the housing need is projected at 3.75 million units, assuming a

population growth of 2.36% annually and urbanization rate of 52%. Given its limited resources,

however, government has targeted only about a third of this need or 1,145,668 units up to

2010.

The agencies involved in the sector are the National Housing Authority (NHA), Home

Development Mortgage Fund (HDMF), Home Guarantee Corporation (HGC), GSIS, SSS, and

DBP. All these agencies fall under the umbrella of the Housing and Urban Development

Coordinating Council (HUDCC).

For the 12-month period under view, the sector has attained 45% of its 6-year target,

generating 454,790 jobs at the cost of P21.4B. Almost ¾ or 70% of these was contributed by

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HDMF, which also contributed 67% of the units completed and accounted for 64% of total cost

involved.

Table 69: Government Shelter Agencies Accomplishment Report Estimated Jobs Generated

July 2004-March 2005 Agency Housing Units

Completed New Jobs Created

Cost of Housing (P’mn)

NHA 11,996 59,810 16.79 HDMF 38,442 319,069 14,391.47 HGC 6,198 51,226 2,742.01 GSIS 2,827 21,117 4,183.38 SSS 101 834 47.09 DBP 330 2,735 47.00 Total 59,893 454,790 21,427.74 Source: PMS Report on Opportunities to Create 6 to 10 Million Jobs

The excellent performance of the sector may be explained by the strong showing of the

construction sector, which posted 7.9%1 growth in the first quarter, with private construction

posting a high 5.85% and public construction a 5.1% growth rate.

Information and Communications Technology (ICT)

The Information and Communications Technology (ICT) sector remains one of the fastest-

growing sectors in the country today. In this sector, McKinsey and Co. has identified 11 white-

collar services, with estimated demand worth US$180 B by 201023 that mature economics can

profitably outsource, and which the Philippines is well-positioned to supply. The country is

currently second only to India as the largest producer of computer services in Asia.

To give focus to the sector, government recently created the Commission on Information and

Communications Technology (CICT) to draw up the country’s road map to strengthen its

advantages further vis-à-vis other countries in the region. This road map invariably includes

the rationalization of incentive packages to attract investors, and improvement of ICT

manpower, in coordination with the education sector, to prepare future graduates/workers for

IT-related work.

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CICT estimates that the ICT sector can contribute 688,250 jobs in the next six years as the

country strengthens its drive to become the IT center in Asia. Below is the summary of jobs

projected to be created annually.

Table 70: Projected Jobs to be Generated in ICT 2005-2010

Year Jobs Generated 2005 43,250 2006 65,000 2007 110,120 2008 120,000 2009 165,000 2010 185,000 Total 688,250

Source: PMS Report on Opportunities to Create 6 to 10 Million Jobs, June 20, 2005.

As of the first five months of the year, the sector has created 41,000 jobs or 95% of the full-year

target. Most of these jobs come from ICT-related services such as business process outsourcing,

medical transcription, animation and software development.

Infrastructure

In the infrastructure sector, a mix of activities generate short term employment of 3.5 million

jobs. The cumulative cost of these activities is pegged at P10.38 B. Sixty (60) percent of the

total jobs generated are expected to come from the following government projects: “Kalsada

Natin, Alagaan Natin” (KANAN), DPWH projects and LGU-funded projects namely Out-of-

School Youth Serving Towards Economic Recovery (OYSTER) and those for Persons with

Disabilities (PWDs). The private sector/contractors are expected to contribute 40% equivalent

to 1.37 million jobs.

In terms of budgetary requirements, the program is projected to cost P10.38 billion or

P2,994/person. At the minimum wage of P300/day, this translates to an average of 10 working

days per person.

Below is a table which details the annual targets and corresponding budget needed to

implement the program up to 2010.

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Table 71: Summary of DPWH Job Road Map Tracking No. of Job Opportunities Period Field Office

Contractor KANAN OYSTER PWD Total

2004 519,157 438,277 414,380 175,339 22,738 1,569,891 2005 66,919 172,029 96,679 20,113 23,637 379,377 2006 15,165 131,719 94,642 21,541 13,101 276,168 2007 15,387 137,249 92,744 22,578 13,771 281,729 2008 15,548 199,514 95,539 22,850 14,474 347,925 2009 15,558 93,444 98,450 25,360 15,211 248,023 2010 16,107 202,575 101,538 27,094 15,965 363,279 Total 663,841 1,374,807 993,972 314,875 118,897 3,466,392 % to Total

