Congressional Planning and Budget DepartmentH O U S E O F R E P R E S E N T A T I V E S, 13TH C O N G R E S S

24 july 2006

CPBD RECOMMENDS ...Proposed Top 20 Priority Legislation

For The 3rdregular Session

TABLE OF CONTENTS

CPBD Recommends Priority Legislation..........................................................................................2

Strengthening Anti-smuggling Strategies .......................................................................................5

Rationalizing Fiscal Incentives ..........................................................................................................8

Removing Automatic Guarantees to GOCCs............................................................................10

Creating a Central Appraisal Authority........................................................................................12

Amendment To The Bases Conversion and Development Act ...............................................14

Corporate Recovery Act ................................................................................................................15

Pre-Need Code Of The Philippines................................................................................................17

Personal Equity Retirement Account (PERA) ...............................................................................19

Amending The Build-Operate-Transfer Law.................................................................................21

National Land Use Code.................................................................................................................23

Farmland as Collateral ....................................................................................................................25

Water Resources Management Act.............................................................................................27

Re-Engineering the Bureaucracy ..................................................................................................29

Deputizing Private Lawyers to Act as Prosecutors ......................................................................31

Campaign Finance Act ..................................................................................................................32

Ensuring Automation of Electoral Process....................................................................................34

Amending The 1987 Philippine Constitution ................................................................................36

Pre-school Development Act.........................................................................................................38

Responsible Parenthood and Population Management Act ..................................................40

Amending R.A. 8545 (GASTPE Law)...............................................................................................42

CPBD RECOMMENDS PRIORITY LEGISLATION FOR THE 3RD REGULAR SESSION OF THE 13TH CONGRESS

As the 13th Congress begins the last of its three annual regular sessions, there is need to reiterate that the overarching development goal of the country has basically remained largely elusive. The country must achieve sustained, robust, and broad-based growth, accompanied by an increase in employment that would reduce poverty and improve the well being of Filipinos in the long run. In view of this, institutional and governance mechanisms, including the legislative process must focus on the realization of a development agenda to ensure that the benefits redound to the Filipino masses. Compared to other countries in East and Southeast Asia, the country has never achieved rapid and sustained economic growth and improvement in the living condition of its citizens. Unless the country puts its acts together, it would find itself lagging farther behind its neighbors. There are two identified factors that are very important in attaining rapid and sustained economic growth. One is the accumulation of capital, which can be achieved through higher investment. A large capital stock increases the productive capacity of the economy. Improving the investment climate and mobilizing savings are critical to increasing investments in the country. The other factor is technical change, which can be in the form of either producing the same outputs more efficiently or producing entirely different and superior products. Both capital accumulation and technical change have acquired greater dynamism with globalization. Globalization provides for bigger product, factor and financial markets, and for greater competition among firms from different countries. This compels local industries to enhance their entrepreneurial and technological capabilities to be able to compete and survive. It is important that government provides the necessary policy and legal framework to reduce transaction costs and risks, create a level playing field, correct market distortions and allow firms to compete and operate efficiently. The promotion of macroeconomic stability is critical to the investment decision of firms. The government must also provide for basic infrastructure and foster efficient and cost competitive utilities and services. Simplifying the process of securing business permits and implementing clear bankruptcy laws and insolvency laws also reduce business transaction costs and opportunities for corruption. Political institutions play a crucial role in promoting efficient markets and good governance. It is therefore a challenge to make political processes and organizations more transparent and accountable to the greater majority of the people through reforms in electoral processes, intergovernmental relations and political parties. It is not only the rate of economic growth that is important but also its quality. Economic growth should be broad-based and equitably distributed to effectively reduce poverty and improve living standards. Thus, economic growth should be accompanied by an improvement in both quantity and quality of employment opportunities. In this regard, the government should provide clear and effective programs on education, health and population control to enhance the only endowment of the poor which is their labor.

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In line with this framework, the Congressional Planning and Budget Department recommends a number of proposed legislative measures for prioritization for the Third Regular Session of the 13th Congress to support the attainment of the development objectives. These bills can be categorized into broad areas of policies and programs such as macroeconomic stability, countrywide development, improving governance, political reforms and social development. Macroeconomic Stability

Strengthening Anti-Smuggling Strategies Rationalizing Fiscal Incentives Removing Automatic Guarantees to GOCCs Creating a Central Appraisal Authority Amending the Bases Conversion and Development Act Corporate Recovery Act Pre-Need Code of The Philippines Personal Equity Retirement Account (PERA)

Countrywide Development

Amending the Build-Operate-Transfer Law National Land Use Code Farmland as Collateral Water Resources Management Act

Improving Governance

Re-engineering the Bureaucracy Deputizing Private Lawyers to Act as Prosecutors on Behalf of the Ombudsman

Political Reforms

Campaign Finance Act Ensuring Automation of Electoral Process Amending the 1987 Philippine Constitution

Social Development

Pre-School Development Act Responsible Parenthood and Population Management Act Amending R.A. 8545 (GASTPE Law)

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CCPPBBDD DDeevveellooppmmeenntt FFrraammeewwoorrkk

Weak Long-term Economic Performance

Long regime of industrial protectionism & discriminatory policies

Episodes of political instability

Boom-Bust cycle High Population Growth Low Levels of Productivity Fiscal Deficit & Low National Savings Rate Huge Debt Overhang Unfavorable Investment Climate Weak Entrepreneurial Culture Weak Governance Peace & Order Problem

Macro-economic Stability

Resource Mobilization

Debt Management Public Expenditure

Mgt Infrastructure Development Outward Orientation

Trade Arrangements Exchange Rate Tariffs

Competition Policy R & D Program/ Technology Education & Health Programs Improved Governance

Law and Order Good, predictable

policies & regulations Reduced red

tape/corruption Government Re-

engineering Political Reforms

Constitutional Reforms

Political Party System

High Savings

High Investment

Technological Progress

Human Capital Development

Productivity and Global

Competitiveness

Robust and Broad-Based Economic

Growth

MAJOR DEVELOPMENT CONSTRAINTS

POLICIES AND PROGRAMS

GROWTH FUNCTIONS

DESIRED OUTCOMES

Employment

Reduced Poverty

Improved Well-Being

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STRENGTHENING ANTI-SMUGGLING STRATEGIES

CPBD recommends…

Facilitating early detection of smuggling activities by amending certain provisions of the Tariff and Customs Code of the Philippines (TCCP)

Imposing new and/or heavier penalties against smuggling (e.g. unlawful importation of goods in excess of P50 million shall be considered a heinous crime, increasing fines and period of imprisonment)

Creating a cabinet level anti-smuggling body that will formulate policies and develop strategies to curb large-scale smuggling and ferret out smuggling syndicates.

