SOCIOECONOMIC REPORT 2005 1

SOCIOECONOMIC REPORT 2005 1

About the Cover

The year 2005 showcased the resilience of the economy.Despite challenges coming from various fronts, grossdomestic product grew by a healthy 5.0 percent.

The photos on the cover showcase some of the reformsundertaken by the government to put development on surerfooting. These include promotion of science and technologyin the schools, initiatives to ensure fiscal stability, publichealth, more efficient mass transport, and improvedagricultural practices.

ISSN 0119-0687

SOCIOECONOMIC REPORT 2005

NATIONAL ECONOMIC AND DEVELOPMENT AUTHORITYJune 2006

Acknowledgment

he Socioeconomic Report 2005 (SER) is the result of collaboration amongthe various NEDA staffs: Agriculture Staff (AS), Development Information

Staff (DIS) Information, Technology Coordination Staff (ITCS), Infrastructure Staff(IS), Management Staff (MS), Project Monitoring Staff (PMS), Public Investment Staff(PIS), Regional Development Coordination Staff (RDCS), Social Development Staff(SDS), and Trade, Industry and Utilities Staff (TIUS). Overall coordination was doneby the National Planning and Policy Staff (NPPS).

The NEDA also wishes to acknowledge the cooperation of the followingdepartments and their attached agencies and also the private sector for providing thedata and other information used in the preparation of the SER:

Air Navigation ServiceAir Transportation OfficeARMM-Regional Planning and Development OfficeBangko Sentral ng PilipinasBases Conversion Development AuthorityBoard of InvestmentsBureau of Agricultural StatisticsBureau of CustomsBureau of Internal RevenueBureau of Small and Medium Enterprise DevelopmentBureau of the TreasuryBureau of Working ConditionsCagayan Economic Zone AuthorityCareer Executive Service BoardCebu Ports AuthorityCivil Aeronautics BoardCivil Service CommissionCommission on AuditCommission on ElectionsCommission on Higher EducationCommission on Information and Communications TechnologyCommission on PopulationCooperative Development AuthorityCouncil for the Welfare of ChildrenCouples for Christ-Gawad KalingaDepartment of Agrarian ReformDepartment of Agriculture

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Department of Budget and ManagementDepartment of EducationDepartment of EnergyDepartment of Environment and Natural ResourcesDepartment of FinanceDepartment of Foreign AffairsDepartment of HealthDepartment of JusticeDepartment of Labor and EmploymentDepartment of National DefenseDepartment of National Defense - Office of Civil DefenseDepartment of Public Works and HighwaysDepartment of Science and TechnologyDepartment of Social Welfare and DevelopmentDepartment of the Interior and Local GovernmentDepartment of TourismDepartment of Trade and IndustryDepartment of Transportation and CommunicationsDevelopment Academy of the PhilippinesDevelopment Bank of the PhilippinesEmployers Confederation of the PhilippinesFood Nutrition and Research InstituteGovernment Service Insurance SystemHome Development Mutual FundHome Guaranty CorporationHousing and Land Use Regulatory BoardHousing and Urban Development Coordinating CouncilInformation Technology and e-Commerce CouncilInsurance CommissionLaguna Lake Development AuthorityLand Bank of the PhilippinesLand Registration AuthorityLand Transportation OfficeLand Transportation, Franchising and Regulatory BoardLight Rail Transit AuthorityLocal Water Utilities AdministrationMactan-Cebu International Airport AuthorityManila International Airport AuthorityMaritime Industry AuthorityMetro Manila Development AuthorityMetropolitan Waterworks and Sewerage SystemMindanao Economic Development CouncilNational Anti-Poverty CommissionNational Commission for Culture and the ArtsNational Commission on Indigenous Peoples

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National Commission on the Role of Filipino WomenNational Computer CenterNational Conciliation and Mediation BoardNational Council on the Welfare of Disabled PersonsNational Development CompanyNational Disaster Coordinating CouncilNational Electrification AdministrationNational Food AuthorityNational Home Mortgage Finance CorporationNational Housing AuthorityNational Labor Relations CommissionNational Nutrition CouncilNational Power CorporationNational Statistical Coordination BoardNational Statistics OfficeNational Telecommunications CommissionsNational Transmission CorporationNational Wages and Productivity CommissionNational Water Resources BoardNational Youth CommissionNorth Luzon Railway CorporationOccupational Safety and Health CenterOffice of the OmbudsmanOffice of the Presidential Adviser on the Peace ProcessOverseas Workers Welfare AdministrationPAWS Animal Rehabilitation CenterPeople’s Credit and Finance CorporationPhillippine Health Insurance CorporationPhilippine Center on Transnational CrimePhilippine Council For Agriculture, Forestry and NaturalResourcesPhilippine Deposit Insurance CorporationPhilippine Economic Zone AuthorityPhilippine Information AgencyPhilippine International Trading CorporationPhilippine National Oil CompanyPhilippine Overseas Employment AdministrationPhilippine Ports AuthorityPhilippine Sports CommissionPhilippine Stock ExchangePhilippine Tourism AuthorityPNOC-Exploration CorporationPopulation CommissionPower Sector Assets and Liabilities ManagementPresidential Agrarian Reform Council

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Presidential Anti-Graft CommissionProfessional Regulation CommissionSecurities and Exchange CommissionSocial Security SystemSocial Weather StationSubic Bay Metropolitan AuthoritySupreme Court of the PhilippinesTariff CommissionTechnical Education and Skills Development AuthorityTechnology and Livelihood Resource CenterThe Quedan and Rural Credit Guarantee CorporationToll Regulatory Board

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Foreword

he Socioeconomic Report (SER) 2005 summarizes what has been achievedduring the year to meet national goals and targets spelled out in the Medium-

Term Philippine Development Plan. We believe in management by objectives, so weregularly compare these goals on paper with accomplishments on the ground.

To track these developments, we gathered reports from the various agenciesof government. Our NEDA sector staffs then sifted through the data, analyzedperformance gaps, and highlighted areas needing the most improvement. Indeed,information on failure was just as important as accounts of success.

In broad strokes, the year 2005 revealed how resilient the economy was. Itwas a time marked by high oil prices, political drama, a crippling El Niño drought, asevere slowdown in our exports, and price pressure from the expanded value-addedtax (EVAT). Despite all these challenges, gross domestic product grew by a healthy5.0 percent. A tough economy made it through tough times. Powering growth weremassive inflows from overseas workers, foreign direct and portfolio investments, abooming outsourcing industry and the rediscovery of mining, among others.

The year saw the government’s will to push through with difficult fiscalreforms. EVAT was implemented despite the threat of political fallout. The statewent after tax evaders and smugglers and restrained government spending. The reformsbrought the fiscal deficit to a record low, surpassing the targets set for the year. Theoriginal plan was to close the deficit by 2010; but at the current rate of reform, itwould be closed by 2008. This determination impressed investors, raised the country’scredit ratings, and boosted the peso. The strong peso in turn blunted the impact ofinflation unleashed by tight oil and the EVAT.

The challenge for 2006 is to sustain the reform momentum and to use thehard-earned fiscal revenues to invest judiciously in infrastructure and top socialpriorities. Ordinary families must benefit from the recent economic gains. This meansmore jobs in the market, cheaper food on the table, higher scores on the report card.

We wish to thank all the agencies that provided us their data and reports. Wetrust that they will be cooperative next year as we all work together to upgrade theliving standards of the Filipino people.

ROMULO L. NERI

Secretary of Socioeconomic Planning

National Economic and Development AuthorityPasig City, Philippines

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AcronymsACT Action for Conflict TransformationADB Asian Development BankAEDS Automated Export Declaration SystemAFIS Automated Fingerprint Identification SystemAFMA Agriculture and Fisheries Modernization ActAFMP Agriculture and Fisheries Modernization PlanAFP Armed Forces of the PhilippinesAFPDDC AFP Doctrine Development CenterAFPMO AFP Modernization Planning OfficeAFP-OTCE AFP-Office of the Chief EngineerAFPWSSU AFP-Wide Service Support UnitAFTA ASEAN Free Trade AreaAGIA Association of Government Internal AuditorsAICO ASEAN Industrial CooperationAIDSOTF Anti-Illegal Drugs Special Operations Task ForceAISP ASEAN Integration System of PreferencesANI Action for Nutrition ImprovementAPC Asset Participation CertificateAPCSS Asia Pacific Center for Security StudiesAPJR Action Program for Judicial ReformARC agrarian reform communityARF Agrarian Reform FundARF ASEAN Regional ForumARMM Autonomous Region in Muslim MindanaoASDSDPP Ancestral Domains Sustainable Development and Protection PlansASEAN Association of Southeast Asian NationsASEM Asia-Europe MeetingASG Abu Sayyaf GroupASKI Alay sa Kaunlaran sa Gitnang Luzon, IncASTI Advanced Science and Technology InstituteASYCUDA Automated System for Customs DataATO Air Transportation OfficeATTF Anti-Terrorism Task ForceAUSAID Australian Agency for International DevelopmentBAC Bids and Awards CommitteeBALS Bureau of Alternative Learning SystemBAP BuCor’s agriculture projectsBAS Bureau of Agricultural StatisticsBCWF Brighter Children, Wealthier FarmersBDA Bangsamoro Development AgencyBEAM Basic Education Assistance to MindanaoBEDC Basic Entrepreneurship Development CourseBFAR Bureau of Fisheries and Aquatic ResourcesBFP Bureau of Fire ProtectionBI Bureau of ImmigrationBIN Barangay Information NetworkBIR Bureau of Internal RevenueBJMP Bureau of Jail Management and PenologyBMBE Barangay Micro Business EnterpriseBME Bureau of Madaris EducationBnB Botika ng Barangay

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BNFE Bureau of Non-Formal EducationBOC Bureau of CustomsBOI Board of InvestmentsBoP Balance of PaymentsBOT Build-Operate-TransferBPA Beijing Platform for ActionBPP Board of Pardons and ParoleBSMED Bureau of SME DevelopmentBSP Bangko Sentral ng PilipinasBTr Bureau of the TreasuryBuCor Bureau of CorrectionsBWSA Barangay Waterworks and Sanitation AssociationCAAP Civil Aviation Sector Authority of the PhilippinesCAB Civil Aeronautics BoardCAC Coalition Against CorruptionCACO Competency Assessment Certification OfficeCADT Certificate of Ancestral Domain TitleCALT Certificate of Ancestral Land TitleCAMIS Court Administration Management Information SystemCAP Community Action PlanCARD Center for Agricultural and Reform DevelopmentCARE Courtesy, Action, Results and ExampleCARHRIL Comprehensive Agreement on Respect for Human Rights

and International Humanitarian LawCARP Comprehensive Agrarian Reform ProgramCAST Culture and Arts for Social TransformationCATLU Central Azucarera de Tarlac Labor UnionCBA collective bargaining agreementCBBS Community Bulletin Board SystemCBCP Catholic Bishops’ Conference of the PhilippinesCBFM Community-Based Forestry ManagementCBRED Capacity Building to Remove Bariers to Renewable Energy

in the PhilippinesCCAGG Concerned Citizens of Abra for Good GovernenceCDA Cooperative Development AuthorityCDAP Comprehensive Delineation Action PlanCDM Clean Development MechanismCEDAW Convention on the Elimination of All Forms of Discrimination Against

WomenCenTExe Centers of Technical ExcellenceCEPT Common Effective Preferential TariffCESB Career Executive Service BoardCESPES Career Executive Service Performance Evaluation SystemCEZ Community Employment ZonesCFC Couples for ChristCHARMP Cordillera Highland Agricultural Resource Management ProjectCHED Commission on Higher and EducationCHEDIS CHED-Information SystemCIA CARP-Implementing AgencyCIAP Construction Industry Authority of the PhilippinesCIB Credit Information BureauCICT Commission on Information and Communications TechnologyCIDG Criminal Investigation and Detection GroupCIDSS Comprehensive and Integrated Delivery of Social Services

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CIU Crisis Intervention UnitCIW Correctional Institution for WomenCLUP Comprehensive Land Use PlanCMMI Capability Maturity Model IntegrationCMP Community Mortgage ProgramCMT Change Management TeamCMTS Cellular Mobile Telephone ServiceCNC Certificate of Non-CoverageCNS/ATM Communications, Navigation, Surveillance/Air Traffic ManagementCOA Commission on AuditCOC-IS Cabinet Oversight Committee on Internal SecurityCOMELEC Commission on ElectionsCOPS Community-Oriented Policy SystemCP Certificate of PreconditionCPI consumer price indexCPIP Credit Policy Improvement ProgramCPLA Cordillera People’s Liberation ArmyCLPIMS Core Local Poverty Indicators Monitoring SystemCPR contraceptive prevalence rateCPSD Consolidated Public Sector DeficitCRMP Coastal Resource Management ProjectCSC Civil Service CommissionCSE crime solution efficiencyCSR Contraceptive Reliance StrategyCSRT Comprehensive Security Response to TerrorismCTCBP Counter-Terrorism Capacity BuildingCTM Communist Terrorist MovementCWC Council for the Welfare of ChildrenDA Department of AgricultureDA-BSWM Department of Agriculture-Bureau of Soils and Water ManagementDAC Distinctive Areas of CompetenceDAC Defense Acquisition CommitteeDA-HFIDC DA-Halal Food Industry Development CommitteeDAI digital accessibility indexDAP Development Academy of the PhilippinesDAR Department of Agrarian ReformDARAB DAR Adjudication BoardDBCC Development Budget Coordination CommitteeDBGO Deutsche Bank Real Estate Global OpportunitiesDBM Department of Budget and ManagementDBP Development Bank of the PhilippinesDENR Department of Environment and Natural ResourcesDENR-MGB Department of Environment and Natural Resources-Mines and

Geosciences BureauDepEd Department of EducationDFA Department of Foreign AffairsDHUD Department of Housing and Urban DevelopmentDICT Department of Information and Communications TechnologyDILG Department of the Interior and Local GovernmentDMIA Diosdado Macapagal International AirportDND Department of National DefenseDOC-SCS Declaration on the Conduct of Parties in the South China SeaDOE Department of EnergyDOF Department of Finance

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DOF-NCC Department of Finance-National Credit CouncilDOH Department of HealthDOJ Department of JusticeDOLE Department of Labor and EmploymentDOST Department of Science and TechnologyDOT Department of TourismDOTC Department of Transportation and CommunicationsDPG Defense Planning GuidanceDPUCSP Development of Poor Urban Communities Sector ProjectDPWH Department of Public Works and HighwaysDSAP Drugstores Association of the PhilippinesDSL digital subscriber linesDSWD Department of Social Welfare and DevelopmentDTI Department of Trade and IndustryDTOMIS Drug Test Operations Management Information SystemE-BESE Employees’ Confederation of the Philippines (ECOP) BESEe-Biz e-BusinesseBPLS Electronic Business Permit Licensing SystemEC electric cooperativeECARP Every Child A Reader ProgramECC environmental compliance certificateECCD Early Childhood Care and DevelopmentEDC Energy Development CorporationEER Efficiency and Effectiveness ReviewEHP Early Harvest ProgramEIS Environmental Impact Statemente-NGAS Electronic National Government Accounting SystemEPI Expanded Program on ImmunizationEPIRA Electric Power Industry Reform ActERC Energy Regulatory CommissionESWM Ecological Solid Waste ManagementETEEAP Expanded Tertiary Education Equivalency and Accreditation ProgramEVAT Expanded Value-Added-TaxFAME Furnishings and Apparel Manufacturers’ ExchangeFAP foreign-assisted projectFARMC Fisheries and Aquatic Resources Management CouncilsFDI foreign direct investmentFEALAC Forum for East Asia-Latin America CooperationFIC full immunization coverageFIO Field Investigation OfficeFISH Fisheries Involved for Sustainable HarvestFITS Farmers’ Information and Technology ServicesFMD foot and mouth diseaseFNRI Food and Nutrition Research InstituteFOSARV Follow-On Search and Rescue Vessel Acquisition ProjectFPAN Federation of PNP Accredited Nongovernment OrganizationsFPW Framework Plan for WomenFRMP Fisheries Resource Management ProjectFSF Financial Sector ForumFSI Foreign Service InstituteFTI Food Terminal IncorporatedGAA General Appropriations ActGAD gender and developmentGAMABA Gawad sa Manlilikha ng Bayan

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GDP gross domestic productGenCo generation companiesG-EPS Government Electronic Procurement SystemGFI government financial institutionsGIP Government Internship ProgramGIR gross international reservesGIS Geographic Information SystemGITR Global Information Technology ReportGK Gawad KalingaGNP gross national productGOCC government-owned-and-controlled corporationsGPPB Government Procurement Policy BoardGREAT Gender-Responsive Economic Actions for the Transformation of WomenGRP Government of the Republic of the PhilippinesGSIS Government Service Insurance SystemGVA gross value addedHDMF Home Development Mutual FundHEI higher education institutionsHGC Home Guaranty CorporationHIV human immunodeficiency virusHLURB Housing and Land Use Regulatory BoardHRISSP Human Resource Information System Strategic PlanHRMIS Human Resource Management Information SystemHSRT High School Readiness TestHUDCC Housing and Urban Development Coordinating CouncilHWG hazardous waste generatorsIACAT Inter-Agency Council Against Trafficking in PersonIAS Internal Audit ServiceIAS international accounting standardsIAUs Internal Audit UnitsIBP Integrated Bar of the PhilippinesIC Insurance CommissionICAC Independent Commission Against CorruptionICAM Institute for Culture and Arts ManagementICAO International Civil Aviation OrganizationICC Investment Coordination CouncilICDL International Computer Driving LicenseICPD International Conference on Population DevelopmentICT information and communications technologyICTP in-country training programIDAP Integrity Development Action PlanIDR Integrity Development ReviewIEE Initial Environmental ExaminationIFC International Finance CorporationIFES International Foundation for Electoral SystemsIGF international gateway facilitiesIIPA International Intellectual Property AllianceILO International Labor OrganizationIOM International Organization for MigrationIPDL Intellectual Property Digital LibraryIPP Independent Power ProducersIPP Investments Priorities PlanIPR Intellectual Property RightsIQuAME Institutional Quality Assurance on Monitoring and Evaluation

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IRA internal revenue allotmentIRR Implementing Rules and RegulationsISM International Safety ManagementISP Information System PlanISP Internet service providerISSC International Ships Security CertificatesISSP Information System Strategic PlanISTIV Industrious, Systematic, Time-concious, Innovative, and Strong Value for

WorkITCs Industry Tripartite CouncilsITECC Information Technology and E-commerce CouncilITFP IT Foundation of the PhilippinesITU International Telecommunications UnionIWG industry working groupsIWRM Integrated Water Resource ManagementIXC inter-exchange carriersJAGS-CT Jose Abad Santos-Glan-Sarangani Cooperation TriangleJARD Judicial Administrative Reforms and DecentralizationJASIG Joint Agreement on Safety and Immunity GuaranteeJBIC Japan Bank for International CooperationJDA Joint Defense AssessmentJDA-PAIG JDA Planning and Implementation GroupJI Jemaah IslamiyaahJICA Japan International Cooperation AgencyJOMSRE-SCS Joint Maritime Scientific Research Expedition in the South China SeaJSMP job-skill matching programJURIS Judicial Reform Initiative SupportKALAHI Kapit-Bisig Laban sa KahirapanKALAHI-CIDSS Kapit-Bisig Laban sa Kahirapan-Comprehensive and Integrated Delivery

of Social ServicesKARZones (KALAHI) Agrarian Reform ZonesKasH Kasanayan at Hanapbuhay ProgramKIG Kalayaan Islands GroupKKB Kapangyarihan at Kaunlaran sa BarangayLAMA Land Administration and Management AuthorityLBP Land Bank of the PhilippinesLELEDFI Lino Ed. Lim Educational Development Foundation, Inc.LIAC Local Inter-Agency CommitteeLMC labor management councilLPRAP Local Poverty Reduction Action PlanningLRA Land Registration AuthorityLTI Land Tenure ImprovementLTO Land Transportation OfficeLUC Local Universities and CollegesLWUA Local Water Utilities AuthorityLYDP Local Youth Development CouncilsMAP Minerals Action PlanMAP Microfinance Availment PlansMAP modified atmosphere packagingMAPIO Mindanao Area Police Intelligence OperationsMAR Multi-Access RadioMAR maximum allowable revenueMARINA Maritime Industry AuthorityMBC Makati Business Club

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MBE molecular beam epitaxyMBUSS Mindanao Basic Urban Services SectorMCLE Mandatory Continuing Legal EducationMDGs Millennium Development GoalsMEDCO Mindanao Economic Development CouncilMFI microfinance institutionMIAA Manila International Airport AuthorityMILF Moro Islamic Liberation FrontMMBFOE Million Barrels of Fuel Oil EquivalentMMDA Metro Manila Development AuthorityMMS multimedia messaging serviceMMUSP Metro Manila Urban Services for the Poor ProjectMOA Memorandum of AgreementMRDP Mindanao Rural Development ProgramMSC Market Service CenterMSME micro, small and medium enterprisesMTEF Medium-Term Expenditure FrameworkMTPDP Medium-Term Philippine Development PlanMTPIP Medium-Term Public Investment ProgramMVA megavolt ampereMVEA Mine Viability and Environmental AssessmentMWCI Manila Water Company IncorporatedMWSI Maynilad Water Serivces IncorporatedMWSS Metropolitan Waterworks and Sewerage SystemMYCaPS Multi-Year and Capability Planning SystemNAC National Amnesty CommissionNaFFAA National Federation of Filipino American AssociationsNALUA National Land Use ActNAPC National Anti-Poverty CommissionNAP-EVAW National Action Plan to Eliminate Violence Against WomenNAPOLCOM National Police CommissionNAPWC Ninoy Aquino Parks and Wildlife CenterNBI National Bureau of InvestigationNBP New Bilibid PrisonNCAJ National Council on the Administration of JusticeNCBTS National Competency-Based Teaching StandardsNCC National Computer CenterNCC National Credit CouncilNCCA National Commission for Culture and the ArtsNCIP National Commission on Indigenous PeoplesNCMB National Conciliation and Mediation BoardNCR National Capital RegionNCRFW National Commission on the Role of Filipino WomenNDA National Dairy AuthorityNDC National Development CompanyNDCC National Disaster Coordinating CouncilNDF National Democratic FontNDHS National Demographic and Health SurveyNEA National Electrification AdministrationNEDA National Economic and Development AuthorityNEFCA National Endowment Fund for Culture and the ArtsNEPP National English Proficiency ProgramNFA National Food AuthorityNG National Government

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NGAS New Government Accounting SystemNGC National Government CenterNGO nongovernment organizationNGVPPT Natural Gas Vehicle Program for Public TransportNHA National Housing AuthorityNHIP National Health Insurance ProgramNHMFC National Home Mortgage Finance CorporationNIA National Irrigation AdministrationNICS National ICT Competency StandardNIPAS National Integrated Protected Areas SystemNISP National Internal Security PlanNLEX North Luzon ExpresswayNLRC National Labor Relations CommissionNLRC North Luzon Railways CorporationNLSF National Livelihood Support FundNMEC NDC-Maritime Equity CorporationNNC National Nutrition CouncilNPC National Power CorporationNPCC National Price Coordinating CouncilNPTC National Plan to Address Terrorism and its ConsequencesNPUDC National Peace Unification DevelopmentNRMDC Natural Resources Mineral Development CorporationNSO National Statistics OfficeNSTP National Science and Technology PlanNTC National Telecommunications CommissionNCT National Cultural TreasuresNTESDP National Technical and Skills Development PlanNTP notice to proceedNWAR National Warrant of Arrest Registry SystemNWIN National Water Information NetworkNWRB National Water Resources BoardNWTF Negros Women for Tomorrow FoundationNYC National Youth CommissionOAV overseas absentee votingOBU Offshore Banking UnitsOCD Office of the Civil DefenseODA official development assistanceODS ozone depleting substanceOFW overseas Filipino workerOGCE other government corporate entitiesOMA Office on Muslim AffairsOMB Office of the OmbudsmanOP Office of the PresidentOPANGC Office of the Presidential Adviser for New Government CentersOPAPP Office of the Presidential Adviser on the Peace ProcessOPCEN Operations CenterOPIF Organizational Performance Indicators FrameworkOSCA Office of Senior Citizens AffairsOSND Office of the Secretary of National DefenseOSSC One-Stop Shop CommitteeOTOP One-Town-One-ProductOUSIC Office of the Undersecretary for Internal ControlOWWA Oversease Workers Welfare AdministrationP/MWSU Provincial/Municipal Water and Sanitation Unit

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PACAP Philippines-Australia Community Assistance ProgramPACER Police Anti-Crime Emergency ResponsePAGCOR Philippine Amusement and Gaming CorporationPAIRTF Presidential Anti-Illegal Recruitment Task ForcePAMB Protected Areas Management BoardPAO Public Attorney’s OfficePARI Philippine Association of Refrigerant ImportersPATROL People’s Action Team Responding OnlinePBD Philippine bidding documentsPBDC Philippine Bomb Data CenterPCARRD Philippine Council for Agriculture, Forestry and Natural Resources

Research and DevelopmentPCASTRD Philippine Council for Advanced Science and Technology Research and

DevelopmentPCBS polychlorinated biphenylsPCCS Position Classification and Compensation SystemPCEP Philippine Cultural Education PlanPCFC People’s Credit and Finance CorporationPCGG Presidential Commission on Good GovernmentPCHRD Philippine Council for Health Research and DevelopmentPciP Philippine Cultural Index ProjectPCO public calling officePCO Police Commissioned OfficersPCR polymerase chain reactionPDAF Priority Development Areas FundPDAP Provincial Delineation Action PlanPDEA Philippine Drug Enforcement AgencyPDI parallel drug importationPDIP Parallel Drug Importation ProgramPDR Philippine Defense ReformPDTF People’s Development Trust FundPEDP Philippine Export Development PlanPEMIP Public Expenditure Management Improvement ProgramPERA Personal Equity Retirement AccountPESFA Private Education Students Fund AssistancePESO Public Employment Service OfficePEZA Philippine Economic Zone AuthorityPHIC Philippine Health Insurance CorporationPhilHealth Philippine Health Insurance CorporationPHILJA Philippine Judicial AcademyPHILSSA Partnership of Philippine Support Service AgenciesPHIVOLCS Philippine Institute of Volcanology and SeismologyPIC Philippine Infrastructure CorporationPIDS Philippine Institute for Development StudiesPITC Philippine International Trading CorporationPMC project monitoring committeesPMO Program Management OfficePNCO Police Non-Commissioned OfficersPNOC Philippine National Oil CompanyPNP Philippine National PolicePNP CLG PNP Crime Lab GroupPNQF Philippine National Qualifications FrameworkPNRI Philippine Nuclear Research InstitutePOEA Philippine Overseas Employment Administration

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PPA Philippine Ports AuthorityPPCRV Philippine Pastoral Council for Responsible VotingPPO Parole and Probation OfficePPRA Program Performance Review and AnalysisPPSC Philippine Public Safety CollegePPSJ Philippine Province of the Society of JesusPPTA Preparatory Project Technical AssistancePRRC Pasig River Rehabilitation CommissionPSALM Power Sector Assets and Liabilities Management CorporationPSC Philippine Services CoalitionPTA Philippine Tourism AuthorityPTCA Parents-Teachers-Community AssociationPTE public telecommunications entityQUEDANCOR Quedan and Rural Credit Guarantee CorporationRATE run after tax evadersRATS run after smugglersRCO revenue collection officerRDC Rehabilitation and Diagnostic CenterRELIEF Reconciliation and Listing of EstablishmentsRH reproductive healthRICA Revised Investment Company ActRIPS Revenue Integrity Protection ServiceRKCG Regional KALAHI Convergence GroupRNA rapid needs assessmentRORO roll-on/roll-offROW right-of-wayRPMM Rebolusyonaryong Partidong Manggagawa ng MindanaoRRP reverse repurchaseRRTS Roll-On/Roll-Off Terminal SystemRSCWC Regional Sub-Committee on the Welfare of ChildrenRUS Regional University SystemS&T science and technologySAR search and rescueSARS Severe Acute Respiratory SyndromeSAT Site Acceptance TestSBGFC Small Business Guarantee and Finance CorporationSBIA Subic Bay International AirportSBM School-Based ManagementSC Supreme CourtSCADA Supervisory Control and Data Acquisition SystemSCTEP Subic-Clark-Tarlac Expressway ProjectSCTEXT Subic-Clark-Tarlac Expressway ExtensionSDC Social Development CommitteeSEA-K Self-Employment and Assistance KaunlaranSEC Securities and Exchange CommissionSEIPI Semiconductor and Electronics Industries in the Philippines, Inc.SER Socioeconomic ReportSETUP Small Enterprise Technology Upgrading ProgramSFMA Sustainable Forest Management ActSHFC Social Housing Finance CorporationSHS solar home systemsSLEX South Luzon ExpresswaySLIP Skills/Livelihood and Investment ProgramSLT Schools of Living Traditions

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SMS short messaging servicesSNPLP Study-Now-Pay-Later ProgramSOCO Scene of the Crime OperationSONA State of the Nation AddressSPDA Southern Philippine Development AuthoritySPES Special Program for Employment of StudentsSPM Strategic Planning MatrixSPPR State of the Philippine Population ReportSPUG Small Power Utilities GroupSPVA Special Purpose Vehicle ActSRC Seafarer’s Registration CardSRDP self-reliant defense postureSRRFPDP Social Reform Related Feeder Ports Development ProjectSSIS Ship Safety Inspection SystemSSL Salary Standardization LawSSS Social Security SystemSTAR Southern Tagalog Arterial RoadSTORA Supplementary Toll Reparation AgreementSUC state universities and collegesSULONG SME Unified Lending Opportunities for National GrowthSUWCP Street and Urban Working Children ProgramSWAT-EOD Special Weapons and Tactics-Emergency Operation DivisionSWG special working groupSY school yearTECHNICOM Technology Incubation for CommercializationTELOF Telecommunications OfficeTESDA Technical Education and Skills Development AuthorityTESDP Technical Education and Skills Development ProjectTEZ Tourism Economic ZonesTEZA Tourism Enterprise Zone AuthorityTICAL Thailand Income Contingent and Allowance LoanTIPC Tripartite Industrial Peace CouncilTLC third level championsTLRC Technology and Livelihood Resource CenterTOE Table of Organization and EquipagesTOP trial operation programTOR terms of referenceTransCo Transmission CorporationTSKI Taytay sa Kauswagan, IncTSP total suspended particulateTVET technical and vocational education and trainingTWG technical working groupTWRG Transmission Wheeling Rate GuidelineUCPB-CIIF United Coconut Planters Bank-Coconut Industry Investment FundUDP Upland Development ProgrammeULWU United Luisita Workers’ UnionUN-ASPA UN and the American Society of Public AdministrationUNCAC United Nations Convention Against CorruptionUNDP UN Development ProgrammeUNFPA United Nations Population FundUP MSI University of the Philippines Marine Science InstituteUPISSI UP-Institute of Small Scale IndustriesUP-NIP UP National Institute of PhysicsUSAID United States Agency for International Development

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USGS United States Geological ServicesUTPRAS Unified TVET Registration and Accreditation SystemVAS value-added serviceVAWC Violence Against Women and ChildrenVAWCC Violence Against Women Coordinating CommitteeVoIP Voice over Internet ProtocolVPA volunteer probation aidesVRIS Voter Registration and Identification SystemVRRs Voters Registration RecordsVSAT Very Small Aperture TerminalWAC World Agroforestry CentreWASCO Water and Sanitation Coordinating OfficeWB World BankWEDC women in especially difficult circumstancesWEIn Wireless in Education InitiativeWESM Wholesale Electricity Spot MarketWLL Wireless Local LoopWTO-TRIPS World Trade Organization-Trade-Related Aspects of Intellectual Property

RightsYEP Youth Entrepreneurship ProgramYP4SC Youth Profile for Starring CareerYTC Yongden Technologies Corporation

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Introduction

T he economy once again proved its resilience as it emerged stronger than expected notwithstanding the combined adverse effects of unfavorable weather conditions, escalating fuel costs, and the political

turmoil that affected the country in 2005. The marked improvement in thefiscal and BOP position resulted in respectable improvement of the economicfundamentals, necessary for macroeconomic stability. The rise in the inflationrate, however, tempered growth’s direct impact on the quality of life.

Growth prospects for 2006 remainbright provided the continued measures offiscal consolidation, stringent measures tocontrol inflation rate and policy directivesto sustain economic growth areimplemented as planned.

Gross National Product (GNP),which includes production of Filipinosabroad, slowed down to 5.6 percent butwithin the MTPDP target of 5.5-6.4percent. Overseas Filipino Workers’(OFW) remittances, which haveincreasingly served as the economy’scushion from the threats of soaring worldoil prices and sluggishness of the exportsector, reached US$10.7 billion this yearand contributed significantly to GNPgrowth.

Domestic production, as shownby gross domestic product (GDP), alsoslowed down to 5.0 percent growth from6.2 percent in 2004, falling short by 0.3percentage points of the MTPDP targetfor the year. Economic growth was

constrained by the escalating prices dueto high fuel cost and the weak demandfor electronics in the world market.Exports remained sluggish as electronicproducts, which comprise 66 percent oftotal merchandise exports, declined.Nonetheless, this year’s economicperformance fared beyond the generalmarket’s 4.8 percent growth expectation.This is also at par with the overallperformance of the ASEAN 4, which onthe average expanded by 5.1 percent in2005.

The Economy

TABLE A. 2004-2005 GDP GROWTH FOR SELECTED ASIAN COUNTRIES (In Percent)

2004 2005

Philippines 6.2 a/ 5.0 a/

Malaysia 7.2 a/ 5.2 a/

Indonesia 5.1 5.6Thailand 6.2a/ 4.5

a/ RevisedSources: National Statistical Coordination Board (Philippines), National Economic and Social Development Board (Thailand), BPS-Statistics Indonesia (Indonesia), Department of Statistics (Malaysia)

2 THE ECONOMY

SECTORAL DEVELOPMENTS

The Agriculture, Fishery and Forestrysector grew at a slower pace of 1.8 percentfrom 5.3 percent in 2004, below the MTPDPtarget of 4.2-5.2 percent. The combinedeffect of unfavorable weather conditions andthe high cost of commercial fertilizersadversely affected agricultural crops.Consequently, palay grew by only 0.7 percentwhile corn contracted by 3.0 percent. Bananaproduction, benefiting from the expansionof commercial banana farms and the effortsof the Bureau of Plant Industry to developnew varieties, grew by 11.8 percent from4.9 percent a year ago. Meanwhile, thefisheries subsector remained healthy and

posted an output growth of 6.0 percentin 2005 due mainly to the strongproduction of seaweeds and theestablishment of new fishcages formilkfish production. Commercial andmunicipal fisheries experienced anincrease in fishing trips and abundantcatch of several aquatic species.

Industrial production on the otherhand, slightly picked up at 4.9 percent,lower than the MTPDP target of 5.4percent. Underpinning industry growthwere the growth in mining and quarrying(9.3%) and manufacturing (5.6%), whichcushioned the weak performance of theconstruction (0.9%) and utilities (2.5%)sectors. The government’s thrust in

TABLE B. AGGREGATE ECONOMIC PERFORMANCE

INDICATORS 2004 MTPDP 2005 ACTUAL TARGET ACTUAL

Gross National Product, growth rate (%) 6.7b/ 5.5-6.4 5.6 b/

Gross Domestic Product, growth rate (%) 6.2 b/ 5.3-6.3 5.0 b/

Investment/nominal GDP (%) 17.0 16.8 a/ 14.6Inflation rate (%) 6.0 4.0-5.0 7.691-day T-bill rate (%) 7.34b/ 7.5-8.5 6.36Fiscal balance (% of GDP) -3.57 -3.6 -2.5Consolidated Public Sector Deficit (% of GDP) -4.77 -6.0 -1.96Exports of goods, growth rate (%) 9.8 b/ 10.0 2.3Imports of goods, growth rate (%) 8.0 b/ 12.0 7.4Current Account Balance (US$ Mn) 1626 b/ 1134 2354 (% of GDP) c/ 1.9 1.2 2.4Gross International Reserves (US$ Bn) 16.5 d/ 16.0 18.5Poverty Incidence (% of families) - 24.35-25.04 -Unemployment rate (%) - old definition 11.8 11.9 11.3 - new definition e/ 7.8Memo items:Dubai oil prices. Average (US$/bbl) 33.64 32.96 49.31P/$ exchange rate 56.04 55-57 55.09

a/Development Budget Coordinating Committee forecast, as of September 20, 2005b/Revisedc/GDP figure as of January 2006, ratio computed by BSPd/Adjusted figure to effect the adoption of International Accounting Standardse/ Average of April, July and October Labor Force SurveysSources: National Economic and Development Authority (NEDA), National Statistical Coordination Board (NSCB), BangkoSentral ng Pilipinas (BSP), Bureau of the Treasury (BTr), National Statistics Office (NSO), Department of Finance (DOF).


improving the mining policy environmenthas attracted foreign investments, as shownby three new major projects which startedoperation in 2005, namely: the PalawanNickel Project, the Rapu-rapu PolymetallicProject, and the Teresa Gold Project.Construction grew as public constructionpicked up during the latter part of the year.Nonetheless, growth was weak comparedto 2004 with private construction slowingdown further to 1.2 percent from 4.8percent in 2004. Meanwhile, growth ofutilities softened amidst the rising cost ofoil and regulatory uncertainties.

The manufacturing sectoraccelerated by 5.6 percent, the highestgrowth since 2001, on account of thestrong growth from both domestic-orientedand export-oriented industries. The textileindustry’s (13.4%) strong performance in2005 indicated its ability to compete in amore enabling policy environment, notingthe recovery of garment exports from fouryears of consecutive decline. The surge inoutput of the petroleum and chemical sub-sectors also pointed to the growingimportance of the country’s mid-streamindustry.

The services sector remained thelinchpin of growth despite a slower 6.4percent growth in 2005 compared to 7.6percent in 2004. Nonetheless, thisperformance is within the MTPDP target of5.7-6.6 percent. The transportation,communications and storage sector sloweddown by 7.2 percent from 11.2 percent in2004. This is attributed to the negativegrowth of land (-4.1%) and water (-5.7%)transportation sectors. This decline ispartially offset as storage and other servicesincidental to transport accelerated by 18.4percent and by communication whichremained strong at 14.8 percent.

Meanwhile, the finance sectorexpanded by 13.6 percent from 9.9 percent

in 2004, exceeding the MTPDP target of6.0-7.0 percent. Banking services, whichaccount for 71.3 percent of the sector,grew by 20.0 percent as banks’ incomerose mainly due to higher net interestincome and non-interest income derivedfrom fee-based and trading activities. Theupsurge in remittances stimulated fee-based activities from increased remittanceinflows. Commercial banks continued theirvigorous campaign to provide bankingservices to the growing number of Filipinoworkers abroad through enhanced modesof money transfers, as well as widernetwork/presence through increasednumber of remittance centers and tie-upswith foreign financial counterparts resultingin a better capture of remittances.

SOURCES OF DEMAND

Increased household incomeresulting from the strong OFWcompensation inflow helped push privateconsumer spending and somehow mitigatedthe impact of higher prices as personalconsumption expenditure grew by 4.9percent, although lower than the 5.8 percentexpansion in 2004. Cost push pressuresfrom external and internal sources resultedin a full-year inflation rate of 7.6 percent.With stable private consumption, the tradesector grew by 5.9 percent in the fourthquarter, ensuring a full year growth of 5.6percent.

The country’s merchandise exportshowever, managed to expand by only 4.2percent, below the MTPDP target of 8.2-9.2 percent due to the slow growth ofsemiconductors and electronicmicrocircuits (4.8%). This showed thatthe country’s undiversified export structurehas caused export performance to be highlyvulnerable to changes in trade patterns.Amid the political uncertainty resulting

4 THE ECONOMY

from the impeachment complaint filedagainst President Arroyo, capitalformation declined by 6.0 percent.Nonetheless, hefty year-on-year increasesin capital formation were observed amongpriority sectors such as mining andconstruction machinery (30.8%),sugarmill machinery (10.1%),telecommunications (18.5%), andtransportation (rail, road, air, & water)equipment (41.7%).

FISCAL DEVELOPMENTS

True to its commitment to attainfiscal independence, strengthening thecountry’s fiscal position was the centerpieceof fiscal policy in 2005. The governmentpushed for the passage and implementationof key fiscal legislative measures andworked towards improving tax collectionefficiency while at the same time reined inits expenditures. The efforts paid off as thefull-year fiscal deficit of PhP146.5 billion

TABLE C. GROWTH RATE OF AGGREGATE ECONOMIC INDICATORS(In Percent; At Constant 1985 Prices)

Indicators 2004 MTPDP 2005 Actuala/ Target Actual a/

Gross National Product 6.7 5.5-6.4 5.6Gross Domestic Product 6.2 5.3-6.3 5.0Net Factor Income from Abroad 13.5 8.0-8.2 13.5 Production Agriculture, Fishery & Forestry 5.3 4.2-5.2 1.8 Industry 4.7 5.4-6.4 4.9 Mining and Quarrying 2.6 15.0-16.0 9.3 Manufacturing 5.1 5.0-6.0 5.6 Construction 3.4 4.8-5.8 0.9 Utilities 4.2 4.1-5.1 2.5 Services 7.6 5.7-6.6 6.4

Transportation, Communication & Storage 11.2 9.7-10.7 7.2 Trade 6.8 5.7-6.6 5.6 Finance 9.9 6.0-7.0 13.6 Other dwellings and Real Estate 5.3 4.0-5.0 5.4 Private Services 10.1 6.3-7.3 5.5 Government Services 0.5 (1.9) – (1.1) 1.9Expenditures Personal Consumption 5.8 4.7-5.3 4.9 Government Consumption 1.4 3.4-3.9 4.0 Capital Formation 7.2 6.6-6.8 -6.0 o.w. Fixed Capital 1.3 6.6-7.1 -3.9 Construction -0.8 5.1-5.5 -0.9 Public -9.3 2.0-3.0 -4.6 Private 4.8 6.0-7.0 1.2 Exports 14.4 8.2-9.2 4.2 Imports 5.8 11.7-12.7 2.4

a/ Revised as of May 2006Source: National Statistical Coordination Board


was way below the 2004 deficit, the 2005revised and MTPDP targets. This is thelowest NG deficit-to-GDP ratio since 1999and the highest primary surplus-to-GDPratio recorded since 1998.

With a better fiscal position,government consumption expendituresexpanded by 4.0 percentexceeding the MTPDP target of3.4-3.9 percent.

EXTERNALDEVELOPMENTS

The strong inflows ofOFW remittances and renewedinvestor confidence resultingfrom sustained improvements inthe country’s fiscal positiongreatly strengthened thecountry’s external position.

The balance of paymentsposted a steep reversal of its 2004negative external position to asurplus level of US$2.407 billionin 2005. However, the deficit intrade-in-goods widened, with theslowdown in exports and thebigger expansion in goodsimports at 12.6 percentcompared to that of goodsexports at 2.3 percent. Totalimports of goods during the lastquarter of the year reachedUS$12.395 billion on account ofhigher purchases in all majorcommodity groups exceptconsumer goods. Portfolioinvestments increased to US$2.8million from a net outflow ofUS$1.7 million a year earlier.Meanwhile, foreign direct inflowsreached US$970 million.Despite market improvements,capital flows remained largely in

the form of portfolio investments ratherthan foreign direct inflows.

The positive external paymentsposition translated to an increase in BSP’sgross international reserves (GIR) toUS$18.495 billion as of end-December2005, up by 14.0 percent from the end-

TABLE D. BALANCE OF PAYMENTS (In Million US Dollars)

2004 2005

Current Account 1,626 2,354as of % GDP 1.9 2.4Exports of Goods & Services 42,837 44,693Imports of Goods & Services 50,298 53,635Income -73.0 -107.0of which: Resident OFW Remittances 10,260 12,293 Current Transfers 9,160 11,403 Capital Account 17.0 40.0 Financial Account -1,647 820.0 Direct Investment 109.0 970.0 Portfolio Investment -1,665 2,835 Other Investment -64.0 -2,942 Net Unclassified Investment -276 -807.0Balance of Payments -280 2,407as % of GDP -0.3 2.3

Source: Bangko Sentral ng Pilipinas

TABLE E. EXTERNAL VULNERABILITYINDICATORS

2004 2005

Gross International Reserves (in million US dollars) 16,528* 18,495 In months of imports 3.6 3.9 Short-term external debt cover (%) 157 161 Total External Debt/GNP (in%) 59.5 51.5 % Medium & Long Term 91.0 88.2 % Owed to private creditors 31.0 32.6 Debt Service/exports of goods, receipts of services and income 13.8 13.3

Note: Adjusted figure for end-Dec 2004 to effect the adoption of the Int’l AccountingStandards, particularly with regard to the shift to market-to-market valuation, forcomparability with end-Dec 2005 data.


6 THE ECONOMY

December 2004 level of US$16.528 billion.At this level, reserves remained adequateand were equivalent to 3.9 months’ worthof imports of goods and payment ofservices and income. In terms of debtcoverage, the reserves level is 3.0 times theamount of the country’s short-termexternal liabilities based on originalmaturity and 1.6 times based on residualmaturity.

Meanwhile, the country’soutstanding external debt fell to US$54.2billion by end-December 2005, equivalentto 55.5 percent of GDP. This is lower byUS$660 million from the US$54.8 billionin December 2004. The structure of thedebt continued to play at a manageablelevel with medium and long-term loansmaking up 88 percent of the total debtstock.

LABOR DEVELOPMENTS

Labor market conditionsimproved as the economy grew under agenerally stable macroeconomicenvironment. Unemployment rate, usingthe old definition, declined to 11.3 percentfrom 12.1 percent the previous year.However, employment creation remainedbelow target with an additional 699,000workers as against the 1.03-1.26 milliontarget for the year. As industrialproduction remained sluggish,employment mainly came from theagriculture and services sectors. But withthe generally peaceful labor conditions,labor productivity managed to growmodestly although still behind otherAsian countries’ productivity levels.

POLICY DIRECTIONS ANDECONOMIC OUTLOOK

In 2006, the economy isexpected to further expand between5.5 - 6.2 percent on the back ofstronger exports, upbeat interest inmining, the construction of majorinfrastructure projects, a strongservices sector and the recovery ofagriculture. However, despiteexhibited resilience of the Philippineeconomy, this forecast rests on theassumption that all of the outlinedprograms in the MTPDP will beactually implemented. Downsiderisks to macroeconomic growth alsoarise from the political environmentas it may impede the reforms thatare already being implemented aswell as hamper the entry of foreigninvestments and new infrastructureswhich constrained growth in thepast. The EVAT and the expected

TABLE F. PHILIPPINE EXTERNAL DEBT (In Million US Dollars)

Borrower 2004 2005

Grand Total 54846 54186as % of GDP 63.68 55.49 Medium-& Long Term 49800 47791 Short-term 5046 6395Public Sector 37896 36502 Banks 5950 4914 BSP 2721 1866 Government Banks 3229 3048 NonBanks 31946 31588 CB-BOL 101 56 National Government 31845 25657Private Sector 16951 17684 Banks 3701 6171 Foreign Bank Branches 977 2864 Domestic Banks 2724 3307 NonBanks 13250 11513



rise in the cost of oil amid rapid world oildemand and tight world supply, and risingtensions in the geopolitical arena in theMiddle East are anticipated to pushinflation to 7.6-8.0 percent. The rising costof goods is seen to dampen consumerspending in the short run.

Given the bright prospects and thedownside risks, the government’s economicpolicies for 2006 will revolve on its mainthrust to aggressively push for economicgrowth, mitigate the negative effects ofinflation and sustain macroeconomicstability through acceleration of fiscalconsolidation, financial and economicreforms.

To achieve the targeted economicgrowth and address the risks that might arisein 2006, the government shall embark onthe following set of policy directives:

1. Prioritize the completion andconstruction of the ongoing andpipeline infrastructure to providefundamental support to economicgrowth (Refer to Chapter 6,Infrastructure);

2. Pursue aggressive promotioncampaigns, integrated with “thebrand management” approach, toincrease the investment rate in ITand IT-enabled business, mining,shipbuilding, marine products (e.g.seaweed), healthcare and wellnessand overall tourism (Refer toChapter 1, Trade and Investment);

3. Improve competitiveness throughreduced transport and distributioncosts, cheaper power rates, fightingcorruption and simplifyingbusiness procedures and providingmore funds for knowledge

dissemination to increase people’sproductivity;

4. Encourage development of thecountry’s hospital facilities andinfrastructure to enhancecompetitiveness in the medicaltourism industry;

5. Maintain existing and developmore competitive export productsand services (Refer to Chapter 1,Trade and Investment); and

6. Sustain fiscal consolidation tostrengthen investor confidence.

8 TRADE AND INVESTMENT

Chapter 1Trade and Investment

G overnment efforts in 2005 to develop small and medium enterprises (SMEs) as well as promote trade and investments in identified priority areas contributed to a 17.4 percent increase

in loan releases of the SME Unified Lending Opportunities for NationalGrowth or SULONG Program. It also contributed to the tripling oflocal investments that resulted in an increase in committed investmentsby 4 percent, as well as the 3.9 and 10.4 percent increase in merchandiseand services exports, respectively.

ENTREPRENEURSHIP

Provide credit, technology andmarketing support for three millionmicro, small and medium enterprises(MSMEs)

The SULONG program releasedPhP31.6 billion to 14,930 SMEs,surpassing the target amount for 2005 by8.4 percent (Table 1.1). This brings the

total amount lent in 2004-05 to 18.9percent of the total cumulative loan targetof PhP309.98 billion for the period 2004-10. This is higher than the 17 percenttarget for the said two years.

A comprehensive package ofassistance was formulated for 16 regionalpilot models under the One Town OneProduct (OTOP) Program, whichgenerated 23,826 home-based and 46,613community-based new jobs while

TABLE 1.1 PERFORMANCE OF PARTICIPATING GFIs AND GOCCsUNDER THE SULONG PROGRAM

(In Billion Pesos) Commitment Actual Performance Growth Rate 2005

in 2005 2005 2004 (%) Actual vs. Commitment (%)

Land Bank of the Philippines 9.9 17.43 12.56 38.77 76.06 Development Bank of the Philippines 9.9 10.49 10.3 1.84 5.96 Small Business Guarantee and Finance Corp. 3.6 2.94 3.27 -10.09 -18.33 Philippine Export-Import Credit Agency 1.44 0.15 0.07 114.29 -89.58 Quedan and Rural Credit Guarantee Corp. 3.16 0.56 0.6 -6.66 82.28 National Livelihood Support Fund 0.96 0.03 0.12 -75 96.88 Social Security System 0.2 N.A. N.A. N.A. N.A. TOTAL 29.16 31.6 26.92 17.38 8.37 Sources: Small Business Guarantee and Finance Corporation (SBGFC), Development Bank of the Philippines(DBP), Land Bank of the Philippines (LBP)


sustaining the 45,949 jobs created sincethe start of the Program. A total of 2,022new MSMEs (created through newinvestments) were developed and 4,396new MSMEs were provided withdevelopment assistance and interventions.In implementing the OTOP Program,access to financing is a problem. Atpresent, local government units (LGUs)provide financing to OTOP participants.If needed, the latter are also referred to theSULONG Program for financial support.However, some SMEs participating in theOTOP program have remarked that theSULONG Program is not responsive totheir needs. OTOP participants are alsofinding it difficult to secure access to otherfinancing programs of governmentfinancial institutions (GFIs) because ofstringent lending requirements.

Empower existing SMEs to generateadditional employment throughincreased lending and promotion of theBig Enterprise-Small Enterpriseprogram

Partnerships between 50 SMEs and20 big enterprises were forged in 2005under the Big Enterprise-Small Enterprise(BE-SE) Productivity ImprovementProgram of the Employers Confederationof the Philippines, and the NationalWages and Productivity Commission.The Plan target of forging 300partnerships per year was not met due tolimited financial resources, the need tofurther educate SMEs and BEs on theimportance of productivity development,as well as the need for stronger linkages/partnerships with different industryorganizations.

To enhance capacities of SEs topartner with BEs, the Department ofTrade and Industry (DTI) conducted 468

training programs for 11,506 participantsfrom various sectors (e.g., furniture, giftsand houseware). Moreover, 25 out of 84SME Centers were provided with basicfacilities and equipment. To disseminateinformation on existing financing andtechnical assistance programs for MSMEs,the Development Bank of the Philippines(DBP) conducted briefings in 12 provinces.It also created the marketplace forpurchases of SME supplier receivableswhich resulted in loan releases amountingto PhP2.7 billion to 61 SME suppliers of23 big corporate buyers. The Bureau ofSmall and Medium Enterprise Development(BSMED) conducted 117 briefing sessionson entrepreneurship for 5,612 participants,and the provision of 369,963 copies ofpublished materials on SMEs.

Tap returning Overseas FilipinoWorkers (OFWs) as a source of capital

The investment promotionprogram of the Foreign Trade ServiceCorps identified potential and prospectiveinvestors, including OFWs, and providedthem with investment advice andcounseling. To reduce the cost ofremitting through the banking system, theBSP assisted the Federal Reserve Bank ofAtlanta in the conduct of a pre-feasibilitythat will look into the possibility ofinterconnecting with the United StatesFed Automated Clearing House system.

Provide an environment conducive toMSME development

As of August 2005, 1,079 cities andmunicipalities are already implementingthe barangay micro business enterprises(BMBE) law and 4,097 enterprises wereregistered as BMBEs. This is animprovement over the 3,624 registered


BMBEs and 1,003 cities/municipalities asof December 2004. In December 2005,the registration requirements for BMBEswith assets of PhP300,000 or less werereduced from nine to two. Thus, thenumber of registered BMBEs may increasein 2006.

The proposed amendments to theMagna Carta for SMEs were pushed andthe SME Development Plan iscontinuously being implemented. Theproposed amendments to the MagnaCarta, which aim to rationalize the presentinstitutions and organizations involved inSME development, have been deliberated

on by the House of RepresentativesCommittees’ on Trade and Industry andon Small Business and EntrepreneurshipDevelopment, but have yet to bepresented in the plenary session.

INVESTMENTS

Draw up a more focused incentivespackage with focus on priority areas

Only the priority areas identified inthe MTPDP and in specific laws wereincluded in the 2005 Investment PrioritiesPlan. Brand development teams were

TABLE 1.2 TOTAL INVESTMENTS: 2004-2005 (In Million Pesos)

Agency Total Filipino Nationals Foreign Nationals 2004 2005 2004 2005 2004 2005

Total 221,815 231,234 47,920 135,428 173,895 95,807BOI 164,524 163,879 36,635 120,082 127,889 43,797PEZA 50,561 62,761 9,024 12,919 41,537 49,842SBMA 3,727 1,484 1,413 646 2,315 839CDC 3,002 3,110 847 1,781 2,155 1,329

Totals may not add up due to rounding.Source: NSCB

TABLE 1.3 TOTAL APPROVED INVESTMENTS BY INDUSTRY: 2004 - 2005 (In Million Pesos)

Industry 2004 2005 Growth Rate (%)

Total 221,815 231,234 4.2Agriculture 212 770 263.2Mining 1,512 8,294 448.5Manufacturing 54,330 150,160 176.4Electricity, gas & water 115,085 21,928 -80.9Construction 1,140 83 -92.7Trade 517 357 -30.9Transportation 467 22,172 4647.8Storage 388 26 -93.3Communications - 2,080Finance & Real Estate 7,158 10,020 40Other Services 41,006 15,344 -167.2

Source: NSCB


formed to promote each of the priorityareas. An international mining conferencewas held in Manila that complementedmining investment roadshows abroad.The Medical Tourism Program waslaunched and a Philippine study team wassent to Taiwan to determine possible areasof cooperation on integrated circuitsbetween the two countries. Industryroadmaps that identify programs andactivities that will be undertaken to makethe priority sectors globally competitivewere also implemented.