19.15% 39.66% 28.67% 9.08% 3.43% 100.00%

Budgetary Requirement for Salaries (P’mn) 2004 1,267.70 1602.55 495.52 86.93 63.56 3,515.76 2005 525.22 348.78 301.55 144.74 69.22 1,388.52 2006 195.69 291.53 290.62 99.19 72.10 949.12 2007 207.39 317.53 284.86 154.68 76.50 1,037.97 2008 217.45 332.48 300.87 161.63 80.77 1,093.21 2009 230.67 349.28 319.30 175.82 86.40 1,161.47 2010 252.89 377.62 333.09 182.55 88.14 1,234.28 Total 2,897.02 3,616.27 2,325.79 1,005.55 535.69 10,380.32 % to Total

27.91% 34.84% 22.41% 9.69% 5.16% 100.00%

Source: DPWH Job Road Map Tracking, as of March 31, 2005

In 2004, the program provided jobs to 1,569,891 persons; as of the first quarter of this year,

388,449 persons were hired.

Table 72: Summary of Jobs Generated Jan-Mar 2005

Employment Source No. of Persons Hired Various infra projects implemented by DPWH Region/District and PMOs

66,919

Contractors 172,029 KANAN Program 96,679 OYSTER Program 29,185 Persons with Disabilities (PWDs) 23,637 Total 388,449 Source: PMS Report on Opportunities to Create 6 to 10 Million Jobs, June 20, 2005

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However, given the average employment of only 10 working days spread over several months,

the project is not expected to create an impact on household incomes considering the length of

employment period (10 days per person for the whole year).

Economic Zones

The Philippine Economic Zone Authority (PEZA) generally houses companies who intend to

export their products. There were 139 economic zones all over the country as of September

2001 covering 22,404 hectares. These zones offer tax breaks and other incentives to locators

based on their BOI registration.

Under the MTPDP, exporters are projected to contribute about 700,000 jobs in the next six

years or about 116,667 jobs per annum.

Table 73: Summary of Economic Zone total Employment Generated By Region

2004 – Jan to March 2005 Region 2003 2004 Jan-March

2005 New Jobs 2004

New Jobs 2005

III 26,904 27,436 28,844 IV 242,677 262,677 274,240 VII 68,233 78,102 83,888 VIII 1,312 1,561 1,633 X 385 443 408 XII 2,279 4,942 6,882 CAR 3,678 4,099 4,325 NCR 17,183 27,489 40,186 Direct Employment Indirect Employment

362,851 544,276

406,752 610,128

439,406 659,109

Total Employment

907,127 1,016,880 1,098,515 109,753* 81,635

Source: PEZA

*New jobs for half of 2004 is assumed at 54,876 or half of new jobs created for the

whole year.

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It is estimated that the PEZA has contributed 136,551 new jobs from July 2004 (54,876) to

March 2005 (81,635),4 already 115% over its full-year target of 116,667 (or a total of 700,000 for

6 years). In contrast to those generated in the infrastructure sector, PEZA jobs normally

consist of 22 days per month work, which provides steady income to the workforce.

Apprenticeship

Apprenticeship training involves a contract between the apprentice and enterprise on an

apprenticeable occupation or occupation official approved for apprenticeship by TESDA such as

electric repairman, furniture maker, auto mechanic, etc.5 They are usually paid about 75% of

the minimum wage and are entitled to benefits such as social security and health benefits and

overtime pay.

Under the Technical Education and Skills Development Authority’s (TESDA) apprenticeship

program, 10,678 youths were placed in 739 companies registered with the Kasanayan at

Hanapbuhay Program (KASH). TESDA, together with DOLE, is working with these companies

to facilitate the absorption of the apprentices into the regular workforce after their

apprenticeship. Presently, 448 of the apprecntices have been absorbed by their companies after

graduation

Assessment

The achievement of the government in the field of job creation is exceptional. However, a closer

look at the nature of the employment generated will reveal that almost ¾ of the jobs created

are short-term -- ranging from 90 man-days in the agriculture sector, 3 weeks in the housing

sector and 10 man-days in the infrastructure sector. Certain jobs created under the tourism

sector are also considered irregular (e.g. tourist guides). Thus, of the total number of jobs

actually made in the period under review, only twenty-six percent (26%) may be considered

regular or permanent in character.