Revenue collections of the Bureau of Customs (BOC) have been on the decline during the last several years. From a tax collection-to-GDP ratio of 3.9% in 1997, BOC tax effort fell to 2.8% in 2005. One of the reasons for the decline was the implementation of the tariff reduction program in the 1990s in compliance with the country’s commitment to the General Agreement on Trade and Tariff (GATT). Decline in BOC collection is likewise attributed to high incidence of smuggling. The Fair Trade Alliance estimates that losses due to smuggling in 2004 alone amounted to P174.2 billion while the Federation of Philippine Industries places Customs’ foregone revenue at P100 billion annually. It was likewise raised during the Senate plenary deliberation (Session 40) that BOC could have doubled its P115 billion collection in 2004 if not for smuggling. Aside from its fiscal implications, smuggling also pushes local industries either to downscale or to close shop. For instance, production of the match industry declined by 50% while domestic garments industry may have collapsed because of “ukay-ukay”. Auto and auto parts industries laid off thousands of workers while 300,00 farmers in Benguet and Mountain Province were adversely affected by the entry of smuggled vegetables.

To curb smuggling activities, the following amendments to the Tariff and Customs Code of the Philippines (TCCP) should be pursued:

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1) advance transmission and publication of inward foreign manifests to allow the BOC and the industry group to examine the correctness of the valuation of imported articles (Sec. 105);

2) use of a Revision Order as one of the value database instruments in detecting under-valuation of imported articles (Sec. 201);

3) stricter supervision of customs bonded warehouses (Sec. 1901); 4) disallowing the use of freeports as international ports of entry for imported articles

that are destined for the domestic market (Sec. 701); 5) participation of the private sector in the deliberation of valuation issues through

the Valuation and Classification Review Committee (Sec.. 1409) ; 6) declaring as prima facie evidence of fraud articles which have been misclassified,

undervalued or misdeclared by more than 30% (the difference between the declared and the actual value, weight, measurement, or quantity) (Sec. 2503).

Goods that were found to be smuggled into Philippine customs territory shall be confiscated and disposed in the following manner: (1) re-export those that have export potential; (2) allocate to appropriate government agencies those that have immediate use of them; (3) donate to the DSWD (foodstuffs and clothing) and DOH (medicines); and, (4) burn or destroy those that can neither be re-exported nor consumed. Moreover, stiffer punishments should be imposed upon the importer-smuggler and errant Customs personnel. Penalties for statutory offenses of BOC personnel shall be raised from the P5,000 - P50,000 to P100,000 - P500,000; incarceration shall likewise be prolonged from 1-10 years to 10-15 years. Technical smuggling shall carry a fine of P300,000 to P2 million and imprisonment, depending on the amount involved. Technical smuggling refers to the difference between actual and declared value, weight, quantity or measurement of imported articles. Unlawful importation of goods (physical smuggling) in excess of P50 million shall be considered a heinous crime punishable with reclusion perpetua or death and a fine of at least P10 million. Smuggled items shall be summarily seized and forfeited in favor of the government. Due to the far-reaching consequences of smuggling, a special body composed of Cabinet Secretaries should be created to formulate policies and develop strategies to curb large-scale smuggling and ferret out smuggling syndicates. Large-scale smuggling refers to unlawfully importing goods worth more than P5 million while syndicated smuggling shall mean connivance of at least three persons. The anti-smuggling body

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shall likewise have the powers to review assignment/reassignment of BOC officials/examiners and recommend appropriate charges against erring customs functionaries. Relevant Legislation HB No. 4069/CR 614 (pending in the Senate since 03 August 2005)

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RATIONALIZING FISCAL INCENTIVES

CPBD recommends…

Rationalizing and consolidating existing laws on incentives into an Omnibus Investment and Incentives Code to promote efficiency and simplify administration.

Setting criteria and guidelines in the selection of investors who may avail of tax incentives.

Imposing a ceiling on the amount of incentives that may be given during the year.

With some 92 separate incentive laws and issuances being implemented by several government agencies, administration of fiscal and non-fiscal incentives has become costly and unwieldy. The present incentive system is also prone to abuses (double/multiple availment, fictitious claims, shifting of income from taxable to tax-exempt activities) brought about by over-lapping features of different incentive laws. Moreover, the incentive system puts tremendous pressure on the government’s fiscal space and resource allocation. A recent study indicates that in 2004, redundant fiscal incentives—i.e., perks given to investments that would have been undertaken even without the incentives—amounts to P61.3 billion or almost 1.3% of GDP during the year1. This implies that resources that could have been spent for poverty and inequality-reducing expenses like education and infrastructure have been given up instead.

Initially, all existing incentives laws shall be repealed to give way to an Omnibus Investment and Incentives Code. By rationalizing and simplifying incentive system, without sacrificing its attractiveness to investors, the government expects some P5 billion to P15 billion additional revenues yearly. As a general rule, incentives should be offered only to industries with high comparative advantage (relative strength or ability to compete in the export market) and to industries that are known to have high social and economic spill-over e.g. high-technology based enterprises and export-oriented activities. Industries whose growth are constrained by market failures and economic distortions—such as infant industries and firms linked to supply and distribution channels weakened by interdependence of investment decisions—likewise merit some form of fiscal assistance. Administration of the fiscal incentive system shall be centralized in the Board of Investments (BOI) which shall be tasked to: 1 Dr. Renato E.Reside,Jr. “Towards Rational Fiscal Incentives (Good Investments or Wasted Gifts?) “ 16 July 2006.

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Present to Congress a yearly incentive proposal that supports the Medium-Term Investment Priorities Plan

Propose a ceiling on incentives every year subject to Congressional approval similar to that of the national budget

Create a single data base for all incentives provided by all incentives granting agencies for proper monitoring; and,

Apply double entry accounting in recording all incentives granted for transparency purposes.

RELEVANT LEGISLATION HB No. 3295/CR 98 (pending in the Senate since 20 January 2005)

HB No. 271 (consolidated under HB No. 3295)

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REMOVING AUTOMATIC GUARANTEES TO GOCCS

CPBD recommends…

Repealing all laws granting automatic guarantees to Government Owned and Controlled Corporations (GOCCs)

Setting clear-cut standards and parameters for loans that the national government (NG) will guarantee.

Conducting extensive risk analysis before NG extends sovereign guarantee in GOCC loan applications.

Requiring NG to formulate a medium-term fiscal program to be approved by Congress.

One of the reasons for the national government’s ballooning debt - aside from its own fiscal deficit - is the practice of bailing out or assuming liabilities of failing financial institutions and GOCCs. Of the P2 trillion increase in NG debt in 1997-2003, more than 16% or P320.6 billion pertains to GOCC bailouts. 2

While the national government was able to bring down its deficit from P210.7 billion in 2002 to P187.1 billion in 2004, total public sector borrowing requirement (PSBR) grew from P268.3 billion to P286.1 billion during the same period. The increase in PSBR was mostly due to the combined deficits of the 14 major GOCCs (P90.7 billion) and the cost of restructuring the Central Bank (17.5 billion). Under existing GOCC charters, NG serves as “co-borrower” of loans secured by state-owned enterprises and guarantees payment of their liabilities should the GOCCs encounter financial instability at some future time. Such practice stunts fiscal discipline i.e., instead of generating profits/surpluses, GOCCs bleed the national coffers and wipes out expected gains from bold fiscal reform measures. Thus, all laws granting automatic guarantees to GOCCs should be repealed immediately. However, in cases where sovereign guarantee is extremely necessary, a thorough evaluation of risks involved should be undertaken a priori. Clear–cut standards and parameters (e.g. trigger mechanisms, extent of liability, amount of guarantee and service fees, etc.) should likewise be set.