Committed investments increasedby four percent or from PhP221.8 billionin 2004 to PhP231.2 billion in 2005, withlocal investments almost tripling atPhP135.8 billion (Table 1.2 and 1.3).These investments are expected togenerate 132,043 additional jobs thatcould contribute about nine percent tothe annual target of 1.4 million to 1.6million jobs to be generated. However,the actual investment to gross domesticproduct (GDP) ratio of 18.7 percent (inreal terms) in 2005 fell short of the targetfor the year by 20.3 percent and is stillway beyond the target of 28 percent by2010. The decrease in foreign investmentshas been attributed to the political

uncertainties that prevailed during the year(Table 1.4). In contrast, Malaysia andThailand posted increases of 35.9 percentand 8.8 percent, respectively, in approvedforeign investments.

Simplify registration procedures

The Board of Investments (BOI)registration procedures are continuouslybeing streamlined to make it easier to obtainregistrations in one day. To speed upbusiness name registration (BNR), the DTIteamed up with Internet cafés in MetroManila to assist clients in using DTI’s onlineBNR service called WeBNRS. The projectwas pilot-tested in DTI-Rizal. On-line BNRin different parts of the country was alsofacilitated with the successful relocation ofthe BNR System to the DTI Data Center.The Department of Interior and LocalGovernment (DILG) finalized theCompendium of Good Practices in theSimplification of Civil Application System,copies of which were distributed to theLGUs for adoption in their businessregistration system.

TABLE 1.4 FOREIGN DIRECT INVESTMENTS BY COUNTRY OF INVESTOR(In Million Pesos)

COUNTRY 2004 2005 Growth Rate (%)

Total 173,895 95,807 -44.9Japan 26,596 27,539 3.5Korea 3,260 10,828 232.1Netherlands 1,473 19,158 1200.6USA 27,108 14,913 -45Cayman 7,634 13,817 81Nauru 96,529 - -Others 11,295 9,600 -15

Source: NSCB


TRADE

Maximize exports and investmentopportunities offered by tradeagreements

The Philippines was able toincrease exports to other ASEANcountries as a result of the ASEAN FreeTrade Area (AFTA) Agreement. Exportsof goods to the region grew by an averageof 4.2 percent, while imports rose by 13.1percent in 2003-2005. Imports consistedmainly of industrial manufactures, e.g.,semiconductors and machines, andtransport equipment, which could be usedas inputs to higher-value products andcould also be exported later on.

Efforts to become more integratedwith the global economic communitywere continued. For instance, a

Memorandum of Agreement with Chinaon the Early Harvest Program (EHP)under the ASEAN-China Free TradeAgreement was signed and the ExecutiveOrder (EO) that would implement theEHP commitments was issued in 2005.EOs to implement various arrangementsunder the ASEAN Industrial Cooperation(AICO) scheme, as well as commitmentsunder the AFTA Agreement and ASEANIntegration System of Preferences (AISP),were also issued. Philippine exports toparticipating countries under the signedAICO arrangements are estimated atUS$77.9 million while only US$353,7021

worth of imported anthracite fromVietnam was accorded tariff concessionsunder the AISP.

Meanwhile, the governmentcontinued negotiations on the Japan-Philippines Economic Partnership

1 January-August 2005

TABLE 1.5 2006 MERCHANDISE EXPORTS (US$M)

COMMODITY 2005 2004 % Growth

TOTAL 41,223.53 39,680.52 3.89 I. TRADITIONAL EXPORTS 24,594.83 22,718.87 8.26 1. Semiconductors 20,218.76 18,706.78 8.08 2. Garments & Textiles 2,542.40 2,409.23 5.53 3. Machinery & Transport 1,833.67 1,602.86 14.4 II. PROD. MGT. CATEGORY–REV. STREAM 11,170.60 12,166.85 -8.19 1. Wearables (Excl. Garments) 67.84 84.9 -20.09 2. Food 1,179.30 1,098.50 7.36 3. Motor Vehicles & Parts 717.32 746.99 -3.97 4. Home Furnishing 441.66 416.8 5.96 5. Marine Prods & Carageenan 409.64 510.9 -19.82 6. Giftwares/H. Decors 186.66 184.2 1.34 7. Construction Materials 202.47 188.79 7.25 8. Organic Products 74.47 120.07 -37.98 9. Electronic Products 7,085.33 8,019.30 -11.6510. Mineral Products 805.91 796.4 1.19III. OTHER PRODUCTS 5,458.10 4,794.80 13.83 1. Petroleum Products 585.75 380.44 53.97 2. Metal Components 409.01 340.89 19.98 3. Coconut Products 820.79 716.48 14.56 4. Others 3,642.55 3,356.99 8.51

Source: Bureau of Export Trade Promotion


Agreement to resolve outstanding issues.The Philippines, together with otherASEAN countries, signed the ASEAN-Korea Framework Agreement onComprehensive Economic Cooperationand embarked on negotiations for a freetrade agreement with New Zealand andAustralia.

Pursue a market- driven strategy thatwill link our supply capacity closer tothe high-impact markets

Promotional campaigns and tradefairs held abroad yielded sales amountingto around US$115.77 million while salesfrom local trade fairs reached US$160million. Total exports of the 10 revenuestreams declined by 8.2 percent as onlyfive of the 10 export products consideredas revenue streams (i.e., food, homefurnishings, giftware/house decors,construction materials, and mineralproducts) posted a positive export growth(Table 1.5). Meanwhile, exports ofservices grew by 10.4 percent due largelyto higher earnings from computer andinformation services, other business

services, and the finance sector (Table 1.6).The increase in tourist arrivals contributedto the 5.6 percent increase in travelreceipts.

Simplify export/import procedures

The Automated ExportDeclaration System (AEDS) was rolled outto seven pilot locators in three pilotecozones in Mactan. Efforts to roll out theAEDS to the motor vehicle partsmanufacturing sector were continued.Moreover, the Export DevelopmentCouncil prepared draft amendments to theExport Development Act to improveefficiency of export documentation andclearance procedures. To facilitate exportdocumentation, the operation of nineone-stop export documentation centerswere computerized. However, the DTIcommitment to develop an electronicbusiness facilitation platform to facilitatebusiness matching and export transactionsby December 2005 has yet to materialize.The DTI with the Philippine EconomicZone Authority (PEZA) has yet toestablish one holistic center for electronics

TABLE 1.6 SERVICES EXPORTS (US$M), 2004 and 2005

SECTORS 2005/p 2004 % Growth

TOTAL 4,462 4,043 10.4Transportation 1,041 1,001 4Travel 2,130 2,017 5.6Communications 520 487 6.8Construction 66 71 -7Insurance 12 12 0Finance 53 43 23.2Computer and information 89 33 169.7Royalties and license fees 6 11 -45.4Other business services 525 361 45.4Personal, cultural and recreational services 7 20 -65Government services 0 0 0

Source: Bangko Sentral ng PilipinasPPreliminary data.


business and export facilitation to beoperated in key areas nationwide; or issuean EO or any other governing law andpolicy that will streamline exportation ofsemiconductor and finished electronicproducts to ease export processing.

Maintain existing and develop morecompetitive export products andservices and diversify markets

The Philippines’ request to the USDepartment of Agriculture to amend thelatter’s regulation on the importation offruits to the US was favorably considered.The DTI took the lead in harmonizing allgovernment programs related to halal tradeto ensure compliance with internationalstandards and the effectiveimplementation of the Halal Export TradeDevelopment Program. Moreover, theDTI was able to develop 1,022 newstandards, 2.25 percent more than thetarget of 1,000 standards for the year. Itwas also able to harmonize 75 percent ofthe Philippines’ national standards withinternational standards. Notwithstanding

these efforts to enhance exportperformance, total merchandise exportsgrew by only 3.89 percent, way below thetarget of 10 percent for 2005 (Table 1.5).

INFORMATION ANDCOMMUNICATIONS TECHNOLOGY(ICT)

Promote ICT and related services

Total investments in ICT andrelated services increased by 40 percent orfrom PhP8.07 billion in 2004 to PhP11billion in 2005 (Table 1.7). Meanwhile,contact centers remained the highestrevenue earner among the ICT servicesin 2005 at US$1.79 billion, up by 75percent from 2004. Total employment inthe ICT services sector reached 162,250or 63.4 percent more than that in 2004,with contact centers providing 70 percentof employment.

TABLE 1.7 ICT SERVICES: REVENUES, EMPLOYMENT AND INVESTMENTS

SERVICES REVENUES (US$M) EMPLOYMENT 2004 2005 2004 2005

Contact Center 1,024 1,792 64,000 112,000Back Office 120 180 15,000 22,500Medical Transcription 42 70 3,000 5,000Legal Transcription 4 6 300 450Other Data Transcription 26 39 2,000 3,000Animation 52 74 2,800 4,000SW Development (Export) 170 204 10,000 12,000Engineering Design 34 48 2,000 2,800Digital Content 3 7 200 500Total 1,475 2,420 99,300 162,250Total Investment in PhPM 8,074 11,000

Source: BOI


Improved ICT Manpower

Industry-recognized courseelectives focusing on communication andcustomer relations in an internationalbusiness setting were formulated inpartnership with the academe andindustry. These were taught in variousuniversities nationwide, and are beingpromoted for adoption in othereducational institutions. The TechnicalEducation and Skills DevelopmentAuthority (TESDA), the InformationTechnology Foundation of the Philippines(ITFP) and BOI continue to develop skillsand competency standards for the ICTpriority sectors. Standards for contactcenters, medical transcription, animationand software programming were approvedby the industry and TESDA in 2005 whiledevelopment of skills standards forengineering design started in the same year.

As part of the National ICTCertification Program, the Commissionon Information and CommunicationsTechnology (CICT) finalized thedevelopment of the National ICTCompetency Standards (NICS). Variouslevels of NICS, such as NICS Basic, NICSAdvanced, NICS for Teachers, and NICSfor Civil Servants or ICT Specialists inGovernment, were developed to identify thelevel of knowledge and competence anindividual must possess for a specific ICTfield. The International Computer DrivingLicense (ICDL), which is a certificationprogram to determine the level ofcomputer literacy of government officersand employees, has been finalized by theCICT.

Conduct IT investment promotionsand foreign missions

In 2005, the DTI-BOI hosted aseries of walking tour programs in Baguio,Pangasinan, Calabarzon, Camarines Sur,Leyte, Iloilo, Cagayan de Oro, Davao,Zamboanga and General Santos. This is inresponse to the request of investors toidentify other areas outside Metro Manilathat can accommodate and host ICToperations and further strengthen thecapabilities of regions and provinces thathave the interest and potential ofbecoming IT hubs. During the year,Cebu City was launched as an IT hub.

16 AGRIBUSINESS

Chapter 2Agribusiness

R

The available data pointed to ageneral underperformance by both thesector and the sector agencies in 2005 vis-à-vis the targets set in the 2004-2010MTPDP. This is attributed to adverseweather conditions (El Niño during the1st semester and a mild La Niña during the2nd semester), some institutional rigiditiesand adjustment difficulties given that 2005was effectively the initial year of Planimplementation, inadequate resourcemobilization and allocation, among others.

ecognizing that higher agricultural production does not automatically result in higher farm incomes and lower rural poverty, the 2004-2010 Medium-Term Philippine Development

Plan (MTPDP) and the President’s 10-Point Agenda shifted to themore holistic agribusiness approach for the sector. Its “seed-to-shelf”viewpoint looks at the whole production and distribution system toidentify the most strategic and catalytic agriculture and agriculture-basedproducts as well as interventions that will effectively raise farm incomesand employment. Thus, although basic agricultural commodities willcontinue to be a priority, competitive high-value agriculture andagriculture-based products will also be supported. This will not onlyaddress agricultural production constraints but also postproductionhandling, value-adding, as well as marketing and distribution concerns.Specifically, it seeks to attain two major goals within the medium-termperiod: (a) the development of at least two million hectares of newagribusiness lands in order to create at least two million jobs, or onejob per hectare; and (b) making food plentiful at competitive prices,where the cost of priority “wage goods” such as rice, sugar, vegetables,poultry, pork and fish, and other important nonwage goods like cornmust be reduced.

Develop at least two million hectaresof new agribusiness lands in order tocontribute two million out of the 10million jobs targeted as a legacy by 2010

The pace of agribusiness landsdevelopment in 2005 was slower thanwhat is needed to reach the two millionhectare mark by the end of the planningperiod, or at least 333,333 hectares ofagribusiness lands per year to reach thetarget. Of the Department ofAgriculture’s (DA’s) target of 357,650hectares for 2005, only 57 percent hasbeen attained (Table 2.1).Underperformance persisted by


commodity and varied widely with abacaand fisheries having the least shortfall ofless than 10 percent of the target.

Shortfalls were also registered in theCARP land distribution, whereagribusiness is also to be promoted (Table2.2). The DAR reported a 97 percentaccomplishment rate for 2005 vis-à-vis its2005 target. This, however, translated to

TABLE 2.1 TARGET AND ACTUAL AGRIBUSINESS LANDS DEVELOPED IN 2005(In Hectares)

Commodity 2005 Target Area Developed ** Percent of Target

Coconut 151,539 78,903 52Major High Value Crops (Mango,

Banana, Pineapple) 45,240 24,337 54Other High Value Crops 89,931 36,938 41Sugar - 13Corn 48,771 43,542 89Abaca 9,337 8,589 92Livestock 3,482 1,581 45Fisheries 9,351 8,765 94Total 357,650 202,668 57

Source: DA* Physical areas available, specific crops/commodities suited for production, and potential cooperators and agri-fishery

facilities identified. ** Areas planted for crops, planted with forage for cattle grazing, stocked with animals for livestock and seeded with

fingerlings/propagules for fisheries and seaweeds production.

only 55 percent of the 230,000 hectaresper year that the department should havebeen targeting to accomplish its mandatedgoal. Meanwhile, the DENR exceededtheir internally-set land distribution targetfor the year.

Meanwhile, employmentgeneration in the agriculture sectorincreased by 54.1 percent given the

TABLE 2.2 LAND DISTRIBUTION TARGET AND ACCOMPLISHMENT IN 2005(In Hectares)

Program/Activity 2005 Target Accomplishment* Percent of Target

Land DistributionDAR Area Distributed (Ha) 130,000 125,811 97 FBs (No) 81,824DENR Public A&D (Ha) 96,685 107,134 111 ISF/CBFM (Ha) FBs (No) 101,411Total CARP (Ha) 232,945 FBs (No) 183,235

* Partial and PreliminarySource: DAR Planning

18 AGRIBUSINESS

249,000 new jobs created in 2005. Thesector accounted for more than one-thirdof total employment for the year (Table2.3). Quality of agricultural employment,however, needs to be improved consideringthat 24.7 percent are unpaid family workersand underemployment rate is 45.8 percentin 2005.

Make food plentiful at competitiveprices where the cost of priority “wagegoods” such as rice, sugar, vegetables,poultry, pork and fish and otherimportant non-wage goods like cornmust be reduced

The 2005 agriculture productiongrowth data in Table 2.4 shows that theaspect of “making food plentiful” was notmet. Real GVA growth rate for agriculturewas about half of what was expected forthe year mainly due to the El Niño in

TABLE 2.4 GROSS VALUE ADDED IN AGRICULTURE AND FISHERIES, 2004-2005(In Constant Prices)

SECTOR Percentage Change 2003-2004 2004-2005 2nd semester Target Actual Target Actual 2004 2005

Agriculture and Fisheries 4.0-5.0 5.10 4.2 - 5.2 2.24 3.75 3.71 Crops 5.18 0.48 Livestock -1.00 2.04 Poultry 4.23 1.41 Fisheries 9.43 6.47

Source: BAS

TABLE 2.3 EMPLOYMENT CREATION BY SECTOR, 2004-2005

SECTOR Level Percent Percent Share 2005 2004 Change 2005 2004

Agriculture 249,000 161,000 54.1 35.6 16.5Industry 26,000 158,000 -83.4 3.7 16.2Services 424,000 658,000 -35.6 60.7 67.3Total 699,000 978,000 -28.5 100 100

Source: NSONote: Totals do not add up due to rounding-off errors

TABLE 2.5 VOLUME OF PRODUCTION OF WAGE GOODS, 2004-2005(In ‘000MT)

Wage Goods 2004 2005 Growth Rate (%)

Rice 14496.8 14603 1Sugar 1213.9 1056.4 -13Vegetables 1065.9 585.4 -82.1Chicken 1231.8 1238.4 1Pork 1709.4 1761.8 3Bangus 273.5 289.1 6Tilapia 177.8 163 -8Source: BAS


the first half of the year. Crops and poultrywere mostly affected by this phenomenon.Higher input prices, due to the spike in oilprices, have, likewise, constrainedagricultural production. Nonetheless, thesector is showing signs of recovery as thesecond semester production growthrecovered to nearly the same pace postedduring the same period last year.

All the wage goods, except forbangus, registered weak productionperformances during the year (Table 2.5).Vegetables, sugar and tilapia even postedcontractions in production.

In terms of “making food pricesaffordable and competitive,” there was ageneral rise in the cost of living as inflationincreased by 7.6 percent compared to 6.0percent in 2004 due to a surge in oil pricesand its associated products, as well aspossible supply-sideconstraints due to the generalslowdown in productiongrowth (Table 2.6). Foodinflation rate increased by 6.5percent compared to 6.4percent in 2004. The increasein the prices of foodcommodities, however, wasslower compared to nonfoodinflation rate of 8.6 percent in2005.

Except for rice, thevarious wage goods postedonly small increments in pricesin spite of the economy-wideinflationary pressure broughtby the successive oil pricehikes during the year (Table2.6). This is partially explainedby the fact that palayproduction generally use morefossil fuel-based inputs than theother crops (32% ofproduction inputs).

It should, however, be noted thatsome survey results have flagged higherincidences of hunger in some areas of thecountry during the year in spite of thelower vulnerability of food items toinflationary pressure. This concern needsfurther investigation.

On the financial aspect of Planimplementation, the preliminary MTPIPfigures show that there was a generalunderfunding of the NationalGovernment’s (NG’s) Agri-businessinitiatives during the year (Table 2.7)mainly coming from other sources suchas the LGUs, GOCCs/GFIs, donors andthe private sector. It should, however, benoted that there have been difficulties inestimating the financing share of the othersources.

TABLE 2.7 AGRICULTURE SECTOR INVESTMENT REQUIREMENTVS. SUPPLY, 2005 BY FUNDING SOURCE

(In PhP Billion)

Details National Other Sources** TotalGovernment

Investment Requirement 19.9 28.7 48.6 Funding Supplied 20.1* 21.2 41.3 Over (Under) Funding 0.2 -7.6 -7.4

* Funding supplied is based on the General Appropriations Act for 2005. Includes funds from grants, LGUs, GFIs, GOCCs

TABLE 2.6 AVERAGE RETAIL PRICES OF WAGE GOODS, 2004-2005(In PhP)

Wage Goods 2004 2005 % Change

Rice 18.7 20.7 10.8 Sugar 27.1 28.1 3.6 Vegetables 31.3 31.9 1.8 Chicken 101.9 104.5 2.6 Pork 132.4 134 1.2 Bangus 85.1 87.1 2.4 Tilapia 67.4 69.1 2.5

Source: BAS

20 ENVIRONMENT AND NATURAL RESOURCES

Chapter 3Environment and Natural Resources

I

A total of 112 target activities werecommitted to be accomplished for the sectorover the medium-term. Of these, only about69 activities or 62 percent have quantifiabletargets while the remaining 38 percentaccount for those activities withunquantifiable targets.1 For those withquantifiable targets, however, there were noannual targets set, thus, equal annual targetswere used in the assessment in order todetermine whether the pace of achievementof activities is likely to meet the medium-term targets.

Results of the assessment indicatethat the sector and the sector agenciesgenerally underperformed in 2005. The 41percent achievement of the quantifiabletargets means that the targets for the Planperiod will not be achieved if this rate ofaccomplishment is not at least doubled. Theaccomplishment rates of the unquantifiabletargets could not be assessed although it

n keeping with the commitment to fully support the President’s 10 Point Agenda, efforts were strengthened to achieve the targets set in the Medium-Term Philippine Development Plan (MTPDP)under the following five priority thrusts of the Environment and NaturalResources (ENR) sector: (1) sustainable and more productive utilizationof natural resources to promote investments and entrepreneurship;(2) promotion of responsible mining that adheres to the principles ofsustainable development: economic growth, environmental protectionand social equity; (3) focusing and strengthening of the protection ofvulnerable and ecological fragile areas, especially watersheds and areaswhere diversity is highly threatened; (4) creating a healthier environmentfor the population; and (5) mitigating the occurrence of natural disastersto prevent the loss of lives and property. This chapter, thus, assesses thesector vis-à-vis these five thrusts.

must be noted that some activities leadingto the achievement of the planned outputsand targets have been initiated andreported.

Relatively better performanceswere reported for thrusts 1 and 4 given theirhigher accomplishment rates. This couldbe attributed to the availability of morefunding assistance, given the relatively highpriority accorded by the DENR for theseactivities. Only some activities underthrusts 2, 3 and 5 performed well.

The 59 percent shortfall in theachievement of quantifiable targets duringthe year can be attributed to the following:(a) the insufficiency of resources allocatedthat led the DENR to shave theimplementation of programs and projectsinstead of scrapping some of them; and(b) the unpreparedness of some localgovernment units (LGUs) in executingsome of the devolved functions, such as

1 Unquantifiable targets are those which either have no identified quantifiable outputs or those in which outputs aretargeted to be completed at a certain period beyond 2005 but within the Plan period.


mangrove rehabilitation and solid wastemanagement.

The following assessment focuseson the achievements of major StrategyPlanning Matrix targets for 2005. Thesespecifically cover activities that are directlysupportive of the 10-point agenda and theENR banner programs of theAdministration. Table 3.1 provides asummary of achievements of major SPMtargets during the year.

Thrust 1. Sustainable and moreproductive utilization of naturalresources to promote investments andentrepreneurship

In this area, most of the targetactivities during the year were achieved. Inparticular, targets on popularization ofenvironmentally-sound technologygeneration and the surveying andmapping of the area covered by Philippinewaters were surpassed.

Across Ecosystems

The classification of the remainingunclassified lands to determine theirsuitability and to complete thedevelopment of the integrated land-use plannationwide was fast-tracked, with theclassification of 5,090 hectares or fivepercent of the 97,868 hectares equal annualtarget. Furthermore, 107,026 hectares ofalienable and disposable (A&D) lands weredistributed to qualified and deservingbeneficiaries to promote social equitywhere the less privileged are given accessin the management and development ofthe land resources toward greaterproductivity. Land patents were granted tobeneficiaries already occupying alienable anddisposable lands, whose activities involvefull utilization of the said lands.

To maximize physical planning asa development tool for greater andsustained job creation, the survey anddelineation of forestlands was continuedto protect these against illegalencroachment, forest disturbances, otherharmful human activities and, ultimately,for more effective land management. For2005, 2,805 kilometers (km.) of forestlandboundaries covering 18 provinces weredelineated, accomplishing a low 26 percentof the equal annual target of 10,899 km.

To create a climate conducive forinvestments and production, theliberalization and streamlining of theEnvironmental Compliance Certificate(ECC) process was vigorously pursued.Consequently, the processing of ECCsare now relegated to the DENR regionaloffices especially for projects likeinfrastructure, bridges, road projects,water supply, landfills, plantation,agribusiness, aquabusiness and livestock.For 2005, 4,771 ECCs for non-environmental critical regional projectswere issued by the DENR RegionalOffices. Meanwhile, to facilitate theapplication for the Certificate of Non-Coverage (CNC) and InitialEnvironmental Examination (IEE),relevant forms were made fully availableonline. These initiatives helped reducetransaction costs and expeditedprocessing time to create an investment-friendly atmosphere.

Consistent with the government’scommitment to implement the provisionsof the UN Framework Convention onClimate Change, the Rules andRegulations governing theimplementation of Executive Order 320mandating the DENR as the DesignatedNational Authority (DNA) for the CleanDevelopment Mechanism (CDM) wasissued. As the DNA focal, it is mandated


Ground v alidation/v erification of forestland boundaries cov ering a total of 76,291 kms w ithin 74 prov inces conducted and legislation of permanent forest lines of these prov inces passed

10,899 ground v alidation/v erification of forestland boundaries

2805 ground v alidation/v erification of forestland

26%

760,080 hectares of A and D lands through land patents prioritizing areas in Bulacan, C av ite and Laguna distributed

91,846 hectares of A and D lands distributed

107,026 hectares of A and D lands distributed

117%

18-23 large scale mining projects dev eloped, U S $4.0-6.0 billion inv estments, U S $5.0-7.0 billion in foreign ex change generated, PhP5.0-7.0 billion in ex cise tax es collected, and 239,000 in direct and indirect employ ment

3 large scale mining areas 5 mineral dev elopment projects made operational

167%

$1B inv estment 40 000 i di t d i di t

U S $115M in inv estments 12%

40,000 in direct and inidirect employ ment generated

3,780 jobs 9%

M angrov e replanting, cov ering 10,500 hectares implemented and 128 marine sanctuaries established

1,500 has. mangrov e replanted

577 hectares of mangrov e plantations w ere established

38%

21 marine sanctuaries established

17 marine sanctuaries established

81%

Thrust 3. Focus and strengthen the protection of vulnerable and ecologically fragile areas, especially watersheds and areas where biodiversity is highly threatened130,000 hectares in 140 critical w atersheds, especially those areas supporting the Pampanga and Bicol Riv er Basins reforested

18,571 hectares 6,017 hectares of open and denuded areas w ere reforested

32%

Inv estors forum conducted and inv estors mobilized (local and international inv estors)

no number of forum indicated 2 international mining ev ents conducted

---

direct and indirect employ ment generated

Thrust 2. Promote responsible mining that adheres to the principles of sustainable development: economic growth, environmental protection and social equity

540 sq. km. of Philippine w aters surv ey ed and mapped

77 sq. km. of Philippine w aters surv ey ed and mapped

72,172 sq. km. of Philippine w aters surv ey ed and mapped

93730%

7.3 million hectares of production forest assessed

1,216,667 hectares of production forest assessed

343,907 hectares of production forest assessed

28%

47 env ironmentally sound technologies popularized



588%

Surv ey and classification of the remaining 587,238 hectares of unclassified lands

l t d

97,868 hectares surv ey and classification of unclassified l d

5,090 hectares surv ey and classification of unclassified l d

5%

Thrust 1. Maximize physical planning as a development tool for greater and sustained job creation

Measurable Output and Target 2005 ACCOMPLIS HMENT

% Accomplishment (2005 Targets vs.

Accomplishments)

2005 TARGET (equal annual target)

TABLE 3.1 SUMMARY OF ENVIRONMENT AND NATURAL RESOURCES

Major Accomplishments vis-a-vis Targets


continued Table 3.1

14 PAs for proclamation 2 PAs for proclamation 14%17 PAs for legislation --- ---

Assessment and classification of 57 cav es conducted

8 cav es assessed and classified

19 cav es assessed and classified

238%

Potable w ater to the entire country prov ided by 2010 w ith priority giv en to 212 “w aterless” areas in M etro M anila and 633 “w aterless” municipalities outside M etro M anila through priv ate sector or public inv estment

35 w aterless areas 106 w aterless municipalities

20 w aterless areas 10 w aterless municipalities

57% 9%

33 P /M WSU 65 P /M WSU 197%

181 BWSA 27 BWSA 15%Water analy sis and monitoring of 162 bathing areas nationw ide completed

23 bathing areas monitored and assessed

41 bathing areas monitored and assessed

178%

Technical assistance to LGU s on the ff. prov ided:

TA prov ided to 146 open dumpsites

TA prov ided to 864 open dumpsites

592%

a) closure and/or conv ersion of 875 open dumpsites to controlled dump facilities;

TA prov ided to 18 sanitary landfills/w aste processing facilities

TA prov ided to 454 sanitary landfills/w aste processing facilities

2522%

b) construction of 106 sanitary landfills/w aste processing facilities; complete the implementation of LGU -w ide integrated w aste management sy stem (segregation and collection at source, materials recov ery facilities, recy cling and composting) in 48 model 3,900 hazardous w aste generators re-gistered and 500 companies utilizing cy anide, mercury , asbestos and other highly tox ic chemicals like the Poly -chlorinated B iphenils (PC Bs) closely monitored

557 hazardous w aste generators registered 83 companies monitored

1,250 hazardous w aste generators registered 355 companies monitored

224% 428%

One quadrangle per region per y ear w ithin the P lan period

One quadrangle per region A ll regions ex cept 4-A w ith at least one (1) quadrangle map

93%

Thrust 5. Mitigate the occurrence of natural disasters to prevent the loss of lives and properties

Additional sanitation facilities constructed by DILG

28 sanitation facilities 6 sanitation facilities 21%

C apability in w ater resource management (WRM ) of 187 prov incial/municpal w ater and sanitation units (P /M WSU ) established and strengthened, and 1,027 Barangay Waterw orks and Sanitation Associations (BWSA) formed and trained

150%

Thrust 4. Create healthier environment for the populationAir quality in major urban centers improv ed and air pollution (total suspended particulates or TSP) in M etro M anila reduced by 42 percent by the end of 2007

14 percent reduction in the total suspended particulates (TSP)

16 percent reduction in the total suspended particulates (TSP)

114%

Push for the proclamation of 100 Protected Areas (PAs) and legislation of 103 PAs, especially those that are critical w atersheds and habitat for highly endangered species

Ecotourism in 29 protected areas that are included in the N ational Ecotourism M aster P lan promoted

4 PAs w ith ecotourism promoted

6 PAs w ith ecotourism promoted


to: (a) develop criteria and indicators forCDM assessment process; (b) provide toolsfor evaluation and approval of projects; and(c) monitor approved CDM projects.Hence, 22 CDM projects are currentlybeing reviewed and/or evaluated where 19projects are on waste management, twoprojects are on renewable energy (wind),and one on geothermal energy. Theseprojects are crucial in potentially generatingcarbon credits under the CDM from thereduction of green house gases (GHGs)emission and could create an avenue forrevenue generation and promotion ofsustainable development for the country.

Annual targets on popularizingenvironmentally sound technologies (i.e.,eight technologies) was significantlysurpassed with the full transfer of themedium term commitment of 47technologies for adoption and utilization.This registered 588 percent accomplishmentduring the year. These technologies arealready considered “popularized” once thetransfer takes place, with no minimumnumber of clientele required. Thetechnologies transferred include apiculture,bamboo production and management,essential oil production, clonal propagationof dipterocarps, seaweed processing, andvermicomposting technology. The transferof these technologies was done inpartnership with other government andnongovernment agencies, privatecorporations and individuals, internationalagencies and LGUs. However, while thetransfer of technology has been completed,the impacts on income and productivity havenot been documented.

Forest Ecosystem

A total of 343,907 hectares ofproduction forest were evaluated, assessedand validated to determine their suitable

uses (such as for agriculture, agroforestry,ecotourism and other developmentprojects). This covers 28 percent of thetotal 2005 target of 1.2 million hectares.Given this minimal accomplishment,there is a need to accelerate the conductof these activities to properly utilize andvalue land resources.

Coastal Ecosystem

In terms of investment in thecoastal zones, DAO No. 24 on Coastal AreaSpecial Use Agreement was issued lastNovember 17, 2005. This administrativeorder aims to encourage investments in thecoastal zones provided that businessesdone here are nonextractive and will notincur mangrove area conversion.However, the intended impact has yet tobe realized since its implementation wasput on hold on March 3, 2006, because ofthe clamor for further consultations withstakeholders.

The surveying and mapping ofthe country’s Exclusive Economic Zone(EEZ) and other maritime zones areimportant in the delimitation of ourwater boundaries, utilization andexploration of living and non-livingmarine resources and the conduct ofscientific researches. Thus, the DENRsurveyed and mapped a total of 72,172sq. km. for the EEZ. This achievementis way above the annual target of 77 sq.km. per year.

Thrust 2. Promote responsible miningthat adheres to the principles ofsustainable development: economicgrowth, environmental protection andsocial equity

Overall, most SPM targets underThrust 2 were barely achieved during the


year. While the target development ofmining projects was surpassed, two equallyimportant targets, the generation ofinvestments and jobs through mining, werenot achieved. The reason for the latter isthat the impact of the international foraand mining events have yet to be realizedin terms of actual foreign investments andthe resulting jobs to be generated from theseinvestments.

The medium term target onresponsible mining is to develop 18 to 23large scale mining areas and generate aboutUS$4-US$6 billion investments and239,000 indirect and direct jobs. Asreported, there were 24 mineraldevelopment projects implemented.However, only five of them becameoperational in 2005. These projectsgenerated only about US$115 million ininvestments and 3,780 jobs. With theseaccomplishments, only about six percentof the medium term target on investmentshas so far been achieved while only threepercent of the target employmentgeneration has been met. It may be noted,however, that with the conduct of twointernational mining events in 2005, atotal of US$1.9 billion mining investmentcommitments were solicited. Therealization of these commitments wouldlargely depend on how various mine tailingincidents in existing mines as well as thosein abandoned mines could be fullyaddressed. It may be noted that variousmine tailing incidents in the country havehampered the development of the miningareas and have somehow affected the flowof investments in the country.

However, efforts to rehabilitate andimplement remedial measures in the caseof Philippine Pyrite Corporation inBagacay, Samar were initiated. Fieldassessments were conducted and theRehabilitation Plan was finalized for full

implementation in 2006. The initial phaseof implementation will entail thedecommissioning and removal of allunwanted infrastructure, earthworks andre-vegetation. The community shall beinvolved in the propagation of seedlings,in nursery operation and in themaintenance of the rehabilitated areas.Moreover, other priority mines forrehabilitation have also been identified toinclude Basay Mining Corporation,Thanksgiving Mine, Benguet ExplorationInc., Black Mountain, ConsolidatedMines Inc., Palawan Quick Silver Mines,Western Minolco Corp. and PhilippinePyrite Corporation. These are expectedto contribute to efforts towardssustainable mining and further boostingthe mining industry in the country.

Thrust 3. Focus and strengthen theprotection of vulnerable and ecologicalfragile areas, especially watersheds andareas where diversity is highlythreatened

There was underperformance inthis area as shown by the slowdevelopments in the reforestation of openand denuded areas as well as in mangroveplantation due to limited resources andinsufficient LGU capabilities. Theproclamation of protected areas (PAs) hasalso been slow.

In terms of protecting the criticalecosystem, it was targeted that about130,000 hectares in 140 criticalwatersheds will be reforested within themedium term or an annual target of18,571 hectares. For 2005, only 6,017hectares of open and denuded areas (32%of the target) were reforested. Of this area,about 1,854 hectares in Pampanga andBicol River Basins were covered.


In coastal management, of the totalplan target of establishing 10,500 hectaresof mangrove areas (or 1,500 hectares for2005), only about 577 hectares ofmangrove plantations were establishedduring the year. With the technicalassistance provided by the DENR, about17 marine sanctuaries were established byLGUs in seven regions. This figure is a littleshort of the target during the year. TheDENR continued to provide technicalassistance on mangrove rehabilitationdespite this being already an LGUmandate. Faced with very limited resources,the achievement of mangrove rehabilitationtargets remains to be unaddressed.

In its efforts to protect biodiversityresources, two protected areas (PAs)covering an aggregate area of 81,368hectares, or 14 percent of the target, wereestablished by the DENR under theNational Integrated Protected AreasSystem (NIPAS) through PresidentialProclamation. These are Northern NegrosNatural Park (Proclamation No. 895)covering 80,454 hectares and the MatiProtected Landscape (Proclamation No.912) covering 914 hectares. Underaccomplishments were due to factors suchas the tedious process involved in theestablishment of NIPAS areas, inadequatefunds, lack of field personnel and technicalcapability to undertake the variousactivities. These problems have been theperennial cause of poor performance inthe subsector. Given this, possibleencroachment and gradual destruction ofthe proposed protected areas maycontinue to occur in the following years.

Pursuant to the National Caves andCave Resources Protection Act (RA 9072),19 caves were assessed and classified outof the eight caves targeted annually, thusmarking a 238 percent accomplishment.These are habitats of unique diverse flora

and fauna and possess outstandinghistorical, educational, cultural, scientificand aesthetic values. The strongperformance of the DENR in this areashould be continued because caves arenatural habitats that should be protectedand maintained.

The DENR also embarked on thetransformation of several forest andmarine areas into ecotourism sites.Management of these sites were eitherundertaken by the LGUs or the privatesector that has hurdled strict guidelines.The DENR forged partnerships withLGUs/NGOs/POs in the developmentand management of six ecotourism sitesexceeding the equal annual target for 2005of four sites representing 150 percentaccomplishment. These include the TaalVolcano Natural Park and Mts. Banahaw-San Cristobal Protected Landscape. Thisinitiative may boost the tourism industryas well as generate more employment inthe country.

Thrust 4. Create a healthierenvironment for the population

In general, most activities underthis thrust exceeded the targets. Mostnotable were the high rates ofachievements of the targets of providingTAs to LGUs, the formation of barangaywaterworks and sanitation associationsand the improvement in air quality asevident by the decline in the totalsuspended particulates (TSP) levels inMetro Manila. The latter could beattributed to the intensified antismokebelching activities, sulfur reduction andlead phase out and the use of coco-methylesther (CME) blend.

Environmental protection seemedto make some headway with the 16percent reduction in TSP in Metro


Manila. This represents 114 percentaccomplishment during the year. Giventhis performance, it is likely that the plantarget of reducing the TSP level in MetroManila by 42 percent of the 2003 levelcould be achieved.

In the continuing effort to achievean integrated and sustainable developmentof water resources, several water relatedactivities and policy studies were pursued in2005 through collaborative endeavour ofvarious agencies. The National Economicand Development Authority (NEDA) andNational Water Resources Board (NWRB)started the conduct of a joint study in 2005on raw water pricing to establish amethodology for rational raw water pricingmechanism and determine the actual rawwater. The realistic and enhanced raw waterpricing is expected to create incentives touse water more efficiently and conservewater as a scarce resource, provide basis forefficient allocation and generate revenues formore effective water management.

The provision of potable water forthe entire country is one of the 10-PointAgenda of the President as indicated in theMTPDP 2004-2010 and consistent with theMillennium Development Goals (MDGs).For Metro Manila, the plan target is toprovide water to 212 “waterless” areas. Inline with this, in 2005, the MetropolitanWaterworks and Sewerage System (MWSS)through its concessionaires, Maynilad WaterServices Inc. (MWSI) and Manila WaterCompany, Inc (MWCI), provided waterservice to 20 communities in Metro Manila,covering 34,052 households. Moreover, ofthe Plan target to provide water to 633waterless municipalities outside MetroManila, the Local Water Utilities Authority(LWUA) implemented water supplyprojects through the water districts in 10“waterless” communities. This is merely9 percent accomplishment based on the

equal annual target set. Nonetheless, itmaybe noted that under the President’sPriority Program on Water (P3W), theWater and Sanitation Coordinating Office(WASCO) has identified around 161municipalities in seven cities nationwideto be covered under the 633 target“waterless” areas. With the demand-drivenapproach adopted under the P3W,changes are expected to be made in termsof area coverage as the initialidentification of priority waterless areaswere based on the 2000 census. With theavailability of new information based onthe 2006 census, the LGUs will have tosubmit the list of barangays identified aswaterless areas.

On sanitation and sewerage, sixout of the annual Plan target of 28sanitation facilities were constructed byDILG, or only 21 percentaccomplishment for 2005. Theunderperformance is attributed to theunreleased funds during the year. Incontrast, a total of 65 Provincial/Municipal Water and Sanitation Units(P/MWSU) were completed, including theformation and training of 27 BarangayWaterworks and Sanitation Associations(BWSA). This surpassed the annual plantarget by 197 percent.

In support of the country’s moveto rehabilitate water resources, theimplementing rules and regulations (IRR)of the “Clean Water Act” was approved.In line with this, intensive efforts werecontinued to ensure clean water for thecountry, including the implementation of“Sagip Ilog” Program. This aims toimprove water quality of 19 priority riversin terms of reduction in BiologicalOxygen Demand (BOD) level andincrease in Dissolved Oxygen (DO) level.Out of the 19 priority rivers, 12 have beenreported to have improved with the


significant decrease in BOD level by 10percent. However, six rivers were notassessed due to lack of baseline data basedon CY 2003 level while one (Pasig River)exhibited an increase in BOD.

With the growing demand forwater, groundwater resources andvulnerability assessments in 31 LGUs toidentify possible sources of groundwaterwere conducted. The quality of tap wateror domestic water supply was monitored,particularly in the depressed areas ofurban centers in the country under the“Tapwatch” Program. The DENRmonitored 87 barangay sites for fecal andtotal coliform, among other parameters.Of these, water samples were found to bepotable in 21 sites. For those sites withunpotable water, the DENR assistedLGUs and the Department of Health(DOH) in the preparation of water qualityimprovement plans for water safety.

As part of the initiative to enhanceecotourism efforts, 41 beaches weremonitored under the “Beach Eco-Watch”Program. The focus was on the quality ofthese beaches frequently visited by foreignand local tourists. Of these, 34 wereconsidered safe for public bathing,swimming and other recreational activities.The owners of the other seven beachesthat were not in the list were asked toprepare and submit a plan on how toimprove their beaches, in coordinationwith the local government units. These arealso under strict monitoring of DENR toensure their compliance with thestandards set for recreational use.

DENR technical assistance (TA)programs were also provided for the closureand/or conversion of 864 open dumpsitesto controlled dump facilities and for theconstruction of 454 sanitary landfills andwaste processing facilities. Despite effortsby DENR in providing TA by virtue of

RA 9003 (Ecological Solid WasteManagement Act), the devolved role ofLGUs is key to effective wastemanagement in the country.

A critical component of wastemanagement involves the declogging ofesteros. The “Linis Estero” Program wasvigorously pursued to minimize floodingand improve the aesthetics of theenvironment in the metropolis. Technicalassistance was provided to four LGUs inMetro Manila (Manila, Mandaluyong, SanJuan and Quezon City) in the clean-upof critical esteros in their areas.Continuous collaboration with LGUsnationwide led to the clean-up of 16priority esteros. However, there is still nodocumented study on the impact of theLinis Estero Program on flooding incidencein Metro Manila.

In line with the continuedimplementation of RA 6969 (Toxic andHazardous Waste Act), a total of 1,250establishments were registered asHazardous Waste Generators (HWGs),for a 224 percent accomplishment overthe 557 equal annual target. This bringsto 5,051 the total number of registeredHWG to date, or already 52 percent ofthe Plan target 3,900 potential HWGs inthe country. For Chemical Control Order(CCO) registration, 98 firms were issuedcertificates of registration for cyanide,asbestos and mercury. This increased to355 the number of registered firms coveredby CCO. Of these, 148 were monitoredfor compliance or 42 percent of the totalnumber of registered firms. Also issuedwere 106 certificates of registration forozone-depleting substance (ODS)alternatives and 241 for polychlorinatedbiphenyls (PCBs).


Thrust 5. Mitigate the occurrence ofnatural disasters to prevent the loss oflives and property

This thrust generally performedpoorly with the low achievement of theSPM target to generate one quadranglemap per year. Reports also indicate thezero accomplishments on the targets toprovide TAs to LGUs in coping withhazards and putting up adequate floodcontrol and drainage facilities in all flood/sediment disaster prone areas.

Under this thrust, geohazardassessment and mapping of priority areassuch as Pampanga River Basin, Bicol RiverBasin, Aurora, Quezon and Cebu provinceswere intensified to identify the sites proneto geologic hazards such as flooding,landslides, subsidence and liquefaction andprovide warning to local governments ofpotential dangers. At least one quadranglemap was generated in 14 regions nationwidefor a 93 percent accomplishment of thetarget to complete the geohazard mappingof the country. While this accomplishmentis noteworthy given that the target is to comeup with one quadrangle per region per year,the recent occurrences of natural disasters,particularly landslides in various areas in thecountry impress the need to hasten effortsin conducting geohazard assessment anddissemination of information on capacitybuilding initiatives for the LGUs.

30 HOUSING CONSTRUCTION

Chapter 4Housing Construction

I

PROVIDING SHELTER SECURITY

Direct housing provision

From January to December 2005,the housing sector constructed a total of117,330 units against a total target of163,511 units for an accomplishment rateof 71.76 percent. Socialized housingprograms (i.e., housing packages costingbelow PhP 300,000) provided a total of78,021 units vis-à-vis a target of 119,893units for a 65.08 percent accomplishmentrate. Low-cost housing programs (i.e.,PhP300,000 to PhP2 million) registered ahigher performance of 39,309 against itstarget of 43,618 units for a 90.12 percentaccomplishment rate for the same period.However, this aggregate accomplishmentof 117,330 units valued at PhP25.20 billionwas merely 39 percent of the SONAtargeted 300,000 housing units for the year(Table 4.1). Moreover, this output

translates to a 59% accomplishmentvis-à-vis 199,120 housing units or 1/3 ofthe total housing needs of 597,362housing units for 2005. The governmentis only tasked to provide 1/3 of the totalhousing need.

Security of tenure was providedto 20,234 informal settlers through theissuance of Presidential Proclamationsdeclaring public lands as alienable anddisposable for housing purposes andrelocation projects, CommunityMortgage Program of the National HomeMortgage Finance Corporation(NHMFC), National GovernmentCenter (NGC) Project and the North andSouth Rail Relocation.

Housing and slum upgradingservices were provided to 42,382households belonging to the bottom 30percent of the income populationthrough the various socialized housingprograms of the National Housing

n 2005, the housing sector pursued the targets of the Medium-Term Philippine Development Plan ( MTPDP) 2004-2010 oncreating six to ten million jobs, on the provision of shelter security

to Filipino households, and on job creation, provision of shelter andachieving the Millennium Development Goals (MDGs). Under theStrong Republic Housing Program, the sector’s priorities were to meetthe rapidly growing housing need through both direct and indirecthousing provision, and provide security of tenure especially to poor andvulnerable households. For direct housing provision, the prioritiesincluded resettlement, slum upgrading, core housing, socialized housingand low-cost housing, among others. In indirect housing, the majoractivities included the provision of housing guaranties, issuance of licensesto sell, and provision of technical assistance to local government units(LGUs) in the formulation of their Comprehensive Land Use Plans(CLUPs).


TABLE 4.1 COMPARISON OF HOUSING TARGETS VS. ACCOMPLISHMENT

PRIORITY ACTIVITIES 2005 ACTUAL PERCENTAGE OF TARGETS ACCOMPLISHMENT ACCOMPLISHMENT

Direct Housing ProvisionSocialized Housing Program 119,893 78,021 65.08% Resettlement 22,900 17,000 - North Rail and South Rail Relocation 15,828 - Assistance to LGUs/ NHA-administered 1,172 Slum Upgrading 5,800 5,132 Sites and Services 5,700 1,192 Technical Assistance — 3,809 Core Housing 5,000 1,033 HDMF Socialized Housing 18,313 14,276 GSIS Socialized Housing 720 2,995 DBP Socialized Housing 3,700 1,014 Tenurial Assistance (NHA) — 267 Presidential Proclamations (HUDCC) 35,000 1,001 Community Mortgage Program (NHMFC) 15,360 12,710National Government Center Project — 2,686North Rail Relocation Housing Financial — 3,570Assistance (NHA)Provision of Housing Facilities (NHA) — 2,041Local Housing (NHA) 7,400 9,295Low Cost Housing Program 43,618 39,309 90.12% HDMF Housing Program 26,403 39,145 SSS 664 59 NHA Medium-Rise Bldg. 8,200 105GSIS 8,351 —TOTAL (Direct Housing Provision) 163,511 117,330 62.76%Indirect Housing ProvisionRetail Guaranty (HGC) 22,340 5,493 24.59%Development Guaranty in projects (HGC) 2,482 3Issuance of License to Sell (HLURB) 133,420 167,229 125.34%TOTAL (Indirect Housing Provision) 158,242 303,498 191.79%Provision of employment in housing construction 1,063,037 630,925.50 59.35%

Development of Secondary Establish a viable and NHMFC launched liquid secondary the SMI Pilot Program mortgage market and developed the

by 2010 Terms of Reference for the Financial Advisor for securitization

Fast-tracking of disposition Disposal of PhP3 The NHMFC was ableof assets and non-performing billion worth of assets to raise a total ofloans to generate additional in 2005 PhP4.262 million throughfunds the sale of its non-performing

loans to Deutsche Bank Real Estate Global Opportunities (DBGO).

Sources: Strategy Planning Matrices, MTPDP 2004-2010; Housing and Urban Development Coordinating Council


Authority (NHA), Home DevelopmentMutual Fund (HDMF), GovernmentService Insurance System (GSIS) andDevelopment Bank of the Philippines(DBP) valued at PhP5.82 billion.

Housing loans were extended to39,309 low-salaried government and privatesector employees amounting to PhP18billion through the different home lendingprograms of HDMF, NHA, GSIS andSocial Security System (SSS).

The accomplishments of thehousing sector were made possible thoughthe convergence of efforts by the keyshelter agencies. On a per agency basis theaccomplishments are as follows:

Housing and Urban DevelopmentCoordinating Council (HUDCC). TheHUDCC, through the NationalGovernment Center (NGC) Project,awarded Contracts to Sell (CTS) andDeeds of Absolute Sale (DOAs) to 315households or 106 percent higher than its2005 target. A cumulative total of 4,045beneficiaries since 2001 have been awardedand generated land titles. For the 2005 AssetReform Program of the government, onlyfour presidential proclamations wereapproved by the President benefiting 1,001urban poor families, with five moreproposed proclamations still pendingapproval. This reflects the shift in focusand priority of the HUDCC fromproclamations to resettlement efforts dueto the implementation of the North Railand South Rail projects.

National Home Mortgage FinanceCorporation (NHMFC). The NHMFClegalized the tenure of 12,710 informalsettler beneficiaries valued at PhP724.45million through the Community MortgageProgram (CMP). The CMP, which catersto occupants of blighted urban areas byproviding them security of tenure, showedremarkable performance during 2005 and

was able to meet 144 percent of its targetin peso value and 143 percent of its targetin terms of number of beneficiaries.Moreover, the NHMFC was able to raisea total of PhP4.262 billion through thesale and liquefaction of its nonperformingloans (NPLs) to the Deutsche Bank RealEstate Global Opportunities (DBGO),accomplishing 140 percent of its target,and exceeding the PhP3 billion worth ofNPLs it originally targeted.

National Housing Authority(NHA). The NHA provided a total 43,399 housing units and/or units ofassistance from 132 projects implementedunder its various programs. Under theresettlement program, the North RailResettlement Project and theResettlement Assistance Program forLGUs provided 15, 828 units and 1, 172units, respectively. Housing facilities wereprovided to 2, 041 units while 5, 132 slumunits were upgraded and 1, 192 units wereprovided with sites and services assistance.Local housing assistance was also givento 9,295 units, housing financial assistanceto 3,570 units in the North Railrelocation areas, technical assistance to3,809 units, core housing to 1,033 unitsand tenurial assistance to 267 units.

Home Development MutualFund (HDMF). The HDMF-PAG-IBIGextended end-buyers financing to 43,878low-salaried government and privatesector workers valued at PhP18.36 billionand extended developmental loans toprivate developers amounting to PhP2.28billion, which are expected to generate9,543 housing units. The uptick inHDMF housing finance performancegarnered a AAA credit rating and awardby the Philippine Rating ServiceCorporation in August 2005 whichproves the financial strength and abilityof HDMF to serve its mandate.


Home Guaranty Corporation(HGC). The HGC guaranteed a total of5,493 housing units valued at PhP4.69billion through its Retail andDevelopmental, and Cash Flow GuaranteePrograms. Of the total units generated, 98percent were socialized and low-costhousing units. Ayala Land and FilinvestCorporation were among the fewdevelopers that availed of HGC’sguaranties. Compared to its 2004performance, HGC’s accomplishment (asof November 2005) is 140 percent and 196percent higher in housing units generatedand funds mobilized, respectively.

Housing and Land UseRegulatory Board (HLURB). TheHLURB issued licenses to sell to 2,348residential projects with an equivalentnumber of 298,002 saleable lots, housesand lots. The actual number of projectsissued with licenses to sell in 2005 translatesto a 223.36 percent accomplishment vis-à-vis the target of 133,420. HLURB alsoprovided technical assistance to 103 LGUsfor the formulation and updating of theirComprehensive Land Use Plans.

Priority Programs and Projects

The implementation of priorityprograms and projects were fast-tracked in2005. These include the North RailRelocation Resettlement Project and theNorth Rail-South Rail Linkage Project.

North Rail RelocationResettlement Project. This Project involvesthe relocation of some 38,206 families fromCaloocan to Clark, Pampanga to pave theway for the implementation of the NorthRail Development Project. As ofDecember 2005, the NHA has completedthe relocation of 19,526 families coveringthe entire 32-km stretch of the North Railsystem from Caloocan to Malolos,

Bulacan. The Metro Manila segmentcovering 7,344 families from CaloocanCity to Valenzuela City was completedin April 2005 while the Bulacan segmentinvolving 12,182 families fromMeycauayan to Malolos, Bulacan wascompleted in December 2005. NHA hasestablished nine resettlement areas mostlyin Bulacan, Valenzuela, Malabon andNavotas for the North Rail ResettlementProgram. The completion of relocationoperations is expected to pave the wayfor the implementation of infrastructuredevelopment works for the railwaysystem.

North Rail-South Rail LinkageProject. In support of the North Rail-South Rail Linkage Project, NHA hasalso prepared the groundwork for therelocation and resettlement of some31,739 families along the rights-of-way ofthe project covering a 40-kilometer stretchfrom Caloocan City to Alabang,Muntinlupa. This will cover the cities ofCaloocan, Manila, Makati, Taguig,Parañaque and Muntinlupa. The NorthRail-South Rail Linkage Project will linkwith the north terminal of North RailProject in Caloocan City and the northend of the South Rail Project in Calamba,Laguna.

