PMS - SONA 2011 Technical Report - 25 July 2011

8/6/2019 PMS - SONA 2011 Technical Report - 25 July 2011

1/59

The 2011 State of the Nation Address

TECHNICAL REPORT

INTRODUCTION

Tuwid na Daanor the Straight Path is a phrase repeatedly mentioned byPresident Benigno S. Aquino III to pertain to his governance direction for thecountry.

Essential to this concept of Tuwid na Daan is the battle cry KungWalang Corrupt, Walang Mahirap.The administration believes that corruption isthe root cause of the countrys woes, and eliminating corruption will necessarilylead to renewed investor confidence, eventual growth and development, poverty

reduction, and attainment of peace.

The straight path, however, does not only pertain to the Presidents anti-corruption campaign. It also encompasses a way of doing things right, where theprocess is participatory; the programs are holistic; growth is sustained; the peacepolicy is comprehensive; and development is sustainable. Through the livingexamples of our leaders, led by the President, this re-awakened sense of rightand wrong continues to be translated to economic value.

It is in this light that the accomplishments of the Aquino Administration,since the first State of the Nation Address (SONA) in July 2010, are being

highlighted:

A. GOOD GOVERNANCE AND ANTI-CORRUPTION

Taking the initial step in the achievement of Kung Walang Corrupt, WalangMahirap, where eradicating corruption is seen as the key approach todevelopment, President Aquino laid the foundations for a clean, transparent, andresponsive government. Key reforms continue to be instituted to reduce redtape, enforce anti-corruption and anti-red tape laws, and penalize those whoviolate these laws. The government is also fixing the incentive structures torecognize merit and reward good performance with the aim of ensuring the

sustainability of the Aquino reform agenda. These and other initiatives arepresented below:

1. Institutionalizing Public Accountability

1.1. Reforming the budgeting and project identification processes

The 2011 State of the Nation Address Technical Report - Presidential Management Staff Page 1 of 59http://www.gov.ph/2011/07/25/the-2011-state-of-the-nation-address-technical-report/


2/59

1.1.1. Governments prudent expenditure management was a result of the use ofthe Zero-Based Budgeting (ZBB) approach in 2010. The ZBB enables thegovernment to identify and terminate programs that are no longer deliveringintended outcomes. The savings generated from these terminated programswere channeled to programs that are performing well and to other priority

programs to address critical gaps in education and health. As part of the ZBBapproach, the Department of Budget and Management (DBM) is also graduallytransferring Special Purpose Funds back to the departments for greateraccountability and making the Priority Development Assistance Fund (PDAF)more transparent.

Due to the prudent management of public funds, the government has been ableto provide P12 billion in funding for other key social and economic services thatwere not included in the 2011 General Appropriations Act, including:

P850 million for the salaries of 10,000 registered nurses hired and

deployed to poor rural communities in the country; P4.2 billion to build 20,000 houses for the military and the police; and P423 million for the acquisition of the US Hamilton-class cutter, which will

help strengthen the perimeter security within the Malampaya area

1.1.2. In an effort to address issues about the quality of road projects, the RoadBoard strengthened the identification and selection of projects funded by theMotor Vehicle Users Charge through the proper use of the HighwayDevelopment Management version 4 (HDM-4), a planning tool that prioritizes orselects projects based on actual needs and economic considerations.

The Road Board also implemented standard unit costs nationwide that is 30%lower than previous cost estimates; and clearly defined the design andspecification of its projects to make these conform to international standards,where previously, Programs of Work were not required.

1.1.3. The President directed the DBM to establish a comprehensive database ofgovernment manpower through an enhanced Government Manpower InformationSystem (GMIS). The GMIS shall provide a complete and accurate database of allpositions, incumbents, and authorized compensation in the Executive,Legislative, and Judicial Branches of the government, including Government-Owned or Controlled Corporations (GOCCs), Government Financial Institutions(GFIs), and Constitutional Offices. The GMIS shall also be linked with thepersonnel information systems of concerned agencies such as the Civil ServiceCommission (CSC) and the Government Service Insurance System (GSIS).

1.1.4. To eliminate wasteful spending and fund conversion in the military, theDBM changed its previous policy of releasing Personnel Services (PS) allotmentsin full to agencies. Now, releases of PS are done for filled positions only. This



3/59

means that no amount is released to the agencies on top of their actual PSrequirement.

1.1.5. Moreover, the DBM launched on 20 July 2011 the Electronic Transparencyand Accountability in Lump-sum Fund System (eTAILS). The eTAILS is a

management information system that digitizes the processing of lump-sum fundsand supports the timely disclosure of lump sum fund release information on theDBM website. This helps the government keep track of information on therelease, while enabling the public to scrutinize how their money is beingallocated.

1.2. Upholding transparent and competitive bidding

Allegations of collusion in the bidding of public works projects are beingaddressed through transparency reforms and strict adherence to public biddingrules. The DPWH now posts all projects on its website. The DPWH has also

simplified bidding procedures by reducing the required 20 documents to just five(5) documents. It has also adopted a new cost structure for determining theapproved budget cost (ABC), which minimizes leakage by reducing the allocationfor indirect costs by as much as 8%. To cite an example, the DPWH was able tobid out the 7.53-km Plaridel By-pass Road Contract Package No. 2 in Bulacanfor only P543 million in 2010, at one-third of the cost of the slightly longer 7.93-km Contract Package No. 1 that was bid out in July 2008. While the two projectsare of the same road specifications, the cost of Contract Package No. 1 was8.5% above the approved agency estimate while Contract Package No. 2 cost23% lower than the agency estimate, saving a total of P163.2 million.

As a result of these reforms, the DPWH generated savings of P2.51 billion intaxpayers money from the 3,692 projects (civil works, goods, and consultancyservices) from July 2010 to June 2011. The DPWH expects total savings ofroughly P6 to P7 billion by the end of this year as a result of transparent andcompetitive bidding. The savings can then be utilized for other prioritydevelopment projects.

The P2.51 billion savings generated by the DPWH includes the P1.07 billionsaved from the review and bidding of contracts under the Post-Ondoy andPepeng Short-Term Infrastructure Rehabilitation Project (POPSTIRP).