2 De Dios, et.al. “The Deepening Crisis: The Real Score on Deficits and the Public Debt” University of the Philippines, August 2004.

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The Executive Department should also be required to formulate a medium term fiscal program that shall be subject to the approval of Congress. Among other things, the program shall specify GOCC debt obligations that will have to be absorbed by NG. Relevant Legislation

HB No. 3890 Fiscal Responsibility Bill (pending in the Committee on Appropriations)

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CREATING A CENTRAL APPRAISAL AUTHORITY

The CPBD recommends …

Creating a central appraisal authority to develop and implement general valuation standards that will make the valuation system for real property taxation uniform, equitable, and impartial.

Retaining the power of local governments to determine the assessment levels and fix the tax rate.

The current valuation system for real properties is one major problem contributing to an inefficient and inequitable land market in the country. There are different valuation systems and methods used by national government agencies and LGUs, which often result in contested appraisals. Moreover, there is no regular review of zonal values such that real properties tend to be under-assessed and collection from property ownership and transfers are relatively low. Under the Local Government Code of 1991 (Section 212), the local Sanggunian has the power to approve the schedule of fair market values prepared by the local assessors. The Sanggunian also determines the assessed or taxable value of real properties [a certain percentage of market value depending on asset type] as well as the tax rate of at most 2%. However, because of the political nature of the Sanggunian, many LGUs fail to update their schedule of market values and impose the highest allowable assessment level and tax rate. Any increase in levy may bring about political pressure on local incumbents. Real property tax (RPT) is a major internal revenue source of local government units—i.e., it accounts for more than one-third of total locally-generated income. If zonal values are regularly updated, potential revenues from taxes on real properties could be much higher as a result of an expanded tax base. With higher tax take, LGUs may eventually become less dependent on transfers from the national government.

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Relevant Legislation

HB 4354 proposing the establishment of the National Appraisal Authority (pending in the Committee on Local Government)

HB 278 proposing the creation of a regional technical valuation committee that

shall review the schedule of fair market values for approval of the Finance Secretary (pending in the Committee on Local Government)

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AMENDMENT TO THE BASES CONVERSION AND DEVELOPMENT ACT

The CPBD Recommends…

Restoring the same fiscal and non-fiscal incentives provided under Republic Act 7916 or the Special Economic Zone Act of 1995 to duly registered business enterprises located at the Clark, John Hay, Morong and Poro Point Special Economic Zones, similar to the incentives enjoyed by the Subic Special Ecozone and Freeport for uniformity of incentives to investors in all ecozones and freeports.

Providing one-time amnesty on certain tax and liabilities inclusive of fines,

penalties, interests and other additions thereto, incurred by business enterprises operating within the special economic zones and freeports.

Imposing of a 5% gross income tax in lieu of other taxes for enterprises in the ecozones.

In 2005, the Supreme Court ruled that incentives under the Republic Act 7227 or the Bases Conversion and Development Act of 1992 did not explicitly provide incentives for the Clark, Camp John Hay, Morong and Poro Point Special Economic Zones (SEZ), as it did for the Subic Special Economic and Freeport Zone. The ruling nullifying incentives in the four SEZs sent negative signals to investor-locators and may cause them to reconsider their decision to maintain their investments in the country, discourage their plans to expand their operations or worse, withdraw and relocate their investments to other countries. Clearly, this inconsistency in the government’s investment policy may render operations of the existing investors in these economic zones in jeopardy, and without corrective action, will have adverse repercussions to the economy. The four special economic zones has more than 400 investor-locators pouring in P261.7 billion of investments, and employing close to 50,000 Filipinos. Congress can rectify this flaw and the unpredictability of our policies concerning the country’s investments. By promptly passing this piece of legislation, Congress may be able to allay fears and apprehensions of those investors in the four ecozones, who are deprived of the incentives due to them, as well as give an assurance to other investors that the Philippines is still an attractive investment site. Relevant Legislation House Bill 5064 proposing for the amendments to Republic Act 7227 or the Bases Conversion

and Development Act (Committee Report 1343, approved on the 3rd reading and endorsed to the Senate).

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CORPORATE RECOVERY ACT

The CPBD Recommends…

Clarifying the rights of debtors and creditors to initiate formal debt relief proceedings;

Giving options to distressed companies by providing different means of relief

aside from the traditional court-supervised rehabilitation and dissolution/liquidation, including pre-negotiated rehabilitation and fast-tracked rehabilitation.

The various stakeholders in a distressed company face tough choices in protecting their respective competing interests. Creditors want their loans repaid, workers want to maintain their jobs, and shareholders want to avoid dilution of ownership. Therefore, balancing different interests pose a big challenge for concerned government agencies in dealing with bankruptcy cases. The responsibility for resolving conflicts while trying to save an ailing business has fallen on the Securities and Exchange Commission (SEC). The legislative base on which SEC has adjudicated these cases is the Insolvency Law, which passed in 1909, and the suspension of payments and rehabilitation provisions in PD 902-A. The Insolvency Law is sorely out-dated and PD 902-A is skeletal and confusingly written. While SEC has recently adopted rules for governing petitions for suspension of payment and rehabilitation, it nevertheless has remained hampered by this inadequate legislative base. Further, the recently passed Securities Regulation Code (RA 8799) will transfer SEC’s quasi-judicial jurisdiction over suspension of payments cases to the Regional Trial Courts. These courts, lacking a set of procedural rules to govern these cases, may have no choice but to apply the antiquated procedures of the Insolvency Law. Traditionally, these laws recommend dissolution/liquidation as well as court-supervised rehabilitation, which have few guarantee of success due to its inherent delays, cost and risk. Thus, alternative means to resolve these conflicts should be put in place. One option is through a pre-negotiated rehabilitation plan, whereby the debtor can work out a rehabilitation plan with its creditors with the official approval of the court. While the plan awaits approval, the claims and lawsuits of creditors are suspended. When the court approves the plan, all creditors are bound by it. The second option is through a fast-track rehabilitation plan, which stems from the assumption that the persons with the best incentives to fix an enterprise are owners with long-term outlook. Fast-track rehabilitation a) creates new, debt-free enterprise based

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on the assets of the debtor, b) transfers the shares of the new enterprise to the debtor in exchange for the debtor’s assets, c) allows for the auctioning of the shares of the new enterprise with an eye toward maximizing revenues from the sale, d) gives shareholders and creditors of the debtor various preferred rights in bidding for the shares of the new enterprise if they so choose, and f) allocates the proceeds from the sales of shares to creditors and shareholders of the debtor according to pre-established priorities. Fast-track Rehabilitation will still preserve and keep the business operational (albeit under the new corporate entity) while significantly reducing its debt in a very short period of time. While there are no guarantees of success, the enterprise, under new corporate trappings and management, has a far better chance of rehabilitating itself under these circumstances rather than trying to do it through endless rehabilitation proceedings. And chances are, the benefits of a fast-track rehab would redound to various stakeholders. Relevant Legislation House Bill 127 establishing a comprehensive corporate recovery law - (Pending with

the Committee on Banks and Financial Intermediaries)

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PRE-NEED CODE OF THE PHILIPPINES

Providing for safeguards to protect the plan-holders, such as the creation of a trust fund (deposits to the fund should be equal to 45% for life plans and 51% for education and pension plans if paid in full) to ensure the delivery of the guaranteed benefits and services provided under a pre-need plan contract.