Development of Poor UrbanCommunities Sector Project (DPUCSP).To improve the access of poor urbanfamilies outside Metro Manila in securingland tenure, affordable shelter, basiccommunity infrastructure and facilities,and livelihood and micro-enterpriseopportunities, HUDCC and DBPimplemented the ADB-assisted DPUCSP.In 2005, the second year of projectimplementation, the projectaccomplished the following: (a) securedLetters of Intent from 17 LGUs andSanggunian Resolutions from seven


LGUs signifying their intention toparticipate in the Project; (b) for the pilotLGUs of the Project, Angeles City,Pampanga has already prepared andsubmitted its Community Action Plan(CAP) for its three Project sites whileCagayan de Oro City, Misamis Orientalhas submitted its CAP for its MacabalanAccretion site; (c) provided subloan to amicrofinance institution (MFI), the Centerfor Agricultural and Rural Development(CARD) for PhP50 million; (d) processedPhP520 million worth of pipelinesubproject loans (still awaiting DBPapproval) for the Negros Women forTomorrow Foundation (NWTF), Taytaysa Kauswagan, Inc (TSKI), and Alay saKaunlaran sa Gitnang Luzon, Inc (ASKI),among others. On the downside, in 2005,the DPUCSP was plagued by a low loandisbursement rate of 62 percent, availmentrate of 12 percent, and utilization rate of2.7 percent against a time elapsed rate of28.3 percent.

Metro Manila Urban Services forthe Poor Project (MMUSP). The seven-month Preparatory Project TechnicalAssistance (PPTA) of the ADB-assistedMMUSP commenced in November 2005.The MMUSP is aimed at implementingurban renewal, security of land tenure,affordable shelter, basic infrastructure andlivelihood opportunities in Metro Manila.The MMUSP is designed as a relendingfacility/window for Metro Manila LGUsto undertake the mentioned interventions.The pilot project sites for the proposedMMUSP are: (a) NGC Center in QuezonCity; (b) National Bilibid Prisons inMuntinlupa; and (c) Food TerminalIncorporated (FTI) in Taguig.

Habitat for Humanity Project.Habitat builds and rehabilitates houseswith the help of homeowners (known as“homepartner”) families, volunteer labor,

and donations of money and materials.Habitat houses are sold to homepartnerfamilies at no profit (i.e., affordable, zero-interest, inflation-adjusted mortgageloans). In 2005, Habitat built 3,480 unitsagainst a target of about 1,000 units foran accomplishment rate of 348 percent.While proving to be a cost-effectivehousing production approach, Habitathas encountered the following problems:(a) Habitat affiliates are unable to starthousing projects due to lack of buildableland; (b) lack of site development (e.g.,roads, drainage, and other facilities); and(c) difficulty in maintaining current costsdue to rising prices of constructionmaterials especially steel products.

Scaling Up Urban Renewal. ThePartnership of Philippine Support ServiceAgencies (PHILSSA) implemented theWorld Bank-assisted grant project entitled“Upscaling Urban Poor CommunityRenewal Scheme Project” through theJapan Social Development Fund. Theproject was implemented in urban poorcommunities in San Fernando City, NagaCity, Quezon City, Mandaue City andIligan City. This urban renewal projecthas the following components: 1)drawing from “best practices” orsuccessful cases in urban communityupgrading through the production of acasebook, as well as field exposure ofselected project participants; 2) applyingknowledge gained from best practices inimplementing community projects; and3) documenting project implementationprocesses aimed at formulating aguidebook on scaling up and sustainingurban community renewal. Thestructures and equipment such ashousing units, water systems, roads,drainage, and solid waste equipmentprovided in the 17 project communitieshad a total cost of PhP72 million. Theproject benefited over 4,000 householdsin 2005.


1 Construction of a house requires 8.3 persons working for 3 weeks. A serviced unit or development of sites for resettlementand the improvement of sites will require 5 persons working per unit. The financial assistance for housing provided toaffected families of the North Rail Project, on the other hand, will be used to contract jobs computed on 3.3 workingpersons per unit.

Indirect Housing Provision

In 2005, indirect housing provisionresponded to the need for a more efficientand streamlined processing of housingpermits and licenses. The HLURB issuedlicenses to sell to 298,002 saleable houseswith lots, as well as individual houses andindividual lots, exceeding its original targetof 133,420 licenses by 223 percent. Thehousing guarantees, on the other hand,underperformed with retail anddevelopment guarantees totaling only5,493 units and 3 units, respectively.Against the retail guarantee target of 22,340and a development guarantee target of2,482, this reflects a mere 24 percent and0.12 percent accomplishment rate,respectively. While the underperformancein housing guarantee provision may beattributed to the low demand for housingguaranties extended by the HGC fromhousing financial institutions andcommercial banks, HGC obviously needsto improve its targeting, possibly throughdialogues with the private sector.The LGUs continued to benefit from thetechnical assistance provided by theHLURB for the formulation and updatingof the LGUs’ Comprehensive Land UsePlans (CLUPs). One hundred three LGUswere assisted with their CLUPs against thetarget of 101 LGUs for a 102 percentaccomplishment rate.

Policy Reforms

The policy reforms implementedwere aimed at further effecting a moremarket-oriented housing finance andconstruction sector. To respond to the needfor market-responsive housing loanceilings/packages, the HUDCC redefined/adjusted the housing loan ceilings andpackages as follows:

Although the revised ceilings mayaffect the affordability of the housingpackages, the inclusion of level 2 undera low-cost package aims to expandeligibility of banks to RA 7835, alsoknown as the Agri-Agra Law. The lawmandates that all unused agri-agraallocation funds from banks shall beinvested in socialized and low-costhousing and that loans of up to PhP2.0million shall be eligible for therediscounting facility of the BangkoSentral ng Pilipinas (BSP).

CREATING JOBS THROUGHHOUSING CONSTRUCTION

To help create six to ten millionjobs in support of the 10-point Agendaof the President, the housing sector wasable to construct 85,779 completedhousing units, valued at PhP44.24 billion,generating 630,9251 jobs in 2005. Thisoutput translates to 59 percent of the totaltarget of 1,063,037 jobs from housingconstruction per year. With about 8.3skilled and semiskilled constructionworkers completing a socialized housingunit in about three weeks, or a total of124 mandays, the jobs created in thesector are equivalent to providing annualfulltime employment to 296,343 workersassuming a maximum fulltime annualemployment of 264 mandays.

TABLE 4.2 REVISED DEFINITION OF HOUSING LOANCEILINGS/PACKAGES

Housing Packages Loan Ceiling

Socialized PhP 300,000 and belowLow-Cost Level 1 Above PhP300,000 to PhP750,000 Level 2 Above PhP750,000 to PhP2.0 millionMedium-Cost Above PhP2.0 million to PhP4.0 millionOpen Above PhP4.0 million

36 TOURISM

Chapter 5Tourism

TVisitor arrivals increased by 14.5

percent or by 2.62 million in 2005 against,20.1% in 2004 (Table 5.1). The figure was1.5 percent or 45,000 visitors short of thetarget. Jobs created subsequently grew by13.9 percent against 30.7 percent in 2004.It reached 3.20 million or two percent belowthe target of 3.25 million. Visitor receiptsfor the first five months amounted toUS$0.86 billion or just 33 percent of theUS$2.6 billion targeted for the year.

Performance in terms of touristarrivals, however, pales in comparison withthe top ASEAN performers such asMalaysia (13.58 million), Singapore (8.94million) and Vietnam (3.47 million). East

he tourism sector’s performance continued to improve in 2005. However, growth was slower compared to 2004, and was in- sufficient to meet the sector’s targets for visitor arrivals, visitor

receipts and employment generation as enunciated under the Medium-Term Philippine Development Plan (MTPDP) 2004-2010.

Asia (Korea, Japan, Taiwan and China)maintained its position as the country’stop market in 2005. The region accountedfor 47.4 percent of the country’s totaltourist arrivals followed by NorthAmerica (23%), Australia Asia/Pacific(5.5%) and Western Europe (4.3%). Basedon the 2005 tourism arrivals, the countrywas able to capture only a 0.32 percentshare of tourist arrivals. This is much lowerthan the shares of Malaysia (1.68%),Singapore (1.96%), and Vietnam (0.43%).

The Market-Product Focus andDestination Focus Approaches arecontinuously being adopted to promoteand develop tourism.

TABLE 5.1 TOURISM PERFORMANCE

INDICATOR TARGET ACTUAL TARGET ACTUAL GROWTH RATE (%) 2005 2005 2004 2004 2004-2005

Visitor Arrivals (‘000) 2,668 2,623 2,300 2,291 14.5Visitor Receipts (in US$ billion) 2.59 0.861 2.24 1.99 NATourism/Tourism-related 3.25 3.2 2.81 2.81 13.87Employment (in million)2

Source: Department of Tourism1 January-May 2005


MARKET-PRODUCT FOCUSAPPROACH

Marketing and promotion andproduct development were undertaken tofocus tourism promotion on identifiedmarkets and products.

Marketing and Promotion (Table 5.2)

MultiChannel

A total of PhP489 million wasspent by the Department of Tourism(DOT) in 2005 for international marketingand promotion. This is 186.32 percenthigher than the PhP170.62 million used in2004. Of this amount, PhP387 million or79 percent of the DOT’s promotionalbudget went to multichannel promotionof specific products in China, Japan andKorea. This exceeded the budgetaryallocation by nine percent of the 60-70percent set under the Plan.

Multichannel promotion boostedvisitor arrivals from Japan, China andKorea by 8.7 percent, 171.5 percent and29.3 percent, respectively in 2005. Thesethree East Asian countries remain amongthe country’s top tourist markets,accounting for 38.6 percent of total visitorarrivals (Table 5.3). Actual arrivals fromChina almost doubled the 2005 target of54,000 tourists. However, despite thegrowth posted, expected arrivals of 500,000tourists from Korea and 550,000 touristsfrom Japan, were not met.

Rifle-Shot

Around PhP43 million was used forrifle-shot niche-based tailored promotionin Asia-Pacific markets such as Australia,Hong Kong, Taiwan and Singapore. This

constituted 8.8 percent of the DOT’spromotional budget, below the 20 to 30percent planned allocation for promotionaimed at specific niches under theMTPDP.

Niche-based promotion alsoincreased arrivals from the Asia-Pacificmarkets except Hong Kong but at aslower rate relative to multichannel pro-motion. Visitors from Singapore,Australia and Taiwan grew by 15.2percent, 8.2 percent and 6.7 percent,respectively. Outbound tourists fromHong Kong, however, declined by 34.0percent with the opening of Hong KongDisneyland (Table 5.3). Arrivals from theAsia-Pacific region altogether comprised15.1 percent.

TABLE 5.3 PHILIPPINES’ TOP TOURIST MARKETS BY COUNTRY

RANK COUNTRY ARRIVALS GROWTH SHARE 2005 2004 RATE (%) (%)

1 USA 528,493 478,091 10.5 20.1 2 Korea 489,465 378,602 29.3 18.7 3 Japan 415,456 382,307 8.7 15.8 4 Taiwan 122,946 115,182 6.7 4.7 5 China 107,456 39,581 171.5 4.1 6 Hongkong 107,195 162,381 -34.0 4.1 7 Australia 96,465 89,175 8.2 3.7 8 Canada 72,853 64,537 12.9 2.8 9 Singapore 69,435 60,253 15.2 2.610 UK 63,002 56,770 11.0 2.411 Germany 50,411 45,092 11.8 1.912 Malaysia 43,059 34,170 26.0 1.6

Source: Department of Tourism

TABLE 5.2 MARKETING AND PROMOTION

PRIORITY ACTIVITIES BUDGET ALLOCATION Planned Actual

MultiChannel 60-70% 79%Rifle-Shot 20-30% 8.8%Tactical Marketing 20-30% 12.2%(European Market)

Source: Department of Tourism

38 TOURISM

Tactical Marketing

Long-term tactical marketing andnonmedia based campaigns in Europeanmarkets required PhP59 million or 12.2percent of the budget. This is lower thanthe Plan target of 20 to 30 percent.

Tactical marketing increased arrivalsfrom Europe by 16.03 percent. Of the243,928 recorded in 2005, the bulk camefrom Western Europe (46%) and NorthernEurope (40%).

Product Development

Eleven tourism products are plannedto be developed under the 2004-2010MTPDP. In 2005, only two of the 11products to be developed were givenattention as focus was on marketing andpromotion. These were in support of effortsof the Departments of Health andEnvironment and Natural Resources todevelop health tourism and ecotourism. Forhealth tourism, the Filipino SPA Brandingwas launched highlighting local methodssuch as hilot and dagdagan and the use ofvirgin coconut oil and local scrubs. Inecotourism, consultation meetings with localstakeholders were conducted for theproposed development of kayaking tours inHundred Islands National Park.

DESTINATION FOCUS

Tourism promotion anddevelopment are also to be pursued underthe Plan by focusing on eight prioritydestinations classified into three groups:major, minor, special interest destinations.Under these, tourism economic zones(TEZs) are to be built, barriers to free flowof tourists and investments removed, andhotels, restaurants and resorts established.For major destinations, priority shall be

given to major infrastructureimprovement; in the case of minordestinations, the priority shall be to buildmore attractions, and promote these assecondary options; and in special interestdestinations, the priority shall be toincrease accessibility and improve theexisting tourism products being offered.

Establishment of TEZs

The target of developing aminimum of two TEZs per year wasachieved in 2005. These are the Boracay(special interest destination) Eco-CulturalVillage Resort; and the Island Cove Resortand Leisure Park in Cavite. Threeadditional TEZs in Batangas, Albay andBohol (major destinations) were proposedfor PEZA approval. The TEZs in Cavite,Batangas and Albay are not within theidentified eight priority destinations but arebeing supported because of theircompliance with the DOT standards.

Removal of Barriers to Investments andFree Flow of Tourists

Activities were also undertaken toremove the barriers to investments and freeflow of tourists. These are:

a) Travel advisories issued by foreigngovernments (Australia, Canada,United Kingdom, United States ofAmerica, Japan and New Zealand) weremonitored and security issues in theseadvisories were addressed as requiredunder the Plan.

b) Following the success of the visa-upon-arrival scheme provided to tourgroups or individuals from China, asimilar scheme was crafted for visitorsfrom Russia. The scheme was stillbeing reviewed by the DFA as ofDecember 2005.


c) In the area of air access, the CivilAeronautics Board initiated negotiationson air services agreements (ASAs) withNew Zealand, Papua New Guinea,South Africa and Yugoslavia. Air talkswith Korea are also being initiated toexpand the existing ASA.

d) The issuance of permits for charteredflights was also facilitated for nineairlines (i.e., Mandarin, Asiana, Korean,Air Asia, Air Philippines, Cebu Pacific,Merpati, China Southern, and RoyalBrunei).

e) Fees and charges on international carrierswere increased to cover at least the fullcost of services rendered. Discountswere also given to carriers serving theClark and Subic airports.

40 INFRASTRUCTURE

Chapter 6Infrastructure

C

Various technological develop-ments provided significant growth in thetelecommunications sector. The Voice overInternet Protocol1 (VoIP) became analternative to costly calls abroad. This wascategorized as a Value-Added Service (VAS),wherein the interested providers need notapply for a franchise to operate. To furtherdevelop Information and CommunicationsTechnology (ICT) human resources,trainings and seminars were initiated toproduce proficient ICT knowledgeworkers.

TRANSPORTATION

Many of the accomplishments in2005 in the transportation sector have beenresponsive to the sector goals, strategies andaction plans laid down in the Medium-Term Philippine Development Plan(MTPDP) 2004-2010 and the 10-PointAgenda of the current Administration.These accomplishments include projects,programs, policies and activities, vis-à-visspecific targets in these plans.

onsistent with the President’s 10-Point Agenda, various transport infrastructure projects were implemented in 2005. Several Nautical Highways and Road Roll-On/Roll-Off (RORO)

Terminal Systems (RRTS) were improved. Major toll roads wereconstructed to develop the Clark and Subic corridor and to decongestMetro Manila. These projects contributed significantly to the promotionof Philippine tourism, trade, and other economic activities. The privatesector was instrumental in the increase of transport projects.

Nautical Highways to Link the EntireCountry

The Nautical Highway Systemsought to address the reduction oftransportation costs from Mindanaothrough the Visayas to Luzon. Thus,plans to expand the nautical highway andthe RORO system to include the Western,Central and Eastern Nautical Highwayswere set.

The operation of the NDC-Maritime Equity Corporation (NMEC)started in April 2005 with the draftingand implementation of policies thatencourage private sector participation(discussed in the following sections), andthe ongoing completion of priority roadsand ports along the nautical highwaycorridors have largely supported theexpansion of the RRTS envisioned to linkthe archipelago (Table 6.1).

To encourage private sectorparticipation in port development, thePhilippine Ports Authority (PPA) startedin 2005 the implementation of

1 VOIP is the technology used to transmit voice conversations over a data network using the Internet Protocol.


TABLE 6.1 UPDATES ON THE STATUS OF HIGH PRIORITY ROUTES IN THENAUTICAL HIGHWAY SYSTEM

Jagna-Tubigon Roads, Bohol - Bohol Circumferential Road - Loay Interior Jagna-Sierra Bullones-Clarin- Tubigon Road

Calapan-Batangas City RORO 2. Central Nautical Highway Calinan, Davao-Buda, Bukidnon-Misamis Or. Rd

Iloilo East Coast-Capiz Road

Caticlan, Aklan-Roxas, Mindoro Or. RORO

Roxas-Calapan, Mindoro Oriental Road

Dumaguete-Bais-Mabinay-Kabankalan-Bacolod route; and Dumaguete North Road-San Carlos Coastal-Bacolod North Road Bacolod-Iloilo City RORO

Iloilo City-Caticlan (Aklan) Roads

Iloilo City-Passi-Calinog-Ivisan-Kalibo-Nabas-Caticlan Road

Samboan-Barili-Toledo City Road Toledo-San Carlos City RORO San Carlos –Dumaguete Road Dumaguete-Bacolod City Roads:

Oroquieta City-Dapitan City-Dipolog City Road: for F/S verification. Dumaguete: RORO-capable (2 ramps) Dipolog and Samboan: development is under the jurisdiction of the LGU and Cebu Port Authority, respectively.

Oroquieta City-Dapitan City-Dipolog City Road 1. Western Nautical Highway (also known as Strong Republic Nautical Highway)

Dipolog-Dumaguete City RORO Dumaguete-Samboan, Cebu RORO

Santander-Barili-Toledo City Road: for verification through F/S.San Carlos City: RORO-capable (3 ramps) and Toledo: under CPASan Carlos –Dumaguete Road: subject to verification through F/S.Bacolod-Kabankalan Road (Bacolod-Bago Section): subject to verification through F/S.

Iloilo: RORO-capable (ICPC, 1 ramp; Iloilo River Wharf: 2 ramps).Bacolod: has private RORO facilities at BREDCO.Iloilo East-West Road (Concepcion-Sara-San Rafael-Passi-Calinog Road): subject to verification through F/S.

Mindoro East Coast, Calapan-Socorro Section: For F/S verification.Mindoro East Coast, Socorro-Bongabon-Mansalay Section: subject to verification through F/S.

Batangas: Baseport has 6 ramps; and Calapan: baseport has 7

Iloilo East Coast-Capiz Rd: 61.94%complete, 10.37% ahead of h d Iloilo City-Caticlan (Aklan) Highway: completed in 2005

Iloilo-Roxas Road: subject to verification through F/S.Caticlan, Roxas, Calapan and Batangas: all RORO-capable; and developments for Caticlan: a RORO ramp, RC pier and reclamation, are expected to be finished 1st Qtr of 2006.

Mambajao, Port of Balbagon: programmed to be dredged this year under the PPA 2006 Dredging Program (5,000 cu. m.)

Davao-Bukidnon Road (Buda-Naramag Section): ongoingSubject to verification through feasibility studyBalingoan serves as partner-port of Guinsiliban and Benoni (both in Camiguin Island) and has existing RORO ramps (2). Guinsiliban is only 7 km away from Benoni that have 2 RORO ramps.

Butuan City-Agusan del Norte-Misamis Or. Rd Balingoan, Misamis Oriental-Guinsiliban, Camiguin RORO

Mambajao, Camiguin-Jagna, Bohol RORO

Jagna-Sierra Bullones-Clarin-Tubigon Road : for verification thru F/SBohol Circumferential Road, Phase IIBohol Calape-Loon-Loay: 62.11% complete, 8.35% ahead of schedule Loay-Valencia-Candijay: 68.86% complete, 18.38% ahead of schedule.

Mambajao: RORO-capable; improvements programmed for 2006. Jagna: has existing RORO facilities (2 ramps) Tubigon: has existing RORO facilities (2 ramps) San Carlos: has existing RORO facilities (3 ramps) Dumaguete: presently RORO-capableCebu City, Toledo and Samboan: partner-ports of Tubigon, San Carlos & Dumaguete, respectively, are under CPA.

42 INFRASTRUCTURE

Administrative Order (AO) 03-2004 datedDecember 15, 2004 entitled “Guidelineson the Development, Construction,Management & Operation of FerryTerminals under RRTS.” The PPA is alsopursuing the Cost-Based Tariff Analysisand Development Project to review thecurrent tariff system and finalize a newtariff structure that should make maritimetransport more cost-efficient as well asdiscourage to monopolies/cartels. Tofurther improve port services and facilitate

movement and documentation of cargo,the RORO Terminal Fee Cash Ticketshave been prescribed as perMemorandum Circular (MC) 25-2004effective September 2005.

With the implementation ofRepublic Act (RA) 9295, or the DomesticShipping Development Act of 2004, it isexpected that domestic shippingcompanies and operators are alreadyexploring ways to offer competitive ratesand at the same time improving their

continued Table 6.1

Tubigon, Bohol-C ebu C ity RORO Toledo-San C arlos RORO Dumaguete-Samboan RORO

San C arlos-Dumaguete Road

San Remigio-Placer, M asbate RORO

Placer, M asbate-Aroroy , M asbate Road

Boca Engano, M asbate-C lav eria, M asbate Road C lav eria, M asbate-San Pascual, M asbate Road

M asbate-M alinta-M obo Road, M asbate: 83 percent complete

C lav eria, M asbate-Pantao, A lbay RORO Panlao: port dev elopment (phase II) is ongoing and is ex pected to be finished by 2007, w hile none is lined-up for C lav eria.

3. Eastern Nautical Highway

Alegria-Santiago, Agusan del N orte: completed 11 N ov ember 2005San Francisco-Rosario-Bunaw an-Trento (Agusan del Sur / M onkay o By pass, 2.6 kms M onkay o-N abunturan-Tagum, Langkilaan (Trento)-M onkay o Section, Dav ao Or.: original scope

Surigao C ity -Liloan, Southern Ley te RORO Both ports are RORO-capable; further ex pansion of Liloan and Liloan, Southern Ley te-N av al, Biliran H ighw ay Liloan (Panaon)-N av al (B iliran) H ighw ay : Subject F/S

v erification.N av al: under LGU ; municipal port at Kaw ay an, B iliran (14 km aw ay from N av al) programmed to be dev eloped 3rd Qtr of 2006 C aw ay an, M asbate: improv ement starting 2006 inv olv es

C ataingan-Aroroy , M asbate H ighw ay M asbate-C ataingan-Placer Road: completed M ay 2004

Aroroy , M asbate-Boca Engano, M asbate RORO Aroroy : under LGU jurisdiction; PPA has lined-up projects up to 2008. Boca-Engano: not under the PPA Port sy stem; no plans y et. Aroroy : projects for completion by 2008 are RORO ramp, parking area and passenger terminal schedule.

Dav ao-C ompostela Valley -(A llegria-Santiago, Bay ugan-San Francisco-Trento-M onkay o)-Agusan-Surigao Road

N av al, B iliran-C ataingan, M asbate RORO

Tubigon, San C arlos and Dumaguete are presently RORO-capable, w hile C ebu C ity , Toledo and Samboan, w hich are their partner-ports, respectiv ely , are under C PA.

C ataingan-Placer Section, M asbate (M asbate-C ataingan-Placer Road): phy sically completed M ay 2004 P lacer-Aroroy H ighw ay : subject to v erification through feasibility study .

M asbate: has already 3 ramps; San Remigio: under C PA;

Subject to v erification through feasibility study

Aroroy , M asbate: being dev eloped instead of P lacer (no port); and Pilar, Sorsogon: another link for the C entral N autical H ighw ay .


services. Domestic shipping companieshave been authorized to establish their ownrates provided that effective competitionis fostered and public interest is served.The Maritime Industry Authority(MARINA) is currently looking into theexact amount of reductions in cost andtravel time because of these reforms.

Decongestion of Metro Manila

In decongesting Metro Manila, thefollowing activities have been supportiveof spreading development to the regions:

Establish new centers for government andhousing in Luzon, in Visayas, and inMindanao

In 2005, the President approved theproposal of the Office of the PresidentialAdviser on New Government Centers(OPANGC) on establishing satelliteoffices of the following agencies:Department of Agriculture (DA) inMindanao; Department of AgrarianReform (DAR) in Iloilo; Department ofTourism (DOT) in Cebu; Department ofTransportation and Communications(DOTC) in Clark; and Department ofPublic Works and Highways (DPWH) inBicol.

In this regard, the DOT hasestablished and operationalized its officein Cebu in July 2005. The DA and theDPWH conducted ocular inspections intheir prospective sites. Among the sitesconsidered include the former office of thedefunct Southern PhilippinesDevelopment Authority (SPDA) andGreenheights Business ConferenceBuilding in Davao City for the DA, whileDPWH is considering the former BicolRiver Basin Development ProjectCompound and Provincial Capitol

Compound in Camarines Sur. On theother hand, DAR is still looking for a newsite, as the proposed location in the IloiloProvincial Capitol is no longer available.The DOTC’s Memorandum ofAgreement with Clark DevelopmentCorporation on its relocation site is stillfor review and approval.

Activities for the year relative tothe actual relocation of office buildings forthe five agencies and transfer of personnelwere put on hold and were not prioritizedin the agencies’ 2006 budget due tobudgetary constraints. Key policy agendaand programs remain status quo pendingthe implementation of Executive Order(EO) 366 on the Rationalization of theFunctions and Agencies of the ExecutiveBranch.

Develop Clark-Subic

Activities for a railway, an airport,and an expressway are in progress topromote development of the Clark-Subicarea. The Northrail Project (Caloocan-Malolos Section) is wrapping upsquatters’ relocation, right-of-way postdemolition clearing and securing oftemporary fences in the Caloocan-Valenzuela Segment, while 90 percent ofsimilar activities are in progress in theBulacan area. Meanwhile, the upgrade ofthe Clark International Airport(Diosdado Macapagal InternationalAirport, DMIA) is expected to progressas the Civil Aviation Board (CAB)approved and published on March 10,2005 the Implementing Rules andRegulations (IRR) of Executive Order(EO) 253, providing for the expansion ofair services to the DMIA and Subic BayInternational Airport (SBIA). Theconstruction of the Subic-Clark-TarlacExpressway (Phase I) is also ongoing with

44 INFRASTRUCTURE

seven-percent accomplishment rate in theSubic-Clark area and 14 percent in theClark-Tarlac section as of December 2005.

Develop the Southern Luzon Corridor

The Southern Tagalog ArterialRoad (STAR) Tollway has already acquired80 percent of the lands required for theproject while the remaining 20 percent tobe expropriated have been documented.Clearing, grubbing and field surveys areongoing. The Southern Luzon Expressway(SLEX), on the other hand, covering fourtoll road projects, has concluded this yearits review of the Supplemental TollOperation Agreement (STOA) subject tothe approval of the President.Implementation of the STOA and start ofconstruction will start in 2006, scheduledfor completion in 2008. The financingarrangement for the PNR Main LineSouth Railway Project Phase I (Alabang-Calamba Section) is currently beingupdated.

Improve transport within Metro Manila

The existing transport system inMetro Manila is being improved as LRTLine 1 and MRT 3 Loop are beingconnected through the MRT 3 Phase IIProject. This project has been undergoingfeasibility study and exploration of fundingas of December 2005. The improvementof seven major roads in Metro Manila isalso a top priority, which includes roadwidening, drainage, footbridges, geometricimprovements, sidewalk improvements,lane markings, road and traffic signs, andillumination. The roads being rehabilitatedare Commonwealth Avenue, EDSA,Quezon Avenue, McArthur Highway,Circumferential Road 5, Radial Road 10 andMarcos Highway.

The Metro Manila DevelopmentAuthority (MMDA) has also effectivelyapplied traffic management schemesalong major corridors through clearingof the roadways, instilling driver andvehicle discipline, improving trafficsignaling system, and providing morefacilities for safe and efficient pedestrianflow. MMDA programs in 2005 reportthat 75 percent of pedestrian commutersare maintained at sidewalks; 64.30 percentof buses enabled to use the EDSAOrganized Bus Route (OBR) andterminals; and 81.47 percent of city busesmade to comply with PUV rules andregulations. Other accomplishmentsinclude construction of sevenfootbridges, installation and constructionof six loading and unloading bays and fiveemergency bays, 14 U-turn slots,construction of an intermodal terminal,lane markings, road signs and otherfacilities.

For road safety, engineering andnonengineering traffic safety measureshave been adopted as the LandTransportation Office (LTO) intensifiedits law enforcement drive, National Anti-Colorum Strategy, enhancement ofmotor vehicle registration system, drivers’training seminars, and the DevelopingRoad Safety Advocate EnvironmentallySustainable Transport Project.

Address critical infrastructurebottlenecks along national roads andbridges to speed traffic out of MetroManila

One of the priority projects meantto address bottlenecks and ease traffic outof Manila is the Metro Manila SkywayProject (MMSP), a 35-km elevated tollroad from Alabang in the south toBalintawak in the north linking the SLEX


and NLEX. The detailed engineeringdesign for the Bicutan to Sucat elevatedsection has been completed and thefinancial aspect of the feasibility study (FS)is ongoing.

Another is the ongoing Manila-Cavite Toll Expressway’s 7.5-km Segment4 from Zapote to Kawit. Advancedreclamation works have already beenstarted at Longos, Bacoor, Cavite with a2.8-percent accomplishment rate.Construction of the Subic-Clark-TarlacExpressway Tollroad Project has also beenongoing since April 2005.

At the forefront of increasing roadcapacity is the NLEX Tollway, whichstarted commercial operation on February10, 2005 with an additional 110-km lane.Tollroad projects in NLEX Phase 1included the upgrading of the existing 84-km portion from Balintawak to Sta. Ines.It covers the widening of Balintawak -Burol–Sta. Rita section, upgrading andconstruction of interchanges, overpasses,and toll plazas, and installation of a newtoll collection and monitoring system. Theimplementation of Phase 2 covering C-5East is planned for 2006.

Tourism Infrastructure: Access to MajorTourism Destinations

Major tourist destinations identifiedin the MTPDP for infrastructuredevelopment include Cebu-Bohol-Camiguin, Clark-Subic, Cordillera, Davao,Ilocos, Boracay and Palawan. In the Cebu-Bohol-Camiguin area, the ManilaInternational Airport Authority (MIAA) iscurrently reviewing the Panglao AirportStudy for possible fund allocation. Some ofthe roads being constructed in the same areaare the Naga-Toledo Road and BoholCircumferential Road (with Calape-Tagbilaran City-Valencia Section 62.11

percent complete, and Candijay-Jagna-Valencia Section 68.86 percent complete).In the Boracay area, the Iloilo Airport is16.99 percent completed and is expectedto be finished by October 2006. TheNew Bacolod (Silay) Airport has attained4.3-percent completion, and will becompleted by January 2007. In theCordillera area, the San Fernando Airporthas undertaken one of five scheduledprojects in 2005 for compliance with theAir Transportation Office’s (ATO) safetyaudit. The remaining projects will bepursued in 2006. Construction of theBaguio-Aritao Road, Suyo-Cervantes-Mankayan-Abatan Road in Ilocos Sur,Benguet and Mt. Province, and Cervantes-Sabangan Road in Ilocos Sur and Mt.Province are ongoing to increase accesstoward Northern Luzon. For Ilocos, theFS/Master Plan for the improvement ofthe Laoag International Airport needs tobe updated. For Palawan, preparatoryactivities for the improvement of theBusuanga Airport (Phase I) are in progress.

Moreover, the ATO is alsocompleting improvements for the nineidentified priority airport projects thatserve as gateways to regional centers andmajor tourist destinations in pursuit ofcontinuous upgrading of airtransportation. These include Bagabag inNorthern Luzon, Bulan in the BicolRegion, Busuanga in Southern Luzon,Catbalogan in Samar Island, Caticlan inPanay Island, Kalibo also in Panay,Lingayen in Pangasinan, Maasin inSouthern Leyte, and Siargao in Surigao.Accomplishments as of 2005 includevarious rehabilitation and improvementof the facilities of the identified airports.

To be globally competitive andaddress safety issues especially raised bytourists, the government is expected toenter into a contract with the consultants

46 INFRASTRUCTURE

for the Communication, NavigationSurveillance/Air Traffic Management(CNS/ATM) Project by August 2006 toupgrade the airports nationwide with theInternational Civil Aviation Organization(ICAO) standards. Maritime safety wasalso enhanced through the issuance of MC205 of the Revised MC 203 on the RulesGoverning the Implementation of the ShipSafety Inspection System (SSIS) on April21, 2005, and through MC 203 on theRules Governing the Implementation ofthe Ship Safety Inspection System (SSIS)on January 19, 2005, which developedprocedures and guidelines to enhanceSafety Management System audit basedon Ship Inspection Results.

Affirmative Action for Peace andDevelopment in Mindanao and OtherHighly Impoverished Areas

Improving underdeveloped roadnetworks is the major infrastructuredevelopment needed to help solve peaceand order problems. Priority regionsspecified in the MTPDP includeMindanao, Bicol, Southern Leyte, EasternSamar, Northeastern Samar, Negros-Panay, and some areas in Ilocos Sur,Pangasinan, Pampanga, Batangas,Quezon, Aurora and Cordillera.

Based on the report of DPWH asof December 2005, ongoing improvementand rehabilitation are underway for roadssuch as the Tukuran-Dobliston-Kapatagan Road in Zamboanga del Surand Lanao del Norte, the Surigao-DavaoCoastal Road in Surigao del Sur, theMalalag-Malita-Jose Abad Santos Road(Sulop Jct.-Malalag-Malita Section) inDavao del Sur, the Zamboanga City-Pagadian City Road, the Katipunan-Manukan Section of Oroquieta-SindaganRoad in Misamis Oriental, the San Jose-

Patnongon Road in Antique, theCatarman-Lope de Vega-Calbayog Roadin Northern Samar, the Himayangan-Silago Road, Silago-Abuyog and Liloan-San Ricardo Road in Southern Leyte, theDolores-Oras-San Policarpio Road inEastern Samar, the Bongabon-Baler Road(San Luis-Ma Aurora-Basal Section) inAurora, the Catanduanes CircumferentialRoad in Catanduanes, the Macalelon-Malunay Road and Tayabas-Mauban-Lucban Road in Quezon, and the Iloilo-Aslunan Road in Iloilo.

Roads that were completed thisyear include the Calamba-Barcelona andBarcelona-Katipunan Sections ofOroquieta-Sindagan Road in MisamisOriental, and the 17.4 km section ofBayawan-Kabankalan Road in NegrosOriental.

Those that are still underpreconstruction stage include theKabankalan-Basay/San Enrique-Vallehemoso Road in Negros Occidental,the Pandan-Libertad-Antique/AklanBoundary Road and Boundary Antique/Iloilo-Anini-y-V, Jimenez Road inAntique, the Prosperidad-Lianga Roadand Butuan City-Las Nieves-Esperanza-Bayugan Road in Agusan del Sur, theAllen-Calbayog and Calbayog-Calbiga inSamar, the San Juan-Laiya Road inBatangas, the Ligao-Pio Duran Road inAlbay, the Central Mindanao Inter-Regional Circumferential Road, and theCotabato (Jct. Awang)-Upi-Lebak-Kalamansig Road.

Bureaucratic and Legislative Reforms

Under the MTPDP 2004-2010, theinstitutional reforms to be pursued in air,water and rail transport includerestructuring of institutions andestablishments of offices. Activities


supportive of this goal include theendorsement of DOTC on March 17,2005 of the creation of the Civil AviationSector Authority of the Philippines(CAAP), through a proposed priority billcalled “An Act Creating the CAAP for theRegulation of All Civil Aviation Activitiesand Institution of Safety Requirements,Defining Its Powers and Functions, andfor Other Purposes”, which is now fordiscussion in both Houses of Congress.For the water transport sector, there is astanding recommendation in the PortMasterplan to amend the PPA Charterwith regards to its dual role as portregulator and operator. The rail sector hasyet to submit its own proposal for similarinstitutional reforms.

DIGITAL INFRASTRUCTURE

While short messaging system(SMS) dominates the market,improvements in multimedia messagingservice (MMS) are expected with theemergence of the third-generation mobilecommunication technology (3G).

Based on the 2004 NationalTelecommunications Commission (NTC)Annual Report2 , the Philippinetelecommunications industry comprisedof 73 Local Exchange Carriers (LEC), 14Inter-Exchange Carriers (IXCs), 11International Gateway Facilities (IGF),seven Cellular Mobile Telephone Service(CMTS), 10 Public Trunk RepeaterService providers, eight radio pagingservice providers, and 329 VAS providers.

Reduce Cost of Connectivity

VoIP as an alternative to traditionaltelephone calls is expected to effectivelyreduce the cost of overseas calls. In 2005,NTC issued MC 05-08-2005 classifying

VoIP as a value-added service (VAS). Assuch, an entity seeking to provide VoIPservices is required to tie up with atelecommunication company prior toregistration with NTC. Meanwhile, theNational Computer Center (NCC) ispreparing the guidelines for theimplementation of VoIP in governmentservices.

With the emerging 3G technology,NTC also issued MC 04-08-2005 providingrules and regulations on the allocation andassignment of 3G radio frequency bands.So far, Smart Communications, GlobeTelecommunications, Sun Cellular, andConnectivity Unlimited ResourcesEnterprise Inc. (CURE) were issuedlicenses for 3G operations.

With the use of prepaid cards,Internet connection charge declined fromPhP5 per hour in 2004 to PhP4 per hourin 2005. This cost reduction was attributedto the growing market competition amongInternet Service Providers (ISPs) and thefast technological development in thesector. On the other hand, the cost of astandard call using landline remained atmore than PhP600 per month forresidential postpaid lines. For wirelessservices, the cost also remained atapproximately PhP4.50 to PhP13.75 perminute, while text messaging rate stillranged from PhP0.50 to PhP1 per text

As of end 2004, the major CMTSplayers had provided more than 50 percentcellular coverage to 11 provinces previouslywithout it (i.e., Romblon, Apayao,Aurora, Mt. Province, Kalinga, Ifugao,Basilan, Biliran, Siqujor, Batanes, andQuirino). For this period, subscribersreached 32.94 million, marking a 46.32percent increase from the 22.5 millionsubscribers in 2003. Along with this, theCMTS density is at 39.85 (Figure 6.1), aremarkable rise from 27.77 CMTS density

2 There are no available figures for 2005

48 INFRASTRUCTURE

in 2003. While there was no updated datafor the total number of CMTS and landlinesubscribers in 2005, NTC-Common CarrierAuthorization Department estimated it at34.1 million and 3.5 million, respectively.

Based on the Internet World Stats,Filipino Internet subscribers increased to7.82 million in 2005 from 1.9 million in theprevious year. This was mainly attributedto the improved Internet services, like theDigital Subscriber Lines (DSL) of major

ISPs. Meanwhile, with the prepaidlandline telephone, subscribers increasedfrom 3.3 million in 2003 to 3.44 millionin 2004 (Table 6.2). However, there was adecrease in installed lines from 6.56million in 2003 to 6.47 million in 2004 dueto the increasing popularity of CMTS,among others. This translated toteledensities3 of 4.16 and 7.83 lines per100 persons (out of the total populationof 82.65 million) for the subscribed line

3 There are no available figures for 2005.

3.31019.36

4.0727.77

4.16039.85

0 10 20 30 40

number of lines

2002

2003

2004

Year

Mobile Phones

Subscribed FixedLines

TABLE 6.2 NUMBER OF TELEPHONE SUBSCRIBERS PER REGION

TELEDENSITYREGION 2004 2004 2004 INSTALLED SUBSCRIBED

POPULATION INSTALLED LINES SUBSCRIBED LINES 2003 2004 2003 2004

CAR 1,522,654 94,079 35,713 6.27 6.18 2.25 2.35I 4,413,599 190,335 107,890 4.49 4.31 2.51 2.44II 3,031,999 42,860 26,939 1.02 1.41 0.97 0.89III 8,278,712 410,841 281,842 5.31 4.96 3.20 3.40IV 12,508,472 1,049,413 588,688 8.72 8.39 4.62 4.71V 5,083,404 125,157 72,647 2.50 2.46 1.45 1.43VI 6,772,424 427,497 132,482 6.20 6.31 1.76 1.96VII 5,962,484 470,299 227,468 7.83 7.89 3.17 3.81VIII 4,055,416 151,652 27,737 3.20 3.74 0.41 0.68IX 3,448,619 35,945 25,172 1.00 1.04 0.95 0.73X 3,127,438 147,513 50,942 4.83 4.72 1.65 1.63XI 5,781,992 295,334 111,106 6.75 5.11 1.85 1.92XII 2,909,499 82,616 31,393 2.89 2.84 1.10 1.08XIII 2,273,936 117,116 31,002 5.63 5.15 1.68 1.36ARMM 2,368,698 33,315 2,834 1.29 1.41 0.35 0.12NCR 11,112,687 2,799,079 1,683,636 25.77 25.19 15.07 15.15Total 82,652,033 6,473,051 3,437,491 8.09 7.83 4.07 4.16

FIGURE 6.1 CELLULAR MOBILE TELEPHONE SYSTEM AND SUBSCRIBED FIXED LINESTELEDENSITIES


4 ISUP is the functional part of the Signaling System No. 7 (SS7) protocol that specifies the interexchange signalingprocedures for the setup and tear down of trunk calls between networks, handles routing decisions and supports allmodern telephony services such as 800 numbers, call forwarding, caller ID and local number portability (LNP).

5 The GX 5000 switch converges multiple networks into a single and larger multiservice network with unified managementto support more users.

and installed fixed line in 2004, respectively.However, the 2004 World

Telecommunications Development Reportof the International TelecommunicationsUnion (ITU) showed that in Asia, thePhilippines was still struggling at 4.16 fixedline teledensity, with Taiwan having thehighest at 59.63 and Afghanistan as thelowest at 0.2. For the mobile phonesubscribers, Philippines competed withother Asian countries at 39.85 CMTSteledensity, with Hong Kong as the highestat 118.77. And for the Internet usage,Philippines stood at 5.32, with South Koreaas the highest at 65.68 (Table 6.3).

To improve connectivity, theTelecommunications Office (TELOF)introduced the “Bundling Program” tomaximize the use of its unsubscribed linesthat included the improvement of prepaidsystem both in the voice and data services,and established 119 Community e-Centers(CeCs) nationwide (56 in Luzon, 25 inVisayas, and 38 in Mindanao). The CeCprogram established public access to ICTservices particularly for LGUs and public

schools in unserved areas.Furthermore, the Commission on

Information and CommunicationsTechnology (CICT) in coordination withPhilcom and Bayantel activated the tollinterconnection at Cebu Toll Center usingIntegrated Services Digital Network UserPart (ISUP)4 signaling system, and relocatedGX 5000 switch5 from areas already servedby the private operators to unserved areas.

The NCC also developed a citizen-centric website template designed to attractpotential investors. It offered, among others,ready access to available government’s basicservices and information relative to theindustry and the economy. Of the 17 LGUsassisted nationwide, three LGU websiteswere already 90-percent completed whilethe rest are for completion by 2006.

ICT Human Resource Development

The government through CICTcontinued to support and develop thequality of its human capital. In 2005,CICT developed the National ICT

TABLE 6.3 TELEDENSITY COUNTRY COMPARISON

COUNTRY CELLULAR FIXED INTERNET USERS PERSONAL MOBILE TELEPHONE LINES PER COMPUTERS PER SUBSCRIBER PER PER 100 INHABITANTS 100 INHABITANTS 100 INHABITANTS 100 INHABITANTS

2003 2004 2003 2004 2003 2004 2003 2004

Afghanistan 1.00 2.41 0.18 0.20 0.10 0.10 0.00 0.00Hong Kong 107.92 118.77 55.98 54.42 47.18 50.32 55.46 60.54India 2.47 4.37 3.97 4.07 1.75 3.24 0.89 1.21Indonesia 8.74 13.48 2.73 4.49 3.76 6.52 1.28 1.36Malaysia 44.41 57.12 20.16 17.38 34.50 38.62 16.77 19.16Philippines 27.77 39.85 3.42 4.16 4.93 5.32 3.51 4.46Singapore 82.86 89.47 45.33 43.20 50.88 56.12 62.20 62.20South Korea 70.20 76.09 44.24 55.31 61.07 65.68 50.68 54.49Taiwan 114.14 100.00 52.44 59.63 51.94 53.81 47.14 52.78Thailand 40.15 44.18 8.49 10.97 11.26 11.25 4.88 60.00Vietnam 3.47 6.01 2.25 12.28 4.30 7.12 1.12 1.27

50 INFRASTRUCTURE

Competency Standards (NICS), whichcomprise of NICS-Basic, NICS-Advanced,NICS-Teachers, and NICS-Civil Servantsor ICT Specialists in Government. Also,a total of seven training courses, attendedby 142 participants from 45 schools, havebeen conducted through the eQualityProgram for State Universities andColleges (SUCs). Also, the Bridge Programunder the umbrella eQuality Programwith SUCs provided a six-month on-the-job training (OJT) for students.

Regulatory and Legislative Reforms

There are ICT-related legislative billsstill pending in Congress as of end-2005.These include: (a) Establishment of theDepartment of Information andCommunications Technology Bill, whichwould ensure focused execution of ICT-related programs and projects; (b) TheCybercrime Prevention Act, which wouldallow the country to effectively preventand combat cybercrime; (c) ConvergenceBill, which would optimize the utilizationof available infrastructures and invitefurther capital infusion for digitalexpansion and development; and (d) NTCReorganization Bill, which would makeNTC more responsive to the continuingdynamism of the sector.


Chapter 7Fiscal Strength

F

Moving towards fiscal consolidation

Committed to achievemacroeconomic stability and sustainablefiscal position, the governmentconcentrated on the passage andimplementation of its fiscal legislativemeasures, continued improvement of itscollection efficiency, and prudentspending. As a result, revenue increased by13.7 percent and its ratio to GDP improvedto 14.8 percent (Table 7.1). This actualrevenue effort was slightly higher than therevised program for the year but still lowerthan the program that was set in the Plan.The better-than-revised program collectionwas primarily due to the commendableperformance of the Bureau of Treasury(BTr) and the proceeds from theimplementation of Republic Act (RA)9337 or Expanded Value Added Tax(EVAT). While both the Bureaus ofInternal Revenue (BIR) and Customs

urther strengthening of the country’s vulnerable fiscal position was the center of macroeconomic policy in 2005. After exceeding its target in 2004, the National Government (NG) sustained its

good fiscal performance in 2005, as reflected in Table 7.1, as it managedto contain its full year fiscal deficit at PhP146.8 billion (2.7% of GDP),way below the PhP180 billion (3.4% of GDP) revised target for the year,the PhP184.5 billion MTPDP target for 2005, and the PhP187.1 billion(3.9% of GDP) actual deficit incurred in 2004. This is the lowest NGdeficit-to-GDP since 1999 which resulted from a combination of above-program revenue collections and below-target disbursements. Thistranslated to a primary balance of 2.8 percent of GDP, the highest primarysurplus recorded since 1998, albeit lower than the MTPDP program.

(BOC) failed to meet their respectivetargets, the BTr managed to more thanoffset their shortfalls as it increased itsincome to almost twice the level of itsprogram for the period. Meanwhile, theadditional revenues collected from theimplementation of the EVAT in the lasttwo months of 2005 amounted to PhP4.5billion, PhP0.5 billion of which werecollected by the BIR and PhP4 billion bythe BOC.

The BIR failed to meet its full yeartarget as revenues from Value Added Tax,net income and profits and otherdomestic taxes were lower thanprogrammed. Despite lower than targetedcollection of sin taxes from tobacco andalcohol, excise tax collections for the yearexceeded their target because of bettercollection for petroleum products. Theincremental domestic revenues derivedfrom RA 9334 or the Increase in ExciseTax on Alcohol, Cigarette and Tobacco

52 FISCAL STRENGTH

that was implemented on January 1, 2005only amounted to PhP2.09 billion, muchlower than the PhP7.5 billion program forBIR for the year. This underperformancewas mainly attributed to the front-loadingstrategy of the manufacturers inanticipation to the implementation of thelaw.

The BOC also collected lower thantarget due to lower imports, higher ratio ofnondutiable imports to total imports, pesoappreciation, deferred payments and lowercollection from new measures. Thesecountered factors that had positive revenueimpact on Customs collections, such ashigher tariff on dutiable nonoil imports(5.63% instead of 5.0%) and the lower-than-programmed applied tax credits,among others. It was noted that the Bureaualso underperformed in theimplementation of RA 9334 as it onlycollected PhP0.83 billion out of the PhP7.5billion target for 2005.

The year was highlighted by thepassage and implementation of the EVAT,which is considered to be the centerpieceof the government’s revenue measures. Itsimplementation resulted to improvedinvestor confidence, as evidenced by theupgrade in the country’s credit rating, thesurge in foreign investment flows, the riseof the equities market, the narrowing ofbond spreads and the strengthening of thepeso.

However, RA 9335 or the AttritionAct Law that was passed in January 2005was not yet implemented as itsImplementing Rules and Regulations (IRR)is yet to be approved by the JointCongressional Oversight Committee. Thegovernment nonetheless spearheaded itsanticorruption, anti-evasion andantismuggling campaigns during the year.With Revenue Integrity Protection Service(RIPS), the government investigated

allegations of corruption in the DOF andits attached agencies. It filed the necessarycharges against erring officials andemployees with the concernedgovernment agencies and likewiseencouraged active citizens’ participationin eradicating corruption in thegovernment. From January to December2005, nine cases were filed under thisprogram. On the other hand, the RunAfter Tax Evaders (RATE) program,launched by BIR in March 2005, filedcases against high profile tax evaders. Outof the target 24 to 36 cases from March toDecember last year, the Bureau filed 44tax evasion and estafa cases with theDepartment of Justice against companiesand/or high profile individuals withestimated tax liabilities of PhP2.4 billion.The BOC’s implementation of the Runafter the Smugglers (RATS) program,which aimed to file at least one smugglingcase every month, resulted in the filingof 10 smuggling cases in 2005.

In addition, the tax agencies alsocontinued the implementation of itsadministrative measures to improvecollection efficiency. The BIR maintainedprograms and projects that aim tocomputerize and automate its systemoperation, reform its business process,reduce tax evasion by surveillance and useof third party information (TPI), strengthenthe enforcement of tax laws, and improvevoluntary tax compliance through a massivetax information campaign and complianceverification drive. The BOC also startedthe implementation of the AutomatedSystems Custom Data Management(ASYCUDA) World project with theconduct of technical training tooperationalize the system. The system isintended for the development of adynamic and faster end-to-end cargoclearance process through mobile


broadcasting and Internet/electronic datainterchange connectivity.

Meanwhile, nontax revenuessurpassed MTPDP and revised targetsmainly on account of BTr’s income ofPhP70.6 billion that exceeded by 55.7percent the PhP45.4 billion Plan programand by almost twice the PhP36.6 billionrevised target for the period. This waslargely due to earnings from bond sinkingfund investments and efficientmanagement of the government’s financialresources. The Bureau was also able tomaintain a lower-than-projected 91-day T-bill rate of 6.36 percent1 (versus 8.5% inthe program) due to its comfortable cashposition that enabled it to reject unusuallyhigh bids at the regular auctions. Thiscontributed to the sustained low prevailingrates as well as reduced volume ofborrowings compared with programmedlevels. In addition, privatization receipts for2005 totaled PhP8.5 billion, of whichPhP2.4 has been remitted to the NationalTreasury. The DOF Privatization Officewas able to revitalize its privatizationprogram with the successful completionof government shares in the PhilippineNational Bank (PNB), which wasconsidered to be a big-ticket privatizationasset.2 This was the largest privatizationtransaction since the sale of Fort Bonifacioin 2001 and contributed more than 80percent of privatization remittances in2005. In the past, as PNB assets wereidentified and offered for sale, legalimpediments, the absence of interestedbuyers and the lack of focus on workingout solutions to these problems hadresulted in failure and lack of progress inproceeding with the sale.

On the expenditures side, totaldisbursements in 2005 expanded by 63percent over the 2004 level but this wasstill lower than both Plan and revised targets

for the year. The PhP20.9 billionunderspending was mainly due toPhP13.6 billion (Table 7.1) savings ininterest payments as government incurredinterest savings on account of lower-than-projected interest rates and pesoappreciation. Savings worth PhP5.0 billionwere also gained from net lending asgovernment corporations were able to repayadvances that they availed of early in20053 . Maintenance operations andother expenditures and capital outlays onthe other hand fell short of theprogrammed levels due to the prior years’lower account claims and the delay in theenactment of the budget. The absolutedecline in the magnitude of accountspayable (A/P) in recent years was a resultof the government’s program to tightencontrol over new obligations and its moresystematic settlement of prior years’A/Ps. The underspending could havebeen higher had it not been for additionaldisbursements for personal services togrant Productivity Enhancement Pay andEducational Assistance Pay for allgovernment employees. Also, theallocation for LGUs were released in fullin accordance with the appropriated levelwhile the program assumed one quartersavings in Internal Revenue Allotment(IRA) with the effectivity of the higher2005 IRA to start only upon theenactment of the 2005 GeneralAppropriations Act in April 2005. Inaddition, the disbursements also includedthe PhP4.0 billion in prior year’sarrearages for special shares of LocalGovernment Units (LGUs)4 that weresettled. Subsidy to Government Ownedand Controlled Corporations (GOCCs)was also higher than programmed due toadditional releases to the NationalHousing Authority for the resettlementprograms of the North and South rails,

1 The average interest rates for 182-day and 364-day T-bills were 7.671% and 8.683%, respectively.2 In addition to PNB, other privatization receipts came from the disposition of assets of the Privatization of Management

Office, Presidential Commission on Good Government, and development of the Philippine properties in Japan.3 These include NPC, NFA, NEA, PNOC, MWSS.4 This was in pursuant to RA 7171 as subsidy to the four Virginia-tobacco producing provinces in the Northern Luzon

54 FISCAL STRENGTH

the National Food Authority (NFA) forrice importation, and NationalElectrification Administration (NEA) forthe barangay electrification program.

Meanwhile, Executive Order (EO)366 on the rationalization program wasimplemented in mid-2005, which requirednational government agencies andgovernment corporations to formulaterationalization plans. To date, 16 agenciesand 9 government corporations havesubmitted their plans to the Departmentof Budget and Management (DBM) whiletwo5 have already implemented theirapproved plans that resulted in thereduction in manpower complement andoperational costs. In addition, an initialapplication of the Organizational

Performance Indicator Framework(OPIF) was also made for 13 departmentsin support of the 2006 budget.