Moreover, the unusual volume of jobs created in 2004 may be explained by the fact that

elections were conducted then. The table on jobs generated in the infrastructure, for example,

shows that in 2004, a total of 1,569,891 jobs were created, way beyond the projected jobs to be

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generated in the succeeding years (Table 70). Consequently, this bloated the total jobs created

from July 2004-June 2005, causing the infrastructure sector to attain an accomplishment rate

of 120%.

Job generation must not be seen as an end in itself but as a means to alleviate poverty.

Irregular jobs are merely palliatives that do not address the long-term goal of reducing poverty

incidence and securing for members of the labor force a more permanent source of income. In

this context, the government must re-orient its job-generation strategy and instead focus on

sectors that are potential sources of more permanent employment.

.

Endnotes

1 Source: National Accounts of the Philippines, 1st Qtr 2003 to 1st Qtr 2005 2 Source: MTPDP 2004-2010 ____________________________ 4 The figure is arrived at by getting the difference in employment figures per year for 2004 and 2005 (with 2004 figure divided by 2 to get the half year figure). 5 TESDA Act

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DECONGESTING METRO MANILA BY FORMING

NEW CORES OF GOVERNMENT AND HOUSING

CENTERS IN LUZON, VISAYAS AND MINDANAO

Chapter Summary

Government’s program to decongest Metro Manila has three components: (1) the development

of transport infrastructure linking the metropolis to its adjoining provinces; (2) the transfer of

national government offices to the regions; and (3) formation of new housing cores outside

Metro Manila.

Project planning, negotiations for funding, and implementation/completion of infrastructure

development remain snail-paced. Moreover, the prioritization of projects towards the south

seems inconsistent with the objective of decongesting Metro Manila, since factors conducive to

voluntary relocation such as lower real estate rates are more prominent in the north.

The long-term sufficiency of these projects is also at issue. The construction of transportation

networks connecting Metro Manila to its adjoining regions means that through time,

congestion will spill over to these adjoining regions. The population growth in these regions

presently four times higher than Metro Manila’s, further strengthen this analysis. In the long

run therefore, a more wholistic decongestion program must be carved out by the government.

The transfer of national government offices to the regions as a means of decongesting Metro

Manila requires greater scrutiny. How this will lessen population in the metropolis has not

been fully explained by the administration. In any case, the program has been suspended due

to budgetary and other constraints.

The formation of new housing cores as a component of the decongestion program has so far

focused on the relocation of families affected by the transport projects. In the long run however,

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an increase in housing projects in the adjoining regions should necessary complement the

relocation of individuals and families to these areas.

Introduction

Metro Manila, composed of fourteen (14) cities and three (03) municipalities, is home to

approximately 10.5 million people,1 with a daytime population estimated less than a decade

ago at 12 million.2 The average population density in the city, which land area stretches to 636

sq. km, is close to 17,000/sq. km. The metropolis’ road network is estimated at around 5000

k.m. in length. National roads and bridges cover, as of June 2005 an area of 1,019 km.,3 while

city, municipal and barangay roads, private roads and privately operated toll expressways

cover 2,366 km., 1, 639 km. and 37 km., respectively. On these roads run 1.5 million vehicles.4

The high population density and the ever worsening traffic condition in the metropolis greatly

impact on, among others, worker’s efficiency and productivity. Vehicles in Epifanio de Los

Santos Avenue, a major thoroughfare, travel on the average 15 kph.5 Average travel speeds in

Manila compare poorly with many Asian countries, as shown below6:

0 5 10 15 20 25 30 35

Sinagpore

Hanoi

Tokyo

Kuala Lumpur

Jakarta

Manila

Bangkok

km/hr

Figure 1: Travel Speed in Selected Asian Countries

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The lost man-hours as well as the hazards to health and safety arising from these cramped

conditions have rendered necessary the decongestion of the metropolis.

The Plan

The cornerstone of the government’s plan to decongest Metro Manila is infrastructure

development.7 The plan intends to make viable the option of living outside Metro Manila for its

workers,8 specially in the surrounding regions and provinces. It has two components: the

construction of transportation infrastructure and facilities within Metropolitan Manila and the

adjoining regions, and the transfer of certain departments to the provinces.9 The first of these

components involves rail, road and expressways projects while the second is basically

concerned with the phased-in transfer of departments and agencies into the regions.