Requiring the pre-need company to submit to the SEC a yearly actuarial valuation of reserve liabilities.

The CPBD Recommends…

Requiring pre-need companies to have a minimum paid-up capital of P100 million and a margin of solvency of at least P10 million before incorporation;

Requiring the trustee to maintain a liquidity reserve fund of at least 10 percent of the

trust fund to ensure that pre-need companies are liquid enough to meet future obligations.

The popularity of pre-need products such as pension, educational and memorial pension plans in the country has given rise to an industry with over P90 billion in assets. People rely on these plans to secure some of their future needs. Data from the Philippine Federation of Pre-Need Companies (PFPC) shows that there are more than five (5) million Filipino pre-need plan holders. The dominant product in 2004 is pension plans, which accounted for about 60% of the total pre-need plans. Meanwhile, education plans and life memorial plans accounted for 35% and 5% respectively. Recent financial troubles of two pre-need firms - College Assurance Plan, Inc. and Pacific Plans Inc. - which relate to their failure to pay the benefits due to their plan holders has brought down the confidence of the public in the industry. To revive the industry and bring back the confidence of the public, there is a need to improve its regulation to assure the stability and profitability and to ensure the protection of investors and plan holders. The proposed establishment of a Pre-Need Code should also provide for the following safeguard measures to protect planholders, which include:

• entitlement of planholders to termination values; • prohibition of pre-need companies from declaring dividends without SEC

approval; • withdrawals from the benefit fund limited to payment of planholders’ benefits; • prohibition of DOSRI loans; • SEC to prescribe guidelines on investment of benefit fund.

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Relevant Legislation House Bill 4343 creating a Pre-Need Plan Code of the Philippines (Committee Report

826, pending on 2nd Reading)

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PERSONAL EQUITY RETIREMENT ACCOUNT (PERA)

The CPBD Recommends…

The establishment of a provident personal savings plan known as the Personal Equity and Retirement Account (PERA) as a long-term savings vehicle for retirement years;

Safeguarding investments of contributors by limiting investment on the following

vehicles: a) approved common trust funds and mutual funds registered in the Philippines; b) approved annuity contracts and pre-need pension plans; and c) other investment vehicles allowed by the Regulatory Authority;

The meager savings and funds for retirement of working Filipinos is a critical but underreported national problem. The government has been scored for its lack of plan and action on how to make Filipinos sufficiently aware and understand the importance of retirement savings and the necessity of starting the habit of saving. As of March 2004, only about 2 million people are covered by the GSIS, 20.3 million are members of the SSS and 5.5 million people are covered by the PAG-IBIG fund. In other words, only 27.5 million of the 45.25 million Filipinos of working age have some kind of retirement plan. Moreover, the low propensity of Filipinos to save (at 18.5% lower compared to 38.5% of China; 27% Hong Kong, 27% of Korea; 27% of Malaysia, 28% of Singapore; 24.5% of Thailand; and 31% of Vietnam) has contributed to underperformance of our financial markets, which have lagged substantially behind those of our ASEAN neighbors. Historically, the only source of funds has been the stock market and the contractual savings sectors (i.e., GSIS, SSS). By encouraging savings, therefore, PERA will boost the potential for the capital market to act as an engine of growth for the economy by being the main source of investment capital in the country. This can be done through its contribution to the growth of a robust government securities and stock market and a shift in favor of long-term finance to promote the equity and bonds market. The creation of a Personal Equity Retirement Account also contain the following provisions:

• Exempt PERA contributions from gross income taxation; • Exempt all investment income and all distributions from BIR-approved PERA

Investment Vehicles from income tax; • Limiting investment earnings from PERA on the following: a) NG securities

guaranteed by the Philippine government; b) corporate or government bonds including issues of LGUs or NGAs, or debt instrument including asset-backed securities which is rated by a recognized rating agency in the Philippines; c) bank

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deposits in local and foreign currencies in Philippine FIs; d) foreign currency denominated investments authorized by the BSP but not to exceed 7.5% or whatever current SSS limit on foreign denominated investments; and non-speculative equities in the PSE.

• Giving out distributions upon reaching the age of fifty (50) years provided contributions have been made for at least 5 years.

Relevant Legislation House Bill 1928 creating a Personal Equity Retirement Account (Pending with the

Committee on Banks and Financial Intermediaries).

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AMENDING THE BUILD-OPERATE-TRANSFER LAW

The CPBD Recommends…

Strengthening the BOT Center to serve as a one-stop shop for BOT investors;

Setting clear rules/guidelines on the issues raised in the enforcement of contracts.

Establish a clear-cut framework of risk allocation between government and private sector on BOT projects;

The current drive toward private sector participation and competition in the provision of infrastructure has been driven by general factors, such as high indebtedness and stringent budget constraints limiting the public sector’s ability to meet increasing infrastructure needs; the expansion of international and local capital markets, with a consequent improvement in access to private funding.

In the present Philippine economic environment, where the BOT mode is the most feasible way for most infrastructure provision, privately financed infrastructure projects are an important tool in meeting national infrastructure needs. Unfortunately, private sector investment in infrastructure development in the country has declined substantially over the years. Cost of awarded projects went down by 88.2% to US$1.7 billion in 2003 from $14.7 billion in 1999.3 Why the decline in investor appetite? The decline in private sector investment in BOT projects can be partly explained by the long delays in the negotiation process and approval of BOT projects. This problem stems from the absence of a project company or a one-stop shop center with the legal personality to process the applications and implement approved BOT projects. Another factor hampering private participation is the government’s unclear and unpredictable position in the enforcement of certain provisions in the BOT contract. The lack of clear rules and guidelines are usually in the following areas:

Fairness of prices charged to the public; Risk allocation between government and private proponent, i.e., right-of-way

acquisition, guarantee on counterpart funding, and fiscal incentives; Compliance of companies to environmental, health, and safety standards;

3 Cited in Dr. Gilbert Llanto’s presentation on “BOT: Some Key Lessons for Future Policy-Making”.

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COA’s participation/involvement during project development and pre-implementation or prior to contract award;

Change of partnerships/memberships of consortium after contract award; Creation of a Special Purpose Company Congressional rules for inquiries in BOT contract

Addressing critical loopholes in the current BOT law will help promote and fast track infrastructure modernization in the country, and improve private sector participation in the government’s development goals.