On 26 May 2010, the DPWH was granted a loan by the JICA worth P5.05 billionfor 79 contract packages under the POPSTIRP. Of these contracts, 19 werecancelled due to lapses in the process. The 19 contracts were approved andsigned even prior to the release of the Special Allotment Release Order (SARO)for the project, which is against government procurement laws.

Likewise, the government has conducted open and competitive bidding for thereinsurance needs of the National Power Corporation (NPC), the Power Sector



4/59

Assets and Liabilities Management Corporation (PSALM), the National GridCorporation of the Philippines (NGCP), and the Metro Rail Transit Corporation(MRTC). This generated savings amounting to over US$8 million or about P370million from the lower bids of the winning re-insurers compared to the approvedbudget for the contract and last years premium. Moreover, the insured agencies

get improved coverage by having lower deductibles that allow them to claim forlosses or damages at lower participation limits.

1.3. Ensuring transparency and accountability in local governance

1.3.1. The DILGs full disclosure policy, issued in August 2010, required all LocalGovernment Units (LGUs) to be transparent to the public by posting in localbulletin boards, newspapers, and websites information on the utilization ofgovernment funds and the implementation of projects. As of 31 May 2011, a totalof 1,473 LGUs (68 provinces, 119 cities and 1,286 municipalities) or 86% of the1,714 LGUs nationwide have fully complied with this policy. For purposes of

transparency, the DBM also posted the annual internal revenue allotment (IRA)from 2006 to 2010 per region from the provincial down to the barangay level onits website.

1.3.2. The DILG also awarded the LGU Performance Challenge Fund (PCF) toLGUs that have earned the Seal of Good Housekeeping. These LGUs haveexhibited strong performance along the four (4) core governance areas, asfollows:

Sound fiscal management, i.e., growth in local revenues over three (3)years, and no adverse report from the Commission on Audit (COA);

Transparency and accountability, i.e., strict adherence to the fulldisclosure policy, transparent procurement process, compliance with Anti-Red Tape Law, and functioning local special bodies; and

Valuing of performance monitoring, i.e., use of performance monitoringtools and regular reports to the public.

Good planning, i.e., having a comprehensive development plan and anExecutive-Legislative Agenda;

In 2010, 30 or 4.85% of the 619 4th to 6th class municipalities successfullyobtained the Seal of Good Housekeeping.

Beginning 2011, the coverage of the PCF was expanded to all provinces, citiesand municipalities. Assessment is now ongoing and is focused on the COA auditopinion for CY 2010 and the posting of local budget and finances, bids, andpublic offerings. As of 17 June 2011, 13 or 46.43% of the 28 4 th to 5th class citiesand 218 or 35.22% of the 619 4 th to 6th class municipalities subjected toassessment may now be conferred with the Seal and have the chance to get thePCF.



5/59


6/59

and arrears to the veterans and pensioners. Moreover, through the anti-fixercampaign, three (3) Philippine Veterans Affairs Office (PVAO) employees havebeen dismissed, 27 cases have been filed, and three (3) cases resolved.

2.1.4. On 14 June 2011, the Office of the Deputy Executive Secretary for Legal

Affairs (ODESLA) formally charged Ombudsman Special Prosecutor WendellSulit with acts and/or omissions constituting graft and corruption and betrayal ofpublic trust. The case involves her entering into a Plea Bargaining Agreementwith Maj. Gen. Carlos Garcia, wherein Gen. Garcia was allowed to plea to thelesser offense of indirect bribery and facilitating money laundering. TheOmbudsman also ordered Gen. Garcia to restore to the government the amountof P135 million despite being accused of plundering P350 million.

Special Prosecutor Sulit was placed under preventive suspension for 90 days.The Office of the President will form a panel that will conduct the formalinvestigation on the case.

2.2. Addressing abuses and irregularities in government agencies

2.2.1. Arrested the abuses and funds misuse in the Autonomous Region inMuslim Mindanao (ARMM). An Audit of the ARMM Office of the RegionalGovernor covering the period January 2008 to September 2009 revealed that thefunds received by the ORG for its operations were not properly utilized andmanaged and that transactions amounting to P1.003 billion could not beconsidered as valid and legitimate. Also, a total of P866.51 million in cashadvances, or 80% of total disbursements made by the ORG, were released tothe disbursing officers, in violation of the general rule that payments must be

made by check.

As a result of these findings, the current ORG stopped the payment order againstall checks drawable against the bank accounts of the ARMM RegionalGovernment, terminated all contractual and co-terminus employees hired by theprevious Regional Governor, conducted inventory reports on personnel andassets, and posted bids and awards and the ARMM budget on the ARMMwebsite.

Likewise, the DILG recommended the filing of administrative charges againstsome ARMM officials and personnel for dishonesty, abuse of authority, gross

misconduct, and conduct prejudicial to the best interest of the service. The DILGalso recommended the filing of criminal cases because of the abuse of regionalgovernment resources.

An audit of the Province of Maguindanao had similar findings: that financialtransactions amounting to P865.88 million were considered to be fictitious, asthese were either denied by suppliers or supported with spurious documents.



7/59

Meanwhile, the DPWH-ARMM failed to properly utilize, manage, and recordpublic funds amounting to P1.12 billion. Moreover, the COA found that theutilization of funds and implementation of programs and projects by the ARMMSocial Fund Project Project Monitoring Office (ASFP-PMO) fell short of thedesired improvements as the purpose intended was not maximized and the

implementation was found deficient.

A DILG-proposed roadmap aims to bring ARMM to the sustainable path of goodgovernance. This entails the strengthening of bureaucratic reforms, sustainedtransparency and performance, improved ORG oversight and assistance toLGUs, stricter COA and Civil Service Commission (CSC) oversight on ARMMand LGU implementation of development projects, stepped up peace and orderinitiatives, and reforms in the electoral process.

The postponement of the August 2011 ARMM elections (as mandated by RA10153) will provide an opportunity for ARMM to pursue this roadmap.

2.2.2. Suspended Local Water Utilities Administration (LWUA) officials. TheOffice of the Ombudsman found the LWUA Chairman and two other officers ofthe LWUA guilty of Grave Misconduct and of violating Republic Act (RA) No.6713 (Code of Conduct and Ethical Standards for Public Officials andEmployees) for the alleged unlawful investment of LWUA funds in the amount ofP780 million in Express Savings Bank, Inc. (EXSBI),[5] without securing priorapproval of the Monetary Board. On 4 July 2011, the Ombudsman ordered thedismissal of the LWUA Chairman and the two LWUA officers.