Operationalization of the MTPIP

The Medium-Term PublicInvestment Plan (MTPIP) 2005-2010 wasfinalized and presented for implementationin February 2005. The documentindicated that on the aggregate, theestimated MTPIP requirement for 2005-2010 is PhP2,130.6 billion, of which 43percent will need national governmentappropriations. Meanwhile, as part of itsimplementation and monitoring, anupdating exercise was undertaken in June2005. This is expected to be formally

5 These are the Technology and Livelihood Resource Center and the Civil Service Commission.

TABLE 7.1 NATIONAL GOVERNMENT CASH OPERATIONS(In Billion Pesos)

2004 2005 2005 2005 ACTUAL % OF ACTUAL % OF MTPDP % OF REVISED % OF

GDP GDP PROGRAM GDP PROGRAM GDP

Revenues* 699.8 14.5 795.7 14.8 830.8 16.2 783.2 14.7 o.w. BIR* 468.2 9.7 535.1 9.9 600.6 11.7 546.9 10.3 BOC* 122.5 2.5 141.7 2.6 141.4 2.8 151.2 2.8Expenditures** 886.8 18.4 942.5 17.5 1015.4 19.8 963.2 18.1 o.w. Interest 260.9 5.4 299.8 5.6 332.5 6.5 313.4 5.9 Payments Capital Outlays 132.4 2.7 129.5 2.4 164.8 3.2 131.3 2.5Deficit -187.1 -3.9 -146.8 -2.7 -184.5 -3.6 -180.0 -3.4Primary Surplus**** 79.1 1.6 152.3 2.8 155.0 3.0 139.8 2.6Financing 187.1 3.9 146.8 2.7 184.5 3.6 180.0 3.4 External Financing 81.2 1.7 92.7 1.7 n.a. n.a. 98.4 1.9 Domestic Financing 161.4 3.3 143.3 2.7 n.a. n.a. 117.3 2.2 less: Change in Cash -19.4 -0.4 22.3 0.4 n.a. n.a. 11.0 0.2 less: Non-budgetary 74.9 1.6 66.9 1.2 n.a n.a. 24.7 0.5 accounts

Details may not add up due to rounding off. * Does not include non-cash collections; ** Does not include non-cash subsidies; ***Reflected figure is taken from the preliminary Expenditure by Expense Class released by DBM. Revised Expenditure details notyet available; **** Refers to revenues net of privatization less expenditures net of interest payments and net lending

Sources: MTPDP 2004-2010, Cash Operations Report, Bureau of Treasury (2004 and 2005 as of January 23, 2006), and BESF 2006.


distributed to concerned agencies by end-March 2006.

Strengthening the ICC process

To further improve the processingof projects at the Investment CoordinationCommittee (ICC) and make this consistentwith the targets and activities committed inthe Strategy Planning Matrices (SPM), theICC had enunciated several policy directivesand carried out numerous activities in2005. First was its revision of the ICCGuidelines and Procedures, primarily to:(a) reflect the increase in the cost floor fromPhP300 million to PhP500 million6 ; (b)emphasize that programs and projects linedup for ICC discussion have to be drawnfrom the MTPIP; (c) strictly observe the4-6 weeks evaluation time; (d) consistentlycover in the review the technical, financial,economic, social and institutionalfeasibility of proposals; and (e) continueimplementing various policies that pertainto financing of activities devolved to LGUs.

The ICC had also startedintroducing revisions to the ICCGuidelines for the review of projectsproposed to be financed under the variousprivate sector investment schemes bytaking into consideration the proposedamendments to the IRR of the BOT Law,as approved by the BOT IRR Committee.This revision also considered the February15, 2005 directive to streamline the processof approving projects proposed to beimplemented through BOT and its variousschemes, and this will be finalized uponcompletion of the revisions to the BOTLaw IRR. With these improvements in theBOT process that will promotetransparency in processing of projects, it

is expected that more members of theprivate sector will be encouraged toparticipate in the development initiativesof the government.

In addition, both theDevelopment Budget CoordinationCommittee (DBCC) and the ICCapproved the charging of commitmentfees against budget ceilings ofimplementing agencies to instill disciplinein project implementation. The DBM ledin defining the mechanism on how tooperationalize the proposed policy, withinputs from DOF and NEDA.

Under these revised guidelines, theICC approved 45 projects with a total costof PhP106.1 billion in 2005. Of these, 18were loans (PhP77.7 billion), three weregrants (PhP4.3 billion), 21 involvedrequests for change in cost/scope/timeand/or loan validity extension (PhP24.1billion), two were contracts implementedthrough the BOT scheme, and one IPP wasa contract.

Moving closer to the 1.0 percent CPSD-to-GDP program

In 2005, the consolidated publicsector deficit (CPSD) was significantlyreduced to 2.0 percent of GDP muchbetter than the target for the period andof the previous year (Table 7.2). Theimprovement in CPSD was attributed tobetter than expected performance of allpublic sector entities except for LGUs (vis-à-vis program and 2004) and BSP (vis-à-vis 2004). Fiscal discipline in the 14Monitored Nonfinancial GovernmentCorporations (MNFGCs) was achievedwith the improvement in the NationalPower Corporation’s (NPC) financialposition due to the implementation of

6 For projects and contracts costing below PhP500 million, approval was delegated to heads of agencies and GoverningBoards for GOCCs/GFIs, provided: (a) the project is included in the MTPIP; (b) resource requirement is within annual,multi-year budget ceiling of agency or annual capital expenditure program of the GOCC/GFI as certified by DBM andDOF (considers impact of project on Consolidated Public Sector Deficit), respectively; (c) financial and economicviability and project benefits are established; and (d) the agency/GOCC/GFI approval of the project is consistent withapplicable laws, rules and regulations.

56 FISCAL STRENGTH

tariff rates increase as well as lower interestpayments due to the absorption of NPCdebt by the national government. For allthe corporations, in general, improvementwas due to higher receipts, lower interestpayments and lower capital expenditures,although the lower spending was partiallyoffset by nonreceipt of Masinlocprivatization proceeds by PSALM. Socialsecurity institutions (SSIs) also improvedtheir financial standing with the higherrevenues they earned from members’contributions that exceeded benefitpayments for the first time in six years.

Accelerating the reduction of PublicSector Debt-to-GDP

As of end-December 2005, NGregular debt decreased to 72.3 percent ofGDP from 79.0 percent in end 2004, waybelow the lowest NG Outstanding debt-to-GDP program in the Plan for the year.The improvement was due to lowergovernment borrowings, attributed to the

improvement of its fiscal position. Totalcontingent liabilities of the governmentwent down to 10.9 percent of GDP from17.3 percent the previous year due tolower NG foreign guaranteed andassumed debt arising from netrepayments and net appreciation of thepeso against the US dollar. NG debt wascomposed of 56 percent domestic and 44percent foreign. End-year debt structureremained sound with medium-and long-term liabilities accounting for 83.6percent of the total debt. In January 2005,the government launched the debtconsolidation program and completed thedomestic debt exchange offer, aboutPhP45 billion from which had beenexchanged for 5 to 7-year benchmarkbonds. As of end 2005, fixed rate treasurybonds, which are longer datedinstruments, represented 70 percent oftotal NG issues. Despite NG’sabsorption of NPC’s financial obligationto facilitate privatization and eventuallyreform the Power Industry, it was able to

TABLE 7.2 CONSOLIDATED PUBLIC SECTOR POSITION (In Billion Pesos)

2004 2005 2005 JAN.-DEC. % OF JAN.-DEC. % OF JAN.-DEC. % OF

GDP ACTUAL GDP PROGRAM GDP

Total Surplus/(Deficit) -232.0 -4.8 -106.0 -2.0 -180.3 -3.4National Government -187.1 -3.9 -146.8 -2.7 -180.0 -3.4CB Restructuring -17.5 -0.4 -16.3 -0.3 -18.4 -0.314 MNFGCs -85.4 -1.8 -21.7 -0.4 -42.5 -0.8SSIs 24.4 0.5 51.8 1.0 26.0 0.5BSP* 3.3 0.1 3.0 0.1 1.0 0.0GFIs 5.2 0.1 6.2 0.1 5.8 0.1LGUs 14.9 0.3 13.0 0.2 18 0.3Adjustments** 10.3 0.2 4.8 0.1 9.8 0.2

* 2005 Actual figure is from January-November only**Adjustments include net lending and equity extended by NG to GOCCs and some amount to GFIs.

Source: Department of Finance (as of April 5, 2006)


obtain the best deal in the internationalbond market due to positive developmentsin the fiscal sector that helped createfavorable investor sentiments.

On the whole, total consolidatedpublic sector debt stood at 102.1 percentof GDP while consolidated non-financialpublic sector debt reached 89.4 percent ofGDP as of end-September 2005. To date,bulk of the country’s total public sectordebt was foreign. Next to NG, the 14MNFGCs contributed the second biggestchunk of the total public sector debt, asits debt to GDP reached 28.5 percent asof the third quarter, which were alsomostly foreign denominated. In thegovernment’s continued effort to maintainthe manageability of consolidated publicsector debt, the DOF-InternationalFinance Group worked alongside with theDOF-Corporate Affairs Group tofacilitate the funding of various GOCCfinancing requirements through sourceswith minimal cost and optimal value.

With regard to official developmentassistance (ODA), total loanscommitment as of December 2005 wereUS$10.1 billion, 5.7 percent lower thanin 2004. However, in terms of actualdisbursements, ODA performanceactually improved. ODA loansdisbursement level rose by 9 percent toUS$1.2 billion in 2005 from US$1.1billion in 2004, for both program andproject loans. The ODA’s sustained focusand action towards addressingimplementation bottlenecks andharmonization between the Philippinegovernment and funding institutions onprocedures on procurement and otheractivities led to higher actualdisbursements.

58 FINANCIAL SECTOR

Chapter 8Financial Sector

T

While the primary objective of thereform agenda for the Philippine financialsystem was to mobilize domestic savings,the country’s gross domestic savings toGDP ratio actually went down to 20.7percent from 21 percent in 2004 followingthe one percentage point slowdown in thedomestic economy in 2005. Nevertheless,reforms that will support the objective ofraising the savings rate through theimprovement of the financial infrastructureare already being implemented by theregulatory agencies with the exception ofthose that require legislative action. Amongthe bills that the sector is advocating arethe proposed amendments to the BangkoSentral ng Pilipinas (BSP) Charter, theInsurance Code, the Securities RegulationCode that will improve the regulatoryframework of the financial system, and theCorporation Code to further promotecorporate governance. In addition, there areproposed legislation supporting thedevelopment of the domestic capital

market such as the creation of a CreditInformation Bureau (CIB), the passage ofthe Corporate Recovery Act, the PersonalEquity Retirement Account (PERA), theRevised Investment Company Act(RICA), the Lending CompaniesRegulation Act, and the Pre-Need Code.

Ensure stable macroeconomicenvironment to reduce long-term riskby managing inflation

Despite a deceleration in inflationtowards the end of the year, averageinflation in 2005 reached 7.6 percentexceeding the government target of 5.0–6.0 percent (Table 8.1). This was mainlydue to the rising oil prices in the worldmarket that caused upward adjustmentsin domestic pump prices of oil productsresulting in higher input prices, andeventually translating to higher prices ofconsumer goods.

he Philippine financial sector ended 2005 on an upbeat note, growing 13.6 percent compared with 9.9 percent in the previous year. The sector’s strong expansion was a result of the ongoing

implementation of some key measures focused on ensuring a stablemacroeconomic environment while developing a stronger financialsystem. In 2005, there was a marked improvement in asset quality anddeposit base of banks as the ratio of nonperforming loans to total loansimproved from 12.7 percent as of end-December 2004 to 8.5 percent asof end-December 2005. The growth in the ratio of market capitalizationto GDP from 83.2 percent in 2004 to 98.9 percent in 2005 suggests anincreased level of securities trading. The successful conduct of monetarypolicy and price stabilization efforts also helped ease inflationary pressurestowards the end of the year.


In 2005, the Bangko Sentral ngPilipinas (BSP) decided to raise its policyinterest rates three times in 2005 – in April,September and October – by a cumulative75 basis points to temper the inflationarypressures coming from the supply shockscaused by higher fuel prices. Reserverequirements were also raised by twopercentage points to prevent the adverseeffects of excess liquidity on inflation andinflation expectations. As a complementto the aforementioned policy actions, theBSP also intensified its public informationcampaign to help manage inflationexpectations by conducting regionalbriefings in areas not previously covered,such as economic developments andprospects, the conduct of monetary policyincluding the role of the BSP, inflationtargeting, and the concept of core inflation.

On the other hand, the NationalPrice Coordinating Council (NPCC),through its member agencies and theprivate sector, implemented measures tocounter supply-side inflationary pressures.The Department of Agriculture (DA)undertook measures such as:(a) productivity enhancement thatimproved genetic materials of crops,livestock, poultry and fishery products toensure high yields and intensified diseaseprevention; (b) logistical support to cutproduction and distribution costs; (c)direct market linkages, reduction in marketlayers and improvements in agri-fisherylogistics efficiency; and (d) organic-basedfarming input reduction and substitution.The Department of Trade and Industry(DTI) also pursued price monitoringactivities to protect consumers fromprofiteering by publishing commodityprices. In 2005, the DTI established nineConsumer Welfare Centers (CWC) anddonated 23 sets of test weights to promoteaccurate weighing of purchases.

To mitigate the adverse effects ofsoaring world oil prices on power anddomestic petroleum products, thegovernment promoted the use ofalternative fuels through Executive Order(EO) No. 449 which ordered thereduction of import duty on bioethanolfuel from ten percent to one percent. TheNational Power Corporation (NPC) alsoimplemented a dispatch order for itspower plants that emphasized the use ofgeneration facilities fueled by cheaper andrenewable energy sources. Since theimplementation of the program, the oil-fired plants expenses have gone down toabout PhP11.8 billion, equal to about 709million liters of fuel oil.

Promoting a stronger, more stable anddeeper financial system

Accelerate reduction ofnonperforming assets of the bankingsystem. The implementation of theSpecial Purpose Vehicle (SPV) Act hasimproved the asset quality of banks and

TABLE 8.1 INFLATION RATES(In Percent)

BY COMMODITY GROUP 2004 2005

All Items 6 7.6 Food, Beverage & Tobacco 6.2 6.4 A. Food 6.4 6.5 B. Beverages 4.1 5.9 C. Tobacco 1.7 6.3 Non-Food 5.8 8.6 A. Clothing 2.7 3.5 B. Housing & Repairs 3.8 4.5 C. Fuel, Light & Water 7.4 18.1 D. Services 9.2 11.8 E. Miscellaneous 2.2 3.2

Source: NSO

60 FINANCIAL SECTOR

has reduced the problem assets of thebanking system to manageable levels.Total nonperforming assets (NPAs)disposed under various SPV-relatedtransactions reached PhP96.7 billion as of26 June 2005 or 18.6 percent of thePhP520.0 billion NPAs of the bankingsystem as of end-June 2002. This broughtdown the nonperforming loans (NPL)ratio of universal and commercial banksto 8.5 percent as of end-December 2005,the lowest in nearly eight years and thesixth month at which the NPL ratio hasremained at a single-digit level.

Prevent and minimize systemicrisks by strengthening regulations inaccordance with international standards.To keep pace with modern banking andfinance standards, the BSP, the InsuranceCommission (IC) and the Securities andExchange Commission (SEC) shifted to aconsolidated and risk-based approach inthe supervision of their respective areas.Some of the programs implemented by theBSP were the development andimplementation of Risk Management,Operational Control, Compliance andAsset Quality (ROCA), and a Strength ofSupport Assessment (SOSA) ratingsystem, both of which are for foreign bankbranches. Meanwhile, the IC coordinatedwith the Philippine Life InsuranceAssociation (PLIA) in formulating the RiskBased Capitalization (RBC) framework forlife and non-life companies to ensureviability. The SEC, on the other hand,calibrated requirements for securitiesbrokers and dealers vis-a-vis their riskexposures.

The SEC strengthened itsenforcement and compliance services andintelligence activities by maintaining a real-time market surveillance system to detectfraudulent and abusive trading practices.

An online monitoring of securitiestransactions at the Exchange using theAdvanced Warning and Control Systems(AWACS) was conducted, wherein sevenunusual transactions were referred to theSecurities and Exchange Commission –Market Regulation Department (SEC-MRD). The transactions involvedunusual price or volume movements onfour issues and the identification of thebeneficial owners of transactions done bybrokers on behalf of three codes.

A Memorandum of Agreementwas also drafted for the Financial SectorForum member agencies to establish aninformation exchange scheme that willharmonize and promote the consistencyof rules and regulations, as well as toaddress the gaps and overlaps among thefinancial services regulatory agencies.However, the long-term developmentplan or blueprint of the Non-BankFinancial Sector, which will promote itsgrowth and expand contributions to thedomestic economy, has yet to be reviewedand finalized.

Improve market liquidity. Topromote and accelerate the developmentof the capital market, the BSP broadenedthe array of available financial productsin the capital market by: (a) issuing rulesand regulations to govern banks’investments in securities overlyingsecuritization structures and the capitaltreatment of banks’ exposures tostructured products; (b) issuingprocedures to be observed in investing inCredit-Linked Notes, Structured Productsand Securities Overlying SecuritizationStructures; (c) allowing third partycustodians to open an account in theRegistry of Scriptless Securities (RoSS) ofthe Bureau of Treasury (BTr); (d)converting Common Trust Funds


(CTFs) into Unit Investment Trust Funds(UITFs); and (e) supporting the privatesector-led initiative to launch the Fixed-Income Exchange (FIE) as a virtual tradingplatform of a secondary market for fixedincome securities.

As an initial step to theestablishment of an FIE, the SEC hasreviewed and prepared Rules on InterdealerOrder-driven Market Board. The rules willprovide an adequate capability to manageand conduct an effective surveillance andcompliance unit.

Meanwhile, the registration andlicensing of the Marketplace for Small-Medium Entrepreneurs (M4SME-RP) as anAlternative Trading System (ATS) for theDevelopment Bank of the Philippinesbroadened investment options for marketplayers and investors by providing anelectronic market place for primary orsecondary trading securities notcommonly traded in traditional outlets.

Promoting CorporateGovernance and Market Discipline.Reforms in corporate governance were alsoimplemented to promote marketdiscipline. The BSP strengthened existingprudential regulations by: (a) requiringbanks/quasi-banks/nonstock savings andloan associations (NSSLAs)/NBFIs to

conduct an annual financial audit by anindependent auditor acceptable to theBSP not later than 30 calendar days afterthe close of the fiscal year; (b) releasingfor implementation the Manual ofExamination procedures on CorporateGovernance; (c) incorporating certainelements of Basel II into the current risk-based capital adequacy framework suchas giving lower risk weights for highly-rated corporate exposures and higher riskweights for past due claims to furtherstrengthen credit risk management; (d)adopting a standardized approach usingexternal ratings for investment insecuritization structures; (e) recognizinghybrid Tier 1 capital instruments aseligible Tier 1 or core regulatory capitalof a bank; and (f) partial lifting of theBranch Moratorium Policy to improve theaccessibility of banking services tounderserved areas.1

Bank accounting practices werealso aligned with internationalaccounting standards/internationalfinancial reporting standards (IAS/IFRS).Financial institutions under BSP and SECregulation and supervision adopted thePhilippine Accounting Standards/Philippine Financial Reporting Standards(PAS/PFRS) and the Philippine Standardson Auditing (PSA).

1 BSP’s branch moratorium policy aims to provide an orderly exit of weak banks, encourage mergers and consolidation,and strengthen the banking system.

62 LABOR

Chapter 9Labor

C

LABOR MARKET PERFORMANCEIN 2005

The labor market registered a lowerunemployment rate of 7.8 percent from

ompared to the previous year, labor market conditions improved in 2005 on a number of indicators. While the unemployment rate was lower, the rise in the underemployment rate has become a

concern. Net employment creation, most of which are for salaried jobsrather than unpaid work however, is way below Medium-Term PhilippineDevelopment Plan (MTPDP) 2004-2010 targets. Compliance with laborstandards likewise declined in 2005. However, the year was also generallypeaceful in terms of labor-employer relations, even as supervening conditionsallowed workers to get a wage increase in the middle of the year. Meanwhile,the government’s facilitation and protection of overseas Filipino workers(OFWs) contributed to record monthly remittances that supported thereal economy. The government shall continue to pursue programs insupport of employment generation, preservation, enhancement, andfacilitation in 2006.

11.8 percent in the previous year1 (Table9.1). Employment creation, however, fellshort of the target for 2005, employingan additional 699,000 workers vis-à-visthe targeted 1.03-1.26 million.

1 Average for April, July and October 2005 for unemployment rate and labor force. Based on old definition, unemploymentrate for 2005 is 11.3 percent. The use of the new Labor Force Questionnaire to estimate the unemployed started in April2005 with the adoption of the revised definition of unemployment that adds the “availability” criterion (NSCB ResolutionNo.15, series of 2004). Subsequently, levels for labor force and derived labor entrants were affected by this change.

TABLE 9.1 SUMMARY INDICATORS ON LABOR AND EMPLOYMENT: 2004-2005

Level Growth Rate (%) Indicators (in ‘000, except rate)

2004 20051 2004 2005

Labor Force 35,862 35,286 3.7 -1.6Labor Entrants 1,292 -576 103.3 -144.6Employment Level 31,613 32,312 3.2 2.2Net Employment Creation/Employment Generated 978 699 70.3 -28.5Unemployment Rate (%) 11.8 7.8 0.4* (0.5)*Underemployment Level 5,575 6,788 6.8 21.8Underemployment Rate 17.6 21 0.6* 3.4*Employment by No. of Hours Worked Less than 40 hours a week 11,613 11,642 2.7 0.2 40 hours and above 19,367 20,185 2.8 4.2Employment by Class of Workers Wage and salary workers 16,472 16,315 7.3 (0.9) Own-account workers 11,678 12,103 1.4 3.6 Unpaid family workers 3,567 3,893 (5.2) 9.1


By industry, the employmentincrement was largely in the service sector(424,000), followed by agriculture(249,000) and lastly, by industry (26,000).The trends in employment creationmirrored the sectoral growth pattern exceptfor industry, which was hardest hit by therising cost of petroleum and thecorresponding wage hike.

With employment mainly comingfrom agriculture and services, quality ofemployment deteriorated as the numberof remunerative workers2 declined (0.9.%)while the number of unpaid familyworkers (9.1%) and own-account type ofworkers, both increased (3.6%).

By region, the employment ratewas lowest in the urban centers of MetroManila (83.7%), Region IV-A(CALABARZON) (87.6%), Region III(Central Luzon) (88.2%) and Region I(Ilocos Region) (89.4%).

Most of the labor force stillworked 40 hours and above a week butthey wanted to work more hours, asindicated by the high underemploymentrate of 21.0 percent. The last time theunderemployment rate breached this ratewas in 2000.

In 2005, minimum wagesmanaged to increase in view of theerosion of purchasing power due to price

2 Wage and salary worker.

Indicators Level Growth Rate (%) (in ‘000, except rate)

2004 20051 2004 2005

Net Employment Creation/Employment Generated, by IndustryAGRICULTURE, FISHERY, FORESTRY 161 249 65 54.1 Agri, Hunting, Forestry 57 222 -889.7 287.8 Fishing 104 26 -1 -74.8INDUSTRY SECTOR 158 26 9 -83.4Mining & Quarrying 14 5 -250 -63Manufacturing 120 17 67.8 -86Electricity, Gas and Water 8 -3 -266.7 -140Construction 17 8 -80.2 -56.5SERVICE SECTOR 658 424 98.8 -35.6Wholesale & Retail Trade, Repair of Motor Vehicles, Motorcycles & Personal & Household Good 270 275 -2502.2 1.8Hotel & Restaurants 56 55 -2.2 -2.2Transportation, Communication & Storage 116 24 -21.7 -79.1Financial Intermediation 25 13 -380.6 -49.5Real Estate, Renting & Bus. Activities 51 45 -46.9 -12.3Public Ad & Defense, Compulsory Social 77 -10 -376.6 -113.4 SecurityEducation 13 40 -235.1 216Health and Social Work -10 15 -145.6 -243.9Other Community, Social & Personal Service -27 -59 35.4 121.5Private Households with Employed Persons 88 28 3.5 -68.6Extra-Territorial Organizations & Bodies -1 0 0 -66.7

*Percentage point differenceSource: Labor Force Surveys, National Statistics Office

continued Table 9.1

64 LABOR

increases, notably of petroleum andtransport, during the period. All regionshave issued minimum wage orders betweenMay to July, granting minimum wageincreases, cost-of-living allowance orintegration of cost-of-living allowances intothe basic pay. The National Capital Region(NCR) still has the highest minimumwages for nonagricultural workers atPhP325.00 and Autonomous Region inMuslim Mindanao (ARMM) has the lowestat PhP180.00.

Labor productivity grew by 2.7percent in constant terms from PhP36,446in 2004 to PhP37,431 in 2005, slightlyhigher than the 2.9-percent growth postedin the previous year. Productivity ofworkers in the agriculture sector fell from3.8 percent to -0.3 percent, while a rise inlabor productivity growth was experiencedin industry (from 1.4% to 4.3%) andservices (from 3.0% to 3.5%).

Overseas employment remained akey source of jobs for Filipinos with981,667 of them deployed in 2005, anincrease of 5.2 percent. Decline indeployment in several destinations wasobserved in Asia, Europe, Americas andOceania, while increased deployment wasrecorded in the Middle East, TrustTerritories and Africa. On a positive note,remittances managed to post a recordUS$10.69 billion or a 25.0 percent growth,attributed to higher skilled and higherpaying jobs for OFWs.

SUPPORT FOR EMPLOYMENTGENERATION

To ease the unemploymentproblem, the government, through theDepartment of Labor and Employment(DOLE) implemented projects to developOFWs and/or their families asentrepreneurs through the Enhanced

Reintegration Program for OFWs and theOFW Groceria Project.

In 2005, a total of 150 fundedprojects were implemented under theOverseas Workers Welfare AdministrationNational Livelihood Support Fund(OWWA-NLSF) Livelihood Develop-ment Program. Also trained were 3,927and 13,076 participants under theOWWA-NLSF Livelihood Program andcommunity-based program, respectively.Of the 500 OFW Groceria targeted to beset-up, the DOLE reported an 87-percenttarget accomplishment for the year byestablishing 437 Grocerias nationwide,and released PhP5.5 million fund for retailoperations.

EMPLOYMENT PRESERVATION

Industrial relations were generallypeaceful in 2005. There were 26 cases ofactual strikes/lockouts declared for theyear against 25 in the previous year, andthe DOLE recorded a 96 percent strikeprevention rate by end-2005 due to thecontinued 24-hours-7-days a week actionon labor cases. This resulted in only fourpercent of the total notices of strikes/lockouts handled erupting into full-blownstrikes. Strike incidence in 2005 (26 cases),was the lowest in 26 years. A total of 8,496workers were involved in these cases,compared to 11,197 the previous year.This resulted in 124,979 mandays lost forthe year, although there were fewermandays lost last year (53,434).

Promoting dispute prevention andalternative dispute settlement at theworkplace for unionized andnonunionized establishments was on topof the agency’s agenda in 2005. This wasdone through voluntary arbitration,grievances machinery (GM) andestablishment of labor management


councils (LMC). There were 251 new GMsoperationalized in organized establishmentswith 410 existing GMs strengthened orenhanced.

To facilitate the disposition ofdispute cases, the National LaborRelations Commission (NLRC) set up theCase Management System’sModernization Program. The last phase ofthe project is ongoing as of September2005. With this system is the procurementand upgrading of capital equipment crucialto the agency’s thrust. In terms of casesettlements, the Compulsory Arbitrationproject aimed to improve labor disputeresolution, promote dispute preventionand alternative dispute settlement.

To attain its target of a 10-percentincrease in the number of nonunionizedfirms covered with advocacy on LMC, theDOLE facilitated 41 new LMCs covering672 employees in the unorganizedestablishments, bringing the totalnumber to 110. With regards to casesfiled with NLRC involvinginterpretation and implementation ofcollective bargaining agreements (CBA)and passed thru GMs referred tovoluntary arbitration this year, 11NLRC cases were referred to NCMBfor voluntary arbitration.

The implementation of laborand management education onworkers’ rights, dispute prevention andsettlement continued with significantefforts put into labor and managementeducation. There were 2,841 laboreducation seminars, benefiting 69,078workers from the organized andunorganized labor sector, an increaseof 406 percent. Also, managementeducation seminars covering 2,349establishments with 5,008 participantswere conducted, a 209-percent increasefrom last year.

Strengthening quick responseintervention for displaced and about-to-be-displaced workers by promotingefficiency-enhancing measures, includingarrangements or human resourcestrategies, to minimize job losses were alsoconducted in 2005. However, only a 32-percent target accomplishment rate wasachieved, involving 22,653 out of 71,060workers.

Social dialogue as a central elementof labor policies, and a means to securesustainable decent work outcomesachieved through tripartism was sustainedthis year. As of October 2005, there were76 existing Industry Tripartite Councils(ITCs), and 104 existing TripartiteIndustrial Peace Councils (TIPCs)(Table9.2 and 9.3).

TABLE 9.2 NUMBER OF EXISTING INDUSTRYTRIPARTITE COUNCILS (ITCs)

Level No. of ITCs Establishments / Workers covered

Regional 23 322 est.1,038 workers

Provincial 33 853 est.1,059 workers

City/Municipal 20 241 est.448 workers

TABLE 9.3 NUMBER OF EXISTING TRIPARTITEINDUSTRIAL PEACE COUNCILS (TIPCs)

Level No. of TIPCs Establishments / Workers covered

Regional 11 831 est.9,940 workers

Provincial 41 1,402 est.76,900 workers

City/ Municipal 52 581 est.40,861 workers

66 LABOR

EMPLOYMENT ENHANCEMENT

Trainings

The government has intensified theprovision of training and consultingservices by showcasing productivityimprovement programs in micro, small andmedium enterprises (MSMEs), like theproductivity-enhancing Industrious,Systematic, Time-conscious, Innovative,and strong Value for work (ISTIV) program(Small Brother-Big Brother supportinterventions) and BMBEs. A total of 2,667MSMEs were assisted in 2005, a 148-percent target accomplishment.

Assistance to Vulnerable Groups

Youth unemployment comprisesnearly half of the total unemploymentrate. Thus, providing opportunities for theyouths to acquire skills and competenciesrequired by the market through training,scholarships, expanded apprenticeship andlearnership programs, special employmentof deserving students and emergencyemployment for out of school youths(OSY) and out of work youths (OWY) inMetro Manila continued in 2005. A totalof 93,643 trained apprentices or a 47-percent target accomplishment wasattained under the Kasanayan atHanapbuhay Program.

Of the 70,000 students placed peryear under the Special Program forEmployment of Students (SPES), therewere actually 75,816 students placed in theprogram, eight percent more than thetarget. Similarly, 850 OSYs/OWYs werehired under the emergency employmentprogram, or three percent more than thetarget 822 OSYs/OWYs.

For overseas employment, twelvegovernment agencies will be electronically

linked to cut down OFW documentationtime and cost by 50 percent. Reductionin processing time of OFWdocumentation was targeted at 25 percentin 2005. The e-Submission by theagencies was fully implemented lastNovember 2005, accomplishing a 45-percent participation rate with 202participating recruitment agencies and 96percent for 48 manning agencies.

Enforcement of Labor Standards

A culture of safety and health, self-regulation, and voluntary compliance tolabor standards and productivity waspromoted through the continuation ofthe full implementation of new laborstandards framework last year. However,the target of 75 percent compliance rateon inspection was not met as only 58.23percent, or 11,377 establishments werefound complying with general laborstandards before and after inspection.Additionally, 91.3 percent of the totalnumbers of establishments inspectedwere found complying with technicalsafety standards (TSS) before and afterinspection, while a 65.19-percentenforcement rate for violations, whichmaterialized into labor standards cases,was recorded. The enforcement of laborstandards against erring establishmentsresulted in the restitution of 42,783workers, and a total of PhP246.5 millionwas given in monetary awards/settlement.

Wage Policy Review

The government continues thereview of wage policies vis-à-vis emerginglabor industry requirements. In 2005, theDOLE issued 19 Wage Orders and 18Implementing Rules, revised the ArbitralAwards Model template and installed


computer units for DOLE internal users.Likewise it conducted a learning sessionfor Steering and Action Teams and preparedand facilitated the issuance of AO 185 onthe Adoption of StandardizedMethodology on Arbitral AwardAssessment (SM-AAA).

It also completed the study on“Wage Earners’ Profile with Focus onMinimum Wage Earners” while it preparedproject documents for the following studies:

Measurement and Opera-tionalization of Safety Net inMinimum Wage fixing

Effectiveness of the WageExemption Policy (Review of Ruleson Exemption)

Minimum Wage StructureSimplification: Practice andApplication

Study on Wage Increases Grantedby the Regional Boards vis-à-visWage increases through CBAs

Productivity Committee: AnApproach to ProductivityImprovement Towards theDevelopment of Methodology forDetermining Arbitral Awards-Phase II

Employment Facilitation

To enhance local employmentfacilitation, employment guidance andregulation, the strengthening of the LaborMarket Information System Project wasimplemented. This will connect with themajor Public Employment Service Offices(PESOs) to ensure a more efficientmatching of jobs and skills. Complete

interconnection of the major PESOs isexpected by 2006. Ten pilot PESOsinterconnection in three regions (NCR,RO4-A, and RO3) were targeted and anevaluation of project proposal by JICAPhilippines is ongoing.

The DOLE’s job search facility“Trabaho Mo, I-text Mo” was alsooperationalized in 2005 to increase jobseekers’ access to job vacancyinformation. The project has enabled jobseekers to access information on availablejobs via short message service (SMS) orby texting DOLE.

68 ENERGY INDEPENDENCE

Chapter 10Energy Independence

INCREASING OIL AND GASEXPLORATION

Activities in oil and gas exploration(upstream energy sector) increased in 2005.A major activity was the August 2005opening to investors of four petroleumareas in Palawan and the Sulu Sea. Calledthe Philippine Energy Contracting Round(PECR), the activity assured investors oftransparency and economic reward. Madeavailable to them was an updated databaseon the country’s prospective oil and gasbasins, information on the expanding localenergy market, as well as attractive fiscalterms. In 2005, 11 oil exploration contractswere signed amounting to about US$158billion. With increased investor confidence,the Department of Energy (DOE) expectsmore contract applications following theSupreme Court decision in December2004 upholding the Mining Act of 1995.The Act allows 100-percent foreignownership in the mining sector.

Seismic data were acquired inRagay Gulf and South China Sea whilethose from Top Nido Horizon inCalamian, Northwest Palawan wereinterpreted. In two major seismic horizonsin offshore West Balabac, seismic data were

chieving energy independence serves as a catalyst to sustainable economic growth and prosperity. Focus is on developing

indigenous and renewable energy resources to generate savingsfrom reduced oil imports. Energy self-sufficiency level for 2005 stood at56.9 percent, higher than the target of 53.0 percent.

also completed. A Joint Marine SeismicUndertaking with China National OffshoreOil Corporation and Vietnam Oil and GasCorporation was signed on March 14,2005. Signatories will jointly acquiregeoscientific data and assess petroleumresource potential of certain areas in theSouth China Sea. A total of 11,022 line-km 2D seismic data were taken over thearea and completed in November 2005.Agreements for joint exploration in NorthCalamian and offshore Mindoro were alsomade with various oil companies. Inaddition, out of the targeted 16 wells to bedrilled by 2009, eight wells in Leyte andNorthern Negros were drilled in 2005.

Meanwhile, the MalampayaProject continued to provide gas fuelrequirements of Sta. Rita, San Lorenzoand Ilijan Power Plants in Batangas witha total gas production of 112 billion cubicfeet (BCF) in 2005. Also, 5.7 millionbarrels (MMB) of condensate wereproduced and shipped to buyers inSingapore, China, Vietnam and Korea.The project’s output represents 19.5percent of the 2005 production target of573.45 BCF of natural gas, and 18.8percent of 30.4 MMBs of condensate.

A


The San Antonio Gas Power Plant,shut down in October 2004, resumedcommercial operations on September 27,2005. The plant continued to supplyelectricity requirements of Echague, SanAgustin, Jones and part of Santiago City inIsabela generating five GWh of electricityusing 93.2 million standard cubic feet(MMSCF) of natural gas. The San AntonioGas Power Project is expected to produce1,447 MMSCF and generate 82GWh ofelectricity by 2009.

STRENGTHENINGOF THE PHILIPPINE NATIONAL OILCOMPANY (PNOC)

A Strategic Planning Session wasconducted for the PNOC Board ofDirectors in July 2005 to review thecompany’s mission/vision statements.The session hoped to rationalize PNOC’score business by limiting its activities topetroleum upstream business, andgeothermal and selected renewable projects.The Board also drafted a preliminaryworking list of core projects and plan ofaction consistent with the revised missionand vision statements. This activity aimedto strengthen PNOC and its subsidiariesin order for them to lead the developmentof indigenous sources. PNOC-Shippingand Transport Company also modernizedits fleet by acquiring a fleet vessel that waschristened MV Jose P. Rizal in April 2005.

To enhance the role of PNOC-Petrochemical Company in the revival andstrengthening of the country’s midstreampetrochemical industry, the Board ofInvestments (BOI) approved in May 2005the company’s application for a naphthacracker plant. At present, the company isconsidering local and foreign investorswith the goal of having the cracker plantoperational by 2010.

PURSUING THE DEVELOPMENTOF INDIGENOUSAND RENEWABLE ENERGY

The DOE is pushing for thepassage of the Renewable Energy Billcontaining provisions that will resolvemarket and financial barriers whichhamper the development of renewableenergy. For instance, the bill requiresconventional energy producers to use acertain percentage of renewable energy fortheir energy mix. Likewise, the DOE isimplementing the United NationsDevelopment Programme (UNDP)-assisted project on Capacity Building toRemove Barriers to Renewable Energy inthe Philippines (CBRED). The projectwill establish a Market Service Center(MSC) that will assist renewable energyproducers in obtaining legal papers andpermits required for renewable energyprojects. The MSC will link stakeholdersand participating banks, and assist projectdevelopers and local organizationsinterested in availing of funding. A web-based geographical information systemfor renewable energy will also beestablished under the CBRED project.The implementation scheme and Termsof Reference (TOR) for a national wind,microhydro and biomass resourceassessment survey have likewise beenapproved by the DOE. Also, a databaseand a data information exchange systemare being set up.

Meanwhile, groundwork is beingundertaken to maximize benefits from theemerging international carbon market. InDecember 2005, the PNOC signed theEmission Reduction Purchase Agreementwith the Government of Netherlands andthe World Bank (WB). As Trustee of theNetherlands Clean DevelopmentMechanism Facility, WB will purchase a


minimum of 440,000 tons of emissioncredits from the Nasulo Project during2008-2012. The Nasulo GeothermalProject is possibly the first geothermalproject to benefit from the CleanDevelopment Program Mechanism.

Geothermal Energy

Under the PECR 2005, a total of11 geothermal prospects were put up foroffer: a) Luzon: Daklan in Benguet, Natibin Bataan, Mabini in Batangas, Tiwi inAlbay, Montelago in Oriental Mindoro andSta. Lucia-Iwahig in Palawan; b) Visayas:Biliran in Biliran Province, Mambucal inNegros Occidental, Malabuyoc in Cebu;and c) Mindanao: Camiguin in CamiguinIsland and Amacan in Compostela Valley.Submission of bid proposals ended inNovember 2005 and awarding of contractsis expected by June 2006.

The country participated in theWorld Geothermal Congress in Antalya,Turkey in April 2005. Attended byparticipants from 83 countries, the eventwas an opportunity for the Philippineenergy sector to showcase the country’sachievements as a “World Leader inGeothermal Energy” and as an investmenthaven of geothermal and other energyresources.

In January 2005, PNOC-EnergyDevelopment Corporation (EDC)awarded to Kanematsu Corporation thecontract for the 49.37 MW NorthernNegros Geothermal Project. The contractcovers the engineering, procurement andconstruction of the geothermal powerfacility. The project is expected to operatecommercially by February 2007.

Wind Energy

With the commissioning ofNorthwind’s 25-MW wind power projectalong Bangui Bay in Ilocos Norte, thecountry took a major step in June 2005toward becoming the leading wind energyproducer in Southeast Asia. The project hasbegan to supply electricity to about 40percent of the province. The constructionof a substation and transmission linesystem will deliver electricity to IlocosNorte’s local distribution cooperative. Thewind facility proved that wind energy canbe harnessed to lessen government subsidyfor missionary electrification. The Wind Contracting Round waslaunched in March 2005 to promoteamong foreign and local investors thepotential wind power sites available fordevelopment. To provide impetus to thisprogram, several financing assistancewindows have been made available toinvestors willing to undertake wind powerprojects.

Solar Energy

Under PNOC’s Solar HomeSystems (SHS) Distribution Project, a totalof 4,977 SHS were installed in 2005,mostly in Palawan and Maguindanao. AUNDP-funded solar hybrid project startedsupplying electricity to around 100households in El Nido and a fishing villagein Rizal. Meanwhile, a 45 kW peakcentralized PV plant was installed toprovide electricity to 200 households inPangan-an Island, Cebu with funding fromBelgian official development assistance(ODA). The United States Agency forInternational Development (USAID)-Alliance for Mindanao Off-grid RenewableEnergy Program (AMORE), has energized20 barangays using, among others, PV


battery charging stations and PV solarhome systems under Phase 1, and 27barangays using PV solar home systemsunder Phase 2.

Hydropower Energy

In a bid to double the capacity fromthe hydropower sources in the next 10years, the DOE is currently supervisingfive ongoing minihydro (MHP) projectswhich include: 0.96-MW Cantingas MHPProject in San Fernando, Sibuyan Island,Romblon; 0.50-MW Hinubasan MHPProject in Loreto, Dinagat Island, Surigaodel Norte; 2.5-MW Sevilla MHP Projectin Sevilla, Bohol; 0.75-MW San Luis MHPProject in San Luis, Aurora; and 1.0-MWSipangpang MHP in Surigao Sur. TheseMHPs contributed additional installedcapacity of 5,710 kW in 2005, representinga 1.8-percent increase in generatingcapacity of 3,219 MW in 2004.

Coal

The development of indigenous coalalso remains a priority thrust for the energysector with the aim of reducing the country’scoal importation within the 10-year planningperiod. The 2005 coal production was about3.10 million metric tons (MMMT),translating to a fuel oil displacement ofaround 10.94 MMBFOE for the year.Indigenous coal is largely sourced from theoperations of Semirara Mining Corporation(Antique) and augmented the output ofsmall- and medium-scale undergroundmining operations in Sibugay Zamboanga,Cebu, Negros and Albay.

Seven coal prospect areas were putup for offer to potential investors duringthe PECR 2005. The sites are located inPolillo (Quezon), Tagkawayan (Quezon),Calatrava (Negros Occidental), Candoni/Bayawan (Negros Oriental), Gigaquit

(Surigao del Norte), Tandag-Tago-Lianga-Bislig (Surigao del Sur) and Malangas(Sibugay Zamboanga).

As of December 2005, thecountry had 35 coal-operating contracts(COCs) with development, productionand exploration commitments. Theimproved price for domestic coal triggeredthe influx of applications for coalconcessions.

EXPANDING THE USEOF NATURAL GAS

The government’s demonstrationprogram on the use of natural gas in thepublic transport sector continued to rolland in fact has been expanded. Throughits compressed natural gas (CNG) carrierprogram, or the Natural Gas VehicleProgram for Public Transport(NGVPPT), policy directives were issued.

These include:

a) Department Circular 2005-07-006Directing the Enhanced Implementation ofthe NGVPPT and the Development ofCNG Supply and Infrastructure;

b) Executive Order (EO) 290 whichprovided the institutional frameworkfor the implementation of the CNGprogram; and

c) EO 396 which offered incentives suchas the negotiated CNG price ofPhP14.52 per diesel liter equivalent(subject to foreign exchangefluctuation) for the first 200 CNG-fedbuses (set to arrive in 2006) for a periodof seven years, and zero-rated importduty on the acquisition of the 200completely-built-unit (CBU) CNGbuses, NGVs and CNG-NGV industry-related facilities, equipment, parts andcomponents.


By the first quarter of 2005, a totalof 200 CNG buses were expected to plymajor routes from Manila to Laguna andmother-daughter stations to be established.However, DOE has postponed the plyingof CNG buses to 2006 since test runs arestill ongoing for 17 CNG buses that weredelivered in 2005.

The groundbreaking ceremony of thecountry’s first mother refueling station washeld in Tabangao, Batangas in March 2005.The construction of the refueling station andits daughter station located in Sto. Tomas,Biñan, Laguna have been completed.Commercial operation is expected to startupon completion of technical standard/safety requirements for the facilities.

Meanwhile, the entry of natural gasin the industrial sector began whenPilipinas Shell Petroleum Corporationused the fuel in its refinery during thesecond half of 2005. The refinery couldconsume about 1.3 BCF on its first yearof use of natural gas.

DEVELOPING FUEL BLENDS

Toward implementing the use ofone to five percent coco-biodiesel ongovernment vehicles by 2006,Memorandum Circular 55 Directing AllDepartments, Bureaus, Agencies andInstrumentalities of the GovernmentIncluding Government-Owned andControlled Corporation to Incorporate theUse of 1% by Volume Coconut-Methyl Ester(CME) in Their Requirements was issued.As of December 2005, at least 59government agencies with 1,000 dieselvehicles have complied with the Circular.These agencies reported favorable results intheir vehicles’ engine performance in termsof increased mileage and improvedemissions.

Flying V introduced the first CMEpreblended diesel in the country under thename B1 diesel or the Envirotek bio-dieselpremium. The product launch, led byPresident Gloria Macapagal-Arroyo, washeld on August 11, 2005 at Flying V’sservice station in Cainta, Rizal. As ofDecember 2005, Envirotek bio-dieselpremium blend is being sold in 34 FlyingV stations nationwide. The company hasbeen granted accreditation to repack andsell CME.

Going beyond the aim ofimplementing a five-percent ethanolblend with gasoline fuel for vehicles by2007 to reach 10 percent in 2010, Seaoillaunched in August 2005 the first 10percent ethanol-blended gasoline underthe name “E10”. It is now widely availablein all Seaoil stations and Fying V outletsnationwide. Another major developmentunder this program is the groundbreakingceremony of San Carlos Bioenergy, Inc.in May 2005, which was led by PresidentArroyo. It is the first bioethanolmanufacturing plant and power co-generation complex in the country.Another milestone is the forging of aMemorandum of Agreement in October2005 among DOE, the AutomotiveAssociation of the Philippines and SeaoilPhilippines, Inc. to support thealternative fuels program of thegovernment through the utilization ofbioethanol in the motorsports industry.

FORGING STRATEGIC ALLIANCES

Strong strategic alliances areneeded to further boost the country’sobjective of achieving energyindependence. DOE and the Thai Ministryof Energy, through PNOC and PTT PublicCompany, have expressed their intention


to create a Southeast Asia Petroleum Hubin the Philippines and Thailand which arestrategic locations for stockpiling anddistribution points. Moreover, the China-Philippines-Vietnam Joint South China SeaOil Search Accord was signed in March2005. Under the Agreement, oil companiesfrom these countries have agreed to conducta joint marine seismic study in the area.This is a commercial transaction and thuswould not affect their respectivegovernment’s position with regard to theSouth China Sea territorial issue.

STRENGTHENING ENERGYEFFICIENCY AND CONSERVATIONPROGRAM

For 2005, savings from the energyefficiency and conservation program wastargeted to reach 8.1 MMBFOE. For thefirst half of 2005, the country achievedenergy savings of 4.4 MMBFOE as theEnergy Conservation Way of Life wasinstituted. Further savings were projectedin the second half of the year withsignificant contributions coming fromenergy labeling and efficiency standardsprogram. The program has extended itscoverage to luminaire installations, linearfluorescent lamps, household electric fansand televisions, among others, and thecontinued intensification of information,education and communication materialsand trimedia campaigns.

STATUS OF LEGISLATIVE BILLS

Critical to fulfilling the strategies forenergy independence is the passing ofsupporting legislative agenda. The statusof various bills related to the goal ofachieving energy independence follows:

Alternative Fuels Utilization Bill

The bill is still pending in Congress.

Natural Gas Bill

The Office of Senator Juan Flavierre-filed in June 2004 Senate Bill No. 8.The DOE has since provided paralleladvocacy to inform the Senate on thesalient points of the bill. In the LowerHouse, the House Committee on Energyconducted a hearing on the bill on April4, 2006. The House version is expectedto be endorsed to the Committee onRules, Ways and Means and theCommittee on Appropriations for theirrespective reviews.

Bio-Fuels Act of 2006

House Bill 4629 (ethanol bill) waspassed by the Lower House onNovember 9, 2005. On the other hand,Senate Bill 2226 (consolidated bill onbiodiesel and ethanol) is scheduled forplenary deliberations.

Renewable Energy (RE) Bill

The House version of theRenewable Energy Bill has been approvedby the House Committee on Energy inFebruary 2006 and by the HouseCommittee on Ways and Means inMarch 2006. For the Senate version, theDOE is expected to submit to the Officeof Senator Miriam Defensor-Santiago therevised RE Bill. The Senate Committeeon Energy will then conductdeliberations on the said version during thenext Congress.


Liquefied Petroleum Gas Bill

For the House version of the bill,the Technical Working Group (TWG) ofthe Committees on Energy and Trade andIndustry has been conducting weeklymeetings to discuss salient features of thebill. The bill will subsequently besubjected to a second reading in the LowerHouse. On the other hand, the Senateversion has passed through the first readingand two committee hearings during theprevious Congress. The bill is expected tobe re-filed during the next Congress.


Chapter 11Power Sector Reforms

P ower sector reforms aim to promote competitiveness and efficiency in the energy sector that will consequently benefit all of society. Unfortunately, a number of activities encountered delays

in implementation, including the commercial operation of the wholesaleelectricity spot market (WESM), the 70-percent privatization of theNational Power Corporation’s (NPC) power-generating assets, and theprivatization of the National Transmission Company (Transco).

ADDRESS NPC LOSSES

Assurance of successful privatizationof TransCo, NPC generation assets andNPC Independent Power Producers(IPPs)

During the first semester of 2005,the Power Sector Assets and LiabilitiesManagement Corporation (PSALM)continued working on the transactiondocuments for the privatization oftransmission assets to prepare for theirscheduled public bidding. PSALM andTransCo jointly filed with the EnergyRegulatory Commission (ERC) the settingof the Maximum Allowable Revenue (MAR)for the second regulatory period (2006-2010). The ERC will issue a DraftDetermination of the revenue cap for theperiod. This Draft would address asubstantial portion of the risks oruncertainties of the investors and wouldenjoin more investors to participate in thebidding for the concession. From January

to September 2005, nine subtransmissionsale packages were sold to sevendistribution utilities (DUs) amounting toabout PhP664 million.

Meanwhile, despite PSALM’scontinued efforts in 2005 to facilitate theenactment by Congress of TransCo’sFranchise Bill, which will allow automatictransfer of the company’s franchise to awinning investor, the bill did not getCongressional approval.

For the NPC, at least 70 percent ofthe corporation’s power-generating assetsin Luzon and Visayas by the end of 2005was targeted to be privatized through atransparent bidding process. PSALM hassuccessfully bid out five hydropowerprojects and one coal-fired power plant(Masinloc Coal), the aggregate capacity ofwhich represents 11 percent of the 5,667.2megawatts (MW) total installed capacitiesof plants in Luzon and Visayas identifiedfor privatization. No additional power plantwas privatized in 2005.

76 POWER SECTOR REFORMS

Transfer of management and control ofat least 70 percent of total energy outputof power plants under contract withNPC to IPP Administrators (IPPA)should be accomplished by 2006

The preliminary draft of the standardIPPA Bidding Package (Bidding Documents)was completed by the PSALM Task Teamin November 2005, and will be finalizedwhen the IPPA Structure is settled. Threestructures were drafted at the end ofDecember 2005 to be presented to anddecided by the PSALM Management.

Debt absorption of NPC by theNational Government

In compliance with Section 32 of theElectric Power Industry Reform Act(EPIRA) and Section 1 of Executive Order(EO) No. 370, the national governmentdirectly assumed part of NPC’s financialobligations amounting to PhP200 billionbeginning December 31, 2004. Thegovernment completed the documentationfor the debt assumption in March 2005.

As a result, NPC successfully re-entered the international capital markets inAugust 2005, with the issuance of six-yearFloating Rate Notes valued at US$300milllion. The transaction was offered inAsia at the initial price of US$200 millionbut due to strong investor response, thefinal issue was raised to US$300 million.With increased demand, NPC issuedanother tranche of US$100 Million inSeptember 2005. These issues attractedorder books with a total size of overUS$500 million from 85 different accountsacross Asia, Europe and North America.

Formulation of pricing policy

ERC formulated in 2005 thefollowing guidelines which promote aregulatory environment that makesreturns and risks manageable forinvestors:

a) Methodology for Setting DistributionWheeling Rates

b) Calculation of Over or Under Recoveryin the Implementation of the LifelineRates by Distribution Utilities

c) Setting and Approval of ElectricityGeneration Rates and Subsidies forMissionary Electrification Areas

d) “True-up” Mechanism of the Over orUnder Recovery in the Implementationof Inter-Class Cross Subsidy Removalby Distribution Utilities

e) Adjustments of Transmission Rates byDistribution Utilities

f) Calculation of Over or Under RateRecovery in the Implementation ofSystem Loss by Distribution Utilities

Specifically, these guidelines aim:

a) to ensure the full recovery of the systemloss due to adjustments in the cost ofgeneration and transmission;

b) to ensure a revenue-neutral position forthe distribution utilities in theimplementation of interclass cross-subsidy removal;

c) to ensure that the cost of subsidizinglifeline end users shall be passed on toall non-lifeline end-users;

d) to ensure that lifeline discounts shallbe applied to all marginalized end usersof all distribution utilities; and

e) to ensure the revenue-neutral positionof the distribution utilities in theimplementation of lifeline rate anddiscount.


Explore financial engineering methods

Loan restructuring will becontinued by stretching the repaymentperiod for IPP obligations of NPC.Payment of stranded debt and strandedcontract will also be pursued through thecollection of the universal charge (UC).Along this line and in compliance withSection 34 of EPIRA, two components ofthe UC, the missionary electrification ofPhP0.0373 per kilowatt hour (kWh) andthe environment charge of PhP0.0025 perkWh, were determined by the ERC. Thesefees are currently being imposed on endusers. As of September 2005, the total UCremittances and disbursements stood atPhP3.84 billion and PhP2.75 billion,respectively. Disbursements made in 2005were for missionary electrification only.

STRIVE TO REDUCEELECTRICITY RATES

Facilitate the establishment of theWESM and introduce open-access andretail competition

Preparations are underway for thestart of the commercial operations of theWESM with the launching of the WESMCommercial Operations ReadinessAssessment. The Commercial OperationPlan was disseminated to stakeholders inNovember 2005 while registration forcommercial operations of the WESM startedin December 2005.