Relevant Legislation House Bill 5002 proposing amendments to the Build-Operate Transfer (BOT) Law

(Pending with Committee on Public Works);

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NATIONAL LAND USE CODE

The CPBD recommends…

Putting in place a mechanism that will address massive and indiscriminate conversion of forest and agricultural lands to other uses, mainly settlement

Formulating a Land Use Code that will target and delineate areas open

for investment consistent with the country’s development plans

Setting standards and guidelines on land use at the national level for major island groupings based on latest data provided by NAMRIA and other concerned organizations

The country has no Land Use Code that serves as a sustainable growth map for both public development planning and private investment. To a large extent, this results in massive conversion of forest and agricultural land to residential subdivisions and continued squatting especially in urban areas. A Land Use Code is necessary for targeting and delineating areas open for investment in line with the country’s development plans. There is a need for certain lands to be set aside as “agricultural reserves” for food security. The Code is expected, eventually, to help resolve conflicts arising from various economic uses of lands versus the housing needs of the population. Data from the National Statistics and Coordination Board (NSCB) indicates that of the total Philippine land area of 30 million hectares, about 10.3 million hectares or 34% are devoted for agricultural uses, 8.99 million hectares or 30% are woodlands, around 0.54 million hectares or about 2% are utilized for establishments (residential and commercial buildings), and 389 hectares or 0.01% for industrial estates. Philippine forests have been steadily decreasing at an average rate of 3% per annum. From 15 million hectares in 1968, there are only 7 million hectares left in 2004. Based on the Land and Soil Environmental Accounts released by the NSCB, a total of 34,207 hectares were converted from agricultural to other uses from 1988 to 2000 or an average of 2,831 hectares per year. According to the Department of Agriculture, for rice

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lands alone, the 3.8 million hectares planted thirty years ago have dropped by 16% to 3.2 million hectares. Moreover, housing developers and the government are in constant search of land for residential/settlements development due to increasing urban migration, urban squatting and the continuing appreciation of land prices.

Relevant Legislation HB 272 proposing creation of a National Land Use Code (pending in the Committee

on Natural Resources, June 15 2006)

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FARMLAND AS COLLATERAL

The CPBD recommends:

Allowing the Emancipation Patents (EPs) and Certificates of Land Ownership Awards (CLOAs) same treatment accorded to all other land titles provided under the Torrens System

Tasking the Department of Agrarian Reform (DAR) and the Land Bank of the

Philippines (LBP) to come up with a land valuation formula and disseminate the same to financial institutions

Prohibiting any person not qualified to own agricultural land as determined

by DAR in accordance with the Agrarian Reform Law (RA No.6657) to bid in the auction in all cases of foreclosed mortgages over lands nor shall the agricultural land be sold thereof.

Poverty reduction target depends largely on increasing agricultural productivity. A study showed that a 10% increase in crop yields reduce the proportion of people living on less than US$1 a day by 6 to 12% (Thirtle, 2001). No other sector of the economy shows such a strong correlation between productivity gains and poverty reduction. Despite moderate sectoral growth, agriculture has not significantly improved rural welfare. In 1985, more than half of the total families in rural areas were poor. This has slightly declined to 46.9% in 2000. Poverty in the country continues to be a rural phenomenon with the rural sector accounting for 3 out of 4 Filipino families (Progress report on MDG, 2003). The large share of the agricultural sector in total poverty is mainly due to the high share of population dependent on this sector for livelihood. The lack of access to formal credit further exacerbates poverty in agriculture. The current credit and loan access for Agrarian Reform Beneficiaries (ARBs) are constrained by the prevailing banking system where 91% of all deposits and loans are controlled by commercial banks, 7% by the thrift banks, and the remaining 2% by the rural and cooperative banks. Financial institutions mentioned above accept only Certificate of Land Titles as collateral for loans. The CLOAs given by the DAR to amortizing farmers are proofs that they are beneficiaries of the Comprehensive Agrarian Reform Programs but are not yet Certificates of Land Titles. Financial institutions are reluctant to grant loans to beneficiaries of agrarian land because they are perceive as risky borrowers. Even the Land Bank of the Philippines, which has a total loan portfolio of P104 billion and a total agricultural loan portfolio of P50

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billion, extended loans to small farmers and fisherfolks, including ARBs in the amount of P13.4 billion (13.5%) and P13.5 billion (27%) respectively (31 December 2002), This situation resulted in the farmers accessing credit from informal lenders who usually charge exorbitant or usurious rates. Consequently, farmers are hardly able to make any profits and in many cases, default on their loan amortization and ultimately lose their farmlands, which they had used as collateral to the informal moneylenders. Thus, the above proposal that are connected to other existing agrarian reform laws seeks to enhance the acceptability of the agricultural lands as security for loans obtained from financial institutions. In the event that the acceptability of agricultural lands as collateral in loan applications is enhanced, access to rural credit will be upheld and encouraged. Enhancing the value of farmlands as collateral through this measure gives the agrarian reform beneficiaries and other rural and agricultural sectors of the economy optimal prospect and opportunity for growth. In effect, the welfare of the agriculture and rural population is promoted and protected. By increasing their income, productivity and efficiency is maximized and modernization of rural and agricultural sectors of the country is encouraged. RELEVANT LEGISLATION HB No. 247 providing measures to enhance the acceptability of agricultural lands as

security for loans (pending: Committee on Agrarian Reform) HB No. 279 providing measures to enhance the acceptability of agricultural lands as

security for loans (pending: Committee on Agrarian Reform) HB No. 417 allowing farmer-beneficiary to mortgage his farmland awarded to him

without losing his right to security of tenure and providing that the certificate of land ownership award be accepted by banks and other financial institutions as loan collateral. (pending: Committee on Agrarian Reform)

HB No. 447 ensuring security of tenure for agrarian reform beneficiaries over lands

awarded to them under the Comprehensive Agrarian Reform Program (pending: Committee on Agrarian Reform)

HB No. 2830 providing measures to enhance the acceptability of agricultural lands as

security for loans thereby promoting access to rural credit (pending: Committee on Agrarian Reform)

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WATER RESOURCES MANAGEMENT ACT

The CPBD recommends…

Coming up with a clear-cut policy that will address critical and chronic water resource issues such as water shortage, water pollution and over-extraction of groundwater;

Abolishing the National Water Resources Board and creating an

effective Water Resources Authority of the Philippines that shall:

a. formulate and implement policies and strategies for sustainable water resource management

b. call for a consultative meeting of all water resource stakeholders

that will draw up a carefully studied Sustainable Water Resource Management Plan

c. ensure the drawn up Plan considers and incorporates all relevant

and sound principles of ecosystem approach, which looks at the “big picture”, the entire systems (and their component parts) of water resources.

d. oversee effective implementation of the national blueprint on water

resource management, with support from the Local Water Resources Board that shall be created from existing government water agencies

e. assume a stronger regulatory function relative to surface water

use, groundwater extraction, and such other activities that may significantly impact on water resources.