Administrative complaints were also lodged with the Office of the President

against five members of the LWUA Board of Trustees, including the Chairman,for grave misconduct arising from the acquisition of shares of stock of EXSBI.The Office of the President placed the members of the Board of Trustees onpreventive suspension for 90 days.

2.2.3. Rationalized GOCC bonuses. Early in the term of President Aquino, theadministration discovered that officers and board members of several GOCCsenjoyed questionable bonuses and allowances. For example, a COA reportdisclosed that Metropolitan Waterworks and Sewerage System (MWSS)employees received more than P150 million in improperly authorized allowancesand bonuses in 2009. Also, the current Board of the PNCC has reviewed actionsby the previous members of the Board who allegedly benefited from undueprivileges and bonuses during their tenure. The current PNCC Board has alsoreduced manpower, terminated unnecessary positions, and rationalizedadministrative and support services. These cost-saving measures and reformshave resulted in the reduction of monthly expenses from about P22 million to P11million.

http://www.gov.ph/wp-admin/post-new.php#_ftn5http://www.gov.ph/wp-admin/post-new.php#_ftn5http://www.gov.ph/wp-admin/post-new.php#_ftn5


8/59

The President thus ordered a comprehensive review culminating in the signing ofthe GOCC Governance Act of 2011. The Act strengthens governments oversightof GOCCs through the creation of a Governance Commission for GOCCs.

As a result of the Department of Finances (DOF) better oversight, GOCCs

remitted a total of P34.47 billion to the national government, inclusive of P27.29billion in dividends, as of May 2011. This is one of the highest remittances madeby GOCCs to date. In contrast, GOCC remittances in 2010 amounted to 26.99billion.

2.2.4. Reforming the National Food Authority (NFA). The Food Staples Self-Sufficiency (FSS) Program and NFA Roadmap were formulated to attain self-sufficiency in the countrys staple and to implement fundamental reforms in NFAOperations. NFAs role is focused at maintaining buffer stocks of rice (30 days)and providing price support to small farmers. Stocks for buffer stocking areaccumulated by increasing domestic procurement while reducing the volume of

importation by encouraging the private sector to participate more on importation.NFAs policy of buy high-store long-sell low has shifted to a policy where NFAselling prices of rice are gradually increased to approach market levels withsocial welfare agencies handling subsidized rice if needed but buying stocks fromNFA at market prices.

A system audit was conducted with the help of the private sector in order toevaluate the previous administrations unusually large NFA rice importations andevaluate the agencys legacy problems, with the end in view of not only ferretingout the truth but to recommend prescriptive measures to rehabilitate andstrengthen the NFA.

2.3. Investigation of Disadvantageous Projects and Contracts

2.3.1. Addressed PCSOs exorbitant spending for advertisements. The PhilippineCharity Sweepstakes Office (PCSO) overspent its advertising budget by morethan P2.14 billion from 2004 to 2010.[6] To conceal the expenses, parts of theamounts were debited to different accounts. Despite COAs repeatedrecommendations to cut PCSOs advertising expenses, the former PCSO Boardstill authorized more advertising expenses during the campaign period. ThePCSO also sponsored concerts and produced a full length movie. These weredone despite having unrecorded payables to TV, radio, and other mediacompanies in the amount of P740 million. As a result of these anomalies, thecurrent PCSO Board stopped the production of the television dramas, whichsaved P110 million; and, reduced its 2011 advertising budget by 40.8% fromP928.3 million to P549.02 million. The current PCSO board was also able toobtain a 25% discount on all outstanding and valid advertising contracts. Thesavings from these reductions can now be rechanneled to more meaningfulcharitable projects.

http://www.gov.ph/wp-admin/post-new.php#_ftn6http://www.gov.ph/wp-admin/post-new.php#_ftn6


9/59

The PCSO also spent an estimated P325 million for its intelligence funds from2008 to 2010. The intelligence funds were allegedly used to pay for anti-juetengoperations, blood money, and for other discretionary uses. This practice hasbeen discontinued by the present Board.

2.3.2. Cancellation of the Laguna Lake Rehabilitation Project. On 17 June 2011,the President cancelled the P18.5 billion Laguna Lake Rehabilitation Project(LLRP) due to inconsistencies between the project components and its intendedobjectives; and the lack of transparency in the review and approval of the project.A DENR study found out that due to heavy deforestation and erosion, the areasto be dredged would end up being silted again in three (3) years without massiverehabilitation of the watersheds. The DENR further noted that the approval of thesupply contract was done without any thorough review. In addition, the ProjectsEconomic Internal Rate of Return (EIRR) of 7.04%, which considers only theprojects quantified economic benefits, does not meet the 15% minimum hurdlerate or the minimum acceptable rate of return. In the end, despite the laudable

objectives, the questionable project components of the LLRP justified itscancellation.

2.3.3. Reviewed the anomalous procurement of second-hand helicopters for thePNP Special Action Force. In 2009, the PNP procured three (3) Light PoliceOperational Helicopters (LPOH) for P104.99 million on the assumption that thesewere brand new. However, in 2011, the PNP Directorate for Logistics discoveredthat two (2) helicopters supplied by the Manila Aerospace Products TradingCorporation (MAPTRA) were previously owned by Asian Spirit, which leased thesame to Lion Air, Inc. The PNP further discovered that two (2) helicopters, whichwere supposedly brand new, were used for five (5) years prior with flying times of

536.3 hours and 489.9 hours, respectively.[7]

The PNP Procurement Office also failed to recognize that MAPTRA was not aneligible supplier because it was just a newly-registered corporation at the time ittransacted with the PNP. Thus, it had no record yet of completing a singlecontract similar to the contract to bid and of good standing as a supplier, whichare requirements set by the law.[8] There was also an absence of authorizedobservers during the entire procurement process.[9] Lastly, the members of theinspection and acceptance committee (IAC) failed to exercise their duties withdiligence as they did not possess the technical qualifications to perform the dutyof the IAC that resulted in the acceptance of inferior goods.