Infrastructure Development

Summarized below is the status of and progress on the projects related to infrastructure

development10 which form the core program for the decongestion of Metro Manila:

Table 74: Status of and Progress Report on Projects for the Decongestion of Metro Manila Plan

Component Component Projects Progress Report

(July ‘04 to May ‘05) Status

Rail Projects Northrail Project. Establishment of commuter system from Caloocan to Malolos (Nov. 2004-7), and Malolos to Clark (May 2005-8)

• Cleared PNR right of way from Caloocan to Valenzuela and affected families already relocated; temporary fencing works for segment nearing completion and retrieval of old PNR rails ongoing

• Relocation of families for Bulacan segment ongoing

Clearing of right of way

Northrail-Southrail • Loan Agreement Project Approved by the

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Interconnectivity Project. Rehabilitation of PNR Commuter Service Line (Caloocan to Alabang)

signed on 07 May 2004. Construction to commence Dec. 2005

NEDA Board 04 Feb. 2003. Loan Agreement signed and Notice of Loan Secured

MRT/LRT Loop Project. Connect MRT 3 and LRT Line 1, as well as MRT 3 to Northrail.

• Bidding ongoing for consultancy services (for feasibility study and preparation of bid/tender documents – detailed study and civil works)

Pre-Bidding

LRT Line 1 Extension. Expansion of existing LRTA Line 1 to the cities of Paranaque, Las Pinas and Bacoor, Cavite

• SLII and LRTA currently in negotiations over amendments of the unsolicited proposal submitted by SLII

• For re-submission to NEDA

For re-approval by NEDA as unsolicited project

Expressway and Other Major Road Projects

North Luzon Expressway Exapansion Project (Phase I).

Completed and operational.

Southern Luzon Expressway Extension Project.11 The project consists of the following: Toll Road (TR) 1 – Rehabilitation and upgrading of the one-km six-lane Alabang Viaduct in Muntinlupa City; TR 2 – Rehabilitation, upgrading and widening from 4 to 6 lanes of the Alabang-Calamba section; TR 3 – construction of a 2-lane 7.8 km new toll road extensoion connecting South Luzon tollway in Calamba to Southern Tagalog Arterial Road in Batangas; Southern Tagalog Arterial Road Extension – construction of 20kn 2 lane highway from Lipa to Batangas City and vice versa

• Joint venture agreement signed in Oct. 2004 between PNCC and NDC for TR 1-3

• Project to start by middle of August 2005

Amendment of Investment Proposal for TR 1; TR 2 Right of Way Acquisition for TR 3; Notice to Proceed to Resume Construction issued to contractor for TR 3

Manila-Cavite Expressway Extension Project. Will link the existing R-1 Expressway to Noveleta,

ROW acquisition 70% complete. Construction to commence in Sept. 2005

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Cavite and C-5 MacArthur Highway

Widening/ Improvement. Improvement of the Meycauayan to Tarlac segment of the road

Construction commenced June 2005 to be completed in Dec. 2005

Construction of the Plaridel Bypass.

ROW acquisition; initial construction to commence in 2005

Circumferential Road – 6 (C-6). Construction of a 48-km, four lane tolway linking SLE Alabang to NLE Meycauayan via Taguig, Taytay, Antipolo, Marikina, San Mateo, Rodriguez and San Jose del Monte.

Integrated Development of Seven Transport Corridors: Commonwealth Ave., Radial Road 10, C-5, EDSA, Quezon Ave., Marcos Highway, and McArthur Highway

Project Completion. The progress report on the major projects for the decongestion of Metro

Manila confirms how slow-paced public works completion remains to date. The NorthRail

project for instance for the past year has remained in the clearing of right-of-way acquisition

and family relocation stages and will continue to do so for some time. All the other projects are

facing difficulties – for instance, obstacles in the legal front – which prolong the gap from the

planning to execution of the project.

The significant delay in the implementation of these major projects entails additional burden

on the government. It preserves the status quo which stifles productivity and taxes the

economy. It also increases the cost of these projects due to among others, foreign exchange

volatility and inflation.

Sufficiency. Beyond the sluggish pace with which the construction of transport infrastructure

essential in the decongestion of the metropolis has proceeded lies the larger question of

sufficiency: are rail, road and expressway construction enough?