Among the Southeast Asian countries, the Philippines was observed to have the highest total water withdrawals in 1990, followed by Vietnam. Projections up to 2025 show that the country will still have the highest withdrawal as a percentage of annual water resources (Seckler et al 1998) among Southeast Asian countries. This suggest that the Philippines has to prepare a water resources management plan as water withdrawal will sooner or later catch up with the available water supply. The Philippine freshwater ecosystem faces severe problems of pollution and rising costs of potable water supply. Surface water accounts for about three quarters of freshwater supply, but many of the major rivers and lakes, particularly those passing through or close to urban centers, are heavily polluted (Rola et al 2004)

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In the urban centers of the Philippines, serious problems are now being felt based on the projected demand and the current exploitable ground water sources. All the major cities of the country will in fact need additional surface water sources in 2025. Metro Manila, Metro Cebu and Baguio City are found to have the most critical water balance conditions. In Metro Manila, the projected total water demand for the MWSS service area for the year 2010 is 1,898 million cubic meters. Of this projected demand, the MWSS will only be able to supply 80% (Rola, et.al, 2004).

For the Asia-Pacific region, the literature contends that water shortages will become a major constraint in the economic and social development of the region’s individual countries unless equitable and efficient water allocation policies and mechanisms are developed (UNESCAP 2000) RELEVANT LEGISLATION HB 2569 providing for a comprehensive Water Resources Management to address

the national water crisis (on 1st reading)

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RE-ENGINEERING THE BUREAUCRACY

CPBD recommends …

Creating a joint executive-legislative commission that will study the general significance of the mandates, functions and programs of agencies / units, and to classify them as either vital or non-vital.

Developing a Re-Engineering Plan and phasing its implementation within three to five years.

Establishing a Voluntary Early Dis-Engagement Program to protect the welfare of civil servants who may be adversely affected by the reorganization.

The national government spends about P330 billion to support the salaries of 1.5 million civil servants. Aside from eating up a huge portion of the national budget, the size of the present bureaucracy prevents government from providing decent and competitive salaries, which can possibly increase the incidence of graft and corruption. According to the 1997 World Bank Report, graft and corruption is lowest in countries where civil servants are well compensated. Compared with other countries in Asia, the number of government personnel vis-à-vis population is higher in the Philippines. Total public employment in the Philippines constitutes almost two percent of the population which is higher than China and Vietnam at 0.1% and 0.3%, respectively. A bloated bureaucracy compromises efficiency and effectiveness. Redundancies in positions and agency functions affect service delivery and reduce accountability, as having more than one entity with the same function makes it difficult to establish who is liable for any shortcomings or deficiencies in service delivery. Reorganization attempts should not merely be an exercise of downsizing the bureaucracy but should involve reformulating and reconfiguring existing structures. The reorganization of the present bureaucracy should include the following activities: (1) consolidating entities with overlapping functions and mandates; (2) privatizing services which are not the primary responsibility of the government; (3) devolving functions which belong to local government units (LGUs); and (4) simplifying or computerizing procedures where efficiency is required.

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An Executive-Legislative Commission on Government Re-engineering shall be created to develop and oversee the implementation of a comprehensive reorganization plan within a period of three to five years. Organizational changes shall be programmed and phased systematically to minimize the economic and social repercussions that the reorganization will bring about. Safety nets should be provided for civil servants that will be adversely affected by reorganization. Government employees will continue to enjoy security of tenure. Employees of agencies/ units that are deemed non-vital and who wish to remain in service may be reassigned to other surviving entities. They also have the option to participate in the Voluntary Early Disengagement Program (VEPD), which will offer attractive gratuity packages upon retirement. Under this program, an employee may receive as much as two months of the present basic salary for every year of service. To prevent massive cash outflow, it is recommended that Treasury Bills be issued to affected employees with face value equivalent to his/her total cash benefits. A portion of the T-Bills will mature yearly, equivalent to the budgeted salaries and benefits of the employee for the year and succeeding years until fully paid. As these proposed changes will likely be strongly opposed by agencies that will be abolished or subsumed, and by employees who will be displaced, it is important that these reforms be executed evenhandedly and free from political accommodations. RELEVANT LEGISLATION

HB 193 (Pending in the Committee on Government Reorganization) HB 1532 (Pending in the Committee on Government Reorganization)

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DEPUTIZING PRIVATE LAWYERS TO ACT AS PROSECUTORS ON BEHALF OF THE OMBUDSMAN

CPBD recommends…

Authorizing the Office of the Ombudsman to deputize qualified private lawyers as prosecutors in cases involving high-ranking public officials, and where large amounts of public funds are involved and specialized knowledge and training on law is needed.

Prohibiting deputized private lawyers from appearing as counsel in any other case pending at the Office of the Ombudsman.

The Office of the Ombudsman is the prosecuting arm of the State mandated to go after corrupt public officials and employees. It has filed numerous cases at the Sandiganbayan and the lower courts but resolution of these cases is hampered by the lack of prosecutors. Recent figures show a total of 2,444 active cases and 64 prosecutors at the Office of the Ombudsman. This means that on the average, each prosecutor may be forced to simultaneously handle 38 cases. The inability of the state to act expeditiously on these cases could hurt government’s anti-corruption efforts and could further lead the people to lose faith on the justice system. Whistleblowers are discouraged from coming out due to notions that exposing irregularities in the bureaucracy is futile. According to Transparency International, the country’s corruption perception index hardly improved between 2002 and 2005 when its CPI score stayed at 2.5-2.6 (with 10 as highly clean). And with the increasing sophistication by which graft and corruption are carried out, government should intensify its efforts at litigating erring civil servants. Given the lack of prosecutors at the Office of the Ombudsman, it is necessary to tap the services of private lawyers especially for cases involving high-ranking public officials and where a sizeable amount of public funds is involved. Private lawyers may also be deputized to handle cases requiring specialized and expert knowledge of the law. However, to avoid conflict of interest, these deputized private lawyers should be prohibited from appearing as counsel for other cases pending at the Office of the Ombudsman. Relevant legislation HB No. 4275/CR No. 755 (pending in the Senate)

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CAMPAIGN FINANCE ACT

CPBD recommends…

State funding for political parties that demonstrate broad national support as a way of reducing their unhealthy dependence on interest groups for election campaign contributions

Sourcing of public campaign fund from personal and corporate income

taxes and direct allocation from the national budget

Addressing political turncoatism by subjecting offenders with sanctions and penalties.