2.4. Increasing Civil Society Participation in Governance

2.4.1. Implemented participatory budgeting. Six (6) national governmentagencies and three (3) GOCCs have piloted participatory budgeting with civilsociety organizations (CSOs), namely: the Department of Agriculture (DA); theDepartment of Agrarian Reform (DAR); the Department of Education (DepEd);the Department of Social Welfare and Development (DSWD); the Department of

http://www.gov.ph/wp-admin/post-new.php#_ftn7http://www.gov.ph/wp-admin/post-new.php#_ftn8http://www.gov.ph/wp-admin/post-new.php#_ftn9http://www.gov.ph/wp-admin/post-new.php#_ftn9http://www.gov.ph/wp-admin/post-new.php#_ftn8http://www.gov.ph/wp-admin/post-new.php#_ftn7


10/59

Health (DOH); the DPWH; the National Housing Authority (NHA); the NFA; andthe National Home Mortgage Finance Corporation (NHMFC). Participatorybudgeting helps increase governance transparency by engaging CSOs in thedetermination of the expenditure priorities of government.

The DPWH conducted its first CSO budget consultation for FY 2012 on 28 April2011. CSO participation included the review, assessment, and evaluation ofDPWH projects programmed for 2012. A Budget Partnership Agreement (BPA)was signed between the DPWH and Bantay Lansangan (Roadwatch) on 15March 2011 to ensure a continuous budget consultation process with the privatesector. As of May 2011, at least 46 CSOs had been accredited as partners of theDPWH, while 52 others had pending accreditations prior to their submission andcompletion of the required documents.

2.4.2. Forging an integrity pact between government and the private sector. Aprivate sector initiative to forge a pact of integrity between the government and

the private sector is rapidly gaining momentum. As of June 2011, ten (10)agencies have signed on to the Integrity Initiative, namely: DTI, DBM, DepEd,DOF, DOLE, DND, DPWH, DOT, DOE, and DOTC as well as 550 privatecompanies. The Integrity Initiative aims to reduce corruption in the public andprivate sectors through the voluntary enforcement of good governance normsbased on a mutually agreed code of conduct. Agencies will soon ask suppliersand bidders to sign on to their agency integrity pacts.

On 22 February 2011, the DepEd forged an integrity pact with more than 80 of itssuppliers and civil society partners to promote ethical, clean, and transparentbusiness transactions, particularly with regard to the procurement of basic

education goods and services.

2.4.3. Entered into a Memorandum of Agreement (MOA) with civil society groupsand non-government organizations (NGOs) on the Conditional Cash Transfer(CCT) Program. As of 22 July 2011, 222 national and local non-governmentorganizations (NGOs) and civil society organizations (CSOs) signed a MOA withthe DSWD to empower their active participation in the implementation of the CCTProgram to ensure good governance and transparency.

2.4.4. Invited CSO participation in monitoring infrastructure projects. The DPWHhas also entered into a Memorandum of Understanding (MOU) with a broadcoalition of CSOs, NGOs, church organizations, and the academe for thepurpose of monitoring the implementation of DPWH projects.

3. Professional, Motivated, and Energized Bureaucracy and Armed Forces

The government is committed to support the combat readiness and effectivenessof the Armed Forces; recruitment and retention of quality personnel; andupliftment of soldier morale and family wellness.



11/59

From July 2010 to June 2011, a total of P21.37 million was used to repair andmaintain various AFP housing units; P39.60 million was also released for thehousing assistance of AFP battle casualties; another P15.19 million has beenreleased to support AFP battle casualties; and a total of 4,535 dependents ofkilled in action/wounded in action were awarded educational assistance.

3.1. The President committed to provide at least 20,000 housing units for theAFP and PNP in 2011. In this light, Administrative Order (AO) No. 9 Directingthe National Housing Authority to Formulate, Implement and Manage a HousingProgram for the Military and Police Personnel was issued on 11 April 2011,which authorized the NHA to adopt the Community Initiative Approach Program(CIAP) to implement the housing program.

Under the NHAs Socialized Housing Program, a soldier with a rank of Private,receiving a P400 monthly quarters allowance, will now be able to acquire ahousing unit in any of the twelve (12) housing project sites in Brgys. (1) Buena

Vista and (2) Biclatan in Gen. Trias, Cavite; (3) Brgy. Conchu, Trece Martires,Cavite; (4) Brgy. Timbao, Bian City, Laguna; and Brgys. (5) Looc and (6) Kay-Anlog in Calamba City, Laguna; (7) Brgy. Gaya-Gaya, San Jose Del Monte City,Bulacan; (8) Brgy. San Mateo, Norzagaray, Bulacan; and Brgys. (9) Batia and(10) Tambubong in Bocaue, Bulacan; and (11) Brgy. Pinugay, Baras, Rizal and(12) Brgy. San Isidro, Rodriguez, Rizal. A housing beneficiary is required to paythe housing unit for 30 years, with a monthly amortization of at least P200.00 forthe first five (5) years. The Aquino Administration will subsidize P35,000.00 foreach housing beneficiary.

The ground breaking of the AFP-PNP Housing Project in Barangay Batia,

Bocaue, Bulacan was held on 23 May 2011. The first 4,000 Certificates of LandEntitlement and Lot Allotment (CELA) were awarded and 90 housing units wereturned over to AFP and PNP personnel in Brgy. Looc, Calamba City, Laguna;Brgy. Batia, Bocaue, Bulacan; Brgy. Gaya-Gaya, San Jose Del Monte, Bulacan;and Brgy. Pinugay, Baras, Rizal on 15 July 2011.

3.2. The President signed EO No. 15 on 20 December 2010, which increased thecurrent combat duty pay of soldiers from P240 to P500 effective January 2011.

3.3. To further unify and strengthen the AFP, the President issued PresidentialProclamation No. 75 granting amnesty to individuals who participated in the 25July 2003 Oakwood Mutiny, the February 2006 Marines Stand Off, and the 29November 2007 Manila Peninsula Hotel Incident.

4. Revenue Generation Enforcement

In his first SONA, the President pledged that the Bureau of Internal Revenue(BIR) and Bureau of Customs (BOC) would file weekly cases against tax evadersand smugglers. Through the implementation of the Run After Tax Evaders



12/59

(RATE) of the BIR and the Run After the Smugglers (RATS) of the BOC, theleaks in the governments coffers continue to be plugged. Moreover, the DOFsRevenue Integrity Protection Service (RIPS) investigated allegations ofcorruption in the DOF and its attached agencies.