Prior to the commercial operationof WESM, a Trial Operation Program(TOP) began in April 2005 to test the rules,systems and procedures of the WESM, aswell as ensure market participant readiness.By yearend, the TOP progressed into Phase5 of its implementation in preparation forlive dispatch and the final market run. To

support the Department of Energy(DOE) initiative in establishing awholesale spot market for electricity,PSALM participated and registered itsportfolio of generating facilities with fourindependent trading teams. These teamsallowed the IPPs under its portfolio toparticipate in the TOP by offering theenergy and ancillary services of theirfacilities. Likewise, various manuals,protocols and methodologies that willgovern WESM operation have beenapproved. The Philippine ElectricityMarket (PEM) Corporation is nowaccepting nominations for membershipin the PEM Board Committees of WESMthat will directly be involved in thedevelopment and overall governance ofthe spot market. The TOP is expected tocontinue until the commercial operationof WESM.

Another activity relevant tointroducing open-access and retailcompetition is the unbundling of rates.From January to October 2005, seven rate-unbundling applications of the ElectricCooperatives (ECs) and one privatedistibution utility (DU) have been approvedby the ERC. This brings the total ERC-approved unbundling cases to 139, whichinclude TransCo, NPC, 15 Private Utilitiesand 115 ECs.

Resolution No. 12-02 titledAdopting a Methodology for Setting DistributionWheeling Rates was approved by ERCprescribing the Performance Based Rate-Setting (PBR) Methodology for settingtransmission and distribution wheelingrates and retail rates for the captive marketof a DU.

Section 6 of RA 9136 providesthat loans of all ECs to NEA and othergovernment agencies incurred for thepurpose of financing rural electrificationprograms are condoned. The reduction


in rates due to loan condonation rangesfrom PhP0.0578 to PhP1.3507/kWh. Thereduction in rates resulted in lowerelectricity bills of consumers in the ruralareas. In 2005, final authorities were issuedto 116 out of 118 ECs. Nueva Ecija ElectricCooperative, Inc. and San Jose ElectricCooperative, Inc. were not issued finalauthorities because of their failure tosubmit applications for rates reduction.

Strengthen the electric cooperatives anddistribution utilities

The NEA Management Academy,in partnership with the UP NationalEngineering Center, conducted the ElectricPower Distribution System Engineeringprogram. This program aims to train and testthe DUs electrical engineers in thecompetency areas of Distribution SystemPlanning, Operation, Design and UtilityEconomics. A similar capsulized programwas also designed for their finance andinstitutional counterparts to have aunification of ideas in meeting industryrequirements. The Academy was able to train82 electrical engineers from 57 ECsnationwide and nine NEA inhouseelectrical engineers in 2005. There is nophysical construction of a training center.The establishment of the ManagementAcademy merely refers to the conduct ofregular trainings. Although trainingsstarted as early as 2004, several wereconducted in 2005.

Strengthening ECs and DUsultimately aim to address distribution losses.To effectively lower rates, theseinefficiencies should be decreased. Anaverage national system loss level of 14.68percent as of the third quarter of 2005 wasachieved, close to the target of 13 percent.

Reduce claims on the universal chargewith respect to stranded costs

In a bid to finalize renegotiationswith IPPs by 2005, PSALM and NPCcontinued discussions with four IPPcontracts with outstanding issues. These areBauang, Limay A & Limay B, Malaya andthe Mindanao Barges. Their agreementsgenerally provided improvement in thetechnical specifications of the original IPPAgreements. No contracts were finalizedin 2005 but PSALM has already securedthe necessary PSALM (and NP) Boardapprovals for the said four agreements andsubmitted the same to the InvestmentCoordination Committee of the NationalEconomic and Development AuthorityBoard for its appropriate approval orclearance-on-a-no-objection basis.

Provide competitive power rates/time-of-use (TOU) electricity pricing

Aside from promulgatingguidelines and issuing decisions to ensurethat the true cost of electricity is reflectedin the rates charged by its regulatedentities, the ERC prescribed TOU pricingby virtue of its Order dated September 3,2004. Mandatory implementation ofTOU rates for DUs in the Luzon andVisayas grids took effect in the powerbilling of May 2005. The adoption ofTOU pricing scheme provides end userswith price signals on the efficient use ofgeneration facilities. It gives an incentivefor enrolled customers to shift load frompeak to offpeak periods because of theprice differential. Eventually, the loadshifting will result in overall improvementof the utility system’s load factor and theefficient use of the limited generationcapacity.


Eliminate cross subsidy

The Intra-Regional Grid CrossSubsidy was phased out in October 2005but was targeted in September 2005. Thephaseout was first reflected in the October2005 power bill upon ERC’s Order datedOctober 27, 2005.

The Inter-Class Subsidy is beingremoved in various schemes (1/4, 1/3, 2/3, 40:60). In the case of MERALCO, thefirst phase covers the removal of 40-percentsubsidies beginning in October 2004, andthe second phase covers the removal ofanother 30 percent by October 2006. Uponthe complete removal of this interclasssubsidy, the industrial and commercialcustomers will no longer subsidize theresidential customers, hospitals and smallindustries. As of September 2005, a totalof 11 private DUs and 115 ECs hadimplemented the removal of all crosssubsidies.

ENCOURAGE PRIVATE SECTORPARTICIPATION

Operations of seven off-grid areasof NPC-SPUG have been privatized, raisingprospects of additional savings of as muchas PhP2 billion a year for the corporation.These privatized areas are among the 14islands earlier identified by NPC as priorityor “first-wave” areas for privatization byDecember 2005. The DOE opened theseoff-grid areas for private sector participationin January 2004. The other SPUG areas thatare up for privatization are Masbate,Occidental Mindoro, Camotes Island inCebu, Siquijor, Basilan, Sulu and Tawi-Tawi. The bidding for the privatization ofNPC-SPUG areas was supervised by theInternational Finance Corporation (IFC)and the sealed bids were opened in August2005. Coastal Consortium submitted the

lowest electric generation service cost thusemerging as the winning bidder. Thesubmission covered electric generationservices in Marinduque, Romblon andTablas Island.

In line with DOE’s mandate todetermine the remote and unviable areas,the draft DOE Circular prescribing theparticipation guidelines for the qualifiedthird party (QTP) was completed in May2005. The Rural Power Project-ProjectManagement Office is assisting and guidingprivate sector firms with projects adaptableunder the QTP framework particularly theoff-grid systems. Likewise, DOE hasconducted pre-investment studies andbaseline studies on five provincial marketpackages of Palawan, Iloilo-Antique,Eastern Samar and Agusan del Sur.

ENSURE SUFFICIENTAND RELIABLE POWER SUPPLYAND SYSTEM EFFICIENCYIMPROVEMENT

To deliver reliable and sufficientpower supply to end users, several majorprojects have been prioritized by TransCoprimarily to decongest the majortransmission highways of the country. Forthe Luzon grid, major projects involve theintegration of recently completed andincoming power plants into the system toeffectively transmit power to the main grid.Likewise, the southern transmissioncorridors were strengthened as thetransmission lines from Batangas to Makbanand further to Biñan were reinforced. Thisestablished a more reliable delivery systemtoward Metro Manila. In Northern Luzon,two major projects are being implemented.These are the upgrading of the SanManuel-Concepcion-Mexico transmissionline and the completion of Bauang-SanEsteban 230 kilovolts (kV) transmissionline project.


On the other hand, projects forVisayas focused on interconnectionreinforcement and substation expansion.Total ongoing projects are the constructionof 562 circuit kilometers (ckt-km.) oftransmission lines, 1,160 megavolt amperes(MVA) of substation capacity and 357megavolt amperes reactive (MVAR) ofcapacitor devices for voltage support.Completed projects in 2005 consisted of theCebu-Mactan 138kV Interconnection andthe Panay-Boracay Interconnection.

For the Mindanao grid, a total of479 ckt-km of lines and 1,100 MVA ofsubstation capacity were started. Specificprojects include Abaga-Kirahon 230kVTransmission Backbone, reinforcement ofthe 138kV lines from General Santos toTacurong extending to Nuling, extensionof major substations in Aurora, Ma. Cristina,Sta. Clara, Kibawe, Butuan, Bislig, NewLoon and Tindalo, installation of newsubstations in Bunawan and Maco andextension of 69kV lines to connect the load-end substations of the EC.

PURSUE TOTAL BARANGAYELECTRIFICATION

As part of the government’s 10-point agenda, DOE pursued its thrusttowards 100 percent barangay electrificationby 2008. In 2005, a total of 618 barangayswere energized, bringing the electrificationlevel to 93.78 percent in 2005 from 92.41percent in 2004. This fell short of the 96.2percent energization level target, leaving2,564 barangays still to be energized until2008.


Chapter 12Responding to the Basic Needs of the Poor

Expanding Livelihood and MicrofinanceOpportunities for the Poor

Microfinance

Microfinance (MF) was identifiedin the Medium-Term PhilippineDevelopment Plan (MTPDP) 2004-2010 asone of the strategies to provide livelihoodfor the poor. From January to October2005, new loan releases registeredaggregately by the People’s Credit FinanceCorporation (PCFC), UCPB-CoconutIndustry Investment Fund (CIIF), Quedanand Rural Credit Guaranty Corp.(QUEDANCOR), Land Bank of thePhilippines (LBP), Small BusinessGuarantee and Finance Corporation(SBGFC) and the National LivelihoodSupport Fund (NLSF) amounted toaround PhP8.4 billion – benefiting 577,671new MF borrowers.

The expansion of microfinance inthe Philippines was made apparent withthe country’s increased commitment toensure the transparency and quality of MFoperations, and with the growing interestof commercial players and investors toengage in MF services. To ensure moretransparent and sustainable microfinanceinstitutions (MFIs), the PerformanceStandards for All Types of MFIs wasinitiated by the National Credit Council(NCC) in collaboration with key MFstakeholders. This set of standards wasadopted by government financialinstitutions (GFIs), regulators and relevantindustry associations. The Bangko Sentral

ng Pilipinas (BSP) also continued toadvocate for the establishment of acomprehensive and credible credit bureau.A bill establishing a credit informationsystem in the Philippines is currentlybeing deliberated in the Senate and in theHouse of Representatives.

To propagate best practices in theindustry, the Association for SocialAdvancement (ASA) InstructionalManual was published. It providesguidelines to would-be replicators of theASA methodology, based on theexperiences of three breakthrough MFIs:the Center for Agriculture and RuralDevelopment, Inc. (CARD-NGO), theLifebank Rural Bank of Maasin, Iloiloand the Center for CommunityTransformation (CCT). Through thesecond phase of the Microfinance SectorStrengthening Project (MSSP), these MFIswere able to exhibit more than 100percent operational and financial self-sufficiency.

To further raise the quality of MFapproaches and services in the country,the People’s Development Trust Fund(PDTF) was operationalized with the aimof strengthening the technical capacity ofMF players. However, the PhP 4.5 billionfund supposed to be appropriated by thegovernment for 10 years, remainsinadequately funded with only PhP100million in trust loaned to NAPC fromNLSF. The manual of operations thatincludes operational and proceduralguidelines for fund utilization has beenfinalized. To deal with inadequate funds

82 RESPONDING TO THE BASIC NEEDS OF THE POOR

for the much-needed capacity building,NAPC had been sourcing funds frominternational donor agencies in the formof technical assistance, grants and loans.One of these is the Asian DevelopmentBank (ADB) grant to enhance the accessof the 14 NAPC Basic Sectors tomicrofinance services in frontier areas,which are characterized by high povertyincidence and low MF saturation. It aimsto improve MF outreach and sustainabilityby identifying the accessibility issues ofpoor households and training needs ofexisting MFI clients.

With the development of theindustry, the Bangko Sentral ng Pilipinas(BSP) started evaluating and amendingrelevant regulations to respond to theemerging issues and products of MF suchas microagri products, housingmicrofinance, remittances and e-Banking.From mere provision of credit, MF nowincludes related and reinforcing servicessuch as savings, micro-insurance, housingsupport, business development servicesand the like. Efforts to promote gender-responsive MF services were also initiated.These include the conduct of a regionaltraining on gender in microfinance inMindanao and gender mainstreaming indonor-funded special projects. As part ofthe preparatory activities for the proposedGender-Responsive Economic Actions forthe Transformation of Women (GREAT)Project, a preliminary study on laws,policies, programs and services onmicrofinance and microenterprise was alsodone to assist key agencies in developing aset of assessment criteria for gender-responsive microfinance services andproducts.

The People’s Credit FinanceCorporation (PCFC) maintained activepartnership with 199 MFIs operating in 80provinces. The number of cities and

municipalities covered by the companyincreased from 115 cities and 1,263municipalities in 2004 to 117 (1.7% rise)and 1,319 (4.4% rise) respectively in 2005.Its outstanding loans of PhP3.17 billionat yearend falls below the PhP3.45 billionprogrammed for 2005 due to the delaysin the release of funds to PCFC by itscreditors. Nevertheless, 1,652,148 activeend-clients, excluding borrowers whodropped out from the group and thosefrom phased-out MFIs, benefited from it,exceeding its target number of activeborrowers by almost 14 percent.

This was due to the President’sdirective to increase the number ofenrollees in the last two quarters of 2005,the continuous improvements andinnovations in microfinance services, andthe increase in the number of MF providers.The banking sector now has 195commercial and rural banks engaged in MFreaching over 600,000 microentrepreneursaround the country, with a large number ofthem serving as PCFC conduits.

Livelihood and Entrepreneurship

Aside from the 1,652,148microentrepreneurs assisted by PCFCand its partners to gain self-employment,livelihood convergence projects werepursued in areas where the poor andvulnerable are concentrated. SixteenPoverty Free Zones (PFZ) wereestablished in all regions except RegionIVB, leading to the creation of corecommunity enterprises such as floating/cruising restaurants, mussel productionand processing, corn husk processing,bottled sardines production, householdaccessories making, squash noodleproduction, livestock production anddairy processing, and sinamayproduction.


There were also 935 Self-Employment Assistance – Kaunlaran(SEA-K) projects that were given capitalassistance which in turn benefited 20,009families in 2005. However, only 38 percentof the targeted SEA-Kabayans (groupsorganized to manage SEA-K microprojects) were organized to access capitalassistance due to dwindling funds in theSEA-K Trust Fund. This trust fund, witha starting amount of PhP63 million fromthe DSWD, was created to provide fundingassistance to SEA-K beneficiaries. Since thestart of the project in 1993, the said fundhas not been replenished with anygovernment resources. The loan periodgiven to SEA-K beneficiaries, ranging from3-5 years with a maximum loan amountof PhP5,000 per member, and therelatively low repayment rate of 74 percentlikewise contributed to the slow return ofseed capital back to the trust fund.

Livelihood programs for the youthwere also implemented. To equip themwith the skills and competencies requiredby the market, DOLE trained almost 94%of its targeted 100,000 apprentices underits Kasanayan at Hanapbuhay Program andfacilitated the hiring of 850 out-of-schooland out-of-work youth in Metro Manilaunder its emergency employment program.The latter figure is three percentage pointshigher than the Department’s programmedaccomplishment for 2005.

Donors, LGUs and civil societylikewise led to the creation of livelihoodopportunities and the development ofenterprises in Mindanao and other regionsof the country. The Philippines-AustraliaCommunity Assistance Program(PACAP), a component of Australia’sDevelopment Cooperation Program, forinstance, provided a PhP112.95 milliondevelopment grant that spurred livelihoodopportunities, focusing mainly on

agribased and off-farm activities. Suchinvestments which include microlendingfor diversified and organic farming,permaculture projects, enhanced bananaproduction and marketing, and integratedagrilivestock and organic fertilizerproduction, among others, helpedimprove the economic condition of77,721 beneficiaries nationwide.

Speeding Up Asset Reform for theLandless

Agrarian Reform (See Chapter 3,Agribusiness)

On the land tenure improvementstrategy under the ComprehensiveAgrarian Reform Program (CARP), a totalof 147,199 hectares were awarded anddistributed to 81,792 agrarian reformbeneficiaries (ARBs), making them full-fledged owners of the land they till. From1972 to 2005, 3.7 million hectares withland titles were distributed to more than2 million ARBs, including those inARMM. A total of 24,749 hectares werealso placed under leasehold. This coveragemarks 93 percent accomplishment outof the 26,549-hectare target.

Resolution of agrarian-relatedcases for 2005 is relatively high. The DARAdjudication Board (DARAB) and itsadjudicators resolved a total of 14,720cases representing 96 percent of the year’starget. This program involves theadjudication of just compensation andregular cases by the DARAB and itsregional and provincial adjudicators. Justcompensation cases usually involve therecomputation and fixing of land values.Regular cases, on the other hand, includeamong others, ejection of a farmer fromthe land he/she tills, fixing of lease rentalsin leasehold areas, recovery of possession,


and cancellation of land titles.Although the Department is not

directly engaged in organizing, itencourages farmers, specifically the ARBs,to join cooperatives or farmers associationsto be able to avail themselves of varioussupport services that are beneficial tothem. In 2005, there were 114 neworganizations formed while 71,298 ARBsbecame new members. In total, 4,829organizations with 478,262 members existin the ARCs since 1993. Of the totalmembership, 289,784 are ARBs,representing more than 60 percent of totalmembership.

Ancestral Domain

To intensify ancestral domain landreform, a total of 237,004.42 hectares ofancestral domain and nine of 12 targetedCertificates of Ancestral Domain Titles(CADTs) were awarded in 2005. MoreCADTs were issued in 2004 (18) than in2005 (9) due to the carry-over issuancefrom 2003. The 2005 target of 12 CADTsis based on a one CADT per region plan.In the same year, nine titles wereaccomplished, two were scheduled forthird reading to be deliberated by theNational Commission on IndigenousPeoples (NCIP) En Banc for CY 2006, andone is scheduled for first reading. Theissuance of the remaining three CADTswas delayed because the indigenouspeoples (IPs) failed to submit all therequirements within the year. Suchissuance entails social preparation, research,establishment of project control, perimetersurvey, data processing and preparation,CADT deliberation. Similarly, the issuanceof CADTs is a demand-driven activity. Itlikewise depends on the degree ofpreparedness of the IP proponents and theactual filing of applications. As such, of

the 20 targeted in 2005, two were issuedand 18 are scheduled for deliberation bythe NCIP Commission En Banc for 2006.

The NCIP also pretested andadopted the Manual on AncestralDomains Sustainable DevelopmentProtection Plans (ADSDPP)Formulation. Since the ADSDPP processis still being formulated, noaccomplishment was posted in 2005 interms of its implementation. ThreeADSDPPs, however, were integrated inthe local development plans as a result ofthe Commission’s technical assistance intheir formulation. The formulation ofADSDPP both in CADT and non-CADT areas is very important as itdocuments the policies and mechanismsfor recognizing and promoting the rightsof Indigenous Cultural Communities(ICC), especially their right to ancestraldomain. It also identifies programs/projects that strengthen self-governance,alleviate poverty and protect theenvironment and cultural integrity, andfacilitates the conduct of free and priorinformed consent (FPIC) process, amongothers.

Only 10 Certifications ofPrecondition (CP) with FPICcompliance were issued in 2005 since thisis also a demand-driven activity. Thenumber of Certification of Preconditionwithout overlap/without IP issued toproponents in 2005, however, was muchhigher at 180. In 2004, there were 13 CPswith FPIC compliance and there were 101CPs with no overlap/IP issued toapplicants.

Other projects involving IPsderive funding assistance frominternational donors such as PACAP.Most of these projects focus onsustainable development initiatives inagriculture and the environment.


Making Essential Services MoreAccessible and Affordable: Health

Cost of essential medicines

To reduce the cost of essentialmedicines, the Parallel Drug ImportationProgram (PDIP) of the Department ofHealth (DOH) addresses the urgent needto make available quality low pricedmedicines to the public. According to thePharmaceutical Management Unit of theDoH (Gamot na Mabisa at Abot KayaProject—GMA 50), the prices of essentialmedicines decreased by an average of 41percent from 2001 levels, a figure lowerthan the 50 percent target by the year 2010.In 2005, only fast moving drugs andmedicines were included in thecomputation, unlike in 2004 wherein theprice reduction stood at an average of 60.9percent after all the slow moving and thefast moving drugs were included in thecomputation.

Relatedly, through the Half-PricedMedicines Program of the PhilippineInternational Trading Corporation(PITC), the distribution network of theBotika ng Bayan (BNB) was expanded from120 outlets in 2004 to 1,016 outlets by theend of 2005. In 2004, the opening of BNBoutlets was limited to Metro Manila andsome parts of Luzon, but in 2005, PITCexpanded its coverage to Visayas andMindanao. PITC supplied low costmedicines to 72 DOH hospitals, 110 localgovernment units (LGUs), and 3,500 Botikang Barangay (BnB).

To improve the use of genericproducts, DOH facilities and institutionswere required to use only genericterminologies in procuring, prescribing,dispensing and administering drugs andmedicines. They were also tasked topromote the Generics Law by con-ducting

seminars that aim to enhance awareness ofthe law, as well as to establish GMA-50Help Desks to assist the public in gainingaccess to low cost medicines and provideinformation on rational drug use.

Health Insurance

Cognizant of its mandate of universalcoverage, the Philippine Health InsuranceCorporation’s (PhilHealth) membershipcoverage reached 13.4 million registeredmembers or about 54.6 millionbeneficiaries. This represents 64 percentof the 2005 estimated population of 85million, lower than last year’s average of85 percent. The decrease in membership,particularly in the Sponsored Program,may be attributed to the LGU’snonrenewal of the membership of someindigent members enrolled under theSponsored Program (through theEnhanced PCSO GMA Program) or thePlan 5/25M. PhilHealth provided threeoptions to assist the LGUs in renewingthe membership of these indigentmembers, namely: (a) Regular SponsoredProgram, (b) Special LGU Premium, and(c) Oplan 2.5M without outpatientbenefits (OPB).

In accordance with ExecutiveOrder (EO) No. 392, “Mandating theTransfer of Overseas Filipino Workers(OFWs) Medicare Funds from the OverseasWorkers Welfare Administration (OWWA)to PhilHealth”, PhP530,382,446 will beused by 2.5 million OFWs and theirfamilies for their benefit payment,administration, and capital expenditures.By the end of 2005, the Overseas WorkersProgram (OWP) of PHIC registered700,000 members or an estimated 3.4million beneficiaries.

The accredited health facilities ofPhilHealth increased from 1,576 in 2004


to 2,750 in 2005. Health facilities includehospitals, medical clinics, rural health units(RHUs), TB-DOTS (Tuberculosis-Directly Observed Treatment ShortCourse) centers, and maternity clinics. Inthe same manner, there was an increase inthe number of accredited medicalprofessionals from 18,677 in 2004 to 21,148in 2005. Of this figure, 10,357 or 49.0percent are specialists, 10,486 or 49.6percent are general practitioners, and 218or 1.0 percent are dentists. There are also87 accredited midwives (0.4%) providingquality medical care to child-bearingmothers and neonatal care for thenewborn. By being accredited withPhilHealth, doctors, dentists, and midwivesare entitled to financial benefits for theservices they provide to PhilHealthmembers. Surgeons are entitled to amaximum of PhP16,000 whileanesthesiologists are entitled to a maximumPhP5,000 per single period ofconfinement, depending on thecorresponding relative value unit of thesurgical procedure done on a patient.Accreditation is a way by which PhilHealthis able to ensure the quality of servicebeing availed by members.

Public health programs

To strengthen public health, thegovernment pursued programs ontuberculosis, malaria and HIV/AIDS. Thetuberculosis program-Public-Private MixDOTS (PPMD) was adopted as a measureto reach 70 percent detection rate, and asan attempt to entice the private sector tocontribute to the objectives of the NationalTB Control Program. The case detectionrate increased to 71 percent in 2004, from61 percent in 2003. Also, cure rateincreased to 81 percent in 2004, from 77percent in 2003. With regard to malaria

morbidity, it has increased from 48/100,000 cases in 2002 to 59/100,000 casesin 2004. The increasing rate is due to theimproved detection of malaria cases whichin turn is attributed to theimplementation of different programstrategies, such as trained microscopistsassigned in remote areas and RHUs. Withthe Expanded Program on Immunization(EPI), the coverage for the fullyimmunized children (FIC) in the lastquarter of 2005 is 76 percent, higher thanthe 2003 figure of 70 percent. The HIV/AIDS prevalence rate remains below onepercent. The 4th AIDS Medium TermPlan 2005-2010 was formulated, whichwill serve as a blueprint for action inaccelerating the country’s response toSTI/HIV/AIDS during the next six-yearperiod.

To improve nutrition, thegovernment implemented the “Food forWork, Food for School Program” in thelast quarter of 2004. The program wascontinued because of the reportedincrease in the proportion of hungryfamilies from 15.1 percent in 2004 to 15.5percent in August 2005, which thenfurther increased to 16.7 percent inDecember 2005 (Social Weather StationsSurvey). In October 2005, the NationalNutrition Council (NNC) implementedthe “Food For School Program: Bigas parasa Mag-aaral at Pamilya”, in coordinationwith the Department of Education(DepEd), Department of Social Welfareand Development (DSWD), andNational Food Authority (NFA). Theprogram aims to provide one kilogram ofrice per child per day among children inselected schools and day care centers. Itaims to mitigate hunger among families,improve retention of children in schooland improve nutritional status, especiallyof malnourished children. Provinces


classified as very, very vulnerable (cluster5), very vulnerable (cluster 4), andvulnerable (cluster 3) using the 12 socio-economic indicators of the FoodInsecurity and Vulnerability Informationand Mapping System (FIVIMS) wereprioritized. At the end of December 2005,the program covered a total of 111,000families nationwide.

In line with the target of increasingthe practice of responsible parenthood,the contraceptive prevalence rate (CPR)increased to 49.3 percent (2004 FamilyPlanning Survey) from 48.9 percent in2003 (2003 National Demographic andHealth Survey). The prevalence rate fortraditional methods decreased by 1.3percentage points from 15.5 percent in2003 to 14.2 percent in 2004. Theprevalence rate of modern methodsincreased from 33.4 percent in 2003 to 35.1percent in 2004. The overall increase inCPR is due to the increase in the use ofmodern methods, where the largestcontributor is the gain in popularity ofthe pill from 10 percent in 1998 to 15.6percent in 2004. In family planning, theDirectional Plan of the PhilippinePopulation Management Program (PPMP)2005-2010 lays down the demographicscenario, operational framework andstrategies that unite the four Programcomponents thrusts: (a) ReproductiveHealth (RH) and Family Planning (FP);(b) Adolescent Health and YouthDevelopment; (c) Population andDevelopment Integration; and(d) Resource Generation, Programming,and Mobilization. The plan is consistentwith the government’s MTPDP 2004-2010, the International Conference onPopulation and Development (ICPD), theConvention on the Elimination of AllForms of Discrimination Against Women

(CEDAW) commitments, and theMillennium Development Goals (MDGs).

Dangerous Drugs Program

The Drug Testing OperationsManagement of Information Systems(DTOMIS) of the DOH is a software thatlinks all Drug Testing Laboratories (DTL)nationwide into a central databaseprocessing system. According to theDTOMIS, out of the 2,659,961 clientstested in October 2005, 2,930 (0.11%)were confirmed positive for drug use,down from 0.19 percent in 2004. Most ofthe clients are drivers (as required by theLand Transportation Office-LTO), anduniformed personnel (soldiers, police,others). The drop should be viewed in thelight of the large pending applications forconfirmatory testing (4,122) due to thePNP testing machines that needed fixingat the time. Confirmed positive casesmostly came from NCR followed byRegions IV, III and I.

The Dangerous Drugs AbusePrevention and Treatment Program of theDOH trained laboratory analysts andheads of laboratories nationwide toincrease their competency andprofessionalism. 67 private screening DTLanalysts, 89 forensic laboratory analystsfrom the DOH, NBI and PNP, and 717private screening DTL analysts weretrained in Cagayan de Oro and NCR in2005.

On the supply side, the PhilippineDrug Enforcement Agency (PDEA), incoordination with concerned lineagencies, initiated the development of aplan that will provide alternative sourcesof income for marijuana growers as ameasure to eradicate the production of theillegal crop.


Protecting the Vulnerable

Children in need of special protection

To provide children preferentialaccess to social assistance, the Bright ChildProgram was launched by President GloriaArroyo in 2005. The Council for theWelfare of Children (CWC) disbursedPhP5 million as seed money to the 24most nutritionally depressedmunicipalities (NDMs) in Regions V andVIII to implement the program, benefiting2,160 children and their families. Thisamount was used to cover the followingservices: (a) deworming and supplementalfeeding for 3-5 year old underweightchildren; (b) nutrition education forparents (PABASA sa Nutrisyon); and (c)livelihood and food production trainingand activities (Food Always in The Homeor FAITH).

To put greater emphasis on childhealth and nutrition, the NationalNutrition Council (NNC), incoordination with the National DairyAuthority (NDA), Philippine CoconutAuthority (PCA), Department of SocialWelfare and Development (DSWD) andthe Food and Nutrition Research Institute(FNRI) implemented the “BrighterChildren, Wealthier Farmers (BCWF)Program” also called as “Malusog naSimula” in the last quarter of 2005. Theprogram covered 60,000 children in daycare centers, where they were provided forabout 60 days with a glass of milk fromlocal dairy farmers and coco pan de sal fromlocal bakeries trained by the FNRI.Inspired by the Action for NutritionImprovement (ANI) Approach of theNNC, “Malusog na Simula” contributedto increased economic activity in the areascovered. DSWD coordinated the overallimplementation of the program. The

Program had a total budget of PhP50million covering 658 day-care centers in90 municipalities and 27 provincesnationwide.

Centers and institutionsaddressing the survival, protection andrehabilitation needs of children were alsostrengthened. Ninety professionalsbenefited from the case management andpsychosocial training and 90 caregivers andhousekeepers in residential care facilitieswere trained on surrogate parenting toCNSP. In an effort to uplift thesocioeconomic conditions of streetchildren in 10 major cities in Visayas andMindanao, the Canadian-assisted Streetand Urban Working Children Project(SUWCP) provided school suppliesamounting to PhP2.48 million, benefiting10,953 street and urban working childrenin seven partner LGUs. Moreover, a totalof 657 bags of rice amounting toPhP558,450 were released to 2,200SUWCs housed at Social DevelopmentCenters.

Frontline services that preventchildren from being victimized, abandonedand neglected were likewise improved. Atotal of 2,260 street children were servedby the DSWD through their 1,195community-based programs and 265center-based services. Moreover, 2,600street children were supported through theStreet Education Program of the SixthCountry Programme for Children(CPC6). Around 470 abandoned andexploited street children in Tacloban,Ormoc and Dagupan were reached bystreet educators. The 4,113 child abuse andpedophilia cases reported to the PNPresulted in the conduct of 6,607operations, leading to the arrest of 3,256offenders and the filing of 3,355 cases.

As part of the variousinterventions to implement an enhanced


program for children involved in armedconflict (CIAC), the CWC is finalizing atraining module in handling them, whichincludes a flowchart of strategies from thetime of apprehension to the time ofreferral. A framework on Community-Based Disarmament, Demobilization,Rescue and Reintegration (DDRR) is alsobeing developed and a revision on theMemorandum of Agreement among thevarious stakeholders on the handling ofchildren involved/caught in armed conflictis currently being undertaken by theCouncil. A common template on thedocumentation of CIAC which was adoptedin October 2005 was explained to theparticipants of a training recently conductedin CARAGA.

Youth employment

In an effort to make youth moreemployable, 184 youth were hired underthe Government Internship Program(GIP). Around 44 percent of the 31,970marginalized out-of-school/out-of-workyouths who received skills and livelihoodtraining were also employed underDOLE’s emergency employmentprogram.

The Youth EntrepreneurshipProgram (YEP), on the other hand, whichtrains the youth to become entrepreneursthrough business training and mentoringand loan provision, has been temporarilyput on hold while being reformulated.This was in keeping with the NationalYouth Council (NYC)’s RationalizationPlan.

Women in Especially DifficultCircumstances

Based on DSWD data, there was aslight decrease in violence against women

and children (VAWC) from 5,559 casesserved in 2004 to 5,389 served in 2005.Similarly, the PNP reported a decreasedfigure of 3,553 cases of wife battering/physical injuries in 2004, down from 4,296cases in 2003 and 5,058 cases in 2002. Toassist women in especially difficultcircumstances (WEDCs), a total of 3,462women were provided with protective andrehabilitative services in the communityfrom January to September 2005. Around770 women who could not availthemselves of community-based serviceswere given center-based assistance for thesame period. DSWD’s Crisis InterventionUnits (CIUs) continuously reached outto women through the provision of food,medical and financial assistance.

The National Action Plan toEliminate Violence Against Women(NAP-EVAW) was also implementedthrough capability building activities forfrontline service providers. Six provincesin Ifugao (Tinoc, Asipulo, Kiangan,Lanot, Banawe and Hinyon), threemunicipalities in Masbate (Dimasalang,Placer and Planas) and three municipalitiesin Eastern Samar (Borongan, Llorente andMaydolong) were oriented on RepublicAct (RA) 9208 (Anti-Trafficking AgainstPersons Act) and RA 9292 (Anti-ViolenceAgainst Women and Children Act) byNCRFW. Conducted with the DSWD,these sessions aim to inform localgovernment officials of their roles andresponsibilities under these two laws, andcall for their support to prevent andeliminate all forms of violence againstwomen. Benchmarks and assessmenttools for VAWC services to improve theimplementation and monitoring of VAWwere also developed. The satisfactoryresults of all these efforts can be seen inthe breakthroughs in prosecutingtrafficking offenders during the last


quarter of 2005, with seven convictionsmade for violations of RA 9208.

To ensure that women contributeto and benefit from development, theHarmonized Gender and DevelopmentGuidelines for Project Development,Implementation, Monitoring andEvaluation was launched and adopted bythe ODA-GAD Network, NCRFW andNEDA. NEDA encouraged governmentagencies, donors, NGOs, LGUs and theacademe to use the Guidelines in theintegration of gender concerns in thevarious stages of the project cycle. This,however, does not apply to WEDCmatters alone. It encompasses a wholegamut of issues concerning genderequality and equity in development.

To promote women’s humanrights, the NCRFW produced anddisseminated IEC materials such as Factsand Figures on Filipino Women, and theSituationers on Violence Against Womenand Rural Women. Core VAW messageswere also published and integrated in thebasic education curriculum. DepEdcurriculum writers were trained by theCommission on gender sensitivity,focusing on adolescent reproductivehealth and violence against women.

Assistance was also provided tostrengthen the capability of labor andmanagement in supporting initiatives thatpromote family welfare. DOLE advocatedthe Family Welfare Program to 895 firmsin 2005, which is a 10 percent increasefrom the 816 firms it covered in 2004.

In the legislative arena, measuresto promote gender equality and womenempowerment have been filed and are stillpending in Congress. These include theLocal Sectoral Representation Bill,Responsible Parenthood and PopulationManagement Bill, and the Anti-Prostitution Bill.

Persons with disabilities (PWDs)

A training of 25 webmasters fromgovernment and NGOs based inMindanao was also conducted to open upeconomic and various opportunities forpersons with disabilities in the south. Itaims to spread accessible ICT for PWDsin the southern regions.

In terms of social assistance toPWDs, 438 of them were served withcommunity-based protective andrehabilitation services from January toSeptember 2005. Out of the 1,500-targeted PWDs, 1,328 were also givenlivelihood training and 1,181 were givenjobs. Monitoring and advocacy issuescontinue to deter the full implementationand strict compliance to the policy ofemploying PWDs in at least 10 percent ofthe government workforce.

Seminars to create awareness on theAccessibility Law were held in the NCR.A “Training of Trainers on the Promotionof a Non-Handicapping Environment forPersons with Disabilities” was conductedto foster the creation of a network oftechnical people from the government andNGOs concerned with implementing theAccessibility Law. There was also aninventory of accessibility facilities forgovernment and private institutions andestablishments. According to the DPWH,393 institutions and establishmentscomplied, 584 partially complied and 500did not at all comply with the law.1

Monitoring of agency activities forPWDs, however, was difficult since therewas no clear basis for operationalizingsuch. The General Appropriations Act(GAA) provision mandating agencies toset aside one percent of their total budgetfor PWD concerns could not beinstitutionalized since it is always subjectto the availability of funds of the national

1 There is difficulty in estimating the proportion of agencies complying with the law due to data unavailability.


government. Without the benefit oflegislation, it runs the risk of gettingscrapped anytime in the GAA.

Older persons

DSWD served 416 community-based and 552 center-based older personsin 2005. Most of the residential and daycare facilities and services for older personsare still being maintained by thegovernment through its center-basedinstitutions. Additional resources areneeded to improve the structure, facilitiesand management of these centers. Theagency also reported 1,179 (65.8% of thetotal) cities/municipalities with an Officeof Senior Citizens Affairs (OSCAs).

Indigenous Peoples (IPs)

Educational assistance wasprovided to poor but deserving IPs.However, out of the PhP84.07 millionneeded funds, only PhP52.62 million(62.6%) was released for SY 2005-2006.The nonrelease of the balance dislodgedabout 2,000 IP grantees whose paymentsare still pending. To cover for their tuition,most of their parents incurred loans in thehope that the owed money will soon bereplenished. Some of them were assistedthrough obtained promissory notes issuedby the NCIP Provincial Offices.Corollary to this, the NCIP Chair issueda memorandum suspending theprocessing of new applicants except forareas where support funds to augment thedeficit can be obtained.

Such nonrelease of funds likewisestifled the promotion of health knowledgeand practices and the use of traditionalmedicine among IPs. Only seven out ofeight proposals were funded, and no fundswere released for the succeeding projects.

In addition to funding problems,change in leadership of concerned agenciesalso hindered initiatives on IPs. Toillustrate, the change in leadership inOPPAP, DSWD and DepEd – agenciesinvolved in conducting trainors’ training(TOT) - in the 2nd quarter of 2005 delayedthe documentation of Indigenous PeoplesChildren-Caught in Armed Conflict (IPC-CIAC) cases. The conduct of TOTs is thebasis for the convening of the RegionalIEC Workshops, a prerequisite fordocumentation of cases.

Legal assistance was provided toICCs/IPs in litigation involvingcommunity interests. In 2004, out of the25 cases, 11 were resolved and 14 werecontinued in 2005. For 2005, there were17 new cases. From 2004 ongoing cases, 2were decided with finality; hence, therewere 29 cases to be continued in 2006. Thecases vary from criminal, civil, labor, toadministrative cases.

With the adoption of ResolutionNo. 079 series of 2005 issued by theCommission en Banc to utilize the NCIPfund for health services amounting toPhP862,480 as a Transition Fund foremergency situations, bulk of which(PhP790,480 or 91.%) was sharedequitably by the 12 Regional Offices. Theamount is to be utilized only for naturalcalamities, epidemics, displacement as aresult of conflict or militarization, and forany similar occurrence that usually besetand adversely affect the indigenous culturalcommunities and which require urgentaction. It benefited a total of 230 families.The remaining PhP72,000 was used torenew the PhilHealth enrollment of 60families in the pilot area of Jamindan,Capiz.

To enhance the socioeconomicproductivity of IPs, projects on honeyproduction and goat raising were


supported through fund sourcing. Thesewere walk-in requests of IPs themselves.A start-up capitalization amounting toPhP11,500 was provided for honeyproduction, benefiting one IP communitywhile PhP35,000 was provided to 20families for goat-raising.

The NCIP implemented 8 out of12 social services for IPs. Thesecontributed to the income generatingactivities of ICCs/IPs including, thoughnot limited to, small-scale infrastructure,extension of credit, financing, marketingand other social services.

Disaster victims

The natural and man-madedisasters that struck the country last yearresulted in the loss of lives, injury,displacement and damage to propertytotaling PhP3.7 billion. Flooding, whichwas caused by intermittent heavy rains,was the major resultant disaster in 2005.Seriously affected areas include RegionsI, II, III, IV-B, V, VI, VIII, CAR andCARAGA.

The Office of the Civil Defense-National Disaster Coordinating Council(OCD-NDCC) extended relief assistanceto 11,622 affected families amountingPhP15,188,200. It also facilitated theapproval and subsequent release ofcalamity fund assistance totalingPhP685,446,910 for the immediate reliefand rehabilitation of disaster-affectedcommunities.

To minimize future risks,community-based disaster managementwas improved through the “Strengtheningthe Disaster Preparedness Capacities ofthe Municipalities of Real, Infanta andNakar” or REINA Project. The projectaims to beef up the municipalities’communication and warning systems.

The NDCC also developed 245 hazardmaps, inventoried 1,078 buildings with 2storeys and above to determine theircompliance to safety laws and regulations,identified and profiled 58,162 residencesat risk in highly vulnerable communitiesand integrated 84 disaster risk reductionmeasures into local development plans. Tocomplement the calamity fund, the ICC-Technical Board agreed to expedite theGovernment of the Philippines (GOP)-World Bank collaboration on thedevelopment and enhancement of thedraft Operations Manual on the RapidDisbursement Mechanism for DisasterManagement Funding, which includes thesetting up of a Disaster Recovery Facility(DRF) and Risk Mitigation Facility (RMF).

Empowerment

The Kapit Bisig Laban sa Kahirapan– Comprehensive and Integrated Deliveryof Social Services (KALAHI-CIDSS) hasbeen one of the government’s mainprojects for reducing poverty andempowering the poor. As of 2005, 42provinces, 101 municipalities and 2,367barangays have institutionalized theprogram. KALAHI focuses on the 42poorest provinces in the Philippines.Delayed release of funds, however, causedthe non-achievement of targeted numberof municipalities and barangays. Theproject has provided community-identified basic needs like water supply,barangay roads and health clinics whichwere implemented in partnership withLGUs and local communities. TheDSWD at present is fine-tuning itsoperation as well as securing timelyreleases of funds to improve projectimplementation.

The NAPC has forged the BasicSector – LGU partnership through the


BASELINK (National) and the RegionalKALAHI Convergence Groups (RKCG).This allows the basic sector representativesto take part in preparing, implementing,monitoring and evaluating povertyalleviation plans. RKCGs were created in16 regions of the country to reducepoverty in areas targeted under theKALAHI Project. Through the NAPC-initiated partnerships with the Chamberof Real Estate and Builders (CREBA)which gave homes to 50 poor families inCAR, and with Splash Foundation whichprovided livelihood and employmentprograms under KALAHI, a PrivateSector Forum was conducted to forge apartnership between the RKCGs and theprivate sector.

A draft Enhanced PovertyReduction Strategy (EPRS) 2005-2010 wasmade in 2005 with a US$50,000 UnitedNations Development Program (UNDP)grant to provide broad strokes that willguide the anti-poverty efforts of theadministration until 2010. On the otherhand, the Second Philippines ProgressReport on the MDGs, which wasprepared for the period 2001-2005, stressedthe importance of social service deliveryat the local level. Presenting the country’ssituation through data disaggregated bysex and geographical location, it led to thedevelopment of a framework that helpedguide DILG’s localization initiatives andimproved governance among LGUs.Around 799 LGUs have already localizedthe MDGs in 2005, vowing to halvepoverty by 2010.

To keep track of the country’spoverty reduction goal, the enhancedCore Local Poverty Indicators MonitoringSystem (CLPIMS) and the Local PovertyReduction Action Plans (LPRAPs) byLGUs were adopted and implemented.The NAPC developed the LPRAP design

and assisted in the conduct of training inLa Union, Agusan Del Sur, CamarinesSur, Oriental Mindoro and all KALAHIbarangays in CARAGA. In addition, theCommission formulated the LPRAP/LPIMS implementation strategy,capacitated the LGUs on these, andadvocated for the funding of LPRAPprocesses. The NAPC alsooperationalized a prototype anti-povertyprogram monitoring database dubbed“Enhanced-Integrated Monitoring Systemfor Anti-Poverty Programs and Projects(E-IMSAPP).” However, the systemcannot be utilized yet since majority ofthe agencies failed to submit informationon their APPs.

Meanwhile, youth participation indevelopment was supported through thecreation of 34 local youth developmentcouncils (LYDCs) and the provision ofassistance to 36 LGUs in coming up withtheir local youth development plans(LYDPs).

94 AUTOMATED ELECTIONS

Chapter 13Automated Elections

O

MODERNIZE THE ELECTORALSYSTEM

The election modernization projectof the Commission on Elections(COMELEC) has three phases:(a) completion and cleansing of databaseof registered voters; (b) automation ofcounting and canvassing of votes; and(c) electronic data transfer of electionresults.

Complete and cleanse database ofregistered voters

The first phase of the electionmodernization project is the developmentof a complete and cleansed database ofregistered voters using biometricstechnology. This aims to decrease thedisenfranchisement of voters and the casesof double or multiple registrants to zero tofive percent.

This phase consists of sevencomponents: (a) continuing registrationof voters; (b) implementation of Voters’

ne of the goals of the Medium-Term Philippine Development Plan (MTPDP) 2004-2010 and the 10-Point Agenda is credible and modernized elections. The MTPDP identifies the

following strategies to achieve this: (a) modernize the electoral system;(b) reform the campaign financing system; and (c) intensify voters’education on civic responsibility. In 2005, the election modernizationproject made some progress on cleansing the database of registered voters.However, no development was made on the automation of countingand canvassing, and the electronic data transfer of election results. Stepswere also taken to reform the campaign financing system and intensifyvoters’ education on civic responsibility.

Validation System; and (c) printing anddistribution of Voters IDs/VoterRegistration Records (VRRs)/Computerized Voters Lists (CVLs);(d) implementation of AutomatedFingerprint Identification System (AFIS);(e) legislative reforms; (f) informationcampaign drive; and (g) training.

The continuing registration oflocal and overseas absentee voters (OAVs)resumed in 2005. For local voters, theregistration period is from May 16, 2005to December 31, 2006, while for OAVs,from October 1, 2005 to August 31, 2006.Through the use of Data CapturingMachines (DCMs) during registration, theCOMELEC was able to capture the dataof 18.38 million out of the total 43.5million registered voters. It also sorted out77,807 out of the 110,090 IDs submittedfor correction. The commission alsoprinted 12,263,185 IDs/VRRs/ElectionDay CVLs nationwide, and dispatched11,412,300 local and 259,000 OAV IDs.Based on the AFIS results of theAutonomous Region in Muslim


Mindanao (ARMM) voters, 14,533 sets ofdouble or multiple registration cases werefiled for investigation.

Amendments to the OmnibusElection Code and other election laws werepursued, along with the provisions for theelection of sectoral representatives to theLocal Sanggunian, and the disengagementof public school teachers from compul-sory election duties. As part of its infor-mation campaign drive, the COMELECprepared the Voter’s Education CampaignPlan for the Resumption of the Nation-wide Continuing Registration. For the lo-cal and overseas absentee voters’ registra-tion, brochures and other print advertise-ments were used to inform and encourageFilipinos to register as voters. For theARMM registration, it held multi-sectorconsultative meetings, issued media advi-sories, and distributed flyers and handbillswritten in local dialects. The COMELECHotlines were reactivated to respond toqueries and reports from the public. Inpreparation for the continuing registrationfor local and overseas absentee voters,COMELEC personnel were trained on theuse of the Data Capturing System (DCS).

Automate counting and canvassingstarting with the 2007 elections

The second phase of the electionmodernization project aims to automatecounting and canvassing starting with the2007 elections. Its components include:(a) procurement of automated countingmachines (ACMs); (b) procurement ofballots and ballot boxes; (c) setting up ofappropriate units and operations tomanage the automated system;(d) legislative reforms; (e) informationcampaign drive; and (f) training.

In General Resolution (GR)159139, the Supreme Court (SC) declared

null and void COMELEC ResolutionNo. 6074 which awarded the contract forthe second phase of the electionmodernization project to Mega PacificConsortium (MPC). Also declared nulland void was the contract executedbetween COMELEC and Mega PacificeSolutions (MPEI). The SC furtherordered the commission to “refrain fromimplementing any other contract oragreement entered into with regard to thisproject”.

The GR also directed the Officeof the Ombudsman (OMB) to“determine the criminal liability, if any,of the public officials (and conspiringprivate individuals, if any) involved in thesubject Resolution and Contract”. It alsoordered the Office of the Solicitor General(OSG) to “take measures to protect thegovernment and vindicate public interestfrom the ill effects of the illegaldisbursements of public funds made byreason of the void Resolution andContract”.

On June 15, 2005, the SC deniedthe motion filed by the COMELEC touse the procured ACMs for the ARMMelections in August 8, 2005. Instead, itdirected the commission to “return theACMs to MPC-MPEI and recover theimprovidently disbursed funds”, and“devise a legally and technically soundplan to computerize our elections”.

Meanwhile, COMELEC soughtto amend Republic Act (RA) 8436 tofacilitate the modernization for the 2007election, and will authorize the agencyto use an automated election system.According to COMELEC, the RA obligesthem to only use devices that utilizeoptical mark reader technology. Theamendment aims to make the RA moretechnology-neutral. The bill wassubmitted for approval to the House of

96 AUTOMATED ELECTIONS

Representatives’ Committees on ElectoralReform and Information andCommunication Technology. At theSenate, a Technical Working Groupdrafted the amendments for submission tothe Committee on ConstitutionalAmendments, Revision of Codes andLaws.

Electronic data transfer of electionresults

The third phase of the electionmodernization project has the followingcomponents: (a) lease of Very SmallAperture Terminal (VSAT) equipment;(b) provision of a National ConsolidationCenter Services; (c) delivery of softwarelicenses for consolidation; (d) projectmanagement; (e) legislative reforms;(f) information campaign drive; and(g) training. In view of the order of theSupreme Court in GR 159139, theCOMELEC pulled out the VSATequipment from the sites.

REFORM CAMPAIGN FINANCE

Another key strategy towardscredible and modernized elections is toreform the current campaign financingsystem. This reform seeks to strengthen thepolitical party system and enhancetransparency in campaign contributionsand expenditures. Both the HouseCommittee on Suffrage and ElectoralReforms and the Senate Committee onConstitutional Amendments are currentlylooking into legislative proposals regardingthis.

INTENSIFY VOTER EDUCATION ONCIVIC RESPONSIBILITY

In partnership with governmentand civil society organizations, theCOMELEC conducted citizens andvoters education to encourage highervoter turnout in the succeeding elections.The Parish Pastoral Council forResponsible Voting (PPCRV) and theInternational Foundation for ElectoralSystems (IFES) assisted the agency informulating the Voters EducationTrainer’s Training Manual for LocalCommunity Volunteers in the ARMM.The training was pilot-tested in theprovinces of Sulu and Tawi-Tawi. TheVoter Education Program was alsolaunched in the National Capital Region(NCR) and other provinces. To furtherintensify voter education, theCOMELEC initiated talks with theDepartment of Education (DepEd) andCommission on Higher Education(CHED) to integrate election educationin the school curriculum.


Chapter 14National Harmony: The Peace Process

TThe following were the major

accomplishments under the peace process:

ON PEACEMAKING ANDPEACEKEEPING

Government of the Republic of thePhilippines-Moro Islamic LiberationFront (GRP-MILF) Peace Negotiations

Exploratory talks were conductedon September 15 to 16, 2005 in KualaLumpur, Malaysia where both sidesadopted consensus points on governanceissues.

The agreement to end hostilities hassignificantly reduced reported cases ofskirmishes between the AFP and the MILF.The success of the ceasefire is largelyattributed to joint monitoring efforts bythe GRP and MILF as well as civil societygroups in Mindanao, notably the BantayCeasefire.

On the rehabilitation anddevelopment aspects of the peace talks,steps have been taken to establish a WorldBank-administered Mindanao Trust Fundfor Reconstruction and DevelopmentProgram (MTF-RDP). This is to supportpost-conflict reconstruction and

he President’s resolve to put a just completion to the peace process has brought considerable gains to the peace negotiations, particularly with the MILF and in the implementation of existing

peace agreements. Confidence-building and development programs havealso contributed to sustained peace in conflict-affected areas.

development in the conflict-affected areasonce a formal peace agreement with theMILF is signed. Capability building forthe Bangsamoro Development Agency(BDA) has also began. The BDA is theproject implementing body identified bythe MILF to determine, lead and managerehabilitation and development projectsin conflict areas.

Other peace negotiationsconducted were:

Rebolusyonaryong PartidongManggagawa Ng Pilipinas/RevolutionaryProletarian Army/Alex Boncayao Brigade(RPMP-RPA-ABB). The agreement is nowin operation. Development projects werelaunched through the KALAHI inprovinces covered under the peaceagreement signed in December 2000. Onreintegration and civil and political rights,several alleged political prisoners havebeen released and granted immediatelivelihood assistance.

Rebolusyonaryong PartidongManggagawa Ng Mindanao (RPMM).Government reached a breakthrough inthe peace process with the signing of theagreement on cessation of hostilities with

98 NATIONAL HARMONY: THE PEACE PROCESS

the RPMM during the second round offormal talks held on October 28, 2005 inCagayan de Oro City. Consultations arealso being conducted in 100 RPMM-identified priority communities forrehabilitation and development.

GRP-National Democratic Front (NDF)Peace Talks

Formal talks between the GRP andNDF have not resumed since August 2004when the NDF unilaterally postponed thenegotiations. At present, government hassuspended the implementation of the JointAgreement on Safety and ImmunityGuarantee (JASIG) in response to theNDF’s unchanged position, effectivelywithdrawing from the peace negotiations.

As part of the confidence buildingmeasures, OPAPP extended humanitarianand technical assistance to the AllegedPolitical Offenders (APOs). They alsocontinued to monitor the status ofcongressional action on the draft bill onthe compensation of human rights victimsof the Marcos regime.

Complementary measures to minimize thelevel of violence arising from armedconflicts

National-level peace talks werecomplemented with initiatives to minimizethe level of violence arising from armedconflicts and to reduce their impact oncivilians. These include full compliancewith ceasefire agreements, support to peacezones and spaces for peace, addressing theissue of children in armed conflict, andexploring the possibility of localized peacetalks.

Full implementation of existing finalpeace agreements

OPAPP continued to monitor andfacilitate the full implementation of thePhilippine government’s final peaceaccords with the Moro NationalLiberation Front (MNLF) and theCordillera People’s Liberation Army(CPLA). The GRP-MNLF peaceagreement is on its second phase ofimplementation under Republic Act9054, the new Organic Act for theARMM. With regard to the GRP-CPLApeace agreement, a total of 264 and 528CPLA members have already beenintegrated into the AFP regular force andthe CAFGU, respectively. Furthermore,in 2005, government explored thepossibility of expanding theirreintegration program.

Implementation of an enhanced andintegrated rehabilitation program tomainstream former rebels into society

Under the national integrationprogram, the government accomplishedthe following in 2005: (a) provision ofemergency assistance for former rebels(FRs); (b) provision of livelihoodassistance for FRs; and (c) provision ofscholarships to qualified FRs under theJoint OPAPP-CHED Study GrantProgram, and endorsement of FRs toCHED-ARMM.

With the abolition of the NationalAmnesty Commission (NAC) pursuantto EO 415, OPAPP took over the residualfunctions and unfinished business of saidagency.


ON PEACEBUILDING AND CONFLICTPREVENTION

Rehabilitation and development ofconflict areas

The Kalayaan Barangays Programwas a major program launched this yearinvolving the immediate delivery of basicinfrastructure, livelihood and socialservices in conflict-affected barangays andcommunities covered by peace agreements.This initiative is led by the OPAPP inpartnership with the DND and othergovernment agencies. Actualimplementation of community projects isexpected to be in full swing with the releaseof the proposed allocation from thenational budget.