Political scientists have already described the Philippines as an oligarchic state where the state bureaucracy is beholden to politicians, who owe powerful business groups for funding their election campaigns. Government then gets oriented around cost recovery instead of national policy and public service. The World Bank identified electoral politics as a major cause of corruption in the country. It noted how costly Philippine elections have become that candidates and political parties alike as constrained to produce funds to support their bid for public office. Election funds are either “legitimate” or “grey” money. Legitimate money comes from businesses, especially from those more politically vulnerable and more prone to use cash to buy certain favors and business advantages. Grey money comes from the operators of illegal economic activities, gambling, smuggling, prostitution and drugs. “Money politics” distorts public policies and diverts government funds from vital social services into private pockets. “Money politics” also distorts electoral competition, if one party is able to attract disproportionately large funds from wealthy supporters. Distorted policies led to weak institutions where corruption and bribery thrive. All these lead to low public confidence on the politicians and government institutions which adversely affects the actions and attitude of candidates and electorates as well.

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Reform of campaign finance cannot be separated from reforming the political party system. Philippine political parties are not very popular even in the Philippines. The media and academics are almost uniformly critical. It is not that Philippine political parties are not ideological, but rather that because they are all, or mostly instruments of the same upper classes. Their political parties, therefore, are not distinguishable from one another on the basis of ideology. One of the functional requirements of the current economic situation are political parties capable of aggregating interest and translating them into policy. Because they are loosely structured and faction-based, they have been unable to fulfill this function effectively in the past. And, lacking ideological bond and platforms formulated along party issues that keep candidates together, political turncoatism has been practiced at all levels which all the more weaken the political party system. A number of prohibitions and penalties on political turncoatism have been proposed in this bill. With two possible sources for public campaign funding, i.e., (1) check off from personal and corporate income taxes, and (2) direct allocation from the national budget, this scheme hopes to level the playing field and increase the chances of poor but worthy candidates to run for public office and simultaneously empower the middle class by allowing them to contribute a portion of their tax payments to political parties of their choice. RELEVANT LEGISLATIONS HB 190, 244, 304, 1073, 1349, 1409, 2306 provides for the institutionalization of

national parties, address political turncoatism through varied sanctions for guilty party/person; creates State Funds to augment registered national parties campaign expenditures (pending in the Committee on Suffrage and Electoral Reforms

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ENSURING AUTOMATION OF ELECTORAL PROCESS

The CPBD recommends…

allowing the Commission on Election (COMELEC) to use an automated election system, one that directly records voting data for the process of voting, counting of votes and canvassing/consolidation and transmittal of results of electoral exercises

using automated system in the National Capital Region, Autonomous Region in Muslim Mindanao (ARMM) and at most, three other regions as determined by the COMELEC.

Elections are governed by the Constitution, laws, jurisprudence and regulations. It is a test of popular acceptability of candidates and a means of validating the performance of incumbent officials. Accountability in public service is also assured by the imposition of term limits, discipline of elective officials, the proscription on political dynasties, removal by way of recall public officials, disqualifications of candidates among others. Election in its broad sense is more than just casting of votes. Election as process involves registration of voters, filing of certificates of candidacies, campaign, casting of votes, counting, canvassing and pre-proclamation cases, proclamation, assumption into office and post-proclamation activities. The main purpose of election laws are to safeguard the sanctity of the ballot and the integrity of the overall electoral process. However, for the past years, election processes are laden with disputes, principally those involving protagonists to a contested position – failure of elections, postponement of elections, disqualification, cancellation of certificates of candidacies, pre-proclamation cases, election protests, quo warranto, election offenses, etc. Only the Commission on Elections has exclusive jurisdiction to hear and resolve the above-enumerated cases. Thus, the need for automation of the election system to minimize if not totally eliminate the above concerns, in particular the duplication of voters registration or the padding of number of voters. Further, it will speed up counting of votes and reporting of results to the public to minimize cheating allegations.

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RELEVANT LEGISLATION:

House Bill 5352 – An Act Amending Certain Provisions of Republic Act No 8436, Entitled “ An Act Authorizing the Commission on Elections to Use an Automated Election System in the May 11, 1998 National or Local Elections and in Subsequent national and Local Electoral Exercises, Providing Funds Therefor and For Other Purposes. (On Third Reading)

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AMENDING THE 1987 PHILIPPINE CONSTITUTION

The CPBD recommends…

Shifting from the presidential to a unicameral parliamentary system

Removing the protectionist economic provisions from the 1987 Charter

Creating autonomous regions towards the establishment of a federal system

The escalating crisis of the country’s political institutions has been the primary factor for the current moves to institute constitutional reforms, particularly the shift to a parliamentary system. This “crisis of governability” is largely attributed to the inflexibility and instability of the present presidential system. The President and the Congress are often locked in a stalemate in policy-making. The inflexibility of the presidential system which is attributed to the fixed term limits as well as the unwieldy impeachment process, has forced certain sectors to resort to extra-constitutional means, e.g. people power, as a means of removing elected leaders from office. Political scientists (e.g. Stepan and Skach, Linz, Riggs, to name a few) who studied the breakdown of many democracies concluded that the presidential system is inherently unstable. They also concluded that democracies with a parliamentary system are more stable and have better chances of political survival. On the economic front, there is a need to relax the economic provisions of the Constitution to be more attuned to the demands of the global economy. The Philippines is one of the few countries with very strict rules on foreign capital written in its Constitution. Even if there is a pressing need to draw in substantial foreign investment to improve our economic performance, the constitutional provisions on ownership of land, capital and utilities discriminate against foreign investments. The National Economic Development Authority (NEDA) estimated that the country's infrastructure requirement for the medium term is about P889.3 billion as of February 2006 exclusive of P167.3 billion emerging BOT projects not included in the MTPIP. However, public sector spending in infrastructure over the last five years was only 4% of GDP—this is below the norm in other East Asian countries that rarely falls below 4% (CPBD, 2000).

The arguments in favor of further liberalization of public utilities and other sectors of the economy emphasized the need for additional capital and financial flows into the economy. The lack of domestic capital renders direct foreign investment the most likely source for development projects. Thus it is safe to assume that the protectionist principles embedded in the 1987 Charter only led the country to lag behind our Asian neighbors.

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Another basic problem of governance is that the national government is highly centralized and unresponsive to the needs of the people in the various regions and local communities. Although the 1987 Constitution and the 1991 Local Government Code are supposed to give autonomy to local governments stifling controls by the national government inhibit local initiative and resourcefulness. Yet such controls are ineffective in curbing waste and corruption at either levels of government. A federal structure will greatly increase the capacity of the people and the government to deal with the country’s problem. It will respond to the demands of local leaders to be free from the stifling and demoralizing effects of over centralization and controls of the national government in the present unitary system. RELEVANT LEGISLATION HCR No. 0014, CR N0. 413 - Calls on the Senate and the House of Representatives to

constitute themselves as a constituent assembly to introduce amendments to the Constitution [Pending in the Committee on Constitutional Amendments]

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PRE-SCHOOL DEVELOPMENT ACT

The CPBD recommends…

Adding another year to basic education to improve quality of students. No child shall be admitted to Grade 1 without pre-school education, unless the child passes a prescribed examination which shall test his/her preparedness in tackling the curriculum for Grade 1.

Prescribing barangay day care centers as pre-school classrooms, and

accrediting and training incumbent day care workers on proper hygiene, proper nutrition, safety, and socialization of children.