4.1. The current administration intensified the implementation of its RATEprogram that in just one year, the tax evasion cases filed with the DOJ reachedalmost half of the 129 cases filed during the previous administration. From July2010 to 07 July 2011, the BIR was able to file 55 tax evasion cases, involving atotal taxable amount of over P22 billion.

4.2. As of 19 July 2011, filed with the DOJ 39 criminal cases involving 179suspected smugglers with a total dutiable value of P54 billion. Of the 39 cases,one (1) has been filed in court, 21 have been submitted for resolution by theDOJ, seven (7) are under preliminary investigation, while 10 are up forpreliminary investigation.

4.3. As of 19 July 2011, the DOF has filed 86 cases against allegedly corruptgovernment employees before the Office of the Ombudsman since 2003. A totalof 53 officials have been suspended since the beginning of the RIPS program in2003, 17 were suspended under President Aquinos watch. A total of 19 officialshave been dismissed from the service since 2003, three (3) of whom weredismissed under the term of President Aquino.

5. Making the Country an Attractive Investment Location.

5.1. Streamlined business name registration. The DTI successfully implemented

measures to reduce the time span of business name registration from anaverage of 4 to 8 hours to within 15 minutes. The Enhanced Business NameRegistration System (EBNRS) simplified the application process by reducing therequired information fields from 36 to 18, resulting in the reduction of theapplication form from nine (9) pages to a single page.

5.2. Streamlined issuance of local government business permits. The DILG alsosigned a Joint Memorandum Circular with the DTI to streamline the BusinessPermits and Licensing System (BPLS) of 480 priority cities, capital towns, andmunicipalities from 2010 to 2012. Out of these 480 priority LGUs, 18% or 86LGUs have already streamlined their BPLS. Meanwhile, for all 1,634 cities and

municipalities in the country, at least 21% are ready for the streamlining of theirBPLS.

As a result, LGUs utilizing the new and improved BPLS offer better service toapplicants for business permits in their respective areas of jurisdiction. LGUs areencouraged to use a single or unified form in every transaction, with a maximumof five (5) steps and five (5) signatories. The outcome is a Business FriendlyLGU that offers reduced processing time for business permits and licenses, i.e.,



13/59

10 days or less processing time for new applications and five days for licenserenewals.

5.3. Developed an electronic payment system. The PEZA has completed thedevelopment of an Electronic Payment System for four (4) out of five (5) selected

transactions of PEZA enterprises. PEZAs E-payment System is a cashlesspayment solution that allows clients to pay for transactions with PEZA online,24 hours a day, and from anywhere. This system promotes greater transparencyand efficiency.

5.4. Promoted competition. The President issued EO 45 on 9 June 2011,designating the DOJ as the Competition Authority. This will encouragecompetition and open markets. EO 45 mandates the DOJ to conductinvestigations, enforce competition laws, and prosecute violators. It alsoauthorizes the DOJ to supervise competition in the markets; monitor andimplement measures to promote transparency and accountability in the markets;

and to call on government agencies to submit reports and provide assistance tothe agency. With this EO, the government will be able to strengthen itsenforcement of existing antitrust laws and policies to promote a level playingfield, while Congress deliberates on the pending antitrust bills.

B. ECONOMIC DEVELOPMENT

1. Sustaining Economic Growth and Employment

In the first quarter of 2011, real GDP grew by 4.9%, slower than the 8.4% growthin the same period in 2010 but very close to the 5.0%-6.0% forecast of the

Development Budget Coordination Committee (DBCC) for the year. Furthermore,this growth is within the NEDAs forecast for the first quarter of 4.8%-5.8% andhigher than the growth rate of Malaysia, Korea, and Thailand[10] for the sameperiod. The strong performance of the industry and agriculture sectors, increasedinvestments in capital formation, and increased household final consumptionexpenditure boosted growth.

In April 2011, the unemployment rate went down to 7.2%, significantly lower thanthe 8.0% rate in April 2010 due to stronger growth of agricultural employment.The number of unemployed persons decreased by 228,000 from 3.099 million inApril 2010 to 2.871 million in April 2011. Employment level grew by 4.0% in April

2011, translating to a net addition of 1.408 million employed persons in theprivate sector.

1.1. Expanded Trade and Investments. Crucial to the goal of generating jobs isthe promotion of key investment areas and expansion of trade and investmentactivities where the country could be globally competitive (e.g., tourism, businessprocess outsourcing and information technology, among others).



14/59

1.1.1. Increase in Philippine Exports. Exports increased by 33.7% from$38.4 billion in 2009 to $51.4 billion in 2010, even surpassing the $50.27 billionrecord set in 2007. The 2010 export growth is the highest in 11 years since 1999.Exports grew by 7.5% from US$19.2 billion from January to May 2010 toUS$20.6 billion in the same period in 2011.

1.1.2. Increase in Investments. For the period July 2010 to May 2011, the BOIand PEZA approved a total of P535.19 billion worth of investments, a 73%increase compared to the P309.87 billion approved investments in the samecomparative period in 2009 and 2010. The P535.19 billion investments areexpected to generate 137,118 employment opportunities once fully operational.

The larger part or 68% of the total investment approvals during the period July2010 to May 2011 came from local investors with committed investments worthP366.62 billion, 95% larger than the P187.53 billion in July 2009 to May 2010.Foreign investors contributed a total of P168.57 billion or about 32% of the total.

Just looking at the first five months of 2011, the strong business confidence,particularly from local investors, was evident as overall domestic investmentssoared by 258% to a total of P224.57 billion from the P62.78 billion level postedduring the same period in 2010. The bulk of these domestic investments wentinto manufacturing (e.g., refined petroleum products, metals, and electronicproducts), power, and real estate activities, among others.

1.1.3. Investments in Major Sectors. The following major investments in keysectors form part of the approved investments for the period July 2010 to May2011:

Manufacturing. The manufacturing sector tops the list of sectors with thehighest committed investments worth P283.07 billion during the periodJuly 2010-May 2011, a 131% increase compared to the P122.30 billionposted in the same period in 2009-2010.