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The regions and provinces surrounding Metro Manila (Cavite, Laguna, Rizal, and Bulacan)

already accommodate a population of 5 million people. From 1980 to 1995, increase in the

population of Metro Manila has been trimmed to 1% p. a. while in the surrounding region it

has ballooned to 5.6% p.a. By 2010, it is predicted that the population of the metropolis will be

at 11.3 million; in the surrounding areas, it will be at 11.4 million.12

These statistics suggest that while in the short term, the current transport infrastructures

being put in place will facilitate the movement of people into the areas adjoining Metro Manila

(and therefore tangentially solve the congestion problem in the metropolis), in the long term,

they will be instrumental in the spill-over of these very same problems into the provinces were

people will relocate.

Prioritization. Infrastructure projects towards the north seem to have been prioritized over

those linking Metro Manila to the north, as manifest in the relatively advanced stage of

completion of these projects.13 This does not sit well with conventional wisdom. Factors

conducive to voluntary relocation of families such as lower real estate rates are more

prominent in areas north of Manila than those in the south. If the mass transport

infrastructure projects therefore are primarily designed to decongest Metro Manila, the more

rational prioritization scheme is to enhance project completion of those towards the north.

Formation of New Government Cores

Part of the plan to decongest Metro Manila is the transfer of key government offices to the

regions. The scheme responds to the oft-repeated allegation that Manila remains an imperial

city in which the decision-making on major issues that affect the provinces is centralized.

Pursuant to the plan, new government centers14 are sought to be created through the following:

1. DA transfer to Davao City. The transfer is intended to further enhance the comparative advantage of Mindanao in food production;

2. DPWH transfer to Bicol. It seeks to address poverty and local peace and order problems in the region;

3. DOT transfer to Cebu. The move highlights the focus on beach-tourism;

4. DLR transfer to Iloilo seeks to expedite the transfer of lands, 30% of the total national balance for land acquisition and distribution beingremaining in Region VI; and

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5. DOTC transfer to Clark is intended to strengthen the role of Subic-Clark in multi-modal distribution, logistics and goods trans-shipment

The administration has not fully explained the rationale for these transfers. The Local

Government Code has effected decentralization by transferring powers and functions to local

government units. The mere relocation of these offices to the various regions does not in any

way further the decentralization process. Neither has it been shown that these transfers will in

fact help decongest Metro Manila. Initial reports on the program suggest that employees of the

affected departments will be given the option either to retire, where possible, or transfer to

other offices. At best therefore, the physical transfer of employees is speculative.

Moreover, there is no showing that these transfers will promote efficiency in the offices affected

or at the least, that it will lessen administrative costs. On the contrary, these transfers entail

costs – in the construction of new infrastructure facilities or lease of the same, in the relocation

of affected employees, etc. – which the administration has not yet quantified.

The costs involved – financial and otherwise – necessitate a more thorough review of the

proposal. Alternative schemes, must be studied which may produce the results sought by this

program. For instance, the cost of transfer may instead be utilized for the acquisition of

technology that not only enhances communication and the sharing of information between the

beneficiaries in the regions and the decision makers in Metro Manila but also reduces the need

for the physical movement of people from the regions to transact with offices in Metro Manila.

Formation of Housing Centers

The provision of adequate and decent housing is in itself a major concern15 and its notable

absence in the President’s 10-point agenda raises questions on the wisdom in prioritization of

the current administration which will be addressed elsewhere in this report. In this section,

our concern will be limited to the formation of housing centers16 as a component-strategy in the

decongestion of Metro Manila.

During the period July 2004 to May 2005, the National Housing Authority implemented 82

projects involving resettlement, slum upgrading, sites and services development, core housing,

medium rise housing and land tenure assistance program. Of the 82 projects, 45 were new

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projects covering 9,949 housing starts of which 6,147 were completed. Thirty seven (37)

projects were carry-overs under which 10, 927 units were completed. The tables below

summarize these accomplishments.

Table 75: Housing Starts and Completion by Program (July 2004 to May 2005) Program Housing Starts Percent

to Total Housing

Completions Percent to Total

Total 9,949 100 17,074 100 Resettlement 3,790 38 11,032 65 Slum Upgrading 802 6 864 5 Sites and Services 1,084 11 1,680 10 Core Housing 929 9 1,434 8 Tenurial Assistance 3,536 36 2,064 12

Source: NHA (June 2005)

Table 76: Housing Starts and Completion by Program (July 2004 to May 2005)

Location Housing Starts Percent to Total

Housing Completions

Percent to Total

Luzon 5,638 57 13,150 77 NCR(a) 2,672 36 2,572 15 CAR 697 7 348 2 Region I 167 2 216 1 Region II 127 1 54 0.3 Region III 672 7 1,944 11 Region IVA 1367 14 7,607 45 Region IVB -- -- 359 2 Region V 32 0.3 50 0.3