In Mindanao, various peace anddevelopment programs that have been inplace in the past years brought aboutbetter understanding on peace processesand mechanisms among different culturalgroups. These projects also provided coreshelter and other physical facilities andservices as part of rehabilitation anddevelopment efforts, some of which aredirected at those displaced by conflicts.These programs included the MindanaoNational Initiatives (Mindanao Natin)Program, Action for ConflictTransformation (ACT) for Peace, whichstarted on May 20, 2005; Project Hope forBadjaos; ARMM Social Fund; theRehabilitation of Internally DisplacedPersons and Tabang Sulu. Specificprograms for the ARMM also included theSelf-Employment Assistance-Kaunlaran(SEA-K) and an enhanced food for workprogram which provide livelihoodassistance activities, particularly to women.

Catch-up program for the ARMM andaffirmative action for Muslims

Agricultural development

As the country’s agrifisheryexport zone, the DA has implementedvarious programs and projects in war tornareas of Mindanao to make them self-sufficient even during the occurrence ofdrought and other man-made calamities.These include the GMA Rice and CornProgram and the Pagkain para sa Masa(PPSM). Livelihood programs were alsoimplemented for Camp Abubakar as partof the government’s commitment torehabilitate this community. In addition,programs for specific areas such as theMetro Kutawato covering Cotabato Cityand its adjacent municipalities and Basilanwere also implemented.

In line with the promotion ofSouthern Philippines as the halal centerof the country, MEDCO in coordinationwith the DA – Halal Food IndustryDevelopment Committee (DA-HFIDC)is linking up Halal initiatives in Mindanaoto the BIMP-EAGA. A National HalalFood Forum was conducted on October10 to 11, 2005 wherein the National HalalFatwa Council was organized. Aside fromthis, line agencies in the ARMM are nowworking for the establishment of acertifying body for Halal products.

Social development

The government supported socialprograms that are culturally responsive toMuslim needs. Under the Madrasaheducation program, the Bureau ofMadaris Education (BME) had processedaccreditation and recognition of the thirtyMadaris in ARMM under the stewardshipof the BEAM and the USAID. The BME

100 NATIONAL HARMONY: THE PEACE PROCESS

also proposed to the Civil ServiceCommission the conduct of QualifyingExaminations for Madaris Teachers inARMM as mandated by RA 9054. Theseefforts were complemented with a trainingprogram for teachers and administratorsand the development of curriculum andlearning materials.

In the public health sector, thefocus of assistance was in the provision ofbasic medical equipment and facilities bythe DOH and the conduct of capacitybuilding programs for health workers andadministrators. Foreign institutions such asthe USAID, AUSAID and JICA have alsoprovided technical assistance and directservices in reproductive health, HIVtreatment, tuberculosis and malariacontrol.


Chapter 15Peace and Order

T

THE LAW ENFORCEMENT PILLAR

The DILG leadership believes thatthe professionalization of police officers andmen will help realize genuine peace andorder with the presence of highly efficient,competent and credible uniformedpersonnel. As a result: (a) 10,881 PNPpersonnel were recipients of variouseducation and mandatory training courses;(b) meritorious awards and commendationswere given to 96,323 and 1,768 PNPpersonnel, respectively, for their exemplaryperformance of duty; (c) 785 policepersonnel were found guilty of being TABA(Tamad, Abusado, Bastos, Ayaw Madisiplina),and underwent a month-long retrainingprogram; (d) 5,546 PNP personnel werecharged with administrative cases under theLetter of Instruction (LOI) Patnubay (i.e.,inculcation of Courtesy, Action, Resultsand Example or CARE and weeding outof TABA, wherein 3,131 were penalizedduring the period; and (e) 92 Kotong Copsconsisting of eight Police CommissionedOfficers (PCOs) and 84 Police Non-Commissioned Officers (PNCOs) wereapprehended.

he Department of the Interior and Local Government (DILG) has registered some significant gains in providing better peace and order in the communities and in the country as a whole in

2005. Various projects and programs (PAPs) were implemented to addressthe issues on criminality and to reduce the crime rate in the country.These were pushed through with the help of the Philippine NationalPolice (PNP) and other law enforcement agencies. Some of itsaccomplished tasks were the implementation of the PNPProfessionalization Program and other anticrime programs.

In addition, the PNPprofessionalization program led to theissuance of various Memorandum Circularsto upgrade recruitment standards andincrease the annual recruitment of qualifiedPNP personnel. A total of 3,970 PoliceOfficers (POs 1) took their oath of officeand had undergone training. Of thesePOs, 656 were female representing 16.5percent or an average ratio of 1:5 againstmale appointees.

The rationalization of the role andfunctions of the PNP vis-à-vis NationalPolice Commission (NAPOLCOM),Philippine Public Safety College (PPSC)and DILG was pursued. The NAPOLCOMissued policy guidelines on streamlining thePNP organizational structure and functionto merge directorate and units withoverlapping functions. In order to attain aneffective and credible law enforcement,some vehicles were issued and someequipment and facilities were provided tovarious police stations in 2005. A totalof 186 units of assorted vehicles wereissued and distributed to PNP unitsnationwide. These include 150motorcycle units, 23 patrol jeeps, 10

102 PEACE AND ORDER

heavy trucks, two jet skis, and one lighttruck. On firepower capability, a total of1,897 different firearms were procured.These include 846 units of long firearms,1,049 units of short firearms and two unitsof crew-served. However, there is still ashortage of 27,475 short firearms procuredand distributed PNP-wide.

On the other hand, some 77construction projects (buildings/facilities)were completed. The PNP also facilitatedthe complete repair/renovation of 364buildings or facilities inside the camps. Ofthe 1,617 police stations or buildingsnationwide, only 26 percent or 423stations were PNP-owned.

Crime incidents were reduced by sixpercent from 77,253 cases in 2004 to76,758 cases in 2005 with a slight declinein crime solution efficiency rate of 89percent (Table 15.1).

About 12,488 anti-illegal drugsoperations conducted by the Anti-IllegalDrugs Special Operations Task Force(AIDSOTF) led to the confiscation ofPhP40 billion worth of illegal drugs,dismantling of 12 shabu laboratories/warehouses, the arrest of 15,554 personsand the filing of 11,051 drug-related casesin court (Table 15.2).

In 2005, the Police Anti-CrimeEmergency Response (PACER)

conducted kidnap-for-ransom (KFR)operations which resulted in theneutralization of 78 personalities,including prominent personalitiessuch as former National Bureau ofInvestigation (NBI) Agent MartinSoriano and Mitchel Gumabao(Dennis Roldan). However, still, theKFR solution efficiency rate wentdown to 39.6 percent from 64.5percent in 2004 (Table 15.3).

The campaign againstantiterrorism was also strengthenedin 2005. The antiterrorismoperations that were conductedresulted in the recovery of sizeableamounts of explosive materialsduring the operation and the arrestof the following internationalterrorists: (a) Gamal Baharan atTapay and Angelo Trinidad at AddulKhalil, both members of the AbuSayyaf and suspects in the MakatiCity bombing on February 21, 2005;(b) Jemar Astalik y Muhamad a.k.a.Janjalani; (c) Rahib Buday, fourthsuspect in the Valentine’s Daybombing, who was arrested inBarangay Layog, Pagalungan,

TABLE 15.2 ACCOMPLISHMENTS: ILLEGAL DRUGS

PARTICULAR CY 2004 CY 2005

Operations conducted 12,488Number of persons arrested 20,328 15,554Number of cases filed in court 16,283 11,051Dismantled shabu laboratories/chemical warehouse 15 12Total value of confiscated illegal drugs and paraphernalia (in Billion PhP) 25.3 40

Source: DILG

TABLE 15.3 ACCOMPLISHMENTS: KIDNAP-FOR-RANSOM


No. of reported KFR incidents 31 48 KFR cases solved 20 19 KFR Solution Efficiency Rate (in %) 64.50 39.60 No. of KFR personalities neutralized 94 78

Source: DILG

TABLE 15.1 CRIME SOLUTION EFFICIENCY Year No. of Crimes No. of Crimes Percent increase Crime Solution Reported Solved in the crime Efficiency Rate

2003 83,704 76,246 2.40 91.10%2004 77,253 69,417 -7.70 89.90%2005 76,758 68,315 -0.60 89.00%


Maguindanao on March 4, 2005; and(d) Fawas Zi Ajjur also known as Fawas ZakiAgour, a Palestinian national who wasidentified as one of the six foreigners whoconducted training on the manufacture ofhomemade bombs at the Abu SayyafGroup (ASG) Camp Adjid in Igasan,Patikul, Sulu.

Meanwhile, operations conductedagainst bank robbery resulted in thereduction of reported incidents in 2005 by29 percent compared with the same periodin 2004, i.e., from 48 bank robbery incidentsin 2004 to 34 reported cases in 2005 as wellas the arrest of 40 suspects (Table 15.4).

Due to the anticarnapping campaignin 2005, the number of vehicles stolendecreased by 125 percent to 1,003 from2,252 cases in 2004 (Table 15.5). Out ofthe 1,003 reported stolen vehicles, 461 wererecovered resulting in an improvement in thesolution efficiency rate of 46 percent in 2005from 40 percent the previous year. Inaddition, six carnapping syndicates wereneutralized, 152 suspected carnappers werearrested and 99 cases were filed in court.

The volume of street crimes alsowent down to 14,569 in 2005 from 14,847in the previous year. Moreover, there wereonly 12,293 cases that include illegal drugpushing, possession and using (street level)and incidence of robbery, theft, physicalinjury and estafa solved which translatedto a reduction in street crime solutionefficiency rate to 84.4 percent from 89.6percent in 2004 (Table 15.6).

Meanwhile, the 6,505antismuggling/piracy operations in 2005led to the confiscation of PhP518.2 millionworth of smuggled/pirated goods, whichis PhP457 million more than thePhP61.565 million confiscated in 2004.About 219 felons were arrested while 114cases were filed in court (Table 15.7).

But the crime rate incidenceremains high. The PNP and the DILG arethus continuing their respective programsand activities to prevent and avoid streetcrimes.

Crime prevention and controlsupport systems and activities wereestablished and strengthened, such as: (a)the 3,499 Community Oriented PolicySystem (COPS) - Kababayan Centersnationwide; (b) 24-hour mobile and footpatrols; and (c) 292 satellite police stationsnationwide manned by 9,830 policemen.In support of the government’s campaign

TABLE 15.6 ACCOMPLISHMENTS: STREET CRIMES

PARTICULAR March-December CY 2004 CY 2005 2003

Street Crime Volume 17,813 14,847 14,569 Cases solved 16,443 13,309 12,293 SC Solution Efficiency Rate (%) 92.00 89.60 84.40

Source: DILG

TABLE 15.4 ACCOMPLISHMENTS: BANK ROBBERY


No. of bank robbery incidents 48 34 No. of cases solved 9 14 Bank Robbery Solution Efficiency Rate (%)18.80 41.20 No. of persons neutralized 23 40

Source: DILG

TABLE 15.5 ACCOMPLISHMENTS: CARNAPPING

PARTICULAR CY CY CY 2003 2004 2005

No. of stolen vehicles 2,272 2,252 1,003 No. of stolen vehicles recovered 738 900 461 Recovery Efficiency Rate (%) 32.00 40.00 46.00 No. of syndicates neutralized 11 5 6 No. of suspected carnappers arrested 227 204 152 Number of cases filed in court 150 172 99

Source: DILG

104 PEACE AND ORDER

against terrorism, the PNP activated its 208Bomb Data Centers, wherein technicalassistance to bombing incidents, thattranspired during the year, were provided.Another notable project launched in 2005was the creation of Mindanao Area PoliceIntelligence Office (MAPIO) as embodiedin LOI 34-05 dated June 27, 2005. TheMAPIO is tasked to supervise theintelligence operations in the entireMindanao especially on matters relating toterrorism and heinous crimes. TheAutomated Fingerprint Identification System(AFIS), a Japanese grant project, wasformally turned over on May 24, 2005. Thesystem is capable of electronically capturinglatent fingerprint images (those found and

lifted from the crime scene) to includetextual information. The AFIS databasewas installed at the PNP Crime LaboratoryGroup (PNP CLG) and has a current entryof more than 200,000 records (bothcriminal and noncriminal). Continuous dataentry is being undertaken for the database.In addition, 25,100 Barangay InformationNetworks (BINs) were being maintainednationwide with 75,300 informants.

The strict implementation of LOIPatnubay was observed. Thus, in 2005,there was a total of 5,546 cases filedagainst PNP personnel including the 2,276pending cases from previous years (Table15.8). Of these cases, 3,131 were solved,registering a case solution efficiency rateof 56.5 percent. About 42 administrativecases were filed against 12 PCOs and 30PNCOs for being “Kotong Cops.” Also, 87PNCOs who were reported to be amongthe TABA cops were sent to a leadershipretraining program.

The PPSC is the training arm of theDILG-Interior Sector and is responsible forproviding education and MandatoryTraining Courses for the PNP, Bureau ofJail Management and Penology (BJMP) andBureau of Fire Protection (BFP) uniformedpersonnel. For 2005, various trainingenhancement activities were alsoimplemented to support the conduct ofPPSC courses.

The PNP, in the conduct ofscientific investigation and expeditiousdisposition of cases, met the 100 percenttarget of investigation efficiency for theperiod. All the 76,758 cases reported tothe police were investigated. Of the casesinvestigated, 68,151 were solved and filedin courts nationwide, registering a crimesolution efficiency (CSE) rate of 88.79percent. The investigation includes the4,726 requests for scientific examinationand collection of physical evidence

TABLE 15.8 CASES SOLVED UNDER LOI PATNUBAYPARTICULAR CY 2004 CY 2005

Total number of cases 4,228 5,546Number of cases solved 1,952 3,131% of Resolved Cases 46.20 56.50

Source: DILG

TABLE 15.7 ACCOMPLISHMENTS: SMUGGLING/ PIRACY PARTICULAR CY 2003 CY 2004 CY 2005

No. of operations conducted 7,774 6,505No. of persons arrested 579 203 219Worth of smuggled items 82,130,000 61,565,339 518,161,220 confiscated (in million PhP)No. of cases filed in court 156 97 114

Source: DILG


No. of TMWPs neutralized 132 155No. of other wanted persons neutralized 35,624 34,552No. of felons surrendered 430 437 Source: DILG

TABLE 15.9 ACCOMPLISHMENTS: CAMPAIGNAGAINST WANTED PERSONS/TOP MOST WANTED

PERSONS


conducted by the PNP’s Scene of CrimeOperation (SOCO) Teams, the 7,979 FieldLaboratory Works (FLW), and 392,417laboratory examinations.

The PNP served a total of 32,498out of the 40,806 warrants received whichyielded a 79.64 percent service efficiencyrate last year.

The campaign against WantedPersons/Top Most Wanted Persons(TMWPs) in 2005 resulted in the arrest and/or surrender of 155 TMWPs with rewardand 34,989 “other wanted persons”(Table 15.9).

From January 1999 to December2005, 20,611 out of 29,843 cases weresolved or a reduction of 69.1 percent in thenumber of unsolved cases which involvedvarious modus operandi, crime syndicatesand terrorists. These cases were recordedand documented.

THE COMMUNITY PILLAR

In 2005, efforts to improvecommunity relations were intensified withthe continuous coordination among 36nongovernment organizations (NGOs)accredited and recognized by the PNP aspartners in the promotion of peace andpublic safety. Weekly (Saturday) seminarson Moral Recovery, Values FormationProgram, Drug Abuse Prevention andControl, Intelligence Gathering andReporting, Crime Monitoring and Reportingand Criminal Justice System werecontinuously conducted for members of theFederation of PNP AccreditedNongovernment Organizations (FPAN).

FPAN members actively took partin activities against criminality such as theimplementation of the school andcommunity-based crime preventionprograms, lectures on drug awareness, bombawareness, traffic duties and other

mobilization activities in school-based,community-based protection program. Also,FPAN members were mobilized during theannual observance of the Lenten Seasonand All Saints/Souls Day.

In addition, the PNP strengthenedits partnership with the Confederation ofCommunity Oriented Policing System(CCOPS) NGOs, Inc. through a MOAsigned on June 1, 2005. CCOPS is anumbrella organization composed of 14different subgroups actively involved incommunity organizing and crime preventionactivities. About 80 police communityprecincts were established and 3,354 centerswere maintained nationwide. The PNP TXT2920, which is an added avenue for publicaccess to the PNP was maintained whereina total of 4,647 text messages were receivedin 2005 relative to complaints against illegalgambling, illegal drugs, TABA and KotongCops, and requests for assistance andfeedback on citizen satisfaction of policeactions on their complaints.

In response to the President’s callto heighten the war against crime, the DILGimplemented and continuously enhancedthe People’s Action Team Responding On-Line (PATROL) 117, which is the people’sdirect link to emergency assistance servicesfrom the police, firemen and otheremergency service providers. As ofDecember 2005, PATROL 117 call centerswere maintained in 22 cities and onemunicipality nationwide.

106 RULE OF LAW

Chapter 16Rule of Law

I

Last year, the Department ofJustice (DOJ) pursued its plan of recruitingmore prosecutors but there were only fewtakers particularly from Mindanao.

There is thus a need to continuethe implementation of the various PAPsto improve the justice system and enticemore prosecutors. The implementation isexpected to increase investments and raiseinvestors’ confidence thus paving the wayfor a more responsive judicial system.

THE COURTS

The new Chief Justice, Artemio V.Panganiban, vowed to continue theimplementation of the APJR with greaterfocus on four areas of concern: (a) accessto justice, (b) corruption, (c)incompetence, and (d) delay in theresolution of cases. The judiciary willcontinue to implement the APJR andpursue activities that will support theattainment of the goals identified in the saidprogram and the judiciary’s vision.

The Committee on Justice on Wheelswas in the process of formulating the casejurisdictional structure and operational

n 2005, the Judiciary continued implementing the programs andprojects (PAPs) under the Action Program for Judicial Reform(APJR). This effort and initiative focused on changing the poor

perception of the public toward the criminal justice system and achievingthe goals and targets enunciated in the Medium-Term PhilippineDevelopment Plan (MTPDP) 2004-2010. However, there are still pendingcases which clog court dockets and derail the smooth disposition ofcases.

guidelines for the deployment of twoadditional Mobile Courts, one each for theVisayas and Mindanao to further improvecase adjudication and access to justice.With the country’s first mobile court bus,754 cases were heard by judges and 300juveniles in conflict with the law werefacilitated and released in 2005.

In support to the AlternativeDispute Resolution (ADR) Act of 2004or Republic Act (RA) 9258, the SupremeCourt (SC) accredited 88 mediators.About 32 judges and 108 court personnelwere trained on the practice of judicialdispute resolution and procedures forreferring cases to the mediation center andprocessing of files. A total of 254 lawyerswere also oriented on court-annexedmediation and judicial dispute resolution.As of June 30, 2005, a total of 2,502 casesfrom the courts were referred for mediation,of which 2,072 or 82.8 percent were setfor mediation. Of the 2,072 cases that wentthrough mediation, 1,326 or 64 percentwere settled.

In providing access to justice bythe poor, the following activities wereundertaken to facilitate project


implementation once the amendments tothe Project are approved: (a) drafting of theinteragency Memorandum of Agreement(MOA) between and among theDepartments of Social Welfare andDevelopment (DSWD), Justice, Interior andLocal Government and the Alternative LawGroups; (b) selection of the target barangays;and (c) review of the Terms of Reference(TOR) of the local consultants. The selectioncriteria for the project sites have already beenagreed upon by the participating agencies.However, the 36 municipalities and 360barangays have yet to be chosen. For the SC,36 first level courts that satisfied all thecriteria set will be its target.

During the year, the SC’s draftliterature on the justice system and reformefforts were completed and issued, such asthe following: (a) Guidelines for JournalistsCovering the Courts; (b) Glossary of LegalTerms; (c) Comprehensive Commu-nication Plan for the Supreme Court;(d) “Justices to Journalists, Journalists toJustices: A Reader on Judiciary-MediaRelations”; and (e) eight feature articles onAPJR.

The SC has established its ownIntegrated Electronic Library System. TheE-Library CDs are being produced by theSC Library Services. The uploading ofexecutive orders, memorandum orders, andpresidential proclamations is also ongoing.These services are now open to justices,judges, SC lawyers, chiefs of office, facultyof the UP College of Law, staff of thePhilippine Law Journal, clerks of court,justices of the Court of Appeals, justicesof the Sandiganbayan and Court of TaxAppeals, PAO chiefs, staffs from theOffice of the Solicitor General, APJRdevelopment partners and selected schools.On the other hand, the enhancement ofthe Court Administration ManagementInformation System (CAMIS) is ongoing.

A MOA was approved betweenthe SC and the Armed Forces of thePhilippines-Office of the Chief Engineer(AFP-OTCE) to support and rehabilitateinternally-displaced persons (IDP) andcommunities in Southern Philippines.The Philippine Judicial Academy(PHILJA) also conducted the followingseminars: (a) Strengthening Shari’a andIslamic Jurisprudence on July 25-29,2005 in Zamboanga City;(b) Strengthening Shari’a Court System onSeptember 26-30, 2005 at the Grand MenSeng Hotel, Davao City; (c)Strengthening the Shari’a Court Systemon November 7-11, 2005 at the GardenOrchid Hotel, Zamboanga City;(d) Strengthening the Shari’a CourtSystem on November 14-18, 2005 at theGarden Orchid Hotel, Zamboanga City;and (e) Seminar on Shari’a, Indigenousand Local Justice System on December14-15, 2005 at the Dynasty Hotel,Cagayan de Oro City.

Another important achievementwas the completion of the repair andrehabilitation of the Hall of Justice (HOJ)in the following places: (a) Isabela City,Basilan; (b) Jolo, Sulu (extension of AnnexBuilding for the Shari’a Court); and (c)Marawi City (extension of HOJ for Shari’aCourt). Also completed were the repair andreconfiguration of Annex Building forShari’a Court, repair and rehabilitation ofHOJ in Cotabato City phase I and phase II,the construction of HOJ in MalabangLanao del Sur and the repair andrehabilitation of HOJ in Zamboanga City.

Despite all these efforts to addressthe issues on case decongestion anddeclogging of court dockets, many casesremain pending and for disposal in 2006(Table 16.1).

108 RULE OF LAW

THE PROSECUTION PILLAR

In 2005, the DOJ recruited 208prosecutors and 38 associate prosecutionattorneys to expedite the resolution ofcases as mandated by RA 9297. From thesenew recruits, a panel of prosecutors wascreated to investigate and prosecutesensational cases and those of nationalsignificance. Likewise, during this same year,a Petition for Review Monitoring System(PRMS) has been developed. This consistsof five percent of the National ProsecutionService Information System, which is partof the DOJ Information System StrategicPlan (ISSP) 2006-2008. Despite theseinitiatives, there are still pending cases toattend to.

The DOJ extended free legalservices to the poor. The Secretary of Justice,prosecutors and public attorneys gave freelegal advice and legal information throughradio, television and print media (trimedia)to enhance public knowledge on all legalmatters and issues. Aiming to upgrade theskills of its lawyers, the Public Attorney’sOffice (PAO) conducted training workshopsincluding Mandatory Continuing Legal

Education (MCLE) as mandated by the SCfor all lawyers. To further provide legalservice, the DOJ established and launchedthe DOJ Action Center (DOJAC) in theregions. Members of the NationalProsecution Service and the PAO weretasked to man the regional DOJACs.

The PAO also actively participatedin the ongoing propoor programs of thegovernment. The DILG was in closecoordination with the courts in providingaccess to justice for the poor, with theassistance of the Lupon Tagapamayapa,which implements a functional justicesystem in 33,613 barangays including thosein the Autonomous Region in MuslimMindanao (ARMM). Other propoorprograms such as the Kapit-Bisig Laban saKahirapan (KALAHI) activities and“Serbisyo Muna” projects also provide legalassistance to barangay officials through theBarangay Outreach Program in order tomaximize the utilization of the KatarunganPambarangay. The enhanced outreachactivities are done through media linkagesfor effective legal education, counselingand information programs. It also rendersprompt, effective and adequate legal

TABLE 16.1 SUMMARY REPORT OF CASES, 2005

COURTS Pending CASE INFLOW CASE OUTFLOW Cases as of Cases Cases Cases Cases Cases Cases Cases w/

31 December Newly Revived/ Received Decided/ Archived Transferred Proceed- 2004 Filed Reopened from Other Resolved to Other ings

Sala/Courts Sala/Courts Suspended

Supreme Court 6,780 4,348 0 0 4,105 0 708 0 6,315Court of Appeals 22,461 0 0 0 0 0 0 0 22,461Sandiganbayan 1,846 168 253 13 178 21 2 0 2,079Court of Tax Appeals 671 300 28 12 259 0 1 0 751Regional Trial Courts 355,780 148,292 11,518 15,917 115,710 41,351 17,053 0 357,393Metropolitan Trial Courts 157,248 57,916 8,293 440 41,916 31,454 1,489 0 149,038Municipal Trial Courts in Cities 120,265 63,101 10,035 1,409 51,977 25,453 2,693 0 114,687Municipal Trial Courts 86,313 43,106 2,064 593 32,901 8,676 4,584 0 85,915TOTAL 751,364 317,231 32,191 18,384 247,046 106,955 26,530 0 738,639

Source: Program Management Office- Supreme Court


services to the indigent sector in line withthe 10-point agenda of the President.However, the DOJ has yet to coordinatewith the DILG to conduct the KatarungangPambarangay training for barangayofficials.

A MOA was signed among theDOJ, DILG, SC and the Integrated Bar ofthe Philippines (IBP) to create the NationalCouncil on the Administration of Justice(NCAJ). There was also a forumsponsored by the United States Agency forInternational Development (USAID)spearheaded by the Program ManagementOffice (PMO) of the SC to commence theEO institutionalizing the cooperationamong the five pillars of the criminal justicesystem.

However, there is still a need torecruit more prosecutors especially in thesouthern part of the country where fewtakers are enticed due to low salary and thedanger the job poses to their lives. Therecruitment seeks to address the issue onimmediate prosecution of cases to declogcourt dockets.

THE CORRECTIONS ANDREHABILITATION PILLAR

In 2005, there were reductions injail facilities and equipment and officesrented and being maintained. The decreasein jail facilities was due to the clustering ofmunicipal and district jails while thereduction in facilities maintained was dueto the depreciation of some firearms andvehicles (Table 16.2).

In order to improve jail/prisonfacilities, the Bureau of Corrections(Bucor) repaired furniture and otherequipment. The following are theimprovements implemented in thenational penitentiary and penal colonies:(a) renovation of building 14-Cell for inmates

of special concern; (b) Bucor Museum; (c)Butterfly Garden; (d) Rehabilitation andDiagnostic Center (RDC) Prayer Room andInmates Free Telephone Call Center at theNew Bilibid Prison (NBP) MaximumSecurity Compound; and (e) purchase ofBucor’s agriculture projects (BAP) and thepenal farms.

To strengthen the rehabilitationprograms for prisoners, the Bucor incoordination with the Department ofEducation (DepEd) and Commission onHigher Education (CHED), continued toprovide formal and informal education tointerested inmates. Out of 4,862 enrollees,13 percent or 626 successfully graduatedfrom the formal and nonformal educationprograms. There was an increase of fivepercent in the enrollment of inmates atthe college level in the NBP and in theCorrectional Institution for Women(CIW). The University of Sto. Tomas(UST) offered a modular programdesigned for inmates who wish to pursueformal education thru distance learning.The program has ten initial enrollees.Vocational training was held at the NBPMedium Security Camp and in CIW incooperation with the TechnicalEducation and Skills DevelopmentAuthority (TESDA) and other

TABLE 16.2 JAIL CONGESTION

PARTICULAR CY CY % 2004 2005 DISPARITY

Jail facilities maintained 3,687 3,663 -0.70 Equipment (firearms, 5,266 4,550 -13.60 vehicles and supplies) Offices Rented 13 12 -7.70 No. of offenders released 50,424 51,498 2.10 thru applicable laws No. of sentenced prisoners 10,567 51,498 387.30 transferred to other penal Institution

Source: DILG

110 RULE OF LAW

nongovernment organizations (NGOs)through lecture type and on-the-job trainingprograms. On the other hand, the Parole andProbation Administration (PPA) assisted13,364 probationers/parolees/pardonees injob placement, livelihood activities and skillstraining in line with the government’seconomic recovery program by helpingdecrease the rate of unemployment.

About 2,685 probationers/parolees/pardonees attended the adulteducation program and/or were encouragedto enroll and finish their formal studies. A

continuing program for social, moralactivities was devised and attended by28,367 probationers/parolees/pardoneeswhile 28,034 probationers/parolees/pardonees rendered community serviceand participated in civic-oriented projectssuch as tree planting, clean and greenproject, beautification project, etc. A totalof 5,027 probationers/parolees/pardonees underwent/participated in theTherapeutic Community Program fordrug cases.

Except for livelihood, provision ofbasic needs such as food, health careneeds, personal care and hygienematerials to inmates increased in 2005(Table 16.3).

There is a need to encourage andgenerate more citizens’ participation inrehabilitation activities, volunteerism,employment and training of volunteerprobation aides (VPAs) in supervisingparolees and pardonees. In connectionwith the revitalization of VPAs Program,Japan International Cooperation Agency(JICA) was tapped to conduct an in-country training program (ICTP) toimplement a course on Holistic Approach

to Volunteer Resource Development.About 51 field officers and volunteerprobation aides have attended the trainings.To date, there were 2,084 VPAs appointedby the Secretary of Justice who areaffiliated with PPA.

As regards the Adopt-A-JailProject, there was a decline in the numberof organizations approved as adoptors,inmates approved as adoptees and jailsadopted (Table 16.4).

TABLE 16.4 IMPLEMENTATION OF THE ADOPT-A-JAILPROJECT

PARTICULAR CY 2004 CY 2005 % DISPARITY

No. of organizations approved 823 304 -63.10 as adoptorsNo. of inmates approved 30,623 26,408 -13.80 as adopteesNo. of jails adopted 448 175 -60.90

Source: DILG

TABLE 16.3 COMPARATIVE NUMBER OF INMATESPROVIDED WITH BASIC NEEDS,

CY 2004 VIS-À-VIS CY 2005

PARTICULAR CY 2004 CY 2005 % DISPARITY

No. of inmates provided with food 56,141 62,329 11.00No. of inmates provided with health care 56,141 62,329 11.00

needsNo. of inmates provided with personal 25,187 61,329 143.50 care/hygiene materialsNo. of inmates provided with livelihood 56,141 12,135 -78.40

Source: DILG


Chapter 17Education and Skills Development

W

EARLY CHILDHOOD AND BASICEDUCATION

Following the launching of theSchools First Initiative (SFI) in 2004, apackage of policy reforms called theBasic Education Sector Reform Agenda(BESRA) was formulated. The BESRAis the SFI’s policy reform componentwhich will support the attainment of theEducation For All (EFA) 2015 goals andobjectives. It will serve as the frameworkfor a coordinated sector-wide approachto donors’ and partners’ participation inthe SFI. Also, the Education For All(EFA) 2015 Plan was formally adoptedby the government as the vision and theholistic program of reforms to achieveimproved quality of basic education. TheEFA vision and strategies shall bedelivered through the formal schoolsystem and alternative learning systems.

The School-Based Management(SBM) is now being institutionalized inall public elementary and secondaryschools in the country. All schools arebeing required to formulate, implementand evaluate a School Improvement Plan

ith education for all as a priority concern of the 10-point agenda, the overall education sector performance in 2005 was characterized by continuous development and imple-

mentation of institutional and policy reforms. The achievements in thesector were spurred by the formulation of three subsector plans thatwere meant to provide the enabling policy environment for pushingreforms to address the key challenges of providing equitable access andimproving the quality of education that is values-laden and relevant.

with the active participation ofeducation partners in the community,particularly the local government, andthe Parent-Teachers-CommunityAssociations (PTCAs). The use of aSchool Report Card was alsoimplemented where schools arerequired to publicly disclose theirperformance and finances. To ensurecompliance, 221 school heads weretrained on the Basic SchoolManagement Course and 1,040 schoolheads for the special course on LearningManagement Program.

In line with the government’spolicy to standardize preschool and daycare centers, the curriculum tostandardize the competencies of 5-yearold children was formulated alongsidethe development of instructionalmaterials and the massive orientationof teachers and parateachers from theDepartments of Education (DepEd)and Social Welfare and Development(DSWD) and local government units(LGUs). The standard curriculumimplemented in SY 2005-2006necessitated the administration of

112 EDUCATION AND SKILLS DEVELOPMENT

readiness tests to all Grade I entrants asmandated in DepEd Order No. 15, s.2005.

The provision of critical resourcesto basic education continued to be apriority. The total number ofclassrooms constructed from July 2004to December 2005 reached 13,500(Table 17.1). This constitutes 87 percentaccomplishment of the targeted 15,454completed classrooms for 2005,combining targets from the RegularSchool Building Program (RSBP), ODA-assisted Programs and other schoolbuilding projects financed primarilythrough the Priority Development AreasFund (PDAF) and private sectorassistance. Of those constructed, 589classrooms were set up in 571 school-lessbarangays. By end of 2005, 1,954classrooms were still under constructionbut are expected for completion beforeSY 2006-2007 commences. The difficultyin completing the project on time wasattributed to legal issues which prolongedacquisition of school sites in certainbarangays.

Classroom shortage was alsopartially addressed with the continuingadoption of double-shift classes andmaintaining a classroom-student ratio of1:50 per shift, particularly in highly-populated schools. Given the lowerenrolment (as against the estimatedenrolment for SY 2004-2005) in publicschools, the classroom backlog estimatedat 8,684 dropped to 8,072 by end of SY2004-2005. The Government Assistanceto Students and Teachers for PrivateEducation (GASTPE) Program throughthe Education Service Contracting (ESC)Scheme was also expanded to furtherdecongest the public secondary schoolsand involve private school participationin the delivery of secondary education.

For SY 2005-2006, a total of 383,222students benefited from ESC while theTuition Fee Supplement Schemebenefited some 10,692 students. Fromthe original target of 50,000 additionalslots per year beginning 2005 for ESC,about 60,000 new slots were actuallyaccommodated during the year.

The provision of textbooks wassuccessfully carried out during the year.With the procurement and delivery ofabout 105.7 million textbooks and 2.4million teacher’s manuals for all publicschools, a textbook-pupil ratio of 1:1for the five learning areas was achievedin SY 2005-2006, except for high schoolEnglish III and IV, which had a ratio of1:2. This represents an improvementfrom last year’s ratio of 1:1 for the fourkey subjects only. It should be noted,however, that the 1:1 ratio forMakabayan (5th learning area) is forSocial Studies only since procurementfor the other learning areas has yet tobe undertaken (targeted to be deliveredfrom April-June 2006). With thisadditional procurement, textbookshortage declined from 34.7 million in2004 to 26.85 million in 2005. Schoolseats shortage decreased from 3.9million units in 2004 to 2.24 millionunits in 2005. The provision ofcomputers and internet connectivityfrom various sources (i.e., DepEdComputerization Program, the DepEd-Department of Trade and Industry PCsfor School Project, Department ofScience and Technology, etc.) were alsointensified. As of 2005, 73 percent(3,512 high schools) of the country’spublic high schools (4,830) wereprovided with computers while 30percent of these schools withcomputers were provided with internetconnectivity. Internet connection for


the year represented a significantimprovement from last year’s level of 13percent.

The shortage of teachers rose from20,113 in 2004 to 20,874 in 2005 despitethe 6,475 additional teacher items createdin 2005. Efforts to improve teachercompetencies also gave rise to theformulation of the National Competency-Based Teaching Standards (NCBTS). Thisframework will serve many developmentpurposes, e.g., improvement of preserviceteacher curriculum, in-service teachertraining, and performance appraisal. It will

also utilize and improve the licensuresystem and teacher manpower planning,hiring and deployment.

Mobilization of private sectorsupport for basic education was alsocontinued through the Adopt-A-SchoolProgram. In 2005, a total of 155 donorsparticipated in the program benefiting143 schools. The Program alsogenerated around PhP124.7 millionresources in various forms during theyear showing an increasing number ofactive partners promoting basiceducation.

TABLE 17.1 CLASSROOM CONSTRUCTION, JULY 2004 - DECEMBER 2005 ( As of December 2005)

PLAN REVISED ACTUAL PERCENTTARGET* TARGET** ACCOMP.

Regular School Building Program 10,000 6,606 5,725 87a. GAA, 2003 4,036*** 3,739 93b. GAA, 2004 1,527**** 1,341 88b. SEDIP 274 216***** 79c. SEMP II 355 365 103Other SBP, 2005 521 6,692 5,853 87a. CGMA 315 234 74b. DTI-NDC 213 183 86c.1 Congressional Initiative (PDAF for CY 2003) 3,430 3,330 97c.2 Congressional Initiative (PDAF for CY 2004) 734 616 84c.3 PDAF of Sen. Drilon (remaining Projects 580 430 74d. FFCCCII 452 452 100e. Adopt-A-School (30% of DepEd SBRMS Funds and Various Private Donors) 166 19 11f. CY 2003-2004 SONA-School less Barangays (DPWH and AFP) 802 589 73GRAND TOTAL 12,422 15,454 13,500 87

* MTPDP Target for 2004-2005**Revised target of agency including carry-over of unfinished projects***Additional funds were released to District Engineering Offices which increased the physical target for the month of June 2005****Inclusive of SONA Commitments*****SEDIP (January-September 2005 accomplishment only) only schoolbuilding projects which were previously included inJune 2005.Note: Adjustments were made on the PDAF Schoolbuilding Projects to exclude completed repair/rehabilitation of schoolbuildingprojects which were previously included in June 2005.


As a social equity commitment andto ensure that the Muslim learners will bein the mainstream of quality basiceducation for all, the implementation ofMadrasah Education Program wasaccelerated with the institutionalizationof curriculum standards for Madrasaheducation mandated by DepEd OrderNo. 51, s. 2004. Workshops to reviewthe learning materials as well as the actualwriting and layout of the said materialswere undertaken in 2005, alongside theconduct of teacher training on Arabiclanguage and Islamic Values, printing ofcurriculum framework and launching ofMadrasah Education (Islamic education)in 15 public elementary schools in theNCR (i.e., Manila, Quezon City, Taguig,Paranaque City and Pasay City).

To improve school participationand retention, the Food-For-SchoolProgram was launched to provide rice toschool children for 120 school days withDepEd identifying the school

beneficiaries and the National FoodAuthority (NFA) providing the rice. Asof March 2006, a total of 114,281preschool and Grade 1 childrenbenefited from PhP200 million worthof rice released in 2005, exceeding thetarget of 107,500. To date, the programcovers 1,605 public schools in thepoorest urban and rural areas. TheNational Capital Region (NCR) postedthe highest number of childrenbeneficiaries with a total of 17,335 bagsof rice delivered in 25 schoolsbenefiting 20,227 pupils. Region VII,on the other hand, had the highestnumber of school beneficiaries of 168with 7,100 school children asbeneficiaries.

To complement formaleducation, DepEd intensified theimplementation of programs under theAlternative Learning System, DistanceEducation, Balik-Paaralan sa Out-Of-School Youths and Adults, and Inclusive

TABLE 17.2 NATIONAL ACHIEVEMENT TEST RESULTS, SY 2004-2005

Mastery LevelSubject EFA Target* Mastery Near Mastery Low Mastery

75-100 50-74 Below 50

Elementary** 5 20.04 50.51 29.45 Math 30.51 35.59 33.9 English 26.41 42.98 30.6 Science 14.75 47.04 38.21 Filipino 30.13 44.66 25.21 HeKaSi 29.16 40.77 30.07Secondary*** 5 0.48 40.77 58.75 Math 16.41 31.31 52.28 English 6.59 49.16 44.25 Science 1.75 23.99 74.26 Filipino 0.002 27.37 72.63 Araling Panlipunan 3.31 50.41 46.28

* 2005 Target on 75% Mastery; targets set based on the 2002 results which was less than 1 percent** Grade 6*** Year IVNote: The NAT in SY 2003-2004 covers Math, English and Science only while that of SY 2004-2005 covers all thesubject areas (Math, English, Science, Filipino, HeKaSi (for elementary)/Araling Panlipunan (for secondary)


Education for the Differently-abledChildren. Collectively, these programsreached an additional 24,000beneficiaries.

The quality of basic educationremains poor, however. The results ofthe National Achievement Test revealedvery little improvement in thecompetency levels of students althoughhigher achievement has been observedin areas that benefited from interventionswith major public investments, e.g.,TEEP, SEDIP, etc. (Table 17.2). InSY 2004-2005, the mean percentagescore of elementary students was peggedat 58.73 percent, which is the lower rangeof the near mastery competency level ofrequired elementary competencies. Theperformance of high school students wasworse as the mean percentage score forhigh school competency was only 46.80percent. Only about 20 percent of Grade6 students and 0.48 percent of highschool graduating students had mastery(75-100 percentage score) of the requiredcompetencies of their respective levels.More than a quarter of elementarystudents and more than half of highschool graduating students had nomastery of basic educationcompetencies. The performance level ofstudents was found lowest in Science forboth levels.

TECHNICAL VOCATIONALEDUCATION AND TRAINING (TVET)

The enrolment trend in TVET isencouraging. From the 1,683,382students enrolled in TVET courses in2005, about 1,354,322 graduated. Theenrollment figures exceeded the sectortarget of one million TVET students.The figures are far greater than the1,220,438 enrolment and the 618,030

number of graduates in 2004. There wasalso an increase in the number ofapprentices trained from 21,733 in 2004to 101,514 in 2005 (however, target is200,000) under the Kasanayan atHanapbuhay Program which aims toprovide the needed basic skills and workexperience to new entrants to the laborforce thus facilitating greater chances foremployment. The other enterprise-based training program, the DualTraining System registered a total of2,866 trainees.

The number of beneficiaries ofvarious TVET student/traineesfinancial assistance and scholarshipssurpassed targets for 2005. The PrivateEducation Students FinancialAssistance (PESFA) total beneficiariesare 13,944 which is one percent over the13,800 target. The Technical Educationand Skills Development Project(TESDP) also exceeded its 5,120 targetby 29 percent by awarding financialassistance to 6,587 beneficiaries. Onthe other hand, only 44 families out ofthe 1,979 target for 2005 to 2006, availedof the Certificates of EducationAssistance under the Iskolar ng Mahirapna Pamilya Program. The Jobs-Directed Scholarship Program, asubcomponent of the TenderingSystem, was initiated in 2005 coveringa total of 1,913 trainees out of thetargeted 800 scholars. This scholarshipprogram is being carried out in privateenterprises, eventually preparing thetrainees for gainful employment and/or entrepreneurship.

A total of 12,900 TVETprograms were registered under theUnified TVET Registration andAccreditation System (UTPRAS), fromthe 11,228 registered programs in 2004.The number of persons assessed


(271,161) and certified (136,304) alsoincreased. A structure within the agencycalled the Competency Assessment andCertification Office (CACO) wasestablished in December 2005 to focuson the delivery and implementation ofcompetency assessment and certificationprograms and services.

In addition, equivalencyprograms were implemented in 21 pilottertiary education institutions coveringseven disciplines namely: agriculture,health, tourism, engineering, education,maritime and information technology. Atotal of 1,863 students were awardedequivalency credits and gained TVETqualifications with opportunities to earnhigher education in 2005 (target is only1,000 students). Mapping ofcompetencies between TVET and highereducation programs has been undertakento identify which can be givenequivalency. In addition, a series ofactivities such as conferences andorientation workshops were conductedamong the CHED, TESDA and deputizedHEIs to address concerns, resolve issuesand plan for the establishment of a viableinterface between ETEEAP and theLadderization of TVET courses and highereducation programs.

Significant work in 2005 focusedon formulation of the NationalTechnical And Skills Development Plan(NTESDP), 2005 – 2010 and the pilotimplementation of Executive Order No.358 on the “Ladderized Interfacebetween TVET and Higher Education”.The year also stressed the importance ofimproving the quality of TVETcurriculum. An additional 34curriculum exemplars were developedalong with the efforts to continuouslyreview and revise TVET curricula toincorporate work values and ethics, and

gender-fair principles, among others. Inaddition, a total of 69 trainingregulations (TRs) were developed, ofwhich 52 are new, and remaining 17TRs were reformatted. Under the job-skill matching program (JSMP), fivelabor market intelligence reports wereprepared under the SEEK-FIND-TRAIN Strategy of TESDA. TheYouth Profiling for Starring Careers(YP4SC), a multicomponent careerguidance program, was also piloted foraptitude profiling in 2005 and covereda total of 100,500 fourth year highschool students nationwide.

Four industry working groups(IWGs) were established on prioritydisciplines namely: agri-fishery, health,tourism and ICT. The establishmentof these IWGs provides for thesustainability of efforts towards qualitystandards and qualifications, and in theimplementation of a competency-basedindustry-led TVET system. Theseexisting IWGs were maintained and thuscontinued to be active partners incompetency standards developmentand planning for the development ofrequired skills in their respective sectors.

HIGHER EDUCATION

The overall enrolment in highereducation decreased by 0.77 percentfrom 2,420,856 in AY 2003-2004 to2,402,315 in AY 2004-2005. In 2005,there were around 1,431 private(sectarian and nonsectarian) highereducation institutions (HEIs) serving65.9 percent of total higher educationenrolment. State universities andcolleges (SUCs), on the other hand,numbered 111 in 2005 and catered to31 percent of the total enrolment. Fourpercent of the remaining enrolment are


1 Higher education priority disciplines for AY2004-2005 are Maritime Education, Information Technology, Agricultureand related fields, Teacher Education, Engineering and Health Sciences.

served by other government schools,special HEIs, Local Universities andColleges (LUCs) and a CHED-supervised institution. Enrolments inidentified priority disciplines in highereducation, especially in medical andallied courses, registered a two-percentincrease from 1,526,993 in AY 2003-2004to 1,558,118 in AY 2004-2005.1

Enrolment in SUCs increased by 0.3percent from 742,108 in AY 2003-2004to 744,751 in AY 2004-2005. On theother hand, enrolment in private HEIs’decreased by 2.5 percent from 1,590,929in AY 2003-2004 to 1,550,558 in AY2004-2005. Both SUCs and privateHEIs recorded lesser number ofgraduates in AY 2003-2004 than theprevious academic year. The SUCsposted 2.3 percent less graduates fromthe 132,483 recorded in AY 2002-2003to 129,398 in AY 2003-2004. Likewise,the number of graduates produced byprivate HEIs decreased by four percentfrom 256,615 in AY 2002-2003 to246,469 in AY 2003-2004. The decreasein graduation figures were attributed tothe trend of more students dropping outof college to seek employment that donot require a college degree or forstudents to shift to TVET courses suchas physical therapy and care-givingshort-term programs which haveprospects of immediate employmentlocally or abroad. This attribution,however, would still need to be validatedthrough tracer studies as this would havebroad policy implications on bothTVET and higher educationenrolments.

A total of 33,180 students weregiven financial assistance totalingPhP18.2 million through the variousfinancial assistance programs includingthe Private Education Student Financial

Assistance (PESFA) Fund, StudentFinancial Assistance Programs, LoanFunds and Student Study Grants.However, the number of beneficiariesserved is 22 percent short of the targeted42,600 for 2005. Nonachievement of thetarget is mainly due to a lack of adequateinformation reaching the potentialapplicants/grantees and insufficientcoordination and facilitation involvingimplementing partner higher educationinstitutions (HEIs). Students wantingto pursue science and technology(S&T) courses were also providedscholarships under the DOST-SEIscholarship program. In 2005, a totalof 9,266 beneficiaries for undergraduateand 75 for postgraduate were grantedS&T scholarships. A total of 2,041 S&Tscholars graduated in 2004, 318 of themwith honors.

In order to improve the systemsand procedures in the administration ofscholarships and other studentassistance programs, possible legislationto improve the package of Study-Now-Pay-Later Program (SNPLP) wasinitiated. This proposal to rationalize thePhilippine System on Student Loans wasinspired by the Thailand IncomeContingent and Allowance Loan(TICAL) Scheme. However, pendingany reforms through legislation, arevised set of SNPLP guidelines thatinclude a better repayment scheme wasdrafted. New policies, guidelines andprocedures on various financialassistance programs administered byCHED were also prepared.

The College Bridge (pre-Baccalaureate) Program’s first placementtest was administered during the year to915 examinees from seven of the 10 pilotinstitutions. Orientation meetings werealso held with the 10 selected pilot


institutions located all over the country,seven of which sent 76 of their facultymembers to participate in teachertrainings for English, Math and Science.Instructional materials and moduleswere developed and distributed. APhP15,000 grant per semester was agreedto be given to pre-Baccalaureate studentsto cover for tuition and stipend over andabove other incentives to be provided toparticipating institutions and facultymembers.

The Policies, Standards andGuidelines (PSGs) on theimplementation of the ExpandedTertiary Education Equivalency andAccreditation Program (ETEEAP) wasrevised and finalized. The reportednumber of ETEEAP graduates reached1,947 in 2005, mostly in the fields ofEngineering, Business Administrationand Criminology. PSGs on legaleducation, maritime education, businessand health related programs, science andengineering programs, among others,were updated. In particular, curricularprogram offerings in the nursingprofession are being improved byidentifying and integrating applicableand appropriate skills and courses fromthe various nursing curricula in othercountries, especially the US and the UK,to the local nursing curricula. This ispart of the international benchmarkingefforts to make nursing graduates ofPhilippine HEIs globally competitive.

Support to 275 Centers ofExcellence (COEs)/ Centers ofDevelopment (CODs) in differentdisciplines lodged in 79 HEIs all over thecountry was also sustained with theprovision of PhP19 million for studentscholarships, faculty development, libraryand laboratory upgrading, research andextension services, development of

instructional materials and networkingand linkage activities. For quality-assuredLGU-funded Local Colleges andUniversities (LCUs). CHED issuedMemorandum Order No 10, s.2005 inconsultation with LCUs and LGUs tostandardize offerings of new degreeprograms and curricular revisions.Financial assistance amounting toPhP17.8 million was also allocated to 24SUCs for the implementation of theirincome generating programs with cost-recovery arrangements under theCorporatization Program being carried outunder the HEDP. A Manual of Guidelinesfor SUCs in the utilization of their assetswas also drafted in accordance with theRA 8292 (Higher EducationModernization Act). Application of thenormative financing formula in 25 percentof SUCs MOOE was started, makingunit cost-per-student the basis for budgetallocation of instruction and research inthese SUCs.

The year also saw thedevelopment of Institutional QualityAssurance on Monitoring andEvaluation (IQuAME) documents suchas primers and operations handbooksfor monitoring and evaluation. Thenumber of HEIs with accreditedprograms under the Quality AssuranceSystem (QAS) also increased from 11.35percent or 160 in 2001 to 12.67 percentor 193 in 2004.

In pursuing a rational andefficient SUC system, a model regionaluniversity system (RUS) was piloted inRegion XI under the RUS Project. A billwas also drafted to establish RUS thatwould integrate the four existing SUCs inRegion XI. Moreover, the voluntarymerging of SUCs has already been donein Regions II, IV and VIII.


Chapter 18Science and Technology

EThe S&T system takes on

increased importance in a knowledgeeconomy, which is directly based on theproduction, distribution and use ofknowledge and information. In thiseconomy, innovation is driven by theinteraction of producers and users in theexchange of both codified and tacitknowledge.

The investments in research anddevelopment (R&D) have fueledknowledge creation and transfer in thePhilippines. These efforts resulted in the209 mature technologies that are now readyto be commercialized, as well as in theextension centers that serve as channels forinformation dissemination at the grassrootslevel all over the country.

The Department of Science andTechnology (DOST), through the SmallEnterprise Technology UpgradingProgram (SETUP) and the TechnologyIncubation for Commercialization(TECHNICOM) programs continuouslysupport micro-, small- and medium-scaleenterprises (MSMEs) by extending varioustechnological assistance to generateeconomy-wide benefits from innovationsin terms of productivity gains and jobgeneration.

fforts on science and technology (S&T) focused on finding comparative advantages and niches to enable the country to compete in the global economy. Resources were channeled towards S&T

initiatives, which were nurtured and developed to world-class standards toincrease the country’s competitiveness.

ACCELERATE KNOWLEDGECREATION AND TRANSFER

The link between the growth ofeconomic welfare and the developmentand exploitation of scientific andtechnological understanding is furtherstrengthened through knowledge creationand mobilization. Defined knowledgenetworks are essential in thedocumentation and eventual packagingof productivity-enhancing technologiesvital to the development of the rural andremote areas in the country.

Knowledge Creation

Over the years, DOST’s rigorouspursuits to spur technological innovationresulted in the development of 209 maturetechnologies. These technologies areclassified into four levels: (a) technologieswith adaptors that could still be transferredto interested takers; (b) technologies withadaptors under partnership agreement;(c) technologies with feasibility studiesand ready for commercialization; and(d) technologies for verification withoutfeasibility studies. The distribution ofmature technologies on an agency basis isshown on Table 18.1.

120 SCIENCE AND TECHNOLOGY

Of the 209 mature technologies, 88(42.11%) were already adapted but can stillbe disseminated for further utilization ofother individuals or firms, which thentranslates to jobs and ultimately, wealthcreation. Twenty-five technologies (11.96%)were adapted under a partnership agreement,indicating the increasing participation of theprivate sector in productivity enhancinginitiatives such as the commercialization ofmature technologies.

FIGURE 18.1 R&D BUDGET ALLOCATION OF DOST

Central Office34%

Planning Councils

13% R&D Institutes44%

Service Institutes

9%

In 2005 alone, 68 researchcontracts were signed with costs shared bythe private sector partner. The DOST alsosupported invention development throughpatenting and testing/prototyping/pilotingassistance, endorsement of tax/dutyexemption, and provision of support toinventors’ fora and training.

A total of PhP304.5 million wasallocated for R&D investment in 2005,with 44 percent to the seven R&Dinstitutes of DOST, 34 percent to DOSTCentral Office through its grants-in-aidprogram, 13 percent to the five sectoralplanning councils and 9 percent to the sixS&T service institutes of the agency(Figure 18.1).

The bulk of the R&D budget wentto the R&D institutes. These equippedthese institutes to undertake R&Dprograms in the following fields: (a)agriculture and biotechnologies; (b) marinesciences; (c) industry; (d) energy; (e)advanced science and engineeringtechnologies; (f) health/medical sciences;(g) information and communicationtechnologies; and (h) disaster/hazardmitigation and environment.

Testing and calibration serviceswere also provided by DOST to MSMEsto help in the development of new productsand improvement of quality andcompetitiveness. These include chemical

TABLE 18.1 MATRIX OF CLASSIFICATION OF DOST MATURE TECHNOLOGIES (Per Agency Basis)

DOST Agencies A B C D TOTAL

PCAMRD 6 2 8 PCARRD 7 4 29 40 PCASTRD 1 2 3 PCHRD 5 4 9 PCIERD 10 3 5 1 19 ASTI 3 3 1 2 9 FNRI 2 16 2 22 32 FPRDI 14 1 1 16 ITDI 23 6 7 36 MIRDC 5 3 3 11 PNRI 7 1 1 1 10 PTRI 6 1 6 13 PAGASA 2 2 PHIVOLCS 1 1TOTAL 88 25 27 69 209


testing, physical materials andmicrobiological testing and measurement. Atotal of 60,084 clients were served underthe program.