Electronics. The Semiconductor and Electronics Industries in thePhilippines (SEIPI) reported that electronics investments in the countrybroke an all-time record high as fresh capital expanded by 369% from$484 million in 2009 to $2.27 billion in 2010. This is also the 7th year theindustry hit over $1 billion in investments. As a result, 24,552 direct jobs

will be generated. Of the 100 companies, which registered in 2010, 10 areexpansions while the rest are new projects. The industry hopes to doubleits exports in six (6) years from $22 billion in 2009 to $50 billion in 2016.The industry is bullish for 2011 as its exports are expected to hit over $31billion noting that the electronics sector will continue to be the driver ofgrowth of Philippine exports.



15/59

Information Technology Business Process Outsourcing (IT-BPO). A total

of 30,198 IT-BPO jobs were created for the first quarter of 2011. At least84,000 more jobs are expected to be generated in the BPO industry within2011. The BPO industry includes call centers, legal and medicaltranscription, accounting services, software development and animation,

and other services for overseas principals. To help fill up the projectedvacancies, the Technical Education and Skills Development Authority(TESDA) will offer free six-month training courses for prospective BPOworkers. Graduates will be absorbed by the BPO companies. TESDA hasallotted a total of P20 million for the free training of workers.

Shipbuilding. Investments in shipping increased because of foreigninvestors access to 100% ownership of companies engaged inshipbuilding and repair.

Mining. The mining and quarrying sectors recorded the highest increase in

approved FDI, from P0.6 billion in 2009 to P 6.0 billion in 2010. The 2010investments in mining are about nine times larger than the 2009 mininginvestments.

Mass Housing. Investments are huge at P59.02 billion. Theseinvestments, which represent about 50,000 units, are also expected togenerate around P900 billion[11] worth of investments in relatedindustries.

Energy. On 30 June 2011, the DOE launched the fourth Philippine EnergyContracting Round (PECR4), the biggest of all contracting rounds, in

which 15 blocks with a total area of more than 10 million hectares wereoffered. The PECR4 is envisioned to address the countrys energy supplythrough the exploration of local indigenous resources. This will help thecountry meet its daily demand and reduce the importation of petroleumand petroleum products.

The PECR4 road shows have attracted at least 140 independent and large-scaleinternational exploration companies expressing their interest to tender bids in theoffered blocks. The DOE expects around US$300-500 million for each servicecontract[12]. Interested investors will have until December 2011 to signify theirintent to bid while the contracts are expected to be awarded next year.

1.2. Improved fiscal consolidation

1.2.1. The government deficit in 2010 was at P314.40 billion, 3.23% lower thanthe P325 billion programmed deficit for the year.[13] The lower deficit was due tothe implementation of measures to improve collections and spend wisely.



16/59

1.2.2. For the first five months of 2011, the government posted a deficit ofP9.54 billion, 94.11% lower than the P162.107 billion deficit in the same period in2010. However, excluding interest payments on debt, the National Government(NG) incurred a primary surplus[14] of P108.26 billion as of May 2011 due toincreased revenues and sound spending, along with the strict observance of the

principles of zero-based budgeting.

1.2.3. Revenue collection increased to P1.21 trillion in 2010, 7.5% higher thanthe P1.12 trillion in 2009. The BIRs collections increased from P750.30 billion in2009 to P822.60 billion in 2010. The BOCs collections increased by 17.7% fromP220.30 billion in 2009 to P259.2 billion in 2010.

1.2.4. Revenues grew by 16.30% from P500.01 billion in the first five months of2010 to P581.50 billion in the same period of 2011.

1.2.5. The government lowered its disbursements by 10.73% from P662.12

billion in the first five months of 2010 to P591.04 billion in the same period of2011 due to more prudent planning and sound spending of agencies.Government disbursed P1.52 trillion in 2010, or about 94% of the P1.62 trillionprogrammed for that year.

1.3. Other important initiatives to improve the fiscal position include the following:

1.3.1. Congress prompt enactment of the 2011 General Appropriations Act(GAA) on 27 December 2010, the first budget passed on time since the 1999National Budget. The P1.65 trillion 2011 national budget is in favor of the poorand the vulnerable, as social services were allotted the lions share (34%). The

budget is based on the principle of zero-based budgeting, the objective of whichis to cut wastage.

1.3.2. The 2012 Budget preparation is ahead of schedule, again, the first budgetprepared ahead of schedule since 1998. As early as 30 December 2010, theDBM had already issued National Budget Memorandum (NBM) No. 107, s. 2010providing all heads of departments, agencies, bureaus, offices, commissions,state universities and colleges, and other instrumentalities of the nationalgovernment the overall policy framework and thrusts for the FY 2012 Budget.The NBM also set specific guidelines for the budget preparations.

1.3.3. Liability Management. Various upgrades in the countrys ratings wereobtained. Debt watcher Standard & Poors revised its long-term foreign currencycredit rating for the Philippines upwards to BB stable from BB- last November,reflecting the countrys strong fiscal fundamentals. The Moodys InvestorsService and the Japan Credit Rating Agency, Ltd. also raised their outlooks forthe Philippines from stable to positive in January and April 2011, respectively.The upgraded outlook from Japan reflects greater possibility that the Philippineeconomy will resume momentum for the improving trend of its fiscal position after



17/59

successfully weathering the challenges of the world financial crisis. For thesecond time in 2011, Moodys Investors Service has upgraded the PhilippinesBa3 foreign and local currency long-term bond ratings to Ba2, with a stableoutlook, on the back of sustainable fiscal consolidation process of the Aquinoadministration. On 23 June 2011, Fitch Ratings upgraded the Philippines Long-

Term Foreign Currency Issuer Default Rating (IDR) to BB+ from BB, with astable outlook, just one notch below investment grade. This rating was lastachieved in 1997 just before the Asian financial crisis. With the upgrade, thecountry is now one step closer to attaining an investment grade rating, which iscrucial in further lowering borrowing costs and attracting more foreign directinvestments.

The Aquino administration moved early in executing its first Global Exchange lastSeptember 2010 wherein a total of US$2.29 billion worth of short-term, highcoupon U.S. dollar bonds were exchanged into less costly but longer datedRepublic of the Philippines (ROP) global bonds. This represented one of the

largest liability management exercises from an emerging market issuer at thetime and was immediately followed by the P199 billion domestic bond swap inDecember 2010, which offered 10 and 25-year securities to holders of maturingbonds.