Visayas 2,326 23 1,015 6 Region VI 1,024 11 366 2 Region VII 48 0.5 155 1 Region VIII 1,199 12 494 3

Mindanao 2,000 20 2,909 17 Region IX 285 3 333 2 Region X 627 6 858 5 Region XI 383 4 305 2 Region XII -- -- 229 1 Region XIII 474 5 942 6 ARMM 220 2 242 1

Source: NHA (June 2005) Legend: (a) includes only resettlement projects under the Northrail resettlement Program involving relocation of families along the railroad tracks

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Housing starts are highest in resettlement and tenurial assistance programs, while housing

completions is highest in resettlement. Table 74 indicates that 57% of all housing starts and

77% of all housing completions undertaken pursuant to the resettlement program benefited the

National Capital Region (NCR). These projects involved the resettlement of families affected by

the Northrail Resettlement Program. Specifically, under this program, 3,401 families residing

along the tracks were moved to Bulacan, while 3,280 were provided housing financial

assistance.17

On its face, the resettlement program appears to fall neatly into the objective of decongesting

Metro Manila. However, the provision of financial assistance for housing to about half of the

affected families in lieu of actual physical relocation to resettlement sites does not seem to run

parallel with the decongestion plan in so far as such family beneficiaries may in fact still

relocate within the metropolis. It is therefore urged that this program be fine-tuned to serve

the objective sought.

Endnotes

1 Figure extrapolated from National Statistics Office data which reported that MM population as of 2000 stood at 9,932,560 with an annual growth rate of 1.06%. See ww.census.gov.ph/data/pressrelease/2003/pr0312tx.html 2 Uranza, Rogelio. Role fo Traffic engineering and Management in Metro Manila in http://www.adb.org/documents/events/2002/reta5937/manila/downloads/tp_20_uranza.PDF#search='traffic density metro manila' citing MMUTIS Study, 1996 3 DPWH. Existing National Roads and Bridges (as of 18 June 2004) at http://www.dpwh.gov.ph/infrastructure/stat_JUNE182000.htm 4 LTO. Metro Manila (Registered) Motor Vehicles (1981-2004). 5 See http://www.cyberdyaryo.com/press_release/pr2001_0809_01.htm 6 see Uranza, supra, note 2. 7 Presidential Management Staff. Update Report on the President’s 10-Point Agenda. June 2005 8 id. 9 id. 10 Id. 11 PNCC. Decongestion of Metro Manila by forming new roads for government and ______ in Luzon, Viasayas and Mindanao. Committee Presentation (29 June 2005) 12 see Uranza, supra, at note 2 13 On the other hand, The MRT 7, the mass transport system connecting Manila to Bulacan has yet to take off 14 Del Rosario, Rodolfo. Establishing New Government Centers. Committee Presentation (29 June 2005) 15 see, for instance, PIDS study

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16 The figures in this section were provided by the Office of the Assistant General Manager, the National Housing Authority. 07 July 2005 17 820 families were disqualified from the resettlement program

DEVELOPMENT OF SUBIC AND CLARK AS THE

BEST INTERNATIONAL SERVICE AND LOGISTICS

CENTERS IN THE REGION

Chapter Summary

The development of Subic and Clark suffer from delays, although of less magnitude than those

experienced in other infrastructure projects in which the government is involved. Certain

fundamental issues need to be addressed in so far as these development programs are

concerned. For Subic, the container terminal program has proceeded based on the assumption

of inadequacy of facilities. However, under-utilization of the existing container terminal

capacity has been noted.

Similar issues arise from the development of Diosdado Macapagal International Airport

(DMIA). Given the limited period under which this facility has been in operation, a thorough

needs- or demands- analysis is required before any expansion is effected.

Introduction

Since the withdrawal of the US military forces more than a decade ago, the government has

sought the transformation of the Subic Naval Point and the Clark Air Base into regional

centers of economic activity. Unlike any other project, this transformation had a distinctive

advantage – the former military bases were already equipped with the basic infrastructure

such as roads, ports, buildings and other facilities essential to the functioning of both a naval

and air port. The development plans for both Subic and Clark were therefore dovetailed to

these advantages.