Increasing by more than one percent the SEF allocation that would be used for

pre-school education with the corresponding amendment in the Local Government Code.

Compared to its Asian neighbors, the Philippines has one of the shortest basic education cycle with 6 years of elementary and 4 years of high school. On the other hand, Myanmar and Lao PDR both have 11 years of basic education, while Cambodia, Indonesia, Malaysia, Thailand and Vietnam all have 12 years. The average Filipino child starts formal education in elementary at age 6. But children of families who can afford pre-school education from private providers start at age 3. While most Filipino children availed of early childcare and development (ECCD), at least 23% of Filipino children between 3 and 5 years old were not involved in any form of ECCD. For every 100 Grade 1 entrants, only 65 are able to reach Grade 6 and graduate from elementary school. A hefty 60% of school dropouts in the elementary level occur in Grades 1 and 2. Educators agree that starting education at pre-school age gives substantial benefits to learners. The pre-school education promotes effective social, intellectual and skills stimulation and value formation for children 3 to 5 years old, thus preparing them for formal elementary schooling. Pre-schooling may help reduce the number of repeaters. Meanwhile, LGU spending in education is largely financed through the Special Education Fund (SEF), which comes from a one-percent tax on real property located in the LGU. Proceeds of the SEF are allotted for the construction, repair and maintenance of school buildings and facilities, extension classes and sporting activities, education research, purchase of books and materials as prioritized by the Local School Boards (LSB).

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However, there are instances when the LSB includes remuneration of locally hired teachers in the SEF allocation. Thus, in this case, any increase in the SEF allocation should be spent on the operation of ECCD. RELEVANT LEGISLATION HB. Nos. 125, 600, 1999, 2508, 2628, and 3201: An Act Institutionalizing Pre-

School Education (pending: Committee on Basic Education)

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RESPONSIBLE PARENTHOOD AND POPULATION MANAGEMENT ACT

The CPBD recommends…

Enacting a clear-cut national policy on responsible parenthood, effective population management and sustainable human development

Constituting a Responsible Parenthood and Population Management Council that will serve as the central advisory, planning and formulating body on reproductive health

Making available and accessible a full range of family planning methods, techniques and services to all individuals and couples. In this vein, however, the CPBD strongly supports existing statutes that prohibit abortion and other means deemed unlawful.

Pursuing aggressive information/education campaign for natural birth control especially in densely populated areas

The country continues to grapple with high population growth. In 1970, there were 36.7 million Filipinos who shared the country’s limited resources. In the span of 30 years, the population grew by more than double, reaching 76.5 million in 2000. This is not surprising given the rapid population growth rate of the country. From 2.9 percent in 1970, growth rate slightly declined to only 2.3 percent in 2000. Still, this remains one of the highest in Asia. From 3.0 percent in 1970, Thailand managed to drastically reduce its population growth rate to 0.8 percent in 2000. The same goes for China where growth rate dropped from 2.8 percent in 1970 to 0.7 in 2000. Today, Thailand and China are among the fastest growing economies in the world. The country’s high population growth rate stems in part to high fertility level. Filipino women of childbearing age have an average of 3.5 children, also the highest fertility level in Asia. The 2003 National Demogr5aphic and Health Survey noted that if Filipino women had achieved their average desired fertility rate of 2.5 children, there would have been half a million births fewer in 2003. This could have saved the government millions of pesos in terms of immunization shots and micronutrients supplementation. To some extent, unmet family planning needs and poor access to reproductive health care services account for the rapidly expanding population. About 20 percent of close to 20,000 women surveyed in 2002 were not using any method of family planning and did not want any more children or preferred to space births. This gives an estimated 2 million women with unmet family planning needs, of which 50-70 percent might be classified poor. Studies have shown that having more children in a family reduces the wage income of parents, reduces enrolment of children, particularly in secondary and tertiary levels, and

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reduces the expenditure per child who remain in school. Also, it reduces household savings, thus perpetuating poverty among poorer families (Orbeta, 2006). A rapidly expanding population can further strain budget for basic services. Meanwhile, poor access to reproductive health care services can impair MTPDP and MDG health targets. Among other key concerns, the MTPDP saw exigency to address unmet family planning needs and the MDG to reduce child mortality and improve maternal health through increased access to reproductive health services. RELEVANT LEGISLATION HB 3773 proposing a Responsible Parenthood and Population Management Act (on

2nd reading)

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AMENDING R.A. 8545 (GASTPE LAW)

The CPBD recommends…

Increasing the number of educational services that can be contracted out to qualified private providers that includes instructional delivery, management and supervision of public schools, and assessment and monitoring.

Expanding the coverage of Educational Service Contract (ESC) from high school to early childhood, alternative learning system and elementary levels.

Developing a monitoring scheme for periodic assessment of academic outcomes and financial impact of purchased services.

Providing higher ESC allocation to public schools which have higher achievement levels.

The provision of basic education is left mostly to government, which lacks the necessary resources to produce quality education. The education sector, despite being allocated the second largest share of the national budget, continues to be plagued by the same issues of poor quality and inequitable access. In terms of quality, Filipino children aged 11 to 15 who finished Grade 6 were assessed to have learning skills equivalent to only 3.4 years of elementary schooling. Moreover, their mastery levels are either 50% or below. The national averages based on 2002 National Diagnostic Test (NDT) and 2003 National Achievement Test (NAT) were low for Science, Mathematics, and English, with scores below 50%. In the 2003 Third International Mathematics and Science Study (TIMMS) participated in by high school students from 42 countries, our students ranked 41st and 42nd in science and mathematics, respectively. In terms of access, there are differences in access to education by income strata and region. Only 67.1% of families in the lowest 40% income bracket have children enrolled in high school while the families belonging to the higher 60% income bracket account for 83% (2000 APIS). For ten years now, there has been no significant improvement in cohort survival rates at the elementary level (65% - 67%) and at the high school level (70% - 80%). The Government Assistance to Students and Teachers in Private Education (GASTPE) program which comes from the MOOE budget of DECS, is designed to provide assistance to students in the secondary level. The bulk of the GASTPE

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assistance is delivered through the Education Service Contract which enables students to enroll in private schools where no public high schools exist or where there is excess enrollment in the public school. There is a need to expand the ESC scheme, or the voucher system, as it is proven to be more economical than constructing classrooms. For School Year 2004-2005, there are 383,482 students (who each receive a subsidy of P4, 000) accommodated in private high schools. This freed the public school system of about 6,391 classrooms (based on a one-shift actual class size of 60 students to a room). This also helps private schools recover their loss from unused capacity due to dropping enrolments. This scheme is most useful in the elementary level where the lack of classrooms is greater than in the high school level. An assessment of the existing voucher system may help in rationalizing allocation of resources for better education outcomes. Thus, the government may benefit more from better quality through “service purchasing” from private sector. Government should purchase from qualified private providers a wider range of education services in order to cut cost and improve the quality of education. No bill on this subject has been filed yet.

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