Debt exchanges and the issuance of longer-termed securities increased theaverage maturity of government debt to 8.8 years in December 2010 from7.9 years in June 2010.

The debt-to-GDP ratio dropped from 57% in 2009 to 55.4% in 2010, well withinthe 2010 target of 56.5%. This means that the Philippine government is in a

better position to settle its liabilities.

The government decreased debt servicing by 2.14% year-on-year fromP339.34 billion in the 1st quarter of 2010 to P332.07 billion in the first quarter of2011 as the Aquino government cut down on interest payments.

1.4. Ensuring Monetary and Banking Stability

The government maintained an effective balance on policies to preserve pricestability and support economic growth. As a result, inflation for 2010 averaged at3.8%, which was within the Governments 2010 inflation target of 3.5%-5.5%.

The inflation rate for the first five months of 2011 averages at 4.2%, which waslikewise, within the Governments target of 3%-5%.

1.4.1. Government also ensured a stable, market-driven peso. The pesoappreciated by 6.8%, from P47.46/US$1 average in July-December 2009 toP44.45/US$1 in July-December 2010. The peso appreciated by 4.8%, fromP45.66/US$1 average in January to May 2010 to 43.55/US$1 average in Januaryto May 2011. The sustained foreign exchange inflows of portfolio and direct



18/59

investments, overseas Filipinos (OF) remittances, receipts from exports, BPO,and travel continued to support the pesos strength.

The countrys international reserves were built up, taking advantage of the stronginflows of foreign exchange to cushion the economy from external shocks. As a

result, the countrys gross international reserves (GIR) grew by 44% fromUS$47.7 billion in end-May 2010 to $68.8 billion as of end-May 2011.[15] Thecountry is expected to achieve the 2011 GIR target level of $70 billion as itanticipates sustained foreign exchange inflows from portfolio and directinvestments, OF remittances and receipts from exports, BPO and travel.

1.4.2. The government continued to pursue reforms and implement newregulations to maintain the soundness and stability of the banking system. Thetotal resources of the banking system rose by 9.4% to P7.1 trillion as of end-March 2011, spurred by the robust growth in bank deposits which grew by 9.3%to P5.0 trillion.

Asset quality continued to improve with the non-performing loan ratio[16] ofuniversal and commercial banks falling to 2.95% as of end-April 2011. This iswell below the pre-1997 crisis level of 4%. The banking systems overallcapitalization also remained strong, with a 17% capital adequacy ratio (CAR) [17]as of end-September 2010. This is way above the BSP regulatory requirement of10% and the Bank for International Settlement (BIS) standard of 8%. Withstability and ample liquidity in the banking system, banks continued to performtheir critical function of channeling credit to the productive sectors of theeconomy. Bank lending grew at a healthy pace of 14.2% as loans for productionactivities increased by 15.7% in April.

1.4.3. Stock Market. Since the start of the Aquino Administration, the PhilippinesStock Exchange Index (PSEi) hit all-time high levels on seven (7) differentoccasions: on 20 July 2011 at an all-time high of 4,507.04 points; 19 July 2011 at4,485.65 points; 18 July 2011 at 4,476.01 points; 15 July 2011 at 4,458.74points; 5 July 2011 at 4,439.61 points; 4 July 2011 at 4,421.56 points; and 4November 2010 at 4,397.30 points. Mining and Oil, holding firms, and industrialsectors are among those industries that outperformed their own previousperformances in the stock exchange.

2. Ensuring Vital Infrastructure and Energy Sufficiency

2.1 Improved infrastructure support to sustain economic growth. The followingare some of the major infrastructure projects completed during the first year ofthe Aquino Administration:

Name of Project

Amount CompletionDate



19/59

Valderrama Bridge andApproaches, Antique(UK-ODA)

P53.07 million 28 March 2011

Bugo Bridge andApproaches, Antique

(Austria-ODA)

P148.17million

31 March 2011

EstrellaPantaleonBridge andApproaches, Makatiand Mandaluyong City(GOP and Austria-ODA)

P189.32million

15 January2011

Butuan City BypassRoad (Bonbon-Banacasi AirportSection and Lemon-

Antongalon Section),Agusan Del Norte

P177.96million

30 April 2011

Butuan City-Cagayande Oro-Iligan Road(Agusan-MisamisRoad), Agusan delNorte

P105.12million

26 October2010

Tiniwisan-MaguindaRoad (Lemon-Pigdaulan Section),Agusan del Norte

P335.03million

23 April 2011

Metro Iloilo Radial (R4)Bypass Road and IloiloCity-Sta.Barbara Road

P1.21 billion 23 April 2011

ODA and partnerships with the private sector augment governmentsinfrastructure spending to ensure the timely and full completion of ourinfrastructure priorities. The DPWHs management philosophy of Doing the rightprojects at the right cost and right qualityalso resulted in increased savings.

The DPWH aims to use these savings for prioritization of other developmentprojects. For 2011, P16.20 billion or 24.3% of the total DPWH Capital Outlay hasbeen allocated for infrastructure development in Mindanao. This will helpfacilitate economic growth in the region.

2.2 Upgrading the quality and safety of national roads.

2.2.1 Strictly enforced the anti-overloading program pursuant to RA No. 8794(MVUC Law). The DPWH deployed additional mobile weighing stations toaugment the 22 weighbridge stations nationwide. Out of 92,279 weighed trucks



20/59

in the 22 weighbridge stations nationwide, 37% or 34,026 trucks were overloadedand apprehended from January to May 2011, while 4,188 trucks or 3% of143,928 weighed trucks in the 13 mobile weighing stations in Metro Manila wereapprehended from February to May 2011.

2.2.2 Enhanced road safety and minimized traffic congestion on major roads . Atotal of 757,809 violators of transport laws and regulations were apprehended forthe period July 2010-April 2011. This is 45.79% higher than the DOTCs target toapprehend 519,780 errant drivers for the same period.