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The GMA Presidency pursued this same objective, relying on an infrastructure-based

development strategy that would upgrade Subic and Clark (now Diosdado Macapagal

International Airport) into world-class sea- and airports, respectively.1

Development Plan

The government seeks an integrated development of the Subic-Clark corridor into a globally

competitive logistics hub. This development project, intended to foster the efficient movement

of people, goods, services and data, has the following components:2

1. Subic Port Expansion and Rehabilitation;

2. DMIA Renovation, Expansion and Air Liberalization;

3. Subic-Clark Tarlac Expressway;

4. SCAD Master Land Use Plan; and

5. Locator Industry Development.

These programs will be pursued under the supervision of a new government owned and

controlled corporation, the Subic-Clark Alliance Development, Inc., consisting of the BCDA,

SBMA, CDC Board, and DTI, and will entail the active participation of the private sector.

Accomplishment and Assessment

Subic Port Expansion and Rehabilitation

The development of the Subic Port has five (05) major infrastructure project-components: (1)

the construction of a new container terminal in Cubi Point, (2) the construction of an access

road (3) rehabilitation of existing piers and wharves, (4) procurement of necessary equipment

to enhance operation and safety of the Subic Port; and (5) Buildings maintenance and

rehabilitation. The table below reports the progress in each of these projects:

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Table 77: Progress Report: Subic Port Development (June 2005) DESCRIPTION

PERCENTAGE OF PROJECT

SLIPPAGE ACCOMPLISHMENT RATE

New Container Terminal Construction Plan 11.149

Actual 8.37 -2.779 Construction of Access Road

Plan 1.643 Actual 1.554 -0.089

Rehabilitation of Existing Piers and Wharves Plan 2.244

Actual 1.364 -0.88 Acquisition of Special Equipment

Plan 7.161 Actual 8.454 1.293

Repair/Maintenance of Buildings Plan 0.142

Actual 0.054 -0.088- Total -2.543

Source: SBMA, SCAD

Completion. Despite some delays, the accomplishment by the government as regards the Subic

Development project remains one of the bright spots in the country’s infrastructure program.

Accomplishment (in relation to the total project) as of June 2005 is 21.97% and slippage rate is

at –2.529.3.

Rationale. The most important component for the development of Subic is the expansion of its

container port capacity. Half of the world container fleet pass through the port of Subic.

However, the port’s container capacity is very low, at 80,000 TEUs.

Table 78: Container Port Capacity in Selected Ports Port/Country Capacity (TEUs)

Subic 300,000 Manila 2M Singapore 17M HongKong 17M Kaoshiung 7M Pusan 7M Bangkok 2M Laem Chabang 2.5M Qingdao 2.4M Source: SBMA

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Demand is estimated currently at 300,000 TEUs and about 500,000 TEUs by 2010. Given the

projected shortage of 14 million TEUs in the Asia Pacific Region, and the fact that Singapore

has reached its capacity and the heavy siltation of Hong Kong’s port, Subic’s development

becomes critical to exploit the shortage in container port service.

Despite this high demand, Subic has only accommodated close to 70,000 TEUs of the container

fleet traffic in 2004. Its an underutilization rate is about 12.5%. This raises the fundamental

issue of whether Subic has the strategic advantage to capture part of the demand in container

port service. In the end, an increase in demand will depend on whether economic activity

within Subic’s economic zones, or in its adjoining areas, including Metro Manila, is intensified.

Table 79: Subic Seaport Statistics (2002-05) YEAR CONTAINERIZED

CARGO VOLUME (TEU)

NON-CONTAINERIZED CARGO VOLUME

(MT)

SEAPORT REVENUE

(PHP)

SHIP CALLS

2002 53,607.50 1,120,868.10 226,188,516.40 1,764 2003 58,068.00 1,196,445.97 210,082,573.70 1,356 2004 69,521.75 1,310,059.10 227,272,714.68 1,442 2005 16,092.00 654,032.41 102,047,650.99 674

Note: Year 2005 includes Jan to June period only SBMA-Seaport Department

Subic’s development program apparently addresses these issues. Road networks such as the

Subic-Clark-Tarlac Expressway project, and the rail projects connecting Subic to Metro Manila

are expected to facilitate economic linkages between geographic regions, hopefully resulting in

increased demand for container port services. Form this standpoint, the success of each project-

component becomes critical, otherwise failure in one may create a domino effect that imperils

the viability of the development program as a whole.

DMIA Expansion and Renovation

The DMIA has benefited from the liberal air policy adopted by the Civil Aeronautics Board,

and is now seeking to increase air traffic volume, through existing operators as well as through

the entry of low cost airlines (LCCs).