To further boost the morale of localscientists and encourage them in their S&Twork, recognition and awards incentiveswere given to outstanding scientists andresearchers. These included the First NAST-Lino Ed. Lim Educational DevelopmentFoundation, Inc. (LELEDFI) Award forOutstanding Research in Tropical Medicineand the NAST-Hugh GreenwoodEnvironmental Science Award. Fifty-oneacademicians and 11 national scientists werealso given incentives for their significantcontributions to the advancement of S&Tin the country.

Knowledge Transfer

The importance of knowledgetransfer has grown in recent decadesbecause knowledge, as an asset, appearsto be of increasing proportion in manyorganizations. Advances in information andcommunications technology (ICT) havecreated new means of knowledge transfer.The advent of the Internet, for one, pavedthe way for increased diffusion ofinnovations. However, technology alonecannot facilitate knowledge transfersuccessfully. Organizational structures andpractices have to be defined and put inplace to facilitate and motivate knowledgetransfer.

Extension Centers

In the agricultural sector, theFarmers Information and TechnologyServices (FITS) Centers continued to be themeans of disseminating information andtechnologies to the farmers. It is a one-stopshop for information and technology services

in agriculture and natural resources.Through the centers, farmers and fisherfolkcan avail of information andcommunications materials in differentformats such as print, audiovisual,broadcast and e-based media. It alsoresponded to clients’ need for technologytraining and information caravans, thusensuring availability of quality plantingmaterials and animal stocks, fosteringlinkages and enterprise development.

The FITS Centers are hosted by thelocal government units (LGUs), integratedwith the functions of the municipalagricultural officers, state colleges anduniversities, line agencies of theDepartments of Agriculture (DA) andEnvironment and Natural Resources(DENR), DOST provincial science andtechnology centers, and nongovernmentalorganizations (NGOs).

The impact assessment of theproject conducted by DOST-PhilippineCouncil for Agriculture, Forestry andNational Resources Research andDevelopment (PCARRD) in 2005 showedthat farm income for rice almost doubledto PhP51,937 in 2005 from PhP26,018 in2001. The rise in income resulted from anincrease in harvest of PhP65,762 per farmfrom PhP36,111 after the FITS was set up.For corn production, net income alsoincreased to PhP118,332 per farm in 2005from PhP25,356 in 1999.

Each center focuses its services onone or two commodities of majorimportance to the area where it is located,supported by one or two farmer scientistswho serve as resource persons for thecenters’ technology services. There are now173 FITS Centers all over the country.

Another initiative is the KnowledgeNetworking Towards EnterprisingAgricultural Communities (K-Agrinet)program of the Development Academy of


the Philippines (DAP) in collaboration withthe Department of Agrarian Reform (DAR),DOST, and DA. This aims to create anetwork of knowledge generators, providersand users working to increase productivityof farming communities. Through K-Agrinet, the farmer’s productivity increaseswhile his risks decrease due to knowledgediffusion that led to informed decisions.

Moreover, the DAP was able todisseminate three technologies anddocument a total of 23 best practices, whichwere packaged and distributed to thebeneficiaries. Four business technical supportservices for MSMEs have been set up whilethree partnerships for knowledge sharingwere organized per region, province andmunicipality. The DAP originally targetedthree LGUs to enhance its local economicand enterprise development framework, butexceeded the target by actually having nineLGUs with the desired developmentframework by the end of 2005. It was alsoable to organize three sectoral benchmarkingnetworks.

In 2005, trainings were conductedfor local partners, including the ongoingdevelopment of content databases forShort Messaging System (SMS) services forfarmers and extension workers. Also, theDAP has conducted site assessments forthe establishment of community e-centers(CeCs) in selected agrarian reformcommunities and cooperatives. The CeCsserve as access points for delivery ofe-government and other services. It alsoprovided universal access to information andcommunication services in unserved areas,link communities, facilitate trade andcommerce, and empower rural communitiessocially, culturally, economically andpolitically.

At present, there are three projectsunder the Community e-Center program,namely: (a) Telecommunications Office

(TELOF) CeCs, which aims to convert theexchanges of the telecommunication officeinto Community e-Center; (b) i-Schools,which aims to establish 200 computerlaboratories in high schools all over thecountry; and (c) e-LGU CeCs, where theLGU delegates to the Knowledge ExchangeConference are active participants.

As of November 2005, theNational Computer Center (NCC)organized 75 CeCs all over the country,40 of which are operational. The TELOFhas established a total of 119 CeCsnationwide. These were establishedmostly at its Local Exchanges, municipalhalls, selected university and public highschools, with 56 in Luzon, 25 in Visayasand 38 in Mindanao. Its major offeringsinclude national and local government e-services, community-based services,special services and commercial services.

Moreover, a new “expense-free”business technology center that promotestechnology awareness has been launchedto help Filipino MSMEs become globallycompetitive. The business technologycenter aims to empower these enterprisesby taking advantage of technologytowards profitability.

The center facility is located at theDepartment of Trade and Industry (DTI)Regional Operations Group Office inMakati, and was created through a jointindustry effort by Intel MicroelectronicsPhilippines, Microsoft Philippines, and thePhilippine Long Distance TelephoneCompany (PLDT) in partnership with thegovernment.

In this center, a consultation areais provided for MSMEs to seek guidancefrom DTI experts on business planning andusing software applications that can helpautomate their operations. The center alsoserves as a venue for technology skills-building seminars teaching these


entrepreneurs how to use personal computersfor their businesses.

The presence of extension centersall over the country facilitated the equitabledistribution of knowledge and informationin the countryside. However, there is a needto harmonize efforts of government agencieson these extension centers to be able toprovide better services in terms of contentas well as explore the possibility of sharingresources to address sustainability issues.

Government Web Portals

The NEDA Knowledge Emporium,a networking initiative to leverageknowledge or intellectual capital for greaterefficiency and national productivity, isessentially a one-stop web portal to promotegreater productivity in industry, farmingcommunities, and among MSMEs. Users candownload or post their own good practicesand success stories on enhancingproductivity, which can then be shared withothers through the Internet. It is a virtualmarket place for sharing and exchangingproductivity enhancing technologies andexperiences for everyone. In 2005 alone,there was a total of 217 productivity-enhancing technologies posted in theEmporium. About 53 percent, or 115 outof 217 technologies are best practices and

success stories in the agriculture, agrarianreform and natural resources sector. Thedistribution of these technologies on a persector basis are shown on Table 18.2.

Similar initiatives are beingundertaken by other government agencies,thus contributing to the NEDA KnowledgeEmporium. These include the DA, DTI,DENR, DOST, DAP, BiotechnologyInformation Center, Philippine Council forSustainable Development, National Wagesand Productivity Commission, KnowledgeManagement Association of thePhilippines, Children’s Knowledge Center,Philippine Communication Centrum,Excellence in Local Governance CaseStudies, Ramon Magsaysay Awardees, andthe United Nations DevelopmentProgramme (UNDP).

In support of strengtheningknowledge institutions, extension workersand civic organizations on knowledgesharing/dissemination, the Philippine e-Library was launched. The project is acollaborative effort on the part of DOST,CHED, DA, the University of thePhilippines (UP) System and the NationalLibrary. It has a collection of 800,000bibliographic records consisting of morethan 25 million pages of local andinternational material, 29 full text journalsand 15,000 theses and dissertations, amongothers.

TABLE 18.2 NUMBER OF PRODUCTIVITY ENHANCING TECHNOLOGIES POSTED IN THE NEDA KNOWLEDGE EMPORIUM IN 2005

Sector Number of Productivity Enhancing Technologies Posted

Agriculture, Agrarian Reform and Natural Resources 115Governance and Institutional Development 4Industry 80Infrastructure 4Social Reform and Development 10Others 4TOTAL 217


1 Employment computed on the basis of a person working for 20 days a month regardless of the nature of the employmenti.e., contractual, seasonal, per job order.

Although the latest survey of theNational Computer Center (NCC)showed that 93.3 percent of nationalgovernment agencies have alreadyestablished their web presence, thePhilippines has yet to establish a countrygateway/portal, which will serve as theone-stop shop for accessing anddisseminating knowledge and informationand shall strategically serve as a vehicle forpromoting and strengthening closeinteraction with citizens, private sector,civil society, NGOs and othercommunities.

Training

The APEC Digital OpportunityCenter (ADOC)-Manila Partner Officewas launched in June 2005 throughfunding from the Chinese TaipeiGovernment. The Center’s aim of helpinggenerate international e-Commerce in theAPEC region fits well with the 10-PointAgenda through creating jobs through ICT.

Through the Center, e-Business(eBiz) training for MSMEs was conductedwith the goal of educating the MSMEs oneCommerce. The training gave theparticipants the knowledge, guidelines,strategies and skills for applying e-Commerce to their businesses.

Meanwhile, fora, seminars, fairs andexhibits were continuously organized andheld all year round. DOST held 122technology fairs and exhibits and 468 forawhile DAP held six seminars in 2005 thatwere attended by 326 participants.

Information Campaign

In the health sector, the Nutritionand Communication Network orNutriComNet serves as the portal for mediareleases of food and nutrition information;

while the Nutrition Research InformationNetwork or NutriNet, is a network oflibraries and information centers, for foodand nutrition.

For its part, the PhilippineInformation Agency (PIA) conducted anationwide information campaign on theBEAT THE ODDS. It consisted ofproduction of print materials as well as aphoto essay with the theme of“Hanapbuhay Para sa Mahihirap”. TheAgency also conducted informationdissemination through infomercials onmicrocredit and finance. Moreover, aninformation campaign on fuel and energyconservation and on good nutrition wereundertaken in cooperation with theDepartments of Energy (DOE) andHealth (DOH), respectively.

PROMOTE TECHNOLOGY-BASEDENTREPRENEURSHIP

The SETUP is a banner programof the DOST in diffusing knowledge andtechnologies to the stakeholders, and ithas an impact on the productivity of theMSMEs. Production volume increased byan average of 430 percent for each SMEwhile 682 firms were able to generate atotal of 21,7031 jobs for 2005, a 58.73percent increase from 2004. Also thepackaging assistance provided to MSMEsresulted in an increase in sales totalingPhP26,116,000.

Another priority program, theTechnology Incubation forCommercialization (TECHNICOM)originally targeted to establish 35technology-based firms for 2005. Althoughno firm was established, initiatives weregeared to fast track commercial applicationof innovative technologies developed bythe S&T community. Its interventions arein terms of the following: (a) commercial


prototype development/technology;(b) assessment/pilot plant production;(c) technology commercialization plan;(d) Intellectual Property Rights (IPR)protection; (e) technology negotiation andlicensing; and (f) training/consultancyservices.

Notable achievements of theprogram include the signing of aMemorandum of Agreement withSuperlative Snacks Incorporated for theEnriched Rice Premix. Another was theagreement with the BONCOMEnterprises for commercializing the

technology to produce coconut milkbeverages. Also under the program, theDigital Multimeter was launched togetherwith Yongden Technologies Corporation(YTC). The Digital Multimeter is a standardtest instrument used in electronics. It isclassified as a basic yet necessary technicalcommodity. The Advanced Science andTechnology Institute (ASTI) incollaboration with YTC pioneered thedevelopment of a local, low-cost digitalmultimeter. This breakthrough is promisingin the absence of a local design companyfor test instruments.

126 CULTURE

Chapter 19Culture

M

The conservation of built heritage,particularly efforts in preserving theUNESCO World Heritage Sites and the26 churches declared as National CulturalTreasures (NCTs), were sustained. One ofthe notable accomplishments for 2005 wasthe completion of the restoration of theBamboo Organ (declared as a NCT) andthe Church of St. Joseph in Las Piñaswhere it is housed. The rehabilitation andrestoration of the Metropolitan Theater inArroceros, Manila is also underway withthe preparation of the detailed engineeringstudy. In Mindanao, the restoration of theTorogan in Marawi is still ongoing whilethe work on the Loay Complex in Boholis almost complete. In support ofpreserving traditional knowledge and arts,aside from the nine Schools of LivingTraditions (SLTs) being maintained for theGawad sa Manlilikha ng Bayan (GAMABA)artists, 25 new SLTs were approved forestablishment in Panay, Tabuk-Kalinga,Tadian, Buhangin-Davao City, Caburao-Ilocos Sur, Puerto Princesa, Laoag, andDavao Oriental, among others.

ost of the targets identified for the priority activities for 2005 — covering heritage conservation, cultural education, promotion of culture and the arts, support for artistic ex-

cellence, peace advocacy, culture and development, and culture anddiplomacy — were realized, some even exceeding the output targets.However, the implementation of some activities was deferred, due tobudget constraints and delays in the release of funds.

Specific projects on the culturalheritage of indigenous peoples were alsodone. Activities that highlight theircultural and historical heritage andpromote public awareness on their rightswere carried out through ten community-based projects (involving communityfestivals, rituals and gatherings). Supportactivities for the production of traditionalcrafts were implemented. Thesecomprised 11 projects that aim to providea source of livelihood and sustain thetransfer of knowledge to youngergenerations. Initial work on thedocumentation of customary laws andindigenous knowledge system andpractices (IKSP), as an aid to policyformulation and legislation, were carriedout as well.

Three new traditional artists –Haja Amina Appi, a mat weaver fromTawi-Tawi; Darhata Sawabi, a pis yabitweaver from Jolo; and Eduardo Mutuc, ametal artist from Pampanga — wereawarded the GAMABA. In celebration ofthe Centennial of the Feminist Movementin the Philippines, 31 prominent women


were awarded the PAMA-AS Gintong Bai, alifetime achievement recognition forwomen with outstanding contributions inarts and heritage preservation.

Activities to improve culturaleducation were continued under theimplementation of the Philippine CulturalEducation Plan (PCEP). These includeenrichment programs for teachers, trainingfor cultural workers, and curriculum andinstructional materials development.

Culture and development initiativesposted significant gains in its role in peace-building and values formation. Peaceadvocacy was bolstered when the NationalCommission for Culture and Arts(NCCA) completed its collaborativeactivity with the Office of the PresidentialAdviser on the Peace Process (OPAPP) and

the National Youth Commission (NYC),particularly the Mindanao Youth Peace andDevelopment Advocacy Component of theMindanao NATIN Project. Some 800 youthdelegates from Lumad, Christian, andMuslim communities participated in theactivity. The government’s leadership intapping the various forms of media (e.g.television, radio, print and cinema) infostering positive values was realized withthe completion of four major productions.

The KALAHI Cultural Services forthe Poor was launched in 28 provinces withthe highest incidence of poverty. Capabilitybuilding for local communities was alsopursued together with the creation of 16local culture and arts councils inpartnership with local government units(LGUs).

128 ANTI-CORRUPTION

Chapter 20Anti-Corruption

T

IMPLEMENT PUNITIVE ANTI-CORRUPTION MEASURES

Expand and institutionalize lifestylechecks in government

The earlier accomplishments of thelifestyle checks program prompted thegovernment to expand and institutionalizeit as a key anticorruption measure. In 2005,the Presidential Anti-Graft Commission(PAGC) broadened its network ofgovernment and nongovernment partners inthe conduct of lifestyle checks. PAGCentered into an agreement with 10 selectedgovernment agencies, namely the Bureau ofInternal Revenue (BIR), Bureau of Customs(BOC), Departments of Education(DepEd), Interior and Local Government(DILG), Justice (DOJ), Health (DOH),Environment and Natural Resources

he Medium-Term Philippine Development Plan (MTPDP) 2004- 2010 combines punitive, preventive and educational strategies to reduce the prevalence of corruption. The implementation of key

punitive measures resulted in the prosecution and conviction of erringgovernment personnel in 2005. The preventive measures, on the otherhand, were mostly at the initial stages of development and implementationin 2005, and did not meet some of the targets. The electronic NewGovernment Accounting System (e-NGAS), for instance, was installedin only about eight percent of the target agencies due to thenoncompliance of agencies’ hardware and software with the e-NGAsrequirements. This points to the need to refine the resource requirementsof these pilot preventive measures to facilitate their adoption andimplementation. Educational measures were implemented as planned.These measures have to be sustained and expanded to further promote acorruption-intolerant society.

(DENR), Agrarian Reform (DAR), PublicWorks and Highways (DPWH), and theNational Labor Relations Commission(NLRC). The agreement aims to encouragethese agencies to conduct lifestyle checkson their respective employees, andforward the results to PAGC and theOffice of the Ombudsman (OMB) forappropriate action. PAGC also enteredinto an agreement with the CoalitionAgainst Corruption (CAC) andTransparency and AccountabilityNetwork (TAN) for these groups toprovide qualified volunteers to PAGC forits lifestyle check crusade.

Aside from these initiatives,PAGC investigators participated intrainings conducted by the OMB, FederalBureau of Investigation (FBI) and WorldBank (WB) to strengthen their capabilityin conducting lifestyle checks. To further


facilitate the lifestyle check process, PAGCestablished a database of statement ofassets, liabilities, and net worth (SALN);personal data sheet (PDS); andappointment papers of presidentialappointees.

In 2005, the conduct of lifestylechecks led to the suspension of 14 high-ranking officials, dismissal of seven, andfiling of forfeiture cases against three. Astargeted, the conviction rate among caseshandled by the OMB improved from 23percent in 2004 to 39 percent in 2005.

Showcase BIR and BOC in the fightagainst graft and corruption

As showcases in the fight againstgraft and corruption, the BIR and BOCcontinue to expand their electronic servicesand implement programs on personnelintegrity and internal audit.

The Automated System for CustomsData (ASYCUDA) World (e-Customs)Project of BOC aims to develop a fasterend-to-end cargo clearance process throughthe use of mobile broadcasting and internet/electronic data interchange connectivity. TheBOC has completed the migration toASYCUDA World core software. And incooperation with other government agencies,it began implementing 30 automated systemsin 15 ports. These systems include informalentries, bonds management, raw materialsliquidation, legal case tracking; and licensingand clearance. Other project activities thatwere completed are the rehabilitation of theCustoms Computer Center; conduct of 75percent of the planned training sessions; andthe Association of Southeast Asian Nations(ASEAN) Single Window PilotImplementation Project with Thailand.Through the Trade-Related TechnicalAssistance Programme, the BOC installedRisk Management System in major ports

and began conducting the Managementand Technical Training.

The BIR is also expanding thecomputerization of its system operationand business processes. Details of thesecomputerization efforts, which aim toimprove revenue collection efficiency, arefound in Chapter 1 (The Economy).

The Personnel Integrity Programin BOC and BIR led to the prosecutionof erring customs and revenue personnel.In 2005, the BOC filed 20 formal chargesinvolving 40 erring customs personnel. Ofthese cases, one led to a fine penaltyequivalent to six months salary while therest are still pending. In the BIR, 46 formalcharges were filed against erring revenuepersonnel. As a result of these and otherpreviously filed charges, 16 revenuepersonnel were dismissed; 13 weresuspended; 11 were reprimanded and 6were exonerated.

In line with the target to strengthenits Internal Audit Program, the BOCestablished an Interim Internal ControlOffice. The Office would, among otherthings, ensure that all rules governing BOCoperations are strictly and uniformlyapplied. It would also ensure that allprograms, projects and contracts areproperly implemented and complied with.The Office shall exist until a permanentInternal Control Office is created.

The Internal Audit Program ofBIR aims to conduct postaudit review ofterminated tax cases as well as audit thecash and noncash accountabilities ofRevenue Collection Officers (RCOs) andother accountable personnel. The BIRcompleted the preevaluation of 1,106 taxcases as of January 31, 2005. The BIR alsoconducts continuing review of audit reportson noncash accountabilities of RCOs andaccountable officers and chiefs of variousrevenue district offices.

130 ANTI-CORRUPTION

Create an Anti-Corruption Body in thenature of ICAC and emulate its bestpractices

The success of the IndependentCommission Against Corruption (ICAC) incurbing corruption in Hong Kong serves asa model for the Philippines’ own battleagainst corruption. The government aims toestablish an anti-corruption body in thenature of ICAC. In line with this target, theOMB is pushing for the amendment of theOmbudsman Act to replicate the structureand functions of the ICAC. The PAGC alsoadopted the three-pronged ICAC approachin fighting corruption - investigation,prevention and education - in itsorganizational mission, vision and goals.

Support the SOLANA Covenant

The SOLANA Covenant is a jointanticorruption plan by the OMB,Commission on Audit (COA) and CivilService Commission (CSC). Signed in 2004,the SOLANA Covenant lists anticorruptioninitiatives to be undertaken either jointly orindividually by the three institutions withinfive years after its signing. One of the jointinitiatives is the monitoring of unliquidatedcash advances by accountable officers (AOs),which may constitute a prima facie case ofgross neglect of duty under existing CivilService laws. As part of the collaborativeeffort, COA submitted to CSC and OMBreports of cash advances which remainoutstanding/unliquidated beyond theprescribed period and other supportingdocuments to cases. As of 2005, formalinvestigations are ongoing against 13 AOs.To reinforce this initiative, the CSC issuedOffice Memorandum 56 s.2005 thatprohibits the transfer of cash advance fromone AO to another. Related to this, COAalso issued the following policies: COA

Memo 2005-001, providing a monitoringbasis for unliquidated cash advances;COA Memo 2005-072, on referral ofCOA complaints/cases and COA reportsinvolving unliquidated cash advances;and COA Memo 2005-074, on thecampaign for the unliquidated cashadvances under the SOLANA Covenant.

Another initiative under theSOLANA Covenant is the Inter-AgencyLiaison Network for corruption cases. Theinter-agency collaboration under theSOLANA Covenant and the Inter-AgencyAnti-Graft Coordinating Council (IAGCC)facilitated the investigation and prosecutionof corrupt practices. The COA was able toevaluate 13,789 audit observationmemorandums, which led to the issuanceof 825 notices of disallowance/suspensionand charges. Through the cash examinationof AOs, COA discovered shortagesamounting to PhP26.29 million. The COAwas also able to file with OMB 57malversation cases involving PhP 115.59million. The COA also decided on 22administrative cases against 33respondents, out of which 24 were foundguilty and nine were exonerated.

As provided in the SOLANACovenant, the three participating agenciesconducted “self-cleansing” by dismissingerring personnel within their organization.In CSC, 19 personnel were dismissed; inCOA, 20; and in OMB, 3. Pertinentlegislative measures were also pursued suchas the protection and reward forwhistleblowers and the waiver of banksecrecy for corruption-relatedinvestigation.

In view of the considerableprogress made under the SOLANACovenant, the CSC, COA and OMBrenewed their commitment to theseinitiatives by signing SOLANA CovenantII on July 15, 2005. Under SOLANA


Covenant II, the three agencies commit tonew and continuing efforts to detect andprevent corruption in the government. Theseinclude the promotion of gift registry policyas an antibribery mechanism, whereingovernment employees may be required toreport the gifts they receive in a gift registrythat will be made public. SOLANACovenant II also includes improving theregulation of job orders and servicecontracts.

Comply with international standards infighting corruption

The government recognizes thatinternational cooperation is also essential infighting corruption. One of the targets ofthe MTPDP, 2004-2010 is the immediateratification of the United NationsConvention Against Corruption (UNCAC).The UNCAC provides countries with acomprehensive set of standards and rulesto strengthen their legal and regulatoryframework to fight corruption. It seeks tocriminalize prevalent forms of corruption inboth public and private sectors, ranging frombribery to concealment and laundering ofcorruption proceeds. It also harnessesinternational cooperation in the recovery ofassets obtained through corruption. In 2005,the Senate Committee on Foreign Relationsheld a committee hearing and drafted aCommittee Report on the ratification ofUNCAC.

IMPLEMENT PREVENTIVEANTICORRUPTION MEASURES

Strengthen the integrity infrastructureof public sector institutions

The creation of Internal AuditUnits (IAUs) is one of the keyinterventions to strengthen integrity in the

public sector. It is one of the measures inthe Integrity Development Action Plan(IDAP) of the Executive Branch. ThePAGC created an IDAP Committee onthe Institutionalization of IAUs to assistgovernment agencies in complying with thelaws and issuances regarding IAUs. TheCommittee is headed by the Office of thePresident (OP) and the Department ofBudget and Management (DBM). In 2005,the Committee met with variousgovernment agencies and the Associationof Government Internal Auditors (AGIA)to facilitate the creation and operation ofIAUs in public sector institutions.

In line with this, the governmentand the WB signed a grant on June 2005for the “Strengthening of IAUs forEffective Procurement Monitoring andEnforcement” amounting to US$300,000.The grant seeks to develop the followinginternal audit tools: (a) quality assuranceprogram for IAUs; (b) internal audit manualfocusing on procurement review andmonitoring; (c) national training programfor internal auditors; and (d) procurementrecords management and monitoringsystem for national agencies. It also seeksto strengthen the role of the PAGC asperformance monitor of IAUs. The grantcovers nine government agencies (Officeof the President, DBM, Department ofAgriculture (DA), DPWH, DOH,DepEd, Department of Social Welfareand Development (DSWD), Departmentof National Defense (DND), PhilippineNational Police (PNP)), Office of theOmbudsman (OMB) and three localgovernment units (Province of Bulacan,City of Marikina and Municipality ofCainta).

The other priority intervention isthe implementation of CorruptionPrevention Reform Program (CPRP). TheCPRP has since been subsumed under

132 ANTI-CORRUPTION

the preventive strategy of the IDAP. TheIDAP prescribes 22 anticorruptionmeasures for prevention, education,investigation and strategic partnership. Bythe end of 2005, 41 agencies have begunimplementing the IDAP. The PAGCmonitors the IDAP implementationthrough bi-monthly follow-up with IDAPfocal persons; monthly progress reportsby agencies; conduct of performanceindicators workshop, IDAP enhancementseminar and IDAP briefings; and thecreation of IDAP committees.

To further instill integrity ingovernment agencies, the IntegrityDevelopment Review (IDR) is being usedto identify areas vulnerable to corruptionand formulate corresponding preventivemeasures. The target is to apply IDR in 30agencies within the medium term, at fiveagencies per year. In 2005, the IDR wasconducted in DepEd, CSC, OMB andDBM. It is currently being rolled out in BIR,BOC, Land Transportation Office (LTO),DPWH and PNP.

The establishment of ICT-enabledcorruption complaints system is also beingpursued to enable public participation indeveloping integrity in the government. In2005, the PAGC updated its website(www.pagc.gov.ph) to allow the public toemail their complaints. The public may alsosend their complaints to PAGC via phonecall (9241311 local 1) or short messageservice or SMS (0920895709). The COAestablished a Fraud Alert link in its website(www.coa.gov.ph). The link enables thepublic to report allegations of fraud or fundmismanagement. A fraud alert feedback isprovided to the complainants to monitoraction taken thereon by COA. The OMBalso seeks to broaden and strengthenpeople’s participation in anticorruptionefforts through the Dulugan Bayan Project.It has identified Regions IV, VI, and X aslocations of satellite offices for the project.

Fully implement the GovernmentProcurement Reform Act

Republic Act (RA) 9184, or theGovernment Procurement Reform Act aimsto modernize, standardize and regulateprocurement activities in the government.One of its features is the GovernmentElectronic Procurement System (G-EPS),which shall serve as the primary source ofinformation on all government procurement.The Plan aims to have the G-EPSoperational for the purchase of commonsupplies beginning 2005 and to trainsuppliers on its use. From 2001 to 2005,161,302 notices and 20,949 awards havebeen posted in the G-EPS. However, thefull development and implementation of theG-EPS was delayed. The first phase, i.e.,the Electronic Bulletin Board, SupplierRegistry, and Electronic Catalogue, wasdelayed from May 2005 to May 2006. Thiswas due to the failure of the system to passthe System Walkthrough/User AcceptanceTesting. Consequently, the target launchingdate of the remaining phases, i.e.,Electronic Payment, Virtual Store, andElectronic Bid Submission were alsodelayed.

The DBM, nevertheless, continuesto train suppliers on the use of G-EPS. Asof December 2005, 5,162 suppliers havebeen trained. And 14,597 suppliers havebeen registered with the system beginning2001. Regarding government agencies,4,534 have been trained while 3,943 haveregistered from 2001 to 2005.

A related target is the developmentof a Procurement Planning, Monitoring andEvaluation System (PMES) by 2005. ThePMES aims to monitor and assess thecompliance of government agencies with theG-EPS and the rules and procedures of theGovernment Procurement Policy Board(GPPB). It also aims to assess theefficiency and effectiveness of trainings


conducted on RA 9184 and itsImplementing Rules and Regulations PartA (IRR-A). The PMES is currently beingdeveloped, and is expected to befunctional within 2006. Related to this, 42participants from 15 government agencieswere trained on detecting fraud andcorruption by the World Bank. Thetraining included investigative techniqueson examination of fraud schemes and redflags in procurement projects.

To further strengthen theimplementation of the GovernmentProcurement Reform Act, civil societyorganizations (CSOs) were targeted to betrained on procurement monitoring by 2005.The DBM is currently carrying out a studyon institutionalizing support mechanismsfor Bids and Awards Committee (BAC)observers/CSOs. This includes theestablishment of information exchange andhelp desk; deployment system for BACobservers (in partnership with TAN); andself-evaluation training for BAC observers.

To supplement and enhance theunderstanding of Government ProcurementReform Act, the GPPB issued the secondedition of the Philippine BiddingDocuments (PBDs) on May 26, 2005.Trainings and seminars on the use of thePBDs were conducted by the GPPB-Technical Support Office (TSO) andaccredited State Universities and Colleges.As of December 2005, 88 percent of LGUsand 20 percent of national governmentagencies/government-owned and controlledcorporations /government financialinstitutions were trained on the use of thesecond edition PBD. On the other hand,the Customized Agency ProcurementManuals were pilot-tested with theparticipating agencies while the GenericProcurement Manual is being reviewed byGPB. Both manuals are expected to bereleased by the 2nd quarter of 2006.

In support of RA 9184, the Planaims to develop and implement guidelinesfor value engineering for majorinfrastructure projects costing PhP50million and above. Towards this end, theDBM conducted orientation and trainingson value engineering. As of 2005, threebatches of government officials fromvarious agencies participated in themodule I workshop on value engineering.A Trainor’s Training on value engineeringwas also conducted. These trainors areresponsible for rolling-out the principlesof value engineering in their respectiveregions. A related target is to fullyimplement the contractor’s performanceevaluation system (CPES). TheConstruction Industry Authority of thePhilippines (CIAP) has released its CPESReport for ongoing and completedprojects from April 2003 to December2005. This report may be downloadedfrom the GPPB website(www.gppb.gov.ph).

Implement the New GovernmentAccounting System (NGAS) tostrengthen public financialaccountability

The NGAS aims to simplifygovernment accounting; conform tointernational accounting standards; andgenerate periodic and relevant reports forbetter monitoring of performance. Relatedto this, the e-NGAS software wasdeveloped for installation in all national,local and corporate government agencies.The e-NGAS aims to enhance uniformityin the application of governmentaccounting rules and facilitate theconsolidation of financial reports. Thetarget and actual number of agenciesinstalled with e-NGAS in 2005 are shownin Table 20.1.

134 ANTI-CORRUPTION

The wide gap in the installation ofe-NGAS is largely due to the low level ofagency hardware compliance andreadiness. Some agencies also encountereddifficulty in purchasing licensed software.These have prompted COA to considerthe migration of the system to an opensource system to limit cost and dedicateexpenses for required hardware. Anotherpriority measure on e-NGASimplementation is to intensify e-NGAStraining for COA personnel. The targetfor 2005 is to train 150 personnel as roll-out teams. The actual number ofpersonnel trained is 982, and 370 of whichwere deployed as part of the e-NGAS roll-out teams. The e-NGAS software iscontinuously being enhanced. Version1.2.0 of the e-NGAS software was installedin roll-out agencies. Version 1.0.10 of theBudget System was installed in nationalagencies, while version 1.0.2 was installedin LGUs. The Cash Receipts and PayrollSystem was pilot tested at COA CentralOffice. The rest of the applicationsoftware is being developed.

Improve frontline services to simplifyand speed up agency processes

One of the priority measures toimprove frontline services of governmentagencies is to institutionalize performanceexcellence in the public service. TheDBM, together with the DevelopmentAcademy of the Philippines (DAP), is

implementing the project “InstitutionalizingPublic Service Performance Excellencethrough the Establishment of InternationalOrganization for Standardization (ISO)9000-Aligned Quality Management System(QMS)”. The project aims to makegovernment agencies more responsive,competitive, effective and innovative.

The pilot agencies for the projectare: the licensing service of LTO;Organization and ProductivityImprovement Bureau (OPIB) of the DBM;Civil Aeronautics Board (CAB) of theDepartment of Transportation andCommunication (DOTC); IntellectualProperty Office (IPO) of the Departmentof Trade and Industry (DTI); and thePhilippine Council for Industry and EnergyResearch and Development (PCIERD) ofthe Department of Science andTechnology (DOST). The CAB and IPOare currently finalizing their QMS manual.The PCIERD, on the other hand, hascompleted the manual and passed the thirdparty audit conducted by the TUVRheinland Philippines, Inc, an in-dependent ISO audit and certifying body.

PROMOTE ZERO TOLERANCE FORCORRUPTION

Conduct Ethics Compliance,Awareness Raising and ValuesFormation Seminars in publicinstitutions

In the Career Executive Service,215 Career Executive Officers (CEOs) andother third level eligibles participated in theExecutive Leadership Program. Thisprogram has modules on public serviceethics and accountability. The CareerExecutive Service Board (CESB), inpartnership with the PhilippineGovernment Employees Association

TABLE 20.1 INSTALLATION OF E-NGAS IN 2005

Agencies Target Actual

National 296 26 LGUs 338 23 Corporate 27 5


(PGEA), also conducted a separate seminaron public service ethics and accountability.Thirty participants from both governmentemployees unions and management basedin the National Capital Region (NCR)attended the seminar. The CSC, on the otherhand, conducted values orientationworkshops attended by 2,640 employees in2005.

On August 24, 2005, theparticipation in and conduct of trainings,seminars and workshops on valuesformation was exempted from Section 1.a(5) of Administrative Order 103.1 Hence,government agencies and personnel maynow participate in or conduct valuesformation trainings and seminars.

Implement the Code of Conduct forGovernment Executives

The CESB amended the policy onthe conferment of CES eligibility toapplicants with pending administrative/criminal cases, with particular attentionto graft and corruption. Under CESBCircular No. 1 s. 2005, if the applicanthas a pending administrative case involvinggrave offenses of graft and corruption and/or sexual harassment, the CESB shallmanifest to the quasi-judicial body or theagency where the complaint is lodged, thespeedy disposition of the case possiblywithin six months from receipt of thewritten manifestation. If the case isresolved within six months, the applicantshall not be conferred CES eligibility ifthe penalty is dismissal from service. Incase of penalty other than dismissal, theCES eligibility shall not be conferred untilthe applicant has served the penalty. Incase the said period lapses without the case

being resolved, CESB shall confer the CESeligibility, while reserving the right tocancel it should the final judgment requiredismissal from service. CESB Circular No.1 s. 2005 also provides that an applicantwith pending criminal case involving graftand corruption and/or sexual harassment,or other grave criminal offense, shall not beconferred CES eligibility.

The CESB continues to develop thenew Career Executive Service PerformanceEvaluation System (CESPES). The systemwas pretested at the central offices of DTIand DOF, and at the regional offices of DTIand DepEd.

Expand multisector alliance topromote zero-tolerance

As mentioned earlier, the PAGCforged partnerships with variousgovernment and nongovernmentorganizations (NGOs) as part of itsstrategic partnership strategy to fightcorruption. It has also cooperated withvarious TV and radio programs toadvocate for zero-tolerance for corruption.

The OMB, on the other hand,continues its strategic partnership withNGOs such as the Philippine Province ofthe Society of Jesus (PPSJ); CoalitionAgainst Corruption (CAC); Barug!Philipino; Procurement Watch Inc.;Concerned Citizens of Abra for GoodGovernment (CCAGG); and People’sGraftwatch of Iloilo. In partnership withDepEd and NGOs, the OMB alsoembarked on an anticorruption educationprogram among the youth as well ascorruption prevention projectsnationwide.

1 AO 103 orders all national government agencies to adopt austerity measures, including the suspension of the conductof trainings, seminars and workshops, except if funded by grants or if the cost may be recovered through exaction offees.

136 BUREAUCRATIC REFORMS

Chapter 21Bureaucratic Reforms

T

However, many of the 2005 targetsof these strategies have not yet beenachieved. Some of the reforms are still atthe preparatory or development stage,while the others encountered somedifficulties during implementation.Nevertheless, these priority reforms andtargets need to be fasttracked in 2006 tohave considerable impact on public servicedelivery and the bureaucracy within themedium term.

o develop a more accountable bureaucracy, the following priority strategies were pursued in 2005: (a) to rationalize and improve public service delivery; (b) to pass the Reengineering Bill; (c) to

improve governance of GOCCs and other corporate entities; (d) toimprove the level of professionalism, meritocracy, accountability andcompetence in the civil service; and (e) to harness the full potential ofinformation and communications technology (ICT) for faster and efficientdelivery of government services at the national and local levels.

RATIONALIZING AND IMPROVINGPUBLIC SERVICE DELIVERY

Implement Executive Order (EO) 366

EO 366 calls for a strategic reviewof the operations and organizations of theExecutive Branch. The Medium-TermPhilippine Development Plan (MTPDP)2004-2010 targets that, by 2005, thestrategic review should have beenconducted alongside the implementationof impact mitigation measures for affectedpersonnel, and the development ofcapability-building programs for retainedpersonnel.

The Executive Branch began thestrategic review in 2005. By the end ofthe year, only 33 percent of the targetnational government agencies (NGAs)/executive agencies and 12 percent of thetarget GOCCs have completed theinternal strategic review and submittedtheir Rationalization Plans to theDepartment of Budget and Management(DBM)(Table 21.1). Two of theseRationalization Plans were approved byDBM in 2005. Some of the factors that

TABLE 21.1 STATUS OF RATIONALIZATION PLAN SUBMISSION (As of December 2005)

No. of No. of organizations organizations

that submitted their

Rationalization Plans to DBM

Departments and other 48 16 Executive Agencies GOCCs 76 9 Total 124 25

Source: DBM


may have affected the rate of completion/submission of the strategic review were: (a)the seven-month gap between the issuanceof EO 366 and its Implementing Rules andRegulations (IRR)1 ; (b) the weakobservance and implementation of thetimeframe set in the IRR; (c) the changesin the organizations’ leadership; and (d) thechange management issues that confrontedthe organizations.

Impact-mitigating measures wereput in place for personnel who may beaffected by EO 366. An interagency Skills/Livelihood and Investment Program (SLIP)Team was organized to assist affectedpersonnel in maximizing the benefits theywould receive, should they opt to retire orbe separated from the government service.The Team is composed of three groups:Business Opportunities, Job Facilitationand Investment Services. The BusinessOpportunities Group provided trainingsand financial assistance to affectedpersonnel who intend to start a business.The Job Facilitation Group assistedaffected personnel seeking employmentopportunities in the private sector. TheInvestment Services Group providedinformation and guidance regardinginvestment/financial products and trustservices. The DBM prepared anddistributed brochures to raise the awarenessof government agencies and personnelregarding the assistance they may availthrough this program.

In anticipation of the demand forplacement assistance by affected personnelwho opt to remain in government service,the DBM, in coordination with variouspublic sector unions, has identifiedagencies that would likely require newpersonnel upon rationalization. Theseagencies were requested to identify thepositions they would likely require, to

facilitate the placement of affectedpersonnel.

The capability-building programfor retained personnel consisted of theregular trainings conducted by the CivilService Commission (CSC) forgovernment employees. In 2005, the CSCconducted Orientation Courses, ValuesDevelopment Program, MiddleManagement Program, SupervisoryDevelopment Program and ExecutiveTraining Program, among others.

Implement the OrganizationalPerformance Indicators Framework(OPIF)

To rationalize and improve publicservice delivery, the MTPDP targets toimplement an OPIF-based budget in alldepartments/agencies by 2005. It alsoaims to implement by 2005 a personnelmanagement system (PMS) that is linkedto the OPIF. However, both the OPIF-based budget and PMS are still at thedevelopment stage and have not beenfully implemented.

The DBM has been finalizing theOPIF-based budgets of 13 pilotDepartments and three attachedagencies.2 It has also begun developingthe OPIF-based budgets of the otherattached agencies of the 13 pilotDepartments, along with the remainingseven departments (i.e., DepEd, DND,DOF, DOST, DOTC, DTI & NEDA) intime for the 2007 budget call.

The OPIF-based PMS was pilot-tested among the Divisions Chiefs andField Directors of the CSC in 2005. Basedon the results of the pilot test, the CSC issimplifying the PMS processes and formsbefore its implementation in selectedagencies. In view of the linkage of the

2 The 13 pilot Departments and three attached agencies are the Departments of Labor and Employment (DOLE), Justice(DOJ), Environment and Natural Resources (DENR), Interior and Local Government (DILG), Public Works and Highways(DPWH), Health (DOH), Foreign Affairs (DFA), Tourism (DOT), Agrarian Reform (DAR), Agriculture (DA), Energy(DOE), Budget and Management (DBM), Social Welfare and Development (DSWD), Technical Education and SkillsDevelopment Authority (TESDA), Philippine National Police (PNP), and the National Police Commission (NAPOLCOM).

1 EO 366 was issued on October 4, 2004, while the IRR was issued on May 11, 2005.


PMS to the OPIF, the implementation ofthe PMS would largely depend on theimplementation of the OPIF in thedepartments and agencies.

Rationalize the pay of governmentworkers

The target set in the MTPDP is torationalize the compensation forgovernment workers by 2005. While effortswere undertaken in the said year towardsthis direction, further work is still requiredto achieve the target. The CSC, inpartnership with the DBM, isimplementing the Position Classificationand Compensation System (PCCS)Reforms. This initiative aims to developreforms in the PCCS to achieve effectivegovernance.

The first component of the PCCSreforms is the Compensation and TotalRewards Management Project by the CSC.The project aims to develop an updatedcompensation structure for civil servants.It is composed of five activities: (a) reviewof the current system; (b) development ofa compensation and benefits philosophy;(c) job analysis, evaluation and pricing;(d) review of the salary administrationsystems; and (e) preparation ofcommunication strategy. The CSC hascompleted the first three activities. It hascompleted a compensation study thatidentifies the internal distortions/inequitiesand external inequities of the existinggovernment salary structure. Itrecommends a compensation and benefitsphilosophy founded on internal andexternal equity; performance-basedpolicies and incentives programs; andeffective and efficient pay systems. It alsoproposes a salary structure that iscompetitive to that of medium-sized privatefirms.

The CSC expects to complete thetwo remaining project activities in 2006.Once the CSC findings are completed andsubmitted to the DBM, the latter willcommence with the second component,i.e., the PCCS Study Project. The projectaims to develop a revised PCCS and a billproposing the revised system.

Aside from the compensationsystem, the government also expects torationalize the retirement benefits ofgovernment workers within 2005 and2006. Although the DBM has initiatedactions to achieve this target, it expects tocomplete it in 2007. In 2002, the DBMbegan the project “Rationalization of theRetirement Benefits of GovernmentWorkers”. Its first phase involves the studyof existing retirement schemes anddetermination of the implementation costof these schemes. Its second phaseinvolves the design of a unified, equitableand fiscally sustainable retirement scheme,including the costing and funding scheme;preparation of a draft rationalized retirementbill; and advocating for the passage of saidbill. So far, the project has completed onlyone sub-activity of the first phase, i.e.,the review of the legal and regulatoryframework of existing retirement andpension laws. The DBM aims tocomplete the remaining projectcomponents in 2007.

PASSING THE REENGINEERING BILL

The House Committee onGovernment Reorganization has come upwith a consolidated Reengineering Billwhich proposes the creation of aCommission on GovernmentReengineering that will formulate thereengineering plans for specific agenciesor sectors, subject to the review andapproval of the President. The Bill


provides for appropriate incentives andskills and livelihood assistance forpersonnel who may be affected by thiseffort.

IMPROVING THE GOVERNANCEOF GOCCS/OTHER GOVERNMENTCORPORATE ENTITIES (OGCEs)

For 2005, the targets under thisstrategy are the issuance of an EO tostrengthen the oversight of Departmentsover government-owned-and-controlledcorporations (GOCCs), and therationalization of the compensationsystem of GOCCs and governmentfinancial institutions (GFIs). These targetswere not achieved.

The EO drafted by DBM and theDepartment of Finance (DOF) has not yetbeen issued. The draft EO aims tostrengthen the supervision of the Officeof the President (OP) and concernedDepartments over GOCCs/othergovernment corporate entities (OGCEs).It also directs Presidential appointees to theboards of GOCCs/OGCEs to sign acovenant adopting the ethical standardsprescribed under RA 6713.3 The DBM isupdating the list of GOCCs/OGCEs forresubmission to the OP.

The rationalization of the GOCC/GFI compensation system is beingconsidered in the ongoing PCCS Reformsbeing undertaken by the CSC and DBM.This concern was also incorporated in theFiscal Responsibility Bill. (See Chapter 7,Fiscal Strength)

IMPROVING THE LEVELOF PROFESSIONALISM,MERITOCRACY, ACCOUNTABILITYAND COMPETENCE IN THE CIVILSERVICE

Develop market-driven andperformance-based compensation andincentive framework

In 2005, the governmentaccomplished its target of reviewing andidentifying the weaknesses in the currentPCCS, but it still has to develop acompetitive compensation package/scheme based on the study’s findings.

As mentioned earlier, thecompensation study conducted by theCSC identified internal distortions/inequities and external inequities in thecurrent salary structure of thegovernment. First, the progress across thesalary step increments within each salarygrade is based on longevity (i.e., one stepevery three years of service) rather thanperformance. Second, the salary stepincrements sometimes result in overlapsbetween salary grades. Hence,subordinates with long years of servicemay have higher salary than theirsupervisor. Third, various GOCCs areexempted from the supposedlystandardized compensation ofgovernment officials and employees.Fourth, there are wide salary gapsbetween rungs of one job although thedifference in responsibility is not clearlydefined. Fifth, jobs of the same nature aregraded differently across agencies. Sixth,the salary structure seems to discriminateagainst frontline jobs. Lastly, increaseacross salary grades is highest at theadministrative level and lowest at theexecutive level. Based on these findings,

3 Republic Act (RA) 6713 is the Code of Conduct and Ethical Standards for Public Officials and Employees.


the CSC and DBM are developing anequitable and competitive PCCS.

Improve merit-based recruitment,performance evaluation and promotion

The Ethics-Based Assessment Testaims to incorporate value orientation inthe minimum qualification standards ofthe civil service. The test was developedand pilot-tested among CSC employees in2005. The CSC plans to finalize andintegrate it in the CSC examinationsystem in 2006. The Human ResourceInformation System Strategic Plan(HRISSP) was also started as planned. TheHRISSP aims to develop the HumanResource (HR) Database and HumanResource Management InformationSystem (HRMIS) in 2006. In 2005, theCSC began to develop the HumanResource (HR) Database of all governmentemployees to further encourage merit-based recruitment, performanceevaluation and promotion.

Strengthen the civil service legalframework

The government continued topursue the passage of the Civil ServiceCode in 2005. The CSC spearheaded thefiling of the Civil Service Code (SenateBills 1045 and 1142 and House Bills 0081and 0798), pursued the passage of “An ActDeclaring as Unlawful any Form ofCheating in CS Examination” (Senate Bill1888 and House Bill 4435), and the CareerExecutive System Act of 2005 (Senate Bill1889 and House Bill 3687). These bills arepending with the Committee on CivilService of both Houses of Congress.

Strengthen the civil service policyoversight and implementation

To build the capability of thehuman resource management officers(HRMOs) in various areas of personnelmanagement, training modules for theCompetency-Based Training 1 (CBT1)were developed and pilot-tested in 2005.The CSC plans to implement it in 2006.

Push for reforms that aim to strengthenthe career executive service

The target of the MTPDP is to havethe bill on establishing the career executivesystem passed by 2005. As mentionedearlier, the bills regarding this are stillpending with the Committee on CivilService of both Houses of Congress.

In the meantime, the CSC andCESB forged an agreement to implementthe Unified Third Level ExaminationSystem. The system aims to attainefficiency and uniformity in the conductof third level examination and grant ofeligibility. This system merges the CareerService Executive Examination (CSEE) ofCSC and the Career Executive ServiceExamination of the CESB into the CareerExecutive Officer (CEO) Examination.

The CESB also launched the ThirdLevel Champions (TLC) program. Theprogram aims to actively involve CareerExecutive Service Officers (CESOs) andthird level eligibles in meeting the CESB’smandate to promulgate rules, standardsand procedures in the selection,classification, compensation and careerdevelopment in the career executiveservice.


HARNESSING THE FULLPOTENTIAL OF ICT FOR FASTERAND EFFICIENT DELIVERYOF GOVERNMENT SERVICES

Strengthen/streamline/restructure ICT-related activities

To ensure the effectivecoordination and implementation of thenational ICT agenda, the MTPDP aimsto establish a Department of Informationand Communications Technology(DICT) and strengthen the institutionalcapacity of the National Tele-communication Commission (NTC). In2005, House Bills 5282 and 4942 weretaken up at the House of Representatives.House Bill 5282 seeks the creation ofDICT to promote, develop and overseethe government’s integrated ICT system.It provides for an e-Government Fund forpriority ICT projects of the governmentand the transfer of the NationalComputer Center (NCC) from theCommission on Information andCommunications Technology (CICT) tothe DICT. Meanwhile, HB 4942 seeks toreorganize the NTC (See Chapter 6,Infrastructure).

Enact supportive laws and policies

The MTPDP targets toinstitutionalize e-Government Fund by2005 to fund the priority ICT projects ofthe government. It is planned to beinstitutionalized either as part of theDICT Law or as a line item in the GeneralAppropriation Act (GAA). In the 2005budget, the e-Government Fund wasestablished as a line item. It wascategorized as a Special Purpose Fundwith an appropriation of PhP1 billion.

The same item and amount wasincorporated in the proposed 2006 budget.

Enhance access to governmentinformation and services throughe-Government frontline services

During the 13th meeting of theInformation Technology and ElectronicCommerce Council (ITECC), PresidentGloria Macapagal-Arroyo directed allgovernment agencies to comply with atleast Stage 1 of the United Nation’s fivestages of e-government development byJune 2002. Stage 1, emerging webpresence, refers to formal but limited webpresence through independent governmentwebsites that serve as public informationsources. Stage 2 refers to an enhanced webpresence which enables users to accessspecialized and regularly updatedinformation through an increasingnumber of websites. Stage 3, interactiveweb presence, is characterized by anincrease in the number of websitesproviding access to a broad range ofgovernment institutions and theirrespective services. Stage 4, transactionalweb presence, enables the users to conductcomplete and secure transactions online.Stage 5, fully integrated web presence,provides all services and links through aone-stop-shop portal.4

4 Source: United Nations Online Network in Public Administration and Finance (http://www.unpan.org/e-government/stages.htm)


From April 2002 to fourth quarterof 2005, the NCC conducted a survey onthe web presence of 375 NGAs, GOCCsand Constitutional Commissions. Table21.2 shows the results of the survey.

The GOCCs that have reachedStage 4 or transactional web presence arelisted in Table 21.3.

ICT-enable LGUs to the barangay level

The DILG implemented the LocalGovernment Unit Information Portal(LGUIP) that will serve as a gateway andone-stop shop of information and

TABLE 21.2 STATE OF WEB PRESENCE OF NGAS (As of Fourth Quarter 2005) Stage of e-Government No. of NGAs/ GOCCs/ Commissions

Stage 1 (Emerging Web Presence) 68 Stage 2 (Enhanced Web Presence) 132 Stage 3 (Interactive Web Presence) 142 Stage 4 (Transactional Web Presence) 8 Stage 5 (Integrated Web Presence) 0 Without web presence 25 Total 375

Source: National Computer Center (http://www.ncc.gov.ph/ files/wp4thqtr.pdf)

NGA/GOCC Online Payment System/Online Services URL Address

1. Bureau of Internal Revenue e-FPS (e-Filing and Payment System) www.bir.gov.ph e-TIN (Electronic TIN Application

e-Sales (Electronic Sales Reporting System) e-Accreg (Electronic Accreditation and Registration of

Business Machines Generating Cash Receipts/Invoices) eBroad (Electronic Broadcasting System)

2. Securities and Exchange Commission (SEC) SEC-iRegister www.sec.gov.ph Search Reserved/Registered Companies

Online Calculator3. Philippine Health Insurance Corporation (PHIC) e-payment www.philhealth.gov.ph4. National Statistics Office (NSO) e-Census www.e-census.com.ph5. Development Bank of the Philippines (DBP) www.devbankphil.com.ph DBP Electronic Payment System www.gophilippines.ph Go Philippines (RORO Reservation and Ticketing

System) www.buyphilippines.ph Buy Philippines6. Home Development Mutual Fund (HDMF) Pag-IBIG Overseas Program (POP) www.pagibigfund.gov.ph7. Land Bank of the Philippines Electronic Tax Payment System (ETPS) www.landbank.com8. Philippine Amusement and Gaming Corporation Basketball Jackpot (PAGCOR)

www.casinofilipino-online.com Online Soccer

TABLE 21.3 NGAS/GOCC IN STAGE 4 OF E-GOVERNMENT(As of June 2005)

Source: National Computer Center (http://www.ncc.gov.ph files stage-1june2005.pdf)


e-services of the DILG and the LGUs. Theportal development has six components: (a)development of LGUIP and its components;(b) development of server-based computingsystem; (c) acquisition of personalcomputers for DILG central and fieldoffices; (d) establishment of the DILGOperation Center: (e) enhance-ment of theroll-out of the Local GovernancePerformance Management System(LGPMS); and (f) ICT capability-buildingprogram for DILG officials and personnel.In 2005, the DILG accomplished the firstthree components. It will implement theremaining three components in 2006.

144 DEFENSE AGAINST THREATS TO NATIONAL SECURITY

Chapter 22Defense Against Threats To National Security

T

The four-point agenda is beingimplemented through the followingprograms or mission areas: (a) InternalSecurity; (b) Territorial Defense; (c)Disaster Response; (d) Support to NationBuilding; (e) International Defense andSecurity Engagements; (f) InternationalHumanitarian Assistance and Peace-keeping Operations; and (g) Force-LevelCentral C2, Training and Support.

Implementing the PDR program

Institutional and Strategic Improvement.