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Increases in the flights of United Parcel Service, as well as new flights from LCCs such as

China Rich Airways, Air Asia Berhad, and Tiger Airways of Singapore have been registered.

The table below shows the traffic volume in DMIA, with the international traffic showing

potential.

Table 80: DMIA Air Traffic, April and May 2005 April 2005 May 2005 Capacity Capacity

Particulars No. of flights Total Actual

Load Factor

No. of flights Total Actual

Load Factor

International 64 9,856 5,331 54% 63 9,740 7,648 78% Domestic 6 114 22 19.3% 6 114 16 14% Total 70 9,970 5,353 54% 69 9,854 7,664 78%

In anticipation of an increase in traffic, DMIA is introducing infrastructural improvements.

The CDC is in the process of acquiring radar facilities, which is expected to be operational by

January 2006.

The increase in air traffic is based on the presumption that Clark and its related regions will

generate sufficient activities in business and tourism overtime. In relation to the latter, plans

are underway to develop Clark and its adjoining regions into a gaming, amusement and family

entertainment area. This requires massive expenditures which the government may be ill-

equipped to finance. The government therefore must intensify its efforts to encourage private

sector participation.

Subic-Clark-Tarlac Expressway

The Subic-Clark Expressway Project (SCTEP) is intended to provide a direct, efficient and

nearly exclusive road connection between major development areas of Subic, Clark and Tarlac.

It is expected to enhance the synergistic development of, and alleviate the worsening traffic

situation in the region.4

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Through the SCTEP, a 4-lane Asphalt Concrete Paved divided highway with a total length of

94.62 km will be constructed. It is divided into two packages, Package 1 covering the Subic-

Clark section with a length of 50.50km., while Package 2 covers the Clark-Tarlac section with a

length of 44.12km.5 Contracts for Package 1 and 2 were negotiated from January to December

2004, and were signed on 18 March 2005. Groundbreaking was held on 4 April 2005.

Construction period is from January 2005 to July 2007.

Cost and Other Concerns. Concerns regarding the financial viability of the project have been

raised, specially since the Subic-Clark-Tarlac Expressway is a Greenfield project where initial

traffic volumes may not be sufficient to sustain operations and maintenance, among other

costs.6 Moreover, the revision of project cost and other lapses in the bidding process have been

put in issue. The Joint NEDA Technical Board and the Cabinet Committee has for instance

earlier called for the re-bidding of the project. Under these circumstances, full and accurate

disclosure regarding the details of the project becomes necessary.

Land Use Plans and Locator Industry Development

The government is updating and re-aligning the existing Master Land Use Plans for Subic and

Clark and the CDC. These plans are being revised to be reflective of and responsive to the

current socio-economic and physical conditions, and to achieve harmonization with the

development of the areas as a growth corridor.

The government is also establishing a program and strategy for marketing and developing

target industries, and assessing and addressing their basic infrastructure needs. The following

industries are targeted to locate in the Subic-Clark Growth corridor: electronics/semi-

conductors, tourism, ICT, Agriculture and Food Processing.7

Endnotes

1 PMS. Develop Subic and Clark (2005) 2 Subic-Clark Alliance Development. Presentation before the Committee (12 July 2005). 3 Includes Preliminary Activities and Work related to General Requirements not otherwise reported in table 77 4 PMS. Develop Subic and Clark.

Turning Point

127

5 BCDA. Development and Recommendation: Initial Toll Rate (ITR) and Toll Rate Adjustment (TRA) Formula, Subic-Clark-Tarlac Expressway Project. (21 June 2005), p. 4 6 BCDA. Development and Recommendation: Initial Toll rate (ITR) and Toll Rate Adjustment (TRA) Formula. At p. 5 7 Francisco Licuanan III Submission to the Committee. Subic-Clark Area Development (SCAD) Office Accomplishment Report (Jan-May 2005). 23 May 2005.

Committee on Oversight House of Representatives 13th Congress

Hon. Danilo E. Suarez Chairman

Jannalenna S. Olladas, Committee Secretary Markk L. Perete, Ma. Cherryl L. Posadas,

Ma. Cristina B. Sulaik, Marjorie T. Segui, Gregorio R. Ricarte, Celica B. Zarate, Staff Members

July 2005. All rights reserved.

THE CHAIR’S ASSESSMENT OF GOVERNMENT PERFORMANCE … · Accomplishment Report ... Table 34: DPWH...

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