The PDR provides the framework forintroducing a comprehensive, institutional,structural and systemic reform package atthe strategic level for the defense and military.The ten key areas of reform consist of thefollowing interrelated programs:

1) Multiyear defense planning system;2) Improvement of operational and

he Department of National Defense (DND) is mandated to protect the people and the state, assist in socioeconomic development including assistance during and mitigation of

disasters and calamities and similar emergencies, and provide for thewelfare of the veterans. Its mission is “to provide and maintain theconditions of security, stability and peace and order conducive toeconomic growth and national development”. The DND is committedto pursue the following four-point agenda:

1) implementation of the Philippine Defense Reform (PDR) Program;2) upgrading the capability of AFP over a six-year period;3) supporting the peace process efforts; and4) enhancing the ability to fight terrorism.

training capacity;3) Improvement of logistics capacity;4) Staff development program;5) Improvement of personnel

management system;6) Multiyear capability upgrade

program to push for AFPModernization;

7) Optimization of defense budgetand improvement of managementcontrols;

8) Centrally-managed defense acqui-sition system manned by aprofessional acquisition work-force;

9) Improvement of civil-militaryoperations capability; and

10) Information managementdevelopment program.

In order to institutionalize furtherthe abovementioned reforms, two top-level RP-US Executive SteeringCommittee meetings were held in April and


August 2005. Likewise, the DND iscurrently implementing DND DirectiveNo. 1-2003 on Strategic Defense Planningand Execution System (SDPES) and DNDDirective No. 1-2004 on MultiyearCapability Program System (MYCaPS).All planning, programming and budgeting(PPB) activities have also been integratedinto calendar-driven process through theDefense Resource Management System(DRMS), Defense Acquisition System(DAS), and the establishment of theResource Management Office (RMO).

To enhance check and balance, theOffice of the Deputy Chief of Staff forComptrollership, OJ6 was deactivated andits functions were distributed intoindependent offices. Defense ResourcesManagement Offices were established forthe following programs: (a) Program 1 onLand Forces; (b) Program 2 on Air Forces;(c) Program 3 on Maritime Forces; (d)Program 4 on Central C2, Training &Support; and (e) Program 5 on DND-LevelCentral Administration & Support. SeniorDND-AFP executives designated for eachprogram are directly accountable to theSND to achieve the desired capabilities andresponsibilities for the medium-termcapability plans. The Office of the DeputyChief of Staff for Material Development,OJ9 was likewise collapsed andtransformed into the AFP ModernizationPlanning Office (AFPMPO) to improveefficiency and allow the AFP to focus oncore competencies. The self-reliant defenseposture (SRDP) function of OJ9 wastransferred to the Office of the DeputyChief of Staff for Logistics, OJ4.

The DND has taken serious effortsto eventually establish a DefenseProcurement Agency. The DefenseAcquisition Committee (DAC) was createdto review and evaluate the following:(a) the AFP Table of Organization &

Equipment (TOE); (b) the AFP CapabilityUpgrade Program for CY 2006-2011,including the Battalion Upgrade Program;(c) the 18-Year CUP (2006-2023); and (d)the Circular of Requirements (COR) ofdefense and military equipment with costvalue of PhP50 million.

For the 1st Cycle of the MYCaPS,the Department conducted “LessonsLearned” Exercises that aim to enhancethe performance of the RMO of Programs1-5, review the experience gained in the2006-2011 PPB cycle, improve techniquesand practices, identify changes to theDND Directive No. 01-04, set thenational calendar for the 2007-2012 PPBand examine measurements used toexpress capability targets. To date, aMultiyear Capability Planning &Execution System (MYCaPeS) is now inplace.

In 2005, the 1st pilot Cycle of DASand Financial Management System (FMS)were implemented. The 2nd DRMSseminar was conducted to provide theDND personnel with MYCaPeS-relatedconcept management geared towardimproving the understanding of the roles,responsibilities and interdependence ofthe process, participants and productsused in typical modern PPB system.Relatedly, the 1st half of the pilot cycle ofthe Long-Term Capability System(LTCaPS) was also implemented.

To further enhance thedevelopment of the MYCaPeS and tosynchronize the programs and projects ofthe civilian bureaus with the DNDthrusts and programs, the DefensePlanning Guidance for 2007-2011 wasdrafted.

Similar to the AFP, the DNDcivilian bureaus now align the delivery oftheir respective missions and functions toaddress the department’s mission areas.


Several initiatives were undertaken by theDND Proper and the civilian bureaus totransform their budget structures fromfunction-based to capability or missionarea-based. At the DND Proper, the Officeof the Assistant Secretary for Finance wasreorganized with three divisions: (a)Resource Management Division (RMD)which is in charge of the Program 5 budgetintegration; (b) Budget Development &Analysis Division for DND-Wide budgetintegration; and (c) Fiscal ManagementDivision (FMD) for budget execution. TheBudget Estimate Submission Guidance(BESG), which is based on the NationalBudget Call (NBC), was also developed.The DND now uses the BESG to translatethe NBC into clear terms to guide thebureaus in aligning their respective budgetproposals with that of the NBC.

Institutionalizing Improvements through anew National Defense Act.

Considering current realities, theDepartment continues to pursue the draftingof the new National Defense Act to replacethe 1935 Commonwealth Act No. 1 as itimplements the series of reform packageunder the PDR.

Promoting the Welfare and Benefits ofSoldiers.

The DND-AFP exerted efforts toimplement the recommendations of theFeliciano and Davide Commissions to ensurethe grant of better benefits and services tothe soldiers.

Initiatives are being undertaken toimplement offbase and onbase housingprogram for the soldiers. During theperiod, around 8.1 percent of the total AFPstrength benefited from the onbase housingprogram, budget of which included the

PhP1.5 billion fund from the Office of thePresident. For offbase housing, 220 out ofthe targeted 1,700 units at Fort BonifacioHeights area were completed. About 79of these units have been awarded. A totalof 252 out of the targeted 999 units werecompleted at the Riego de Dios area inTanza, Cavite. Out of the 519 qualifiedapplicants, only 69 have completed thepaper requirements and were awarded theunits. Housing assistance was extended to492 of the 1,293 beneficiaries under thekilled-in-action (KIA)/total personnelpermanently disabled (TPPD) category.The remaining 801 are still awaiting aPhP133.4-million fund. Further studiesare also currently being conductedregarding the distribution of the remainingareas for offbase housing projects inCavite, Zambales, Zamboanga, Laguna,Fort Magsaysay, Capiz, Ormoc City andin Gau, Isabela. There is also an ongoingstudy on the development of offbasehousing near the air and naval bases forthe PAF and PN personnel.

Medical services and assistance toAFP personnel and veterans were likewiseimproved. Coordination with thePhilippine Health InsuranceCommission for grant of special privilegesfor AFP members has been initiated. In2005, the VMMC renderedhospitalization, medical care andtreatment to 128,817 inpatients; 178,112outpatients (visits), 83,677 outpatients(treatment), and 6,801 inpatients(contract hospitalization). The FILVETSdonated 184 intraocular lenses to indigentveteran patients. These were distributedby the VMMC Social Services. About 612diabetic patients and their dependentswere also provided dietetic informationand instructions at the VMMC.

The AFP has further looked intothe grant of scholarships and tuition fee


discounts to soldiers and their dependents.It has started to study the grant ofeducational benefits through the AFPProvident Trust Fund.

The AFP retirement fund andfunding pension are likewise beingaddressed. There were also two bills alreadysubmitted to Congress in 2005. One refersto an act granting assistance andscholarship for higher education todeserving members of the AFP and PNPand their dependents, while the other isan act on the establishment of a uniformretirement system for the AFP.

On the other hand, the PVAOreported the approval of the following: (a)8,561 out of 15,707 claims for old agepension; (b) 1,967 out of the 1, 977 claimsfor death pension; (c) 1,485 claims fordisability pension; (d) 6,309 out of 8,064claims for burial benefits; (e) 6,747 claimsof student wards for educational benefits;(f) 846 veterans patients for hospitalization;and (g) 12 claims for veterans preference.In 2005, PVAO paid PhP13.3 billion forthe settlement of veterans’ claims forpension, educational benefits, expandedhospitalization and burial assistance ofveterans, their heirs, wives and dependentsunder RA 6948 as amended by RA 7696.

PVAO continuously validates thelist of beneficiaries and introduces changesand measures to pursue reforms that arefocused on IT intervention that wouldimprove systems and processes, strengthenoperations and services, review policies onbenefits and enhance personnel andorganizational development. Thesereforms are accompanied by processsimplification and the shifting of pensiondelivery from mailing to direct bankremittance. Some legislative initiatives havefurther been undertaken, in cooperationwith the AFP, to provide prompt, effectiveand efficient assistance to the families of

those soldiers killed-in-action.Moreover, the Military Shrines

Services (MSS) generated PhP1,730,085from entrance collections and rental feesin various military shrines during theyear. In line with the environmentalefforts and programs of the government,MSS maintained the 22,000 reforestationtrees at the Capas National Shrines,including the 300 seedlings planted inother military shrines.

At the DND Proper, deliberateefforts are being undertaken to developthe core competencies of its personnelby simultaneously instituting specificstructural changes to conform to therequirements of the PDR Program. In thisconnection, a strategic communication(STRACOM) concept and process havebeen introduced to support the programrequirements. The DND STRACOMorganization is expected to be in place inthe near future.

Upgrading the capability of the AFP

Another policy thrust of thedefense establishment is the attainmentand maintenance of mission-capablearmed forces through the AFP CapabilityUpgrade Program (CUP). This is beingcarried out through a MultiyearCapability Upgrade Program that willimprove the land, air and maritime forcecapabilities, as well as the joint commandand control capability of the AFP.

The AFP CUP replaces the AFPModernization Program (AFPMP)Rolling Plan. The CUP serves as theequipment procurement plan of the AFPfor the next six years, with the projectslisted according to priority in accordancewith the capability enhancement aim ofthe AFP. The focus of the 2005-2010 CUPis the provision of basic tactical


requirements by at least 68 percent. Themain priorities involve the acquisition ofsystems and platforms designed to establishcapabilities for Command, Control,Communications, Computers,Intelligence, Surveillance andReconnaissance (C4ISR), mobility andfirepower. The CUP is presentlyundergoing revisions in line with thepolicies enunciated by the Secretary ofNational Defense (SND) in October 2005.As directed by the SND, the focus of thenew CUP will shift to the retrofitting(retraining and reequipping) of a marinebattalion and 12 infantry battalionsannually for the next six years.

During the period, the AFPimplemented the train-the-trainer programfor the four Light Infantry Battalions, theCombat Life Savers Training, NCOAdvancement Training and the LightReaction Company Training. The AFPalso conducted the assessment of theSOUTHCOM organization to include thedevelopment of its proposedorganizational structure and criteria forpersonnel assignment. The Program ofInstructions (POIs) for personnel of theJoint Command Headquarters andbattalion level and higher unit staffs inSOUTHCOM was likewise undertaken incoordination with the Major ServicesDoctrine Centers, the AFP Command andGeneral Staff College (AFPCGSC) and theNDCP.

The PA implemented the retrainingof battalions through the integration ofpersonnel fill-up and equipmentrefurbishment. The Table of Organizationand Equippages (TOEs) of the Infantryand Marine Battalions was also formed.Furthermore, the AFP inventoried andassessed training facilities, realigned theInternational Military Education andTraining Program (IMETP) courses to

support development of training programs,and reviewed bilateral exercises todetermine support to the battalion training.The template and list of Mission EssentialEquipment of Infantry and MarineBattalions based on the TOEs were alsoreviewed for acquisition. The study of theseparation of the AFP DoctrineDevelopment Center (AFPDDC) from theAFP Command and General Staff College(AFPCGSC) and the subsequent upgradeof the Center into an AFP Wide ServiceSupport Unit (AFPWSSU) was alsopursued.

The Health Services Support(HSS) Infrastructure ReformCoordination Team and the SeniorMedical Officers’ Quorum wereestablished as part of the Health ServicesSupport Project. In addition, thecoordination and monitoring of actionsto field the Forward Surgical Team in early2006, revision of the POI on combatmedicine, and Emergency MedicalTechnician (EMT) training in the US ofsix AFP medics who will become schoolcadres were instituted. In the pursuit ofthese undertakings, the educational careerpaths for officers and enlisted medicalpersonnel are being worked out forincorporation into the careermanagement of the AFP including thedevelopment of the appropriate echelonsor structure of the AFP HSS.

With emphasis on theimprovement of the intelligence,operations and training capacity of itsvarious units and personnel, the AFP isable to sustain its capability to address thevarious mission areas of the DND.

On Internal Security

The AFP continues to address theproblem of insurgency and terrorism in


accordance with the National InternalSecurity Plan (NISP). During the period, theAFP neutralized 1,868 CPP-NPA members,122 MILF members and 174 ASG bandits.A total of 581 high-powered firearms wererecovered during the various operationsconducted by the AFP against these threatgroups. Of these, 460 were from the CPP-NPA, 72 from the MILF and 49 from theASG.

The AFP also programmed 619target barangays for its Special OperationsTeam (SOT) Operations but only 561 ofthe target were funded. Of these, 234 werecompleted, 163 have not yet started and164 are still ongoing. The AFPSOT Centermonitored and supervised 20 SOTtrainings of 35 officers and 548 enlistedpersonnel who compose the 64 SOTSquads distributed nationwide. TheCenter also continued with a study on the“Analysis and Assessment of SOT andSALA’AM Operations” that started inJanuary 2002.

Extra efforts to enhance its ISOwere also done by the AFP. In November2005, it spearheaded a Workshop onHernandez Doctrine relative to thesuspension of the Joint Agreement onSafety and Immunity Guarantees (JASIG).It also hosted the RP-US ScenarioDevelopment Conference/Workshop onthe War on Terrorism (Land and Maritime)in lieu of the proposed Kapit-Bisigconcept. In December 2005, the AFPconducted a workshop on theFormulation of the CY 2006 Thrusts andISO Target Goals. The initiative aims tokeep the current thrusts consistent withthe current operational environment andgenerate realistic capability-based ISOtarget goals for 2006. The workshop alsoprovided the venue for determiningpriority areas and success parameters in theWIN and HOLD areas, identifying and

resolving the gaps, as well as disconnectingand disseminating relevant issues andconcerns in the conduct of the ISO.Specifically, the workshop was designed tocreate a common understanding of the ISOthrusts.

On Territorial Defense

The AFP drafted a UnilateralDefense Plan (UDP) dubbed OPLANLAPU-LAPU which shall provide thestrategic operational plan for the defenseof the country against external attacks.However, it is currently undergoingfurther study because of the issue raisedregarding the components of the NationalManeuver Force (NMF). In connectionwith this, the AFP conducted a reviewworkshop and site visit in August 2005and validated the UDP through a wargame.

In particular, the AFP continuesto monitor the Kalayaan Islands Group(KIG) and the external borders of thecountry against intrusions. During theperiod, 34 aerial reconnaissance andphoto missions were carried out by thePhilippine Air Force (PAF) to updatecapabilities/developments of foreign-heldislets and shoals in the KIG. The missionsinvolved 197.36 flying hours. Aerialmonitoring was also conducted over thesite of the Malampaya Natural-Gas-to-Power (MNGP) Project in Palawan.Eleven aerial photo missions involvingmore than 12.3 flying hours were carriedout. On the other hand, the PhilippineNavy (PN) intelligence gathered andprocessed 1,123 summaries ofinformation on foreign intrusions/illegalpoaching by fishermen from China,Taiwan, HongKong, Malaysia, Vietnamand Indonesia who were entering thewaters of Palawan. It also conducted 57


aerial reconnaissance of “sovereignty”patrols in the KIG.

On Disaster Response

In 2005, the AFP has undertaken209 disaster-related activities and 50evacuation activities throughout thecountry benefiting 2,704 persons and6,600 evacuees, respectively. It alsoconducted 34 rescue operations thatbenefited 11,408 persons in theNOLCOM area of operations and 386rescue operations in the SOLCOM AOR.

Meanwhile, the Office of CivilDefense (OCD) facilitated the approvaland release of calamity fund assistanceamounting to PhP685 million for theimmediate relief and rehabilitation ofdisaster-affected communities. It alsoextended relief assistance to 11,622 affectedfamilies amounting to PhP15,188,200. Asthe secretariat and coordinating arm of theNational Disaster Coordinating Council(NDCC), the OCD continues to pursuethe implementation of the NDCC Four-Point Plan of Action on DisasterPreparedness, namely the upgrading ofPAGASA and PHILVOCS capabilitiesespecially in forecasting, publicinformation campaign on disasterpreparedness, LGU’s capacity building,and collaborative partnership program.This was done to strengthen linkages ofNDCC with other government agenciesand the private sector. The AFP continuesto support the OCD-NDCC in almostall disaster and emergency-relatedactivities.

On Support to Nation Building

The AFP vigorously supports thecountry’s development by undertakingcivic action as well as civil-military

activities. In 2005, the AFP conductedmedical and dental missions nationwidewith 353,134 beneficiaries. In line with thegovernment environmental protectionprogram, the AFP engaged in 98 treeplanting activities. The PN in particularalso entered into a MOA with the Bureauof Fisheries and Aquatic Resources(BFAR)-DENR on the Fisheries Improvedfor Sustainable Harvests (FISH)Project.The FISH project aims to providetechnical assistance in the areas of fisherymanagement information, education andcommunication, coastal fishery lawenforcement and establishment ofmaritime protected areas in Palawan,Bohol, Surigao and Tawi-Tawi.

On community relations, the AFPparticipated in 4,408 national/historicalevents with 57,671 beneficiaries. It alsoparticipated in 4,164 religious events thatinvolved 13,368 beneficiaries. Further, theAFP carried out 10,325 cleanliness andbeautification projects. There were alsoinfrastructure projects of the AFP Corpsof Engineers that involved 20 roadprojects, 249 building units, 14 watersystems, 17 ground development projects,seven drainage systems, 15 power/telephone facilities, 16 survey project for394.345 hectares of land, 13 fencingprojects, one bridge and 20 other relatedprojects with a total value ofPhP842,311,409.

On International Defense and SecurityEngagements

The AFP continues to engage withcounterparts in the Asia-Pacific Region toenhance the country’s self-defensecapabilities and ability to operate withforces from partner militaries. In 2005, theAFP conducted 22 Mutual DefenseTreaty (MDT) exercises with US


counterparts such as the BALIKATANExercises wherein 3,452 AFP officers andenlisted personnel participated. The 2005BALIKATAN Exercises resulted in thetreatment of 21,428 patients and 1,119animals and the construction of a one unittwo-room school house, one unit three-room school house and a 1.2 km farm-to-market road. Three bilateral exercises thatinvolved 212 AFP personnel were heldwith the Malaysian counterparts.Likewise, six Passing Exercises (PASSEX)involving the ships of Malaysia, Thailandand France were conducted in the country.In these exercises, 216 AFP personnelconsisting of 27 officers and 189 enlistedpersonnel participated.

The AFP also played key roles inthe following DND-hosted visits: (a)Japanese Defence Ministers and ViceDefence Minister Takemasa Moriya inMay 2005 and November 2005,respectively; (b) Australian DefenceMinister Robert Hill in November;(c) Spanish Defense Minister Jose Bono,in November; and (d) SingaporeanDefence Minister Teo Chee Hean inDecember. Assistance was also extendedin connection with the visits of SNDAvelino Cruz, Jr. to Australia and NewZealand in February 2005, the UnitedStates in November and to Singapore inJune for the annual Shangri-la Dialogue.

Important activities in which theDND-AFP were involved include thefollowing: (a) hosting of the Philippines-Brunei Darussalam Joint DefenseWorking Committee Meeting in Manilain January; (b) conduct of the firstPhilippines-Japan Political-SecurityDialogue in February; (c) 5th Philippines-Australia Joint Defense CooperationCommittee held in Canberra in February;(d) conduct of the first Philippines-ChinaAnnual Security Dialogue in May;

(e) signing of an Agreement on China’sProvision of Military Aid Gratis to thePhilippines for CY 2005 in July;(f) conduct of the 2nd Philippines-AustraliaDefense Working Group in August;(g) hosting of the ASEAN Regional Forum(ARF) Meeting on Civil-MilitaryOperations in Manila in September;(h) conduct of the ARF Inter-SessionalGroup on Confidence Building Measuresheld in Germany in February andHonolulu in October.

In pursuing proactive defensediplomacy, the AFP also participated inthe Final Planning Conference of thePacific Endeavor 2005 held in Honolulu,Hawaii. The conference focused onassessing Single Channel Radios (SCR)and Telephone Switches (TS) the nationswould likely deploy in support of a crisisresponse and in providing a peacetimeexchange for participants to engagesocially and establish relationships tofoster human interoperability. AFPparticipants were also sent to Honolulu,Hawaii for the Multinational PlanningAugmentation Team Tempest Express-8Workshop. This activity focused on twoaspects – first, the coalition peaceoperations and humanitarian assistance/disaster relief planning and second,transition planning to a UN peacekeepingmission.

On International HumanitarianAssistance and Peacekeeping Operations

In line with the Philippinecommitment to contribute to regionalpeace and stability and to foster closer tieswith its regional counterparts, the AFPparticipated in the UN peacekeepingoperations in Timor Leste, Ivory Coast,Ache, Liberia, Burundi and Sudan asmilitary observers, staffs or peacekeepers.


In 2005, 69 officers and 313 were deployedfor the purpose. The AFP also issuedassorted vehicle spares amounting toPhP7,672,474 to support the motor vehiclesmaintenance requirements of the PhilippineContingent to Liberia and Haiti. The AFPtook initiatives to reorganize itsPeacekeeping Operations Center (POC) bydesignating it as an AFP Wide ServiceSupport Unit (AFPWSSU). The AFP-POCis tasked to prepare and administer therequirements of personnel and units for allpeacekeeping missions.

On Force-Level Central Command andControl [C2], Training and Support

The AFP continued with itspersonnel recruitment program andcommissioned the 149 members of thePMA Class 2005 into the Regular Forceon March 12. On the other hand, 47graduates of the PAF OCC Class 2005were commissioned into the Regular andReserve Forces on March 22. The 68members of the PAF OCC Class 28-2005were also commissioned into the Regularand Reserve Forces in October. Duringthe year, 123 inactive Technical Serviceofficers were Called to Active Duty (CAD)for three years.

Logistics management iscontinuously enhanced to support theISO and contribute to regional peace andsecurity. Significant accomplishments inthis area are the following: (a)procurement of 6,668 ammunition worthPhP60 million from Singapore TechnologyAmmunition; (b) issuance of 5,733,478basic load training and miscellaneousammunition worth to PhP180.34 million;(c) issuance of 70,559 ammunition basicload, training ammo and accessoriesamounting to PhP132,928 in support of theCAFGUs; (d) issuance of 207,394 rounds

of ammunition costing PhP3,030,075.70 insupport of the conduct of RP-USBALIKATAN Exercises and 2,000 roundscosting PhP42,800.00 for the AFP-USExercise TALON; (e) surveillance/inspection of two military supply units, oneforward service support unit and sixsuppliers/manufacturers; and (f) theconduct of a joint training with the USforces to the Light Reaction Company(LRC), Light Infantry Battalion (LIB) andthe use of Night Vision Google (NVG).

The AFP also took variousinitiatives to improve its communications,electronics, and information system(CEIS). Most significant among otherswere: (a) the provision of 41 CEISoperational support to various AFP taskforces in support of the ISO;(b) establishment of a communicationelectronic support system in connectionwith the RP-US BALIKATAN Exercise inLaguna; (c) provision of 336 CEIS supportservices to various presidentialengagements; and (d) the provision ofCEIS requirements to the Asean RegionalForum (ARF) and to the ASEAN DefenseChief Intelligence Informal Meeting heldat Dusit Hotel in Makati City. Specialattention was also given to facilitate theprocessing of certain requirements like thePhP22.8 million worth GeographicalInformation System (GIS), the PhP60million contract of the Integrated RadioTrunking System (IRST); the PhP30million worth Base CommunicationNetwork (BCN) of ISAFP; the PhP46.5million Mobile Communication Network(MCN); the PhP466 million worth two-phase Consolidated FixedCommunication System (FCS), thePhP37million satellite communication(SATCOM), the PhP23.8 millionE-Services Portal project, the PhP37.5million worth of medical equipment, and


the PhP12.5 million worth of dentalequipment.

The strengthening of its reservistand reserve force development was alsogiven emphasis. Significant accomplish-ments include the commissioning andtraining of 2,908 Reservist Officers toimprove organizational development.

The AFP likewise participated inbilateral/multilateral strategic planningexercises and interagency planningconference like in the development of RP-US scenario on the War on Terrorismwith the USPACOM and in theMultinational Planning AugmentationTeam Tempest Express, among others.

Supporting the Peace Process

The DND-AFP continues tosupport the peace process with the MoroIslamic Liberation Front (MILF) and theCommunist Party of the Philippines-National Peoples Army-NationalDemocratic Front (CPP-NPA-NDF). Italso continues to be vigilant and preparedto address insurgent activities and attacks.

The DND-AFP continues toadhere to the provisions of the ceasefireand cessation of hostilities agreementsespecially in monitoring and implementingpeace process-related agreements like theComprehensive Agreement on Respect forHuman Rights and InternationalHumanitarian Law (CARHRIL). Itactively participated in the variousactivities of the joint committee on thecessation of hostilities, the jointmonitoring committee, as well as in thetechnical working group of the GRPmonitoring committee. The DND-AFPalso continues to sustain its involvementin implementing the plan of action of the

Interagency Committee on ChildrenInvolved in Armed conflict (IAC-CIAC).

The DND-AFP is also activelyinvolved in the implementation of the“Kalayaan Barangays” Program (KBP) ofthe national government. The KBP is partof the convergence efforts to addressarmed conflicts pursuant to Agenda No.9(A Just End to the Peace Process) of theGovernment’s 10-Point Agenda asoutlined in the National Peace Plan orChapter 14 of the Medium TermPhilippine Development Plan (MTPDP)2004-2010. As envisioned, the DND,through the AFP, shall undertake theconstruction of the basic infrastructureprojects such as additional schoolbuildings, access roads, potable watersystem, electricity and appropriate healthfacilities for the 500 barangays identifiedby the DND-AFP and the 100 peaceagreements areas identified by the Officeof the Presidential Assistant to the PeaceProcess (OPAPP). The process involvesthe clearing of the conflict-affectedbarangays and rapid needs assessments(RNAs) to determine exactly the basicservices needed in the particular barangay.During the year under review, the RNAsfor the 600 barangays nationwide is almost65 percent done.

In 2005, 800 rebel returnees underthe Balik-Baril Program of the formerNational Peace Unification DevelopmentCouncil (NPUDC) were processed.These rebels surrendered 478 firearms and97 explosives. Since the inception of theprogram on March 1, 1987, the totalnumber of rebel returnees is registered at52,166. Total number of firearmssurrendered is at 26,131 and explosives,3,567.


Enhancing the Ability to FightTerrorism

The DND-AFP is committed topursue the global fight against terrorism.The AFP continues to intensify itsoperations against various threat groupslike the Abu Sayyaf Group (ASG), theCPP-NPA, the MILF and the JemaahIslamiyah (JI) by monitoring closely theiractivities and denying them sanctuaries,training ground and bases of operations.As of end-2005, the AFP neutralized 1,868CPP-NPA, 122 MILF and 174 ASG. TheAFP also recovered 581 high-poweredfirearms. To enhance its capability toaddress the threat of terrorism, the AFPcame up in December 2005 with aproposal to merge the AFP Joint SpecialOperations Group (AFPJSOG) and theAnti-Crime Task Force (ACTAF) into amore potent force for counter-terrorismand anticriminality. The proposal alsoincludes the activation of the Chemical,Biological, Radiological, Nuclear (CBRN)units as an organic unit of AFPJSOG.

Furthermore, the AFP continuesto enhance AFP units to improve theircounter-terrorism capabilities byrefocusing the core functions of the unitsto urban counter-terrorism and defensefacilities against terrorist attacks. Personnelof DND-AFP likewise underwent severalcounter-terrorism trainings offered by theUS, Australia and the United Kingdom.These include the series of trainings onCrisis Management in Counter-Terrorismconducted under the auspices of the RP-UK Crisis Management AssistanceProgramme (RP-UK CMAP) and theComprehensive Security Response toTerrorism (CSRT) Course conducted bythe Asia Pacific Center for Security Studies(APCSS) in Honolulu, Hawaii. TheADND representative was also invited as

observer in the UK Atlantic BlueCounter-terrorism Exercises held inLondon in April 2005.

At the home front, the NationalDefense College of the Philippines(NDCP) also conducted terrorism-relatedfora and trainings. The NDCP conductedthe following: (a) Medical First RespondersInstructors Workshop and InterdictingTerrorist Organizations Training Coursein February 2005; (b) Training for CBRNResponse and Consultation with PolicyMakers in March 2005; and (c) twoHazardous Materials First RespondersAwareness Training in May and July 2005,among others. These training-workshopswere undertaken through the help of theUS Embassy in Manila as well as theAustralian Embassy. The Office of CivilDefense (OCD), on the other hand,conducted simulation exercises incoordination with the member-agenciesof the National Disaster CoordinatingCouncil (NDCC), particularly with theHealth Emergency Services (HEMS) ofthe Department of Health (DOH), andthe local government units to test thecontingency plans of the localgovernments in addressing terrorism.

The DND-AFP also activelyparticipated in the series of simulationexercises conducted by the PhilippineNational Police (PNP) and PhilippineCenter on Transnational Crimes (PCTC),to test the government’s preparations andcontingencies for the hosting of theInternational Parliamentary Union (IPU)in April 2005 and the Southeast AsianGames (SEAG) in December 2005. Bothsimulation exercises focused on addressingthe threat of terrorism. These activitieswere successfully undertaken under theauspices of the RP-UK Crisis ManagementProgramme (RP-UK CMAP).


In February 2005, the DND-OCD-AFP took part in the testing of the guidelinesof the World Health Organization (WHO)in the country’s readiness to respond to thedeliberate use of CBRN agents. InDecember 2005, the DND-OCD-AFP alsoparticipated in the 3rd National HealthEmergency Management Convention. Theconvention tackled the threat of naturaldisasters such as flooding and landslide aswell as man-made disasters like terrorismthat usually result in mass casualties andpose danger to national and publicsecurity. Through this gathering ofexperts, the DND-OCD-AFPrepresentatives had the opportunity topartake, share and learn experiences onhow to deal with such global threats. Atthe same time, they were able to increasetheir capacities to prepare and respond tocrises in the future.

The DND likewise activelyparticipated in the Technical WorkingGroup on the drafting of the proposedAnti-Terrorism Bill. As a member of theAnti-Terrorism Task Force (ATTF), it

participated in the ongoing initiative of theNational Anti-Terrorism Coordinator(NATC), who is the concurrent NationalSecurity Adviser (NSA), to harmonize thegovernment policies, strategies andresponses to terrorism. Meanwhile, theNational Plan to Address Terrorism andIts Consequences (NPTC), which is amajor annex to the National InternalSecurity Plan (NISP), continues to providethe overall framework for theGovernment’s action against terrorism.

In conclusion, the year 2005 hasbecome very challenging for the entiredefense and military establishment as itwent through the tedious process oftransforming itself with theimplementation of the Philippine DefenseReform (PDR) Program. But despite thechallenges, the DND and its bureaus,particularly the AFP remained steadfastin carrying out the DND mission “toprovide and maintain the conditions ofsecurity, stability and peace and orderconducive to economic growth andnational development”.

156 RESPONSIVE FOREIGN POLICY

Chapter 23Responsive Foreign Policy

T

ENHANCE ECONOMIC SECURITY

Expand economic diplomacy efforts

In 2005, the Department of ForeignAffairs (DFA) established the Economicand Trade Core Negotiating Team inresponse to the need to strengthen thecountry’s economic diplomacy efforts. Toexpand these efforts, the countryconducted business missions and facilitatedbusiness/trade agreements, which are thekey targets throughout the medium term.In 2005, 16 outbound business/trademissions by government and private sectorwere arranged, including trade missions toSaudi Arabia, Bahrain and Myanmar. Inturn, 13 foreign business missions to thePhilippines were conducted. Aside fromthese, 51 international fairs andconventions, and eight local ones werecoordinated to facilitate businessengagements in the areas of trade,investment, finance and tourism.

he country’s foreign policy continued to respond to the realities in the global and regional environment. Measures have been initiated and/or implemented to enhance the country’s economic

and national security, as well as to protect the rights of Filipinos overseas.Given the continuing nature of most foreign policy targets, theaccomplishments in 2005 would have to be sustained and maximized inthe proceeding years to achieve the desired foreign policy goals withinthe medium term. The immediate term, however, calls for intensifiedefforts to implement the machine-readable passport and visa (MRP/V)system, as well as to achieve the target high rate of overseas absenteevoters registration for participation in the 2007 elections.

Maximize exports and investmentopportunities offered by tradeagreements

The country pursued free tradeand/or economic partnership agreementsto further enhance its economic security.An exploratory trade mission wasconducted in Eastern Indonesia tostrengthen trading between the Jose AbadSantos-Glan-Sarangani CooperationTriangle (JAGS-CT) and the nearbyislands of Talaud, Sangihe, NorthSulawesi and Gorontalo. The mission ledto trade and economic cooperation in theareas of fisheries, shipping, humanresources, agricultural business,electronics, and general trade. Energycooperation between the National PowerCorporation (NPC) and the IndonesianCoal Mining Association (ICMA) wasalso promoted through the Memorandumon Understanding (MOU) onCooperation on Long-Term Coal, Oil


and Gas Supply and Geothermal EnergyDevelopment.

The Philippines continued tonegotiate with Japan for the Japan-Philippines Economic PartnershipAgreement (JPEPA). The agreement isexpected to be finalized and signed by 2006.The Philippines also initiated and pursuednegotiations for an economic partnershipagreement with the Republic of Korea(ROK). Research and feasibility studies forpossible bilateral free trade agreements withthe United States of America (USA), SouthKorea and the European Union (EU) werealso initiated.

In line with the goals of theAssociation of Southeast Asian Nations(ASEAN), the country extended supportto the negotiations for ASEAN regionalfree trade agreements with China, Japan,ROK, India, Australia and New Zealand.It also led the development of the ASEANMillennium Development Compact(AMDC) during the ASEAN Workshopon Regional Cooperation on Poverty andthe Millennium Development Goals(MDGs), which the Philippines chaired inJakarta in August 2005.

In preparation for the 6th WorldTrade Organization (WTO) MinisterialConference in December 2005, thegovernment conducted multisectorconsultations to develop harmonizedPhilippine positions on trade issues. Thecountry actively participated in WTOnegotiations particularly in the areas ofagriculture; non agriculture market access;services; development; rules; tradefacilitation; trade and environment; trade-related aspects of intellectual propertyrights (TRIPS); and dispute settlement.The country pushed for the advocacy andachievement of a fair and optimum resultfrom the Doha Round for developingcountries and has invited other countries

to work for equitable trade relations.Among the activities to develop

and enhance Philippine trade in services,the Philippine Services Coalition (PSC)was established in May 2005 through theassistance of the European Commissionand the International Trade Center. Withthe DFA as its Secretariat, the Coalitionheld consultations with the government,the private sector and the academe to:(a) increase awareness among the publicand private sectors on the WTOAgreement on Trade in Services; and(b) to strengthen the involvement ofstakeholders in both services exportpromotion and services tradenegotiations.

ENHANCE NATIONAL SECURITY

Strengthen the strategic relationshipwith the United States to propelcommon commitment to fight againstterrorism

The country continued tostrengthen its security cooperation withthe US through bilateral discussions andactivities related to the Philippine DefenseProgram, the Mutual Defense Treaty andthe US Security Assistance to thePhilippines. Joint exercises on RP-USCounter-Terrorism were conducted aspart of the security cooperation. Otherareas of cooperation entered into with theUS include US military training,operational support against the AbuSayyaf Group and training of the anti-terrorism Light Reaction Companies.

Maximize bilateral and multilateral tiesto improve RP’s defense and militarycapabilities

The country also maintained itssecurity cooperation with Australia. The


3-year security package aims to enhancethe capacity of Philippine law enforcementagencies in the fields of intelligence sharing,bomb investigation techniques, forensiccapacity and other counter-terrorismstrategies. In 2005, the amount of thesecurity package was doubled from Aus$5million to Aus$10 million. To furtherexpand the number of Philippine partnersin the fight against terrorism, thegovernment has initiated security talks withPakistan, India, Egypt, Russia, China andJapan.

The country participated inmultilateral fora on political and securityissues. The Philippines participated in the38th ASEAN Ministerial Meeting in July2005, during which the ASEAN-ROKJoint Declaration for Cooperation toCombat International Terrorism wassigned. At the September 2005 Summit ofWorld Leaders in New York, PresidentGloria Macapagal-Arroyo chaired the 3rd

Security Council Summit, shepherding theadoption of a resolution on the preventionof incitement to terrorism and a resolutionon the prevention of conflict particularlyin Africa.

The country also maximized itsdiplomatic ties to extend assistance to othercountries. It sent Filipino medical, civic andforensic teams to Aceh, Indonesia; Phuket,Thailand; and Colombo, Sri Lanka toassist the victims of the Indian Oceantsunami.

Build the capacity of local lawenforcement agencies on counter-terrorism

The government continuedimplementing the three major capacitybuilding projects on counter-terrorism: theCounter-Terrorism Capacity BuildingProject (CTCBP); the RP-United Kingdom

Counter-Terrorism Crisis ManagementAssistance Programme (RP-UK CMAP);and the Philippine Border ManagementProject.

The Philippine Center onTransnational Crime (PCTC) led theimplementation of the CTCBP with theassistance of the Australian Federal Policeand the Australian Agency forInternational Development (AusAID).One of the target outputs of the CTCBPis the Philippine Bomb Data Center(PBDC), which would be the mainrepository of data on all unlawful use ofexplosives and provider of technicalexpertise on counter-terrorism togovernment agencies. In 2005, anExecutive Order creating the PBDC hasbeen drafted and awaiting approval. Thetarget Case Management and IntelligenceSystem (CMIS) has been installed andoperational. As further planned, 14PCTC personnel were trained on theCMIS operation and 11 were trained onintelligence analysis.

The PCTC also led theimplementation of the RP-UK CMAP. Astargeted, a core group of trainers fromconcerned government agencies weretrained on crisis and consequencemanagement. However, the trainers werenot able to echo the training in theirrespective agencies due to budgetconstraints and the adoption ofAdministrative Order No. 103.1 As partof the project, simulation exercises oncrisis management were conducted forthe 112th Inter-Parliamentary Union(IPU) Assembly and 23rd Southeast Asian(SEA) Games. Selected Philippineofficials were also sent as internationalobservers in a counter-terrorism exercisein the UK.

The International Organizationfor Migration (IOM) led the

1 AO 103 orders all national government agencies to adopt austerity measures, including the suspension of the conduct oftrainings, seminars and workshops, except if funded by grants or if the cost may be recovered through exaction of fees.


implementation of the Philippine BorderManagement Project funded by theEuropean Commission (EC). It aims toenhance the Philippines’ national bordermanagement policies and practices toactively support the country’scommitment to combat terrorism andfacilitate the orderly flow of aliens andcitizens. In 2005, the requirements for theExchange of Letters between theGovernment of the Philippines (GOP) andEC were completed.

Ensure the national sovereignty andterritorial integrity of the Republic

Negotiations with the Philippines’neighboring countries were pursued todelineate maritime boundaries and preservethe territorial integrity of the country. TheRP-China Memorandum ofUnderstanding (MOU) on MaritimeCooperation was finalized on April 27,2005. The country continued itsnegotiations with Indonesia and Vietnamthrough the RP-Indonesia Working Groupon Maritime and Ocean Concerns andSub-Working Group on MaritimeBoundary Delimitation and the RP-Vietnam Working Group on Maritime andOcean Concerns, respectively.

The country continued toimplement the ASEAN-China Declarationon the Conduct of Parties in the SouthChina Sea (DOC-SCS). It hosted the 1st

Meeting of the ASEAN-China JointWorking Group on the Implementationof the DOC-SCS on August 4-5, 2005where guidelines for the implementationof the DOC and areas of cooperation werediscussed. As part of the DOC, anagreement was concluded among RP, theRepublic of China and Vietnam on a jointseismic undertaking.

The country also strengthened itsparticipation in regional fora on maritimeconcerns. The Philippines revived itsparticipation in the Asia-Pacific EconomicCooperation (APEC) Marine ResourceConservation Working Group, theFisheries Working Group and the APECOcean-Related Ministerial Meetings. Thecountry also participated in the JointOceanographic Maritime ScientificResearch Expedition in the South ChinaSea (JOMSRE-SCS).

Proactive involvement in shaping theregional environment through theASEAN

The country was deeply involvedin the ASEAN Regional Forum (ARF)to promote mutual confidence andpreventive diplomacy in the region. ThePhilippines hosted the ARF Workshopon Civil-Military Operations inSeptember 2005, and the ARF Seminaron Cyber-Terrorism in October 2005.The Philippines and the US co-chairedthe ARF Inter-Sessional Support GroupMeeting on Confidence BuildingMeasures and Preventive Diplomacy heldin Hawaii in October 2005.

Contribute to the peaceful settlementof the problems facing southernPhilippines and the rehabilitation ofthe Autonomous Region in MuslimMindanao (ARMM) and CentralMindanao

The Philippines continued toparticipate in regional and internationalfora and organizations to articulate andgain support for the development effortsin Southern Philippines. On February10, 2005, the government conducted adiplomatic briefing for the Heads of


Missions of the member-states of theOrganization of the Islamic Conference(OIC) to present the Government of theRepublic of the Philippines-Moro IslamicLiberation Front (GRP-MILF) peace talksand solicit support for the Mindanao TrustFund. On June 28-30, 2005, the countryparticipated in the 32nd OIC IslamicConference of Foreign Ministers in Yemenwhere the government’s efforts toimplement the 1996 GRP-Moro NationalLiberation Front (MNLF) PeaceAgreement were presented. On August 22,2005, a diplomatic briefing on the conductof the ARMM elections was held for theOIC Ambassadors. On October 26, 2005,another briefing on the status of the GRP-MILF Peace Talks was held for thediplomatic corps and developmentagencies. On December 7-8, 2005, thecountry participated in the ExtraordinaryIslamic Summit in Saudi Arabia.

The government held bilateralmeetings with OIC member-states to gainsupport for the government’s bid forobserver status in the OIC. It alsofacilitated the renewal of participation bythe Malaysia, Brunei and Libya in theInternational Monitoring Team for theimplementation of the GRP-MILFceasefire agreement. On the other hand,the country assisted Indonesia in securingits peace agreement with Aceh by sendingFilipino monitors to the Aceh MonitoringMission.

Develop institutional capacities forculture

The DFA has developed a strategyfor cultural diplomacy, which use cultureas an instrument of foreign policy. TheOffice of Cultural Affairs was proposedin the DFA Rationalization Plan to takethe lead in this strategy and institutionalize

cultural diplomacy in the PhilippineForeign Service. While waiting forcreation of this Office, the Foreign ServicePosts, in coordination with otherPhilippine government agencies and theirrespective host countries, pursuedprojects to promote interest in andappreciation for Filipino culture in theinternational community. Tocomplement this effort, the ForeignService Institute (FSI) continued toconduct courses on Philippine cultureand values as well as tourism policies andpromotion to build the capacity ofPhilippine Foreign Service Officers oncultural diplomacy.

An MOU between the FSI andVenezuelan Diplomatic Institute PedroGual was signed on September 1, 2005.The MOU aims to enhance the twoinstitutions’ programs on internationallaw, diplomatic practices and internationalrelations through a linkage program.

Promote mutual understanding andappreciation of cultures

The country pursued bilateralcultural agreements to promote mutualunderstanding and appreciation ofcultures. The Marikina City-BramptonCity (in Ontario) Twinning Agreementwas signed on August 1, 2005. Theagreement establishes cultural andcommunity linkages, as well as economicand business cooperation between thetwo cities. As part of the RP-ThailandCultural Agreement, five Filipino artistsheld workshops and exhibit in Bangkokfrom June 24 to July 8, 2005. ThePhilippines also participated in suchcultural exchange programs as the Japan-ASEAN Youth Friendship Programmefor the 21st Century and the Ship forSoutheast Asian Youth Program, which


provide opportunities for the Filipino andJapanese youths to learn and appreciateeach other’s culture. The country alsoparticipated in the Dialogue betweenCultures and Civilization organized by theAsia-Europe Meeting (ASEM); TripartiteConference on Interfaith Cooperation forPeace; and Asia-Middle East Dialogue.

Information and communicationtechnology was also used to promotecultural understanding. Videos and otherrelevant materials on Philippine cultureand tourist spots were disseminated inMalaysia, Indonesia and the People’sRepublic of China. To encourage theestablishment of Philippine StudiesProgram in universities abroad, the DFAnetworked with universities in Canada,Japan and China. The Beijing Universityestablished a Philippine Studies Programunder its School of Foreign Languages. Insupport of the program, the DFAprovided books on the Philippines;assisted in the conduct of Filipino speechcontests; facilitated the students’ studyvisit to the Philippines and organizedinteraction between students of Philippineand Chinese studies.

The country partnered withforeign governments, Foreign Service Postsand Filipinos overseas to improve accessto Filipino literary works. In cooperationwith the Fairfield City Library, the countrylaunched the Read Philippines Program inSydney on August 20, 2005. The programaims to augment the existing Filipinianain the said library and encouragecommunity participation as donors andvolunteers. Books on Philippine historyand culture were also provided to China’sState Administration of Cultural Heritageand the Philippine Consulate-General inOsaka. The DFA also pursued thecountry’s participation in the SydneyWriters Festival.

To showcase and market thePhilippine cuisine in the internationalmarket, the government helped organizedPhilippine food festivals in 2005 in Sydney(Shangri-la Hotel and Grace Hotel), KualaLumpur (Legend Hotel), Petaling Jaya(Hilton Hotel) and Beijing (Hilton Hotel).The Philippine Embassy also participatedin the Blue Star Beer Festival and FirstWorld Chinese Conference in Beijing,which showcased Philippine food productand fashion, respectively.

PROTECT THE RIGHTS ANDPROMOTE THE WELFARE OFFILIPINOS OVERSEAS

Work with regional and multilateralorganizations

The Philippines won itscandidature to the United Nations (UN)Committee on the Protection of theRights of All Migrant Workers andMembers of their Families. As the ViceChair, the country played an active rolein ensuring the success of the Committeeprojects.

The country also assumed the roleof coordinator for the Asia-Pacific Groupat the International Labor Organization(ILO) in June. It was also elected as titularhead of the ILO Governing Body for theterm 2005-2008, giving the Philippines theopportunity to formulate and influenceILO policy towards improving the welfareof migrant workers.

On a bilateral level, the countrynegotiated for agreements for the welfareof Filipinos in specific countries. Itpursued talks with Malaysian governmentofficials to ensure the welfare ofundocumented Filipinos in Malaysia whowere subjected to repatriation. Thedelegation also negotiated for a labor


agreement with Malaysia with a view toreemploy the repatriated Filipino workers.Philippine representatives also attended aseries of meetings regarding the newimmigration policy of the Japanesegovernment on Filipino entertainers. TheRP-Belgium Consultative Meeting on theDerogation to the Convention on SocialSecurity for Filipino Seamen was also heldin 2005.

Adopt a more proactive approach inensuring the security of Filipinosoverseas

The country coordinated and/orparticipated in the following fora toconsolidate efforts against humantrafficking: Conference on Strategies forCombating Human Trafficking fromSoutheast Asia to Taiwan; OrientationProgram of the Joint Task Forces on Anti-Human Trafficking; DisseminationWorkshop on Non-Traditional Securityin Asia; National Summit for EffectiveProsecution of Cases under RA 9208;Orientation on Trafficking in Persons ; 1st

Council for Security Cooperation in theAsia Pacific Study Group Meeting; and theAsia Regional Cooperation on thePrevention of People Trafficking.

On the domestic front, thegovernment coordinated dialogues withconcerned nongovernment organizations(NGOs) and institutions such asMIGRANTE International, InternationalSocial Services (ISS), Visayan ForumFoundation, Asia Foundation, and Actionfor Health Initiatives Inc. (Achieve Inc.)to improve the welfare of Filipinosoverseas.

Pursue a worldwide doctrine of securityfor Filipinos

To better coordinate securitymeasures for Filipinos communitiesabroad, the government aims to developsecurity manuals for these communities.In 2005, the DFA and DOLE developeda security manual for Filipinos in Iraq. TheDFA also convenes a Crisis ManagementTeam as the need arises.

Strengthen the welfare mechanisms foroverseas Filipinos workers (OFWs)

The government continued toassist victims of human trafficking. In2005, the DFA repatriated and assisted 70victims. Their cases have been referred tothe Inter-Agency Council AgainstTrafficking in Persons (IACAT) andconcerned law enforcement agencies forthe filing of appropriate charges.

The government aims to develop aperformance monitoring system for FSOsto ensure their service orientation. TheDFA is now implementing theOrganizational Performance IndicatorFramework (OPIF), wherein its majorfinal outputs (MFOs) serve as the basis ofits quantitative performance indicators andtargets. This is being used to monitor theperformance of FSOs.

Implement the Overseas AbsenteeVoting (OAV) Law fairly and effectively

The government continued toimplement the OAV Law and target a highrate of registration and participationamong Filipinos overseas. For the May 14,2007 national elections, the application forregistration/certification as overseasabsentee voter began on October 1, 2005and will end on August 31, 2006. An OAV


registration center was established at thePhilippine Overseas EmploymentAdministration (POEA) Main Building tocater to the POEA clients, which average2,500 daily. The registration center beganits operation on October 17, 2005.Preparations to establish an OAVregistration center at the DFA premiseswere also initiated to target Filipinos whoare applying for or renewing theirpassports.

Improve consular services

Reforms to improve the issuanceof passports and authenticateddocuments were initiated in 2005.OPLAN FASTPORT was able to reducethe waiting time for the processing andrelease of passports from two hours to anaverage of half an hour. The DFA has alsoinitiated talks with the National StatisticsOffice (NSO) on the possibility ofobtaining electronic access to its databaseon a read-only basis, in order to facilitateverification of documents. Anothercomponent of OPLAN FASTPORT isthe deployment of mobile passportservices (MPS) teams to make consularservices more accessible to the people. In2005, 163 MPS missions were conductedin different parts of the country with59,578 passports issued.

Project 30-15, on the other hand,was able to meet its target to reduce thewaiting time for the processing ofauthenticated documents by 30 minutes,and the waiting time for release by 15minutes.

The government aims to fullyimplement the machine-readable passportand visa (MRP/V) system. It specificallyplanned to issue MRPs in 2005. However,this was not implemented as planned dueto technical and funding issues that need

to be resolved. In the meantime, the DFAparticipated in the Asia Pacific RegionalSeminar on Facilitation (MachineReadable Travel Documents, Biometrics)and Radio Frequency Identification(RFID) conducted by the InternationalCivil Aviation Organization (ICAO) inHong Kong in June 2005.

To strengthen the capabilities ofDFA in providing Assistance to Nationals(ATN), the Foreign Service Institute (FSI),in partnership with the InternationalLabor Organization (ILO) conducted aproject entitled “Protecting DomesticWorkers from their Vulnerability toForced Labor, Trafficking and HumanRights Abuses and Providing Support toVictims: A Training Tool for ForeignService Officers, Staff Officers, andAttache Corps”. The FSI also partneredwith Achieve Inc. to deepen theknowledge of FSI trainers and students onHIV/AIDS issues affecting Filipinosoverseas.

164 CONSTITUTIONAL REFORMS

Chapter 24Constitutional Reforms

C

ASSESSMENT OF ACTIVITIES

The House leadership from the 12th

Congress to the present has beenconsistent in its legislative agenda toinstitute constitutional reforms as part ofthe package to uplift the economiccondition of the country. In response, theCommittee Members and the Secretariatlived up to their respective responsibilities.

As early as the first regular sessionof the 13th Congress, the Committee wasable to dispose of all matters under itsjurisdiction in the committee level with theleadership of its Chairman.

It filed the following fourCommittee Reports:

1) Committee Report No. 413,recommending the approval of theHouse Current Resolution No. 14,the concurrent resolution callingfor the Senate and the House ofRepresentatives to constitutethemselves as a ConstituentAssembly to introduceamendments to the 1987Constitution;

urrent political and economic policies remain the focus of massive street demonstrations. Thus, this situation provides the impetus for the government to pursue Constitutional Reforms for CY

2006. The reassessment of the 1987 Constitution and the introduction ofamendments are still viable options to attain an effective and more stablepolitical institution, effective and accountable political parties and more liberaleconomic policies to address the prevalence of graft and corruption ingovernment.

2) Committee Report No. 835, theproposed “Rules of the 13th

Congress acting as ConstituentAssembly” in the exercise of itsconstituent power to proposeamendments to the 1987Constitution;

3) Committee Report No. 1065,recommending the approval ofHouse concurrent ResolutionNo. 26, concurrent resolutioncalling Congress to convenejointly to propose amendmentsto, or revision of, the 1987Constitution; and

4) Committee Report No. 1227,proposal for specific amendmentsto the 1987 Constitution,recommending its adoption as theProposed Specific Amendmentsto the 1987 Constitution by theCongress acting as a ConstituentAssembly.

The House ConcurrentResolution (HCR) No. 26, which was


issued on November 29, 2005, calls onCongress to convene jointly to proposeamendments to, or revision of, the 1987Constitution. This was approved by theHouse of Representatives and the same hasbeen forwarded to the Senate for itsconcurrence. The Committee Report (CRNo. 1065) containing HCR No. 26 wasdebated lengthily in the plenary hall butwas nevertheless approved. This signifiedthe overwhelming stance of the membersof the House of Representatives to go forConstituent Assembly as the preferredmode for introducing constitutionalamendments or reforms. HCR 26proposes the following specific areas ofamendments to the 1987 Constitution:

1) Review of the form of government,principally the shift to a unicameralparliamentary form, and from theunitary to the federal system;

2) Review of basic economicprovisions to maximize the benefitsand welfare of the people withoutbeing shackled by unnecessary andimpractical constraints andlimitations; and

3) Provide a mechanism for theorderly transition from the presentto the new form and system thatmay be adopted.

Before the approval of HCR 26, theCommittee has previously approved thefollowing three committee reports, whichwere made as bases for a new committeereport (CR 1065):

1) House Concurrent ResolutionNo. 14, entitled: “Concurrent

Resolution calling for the Senateand the House of Representativesto constitute themselves as aConstituent Assembly tointroduce amendments to the1987 Constitution”;

2) Resolution on the Proposed Rulesto govern the proceedings of theConstituent Assembly; and

3) Resolution on the proposedspecific amendments.

Despite these efforts, the issue asto what mode should be considered inamending the 1987 Constitution remainsunsettled. The present administration ispushing for the ConstitutionalConvention, whereas the HouseCommittee on ConstitutionalAmendments is in favor of amending theConstitution through ConstituentAssembly. This long delay in comingup with the best mode of amending theConstitution makes the plan unfeasibleand untenable.

The Commission on Elections(COMELEC) has exerted efforts inimproving governance through thereassessment and amendment of the 1987Constitution. The Commission hasprepared and submitted ProposedConstitutional Reforms, basically onArticle VI, Sec. 5(2), and Article IX (C)Secs. 2(7), 3, 6, 8.

Likewise, CommissionerResurreccion Z. Borra attended theConstitutional Consultative Committeemeetings/conferences and disseminatedinformation to COMELEC Officials onthe development of the ProposedConstitutional Amendments.