2.3 Working Towards Energy Sufficiency

2.3.1 Energy Efficiency and Conservation. The DOE took the following initiativesto promote the conservation and efficient utilization of energy resources:

2.3.1.1 Established the Wholesale Electricity Spot Market (WESM) in Visayas,

which immediately stabilized electricity supply and eliminated the manual loaddropping of customers. WESM Visayas has also provided good market signalsfor investors. Currently, there are already 180 market participants for theintegrated Luzon and Visayas market. On the other hand, the EffectiveSettlement Price (ESP) in the WESM for both Luzon and Visayas from Januaryto April 2011 ranged from a high of P3.33/kWh in February to a low of P2.30/kWhin March 2011. These prices are lower than the NPC regulated price ofP4.6727/kWh. This is a big reduction from the 2010 ESPs which ranged from ahigh of P10.63/kWh in March 2010 to a low of P3.63/kWh in August 2010. Thismeans that the more players in the market translate to a more stable and reliablesupply of electricity, as well as better power pricing for the benefit of consumers.

With the commercial operations of the WESM in the region, power outages wereeliminated as it allowed even the power plants generating capacity not coveredby bilateral contracts to be dispatched by trading its capacity in the power spotmarket. This kind of set-up provides better market condition and structure toentice more investors to address future power needs.

2.3.1.2 Increased the Visayas generation capacity by 610 MW with thecommissioning of new power plants in the Visayas region. These power plantsare the 246 MW coal-fired power plant of the Cebu Energy DevelopmentCorporation (CEDC), the 164 MW clean coal-fired power plant of the Panay

Energy Development Corporation (PEDC), and the 200 MW coal-fired powerplant of the KEPCO Salcon Power Corporation. This gave the Visayas surpluspower of about 600MW. Increased and constant investor interest, in turn, willprovide a long-term solution in terms of power sustainability for the region.

2.3.1.3 A Shareholders Agreement was recently signed to develop a 600-MWcirculating fluidized bed coal-fired power plant project within Subic Bay FreeportZone. The project consists of two (2) 300-MW generating units. The total cost of



21/59

the project is estimated at US$1 billion and its commercial operations isscheduled in October 2014 (for the first 300-MW unit) and April 2015 (for thesecond unit). Said power plant will use an environment-friendly clean coaltechnology known worldwide to cut down environmental impacts of operating acoal fired plant. The power facility is expected to augment generation capacity of

the Luzon Grid.

2.3.1.4 Promoted the Don Emilio Abello Energy Efficiency Awards[18], whoserecipients, including some 61 industrialized, commercial, and transportcompanies, were able to post total savings of 156 million liters of oil amounting toP5 billion, and reduced carbon emissions equivalent to 269,000 tons.

2.3.1.5 Conducted 12 energy audits[19] for industrial, commercial, academe, andgovernment buildings to ensure the efficient use of energy. Total energy savingsreached P24.6 million after the conduct of such audits.

3. Achieving Food Security for More Equitable Economic Growth

The country has been highly dependent on the importation of food staples.To lessen the nations dependence on imports, Government has placed toppriority on agricultural development.

3.1 The Agriculture sector (Agriculture, Hunting, Forestry and Fishing)grew by 4.2% in the first quarter of 2011 from a negative growth of 1.08% inthe first quarter of 2010. The Bureau of Agricultural Statistics (BAS)reported a 4.04 million metric ton (MT) palay production in January toMarch 2011, 15.6% higher than the 3.49 million MT produced in the same

period in 2010.

The yield per hectare is estimated to reach 3.8 MT from January to June 2011, a4.3% improvement from the 3.64 MT per hectare in the same period in 2010. Assuch, the farmers profit per hectare would reach P14,782.00 from January toJune 2011, a 4% improvement from the P14,159.00 profit per hectare in thesame period last year.

Expansion in palay harvested area, availability of irrigation water andservices, and aggressive advocacy of the DA in the implementation of itsRapid Seed Supply Financing Project, which distributes high quality seeds

to qualified palay farmers, contributed to the increase in palay output.

3.2 Completed projects to strengthen the agricultural sector

3.2.1. Under the continuing regular fund from the DA, a total of 1,814 kilometersof Farm to Market Roads (FMRs) were completed from July 2010 to May 2011,out of the targeted 2,567 kilometers. In addition, 687 kms more FMRs werecompleted under the locally-funded and foreign assisted projects. Overall, a total

http://www.gov.ph/wp-admin/post-new.php#_ftn18http://www.gov.ph/wp-admin/post-new.php#_ftn19http://www.gov.ph/wp-admin/post-new.php#_ftn19http://www.gov.ph/wp-admin/post-new.php#_ftn18


22/59

of 2,501 kms of completed FMRs provide better access to markets and socialservices and boost economic activities by allowing goods and products to flow inand out of the barangays. FMRs also help reduce transport costs, spoilage anddeterioration of quality of agricultural products, and facilitate delivery of farminputs.

3.2.2. From July 2010 to June 2011, a total of 65 tramlines were completedconnecting remote areas to FMRs. A total of 67 agricultural tramlines werecompleted since project start-up in 2009, which is 63% of the targeted 107unitsto be completed by December 2011. The use of these tramlines cuts the cost ofhauling by half from P2 to P1 per kilogram of produce and reduces hauling timesignificantly from hours to just a few minutes.

Inaugurated on 13 April 2011 at Twin Peaks, Tuba, Benguet, a 400-metertramline has reduced hauling time from 2 hours to five minutes. Farmers pay P1per kilo of produce to cover the cost of diesel fuel, engine maintenance and other

repairs and allowance for the tramline operator.

On 25 February 2011, a tramline built by DA-Philmech at a cost of P1.6 millionwas inaugurated in La Paz, Zamboanga City, a barangay located 970 metersabove sea level. A 370 meter distance between the barangay and the closestnational road used to take 12 hours to traverse. With the tramline, travel timeover this distance has been reduced to three minutes. A local group, the La PazFarmers Association operates the tramline collecting a fee of one peso for a loadof 350 kilos of corn and vegetables.

3.2.3. All in all, in the first 11 months of the Aquino Administration (July 2010 to

May 2011), 11,611 hectares of new areas were irrigated, 40,053 hectares wererestored, and 171,910 hectares were rehabilitated both for current and carry overprojects. Restoration entails repairing the irrigation facility that is currently notfunctional while rehabilitation means upgrading or improving the facility, which iscurrently working but has not attained the maximum or designed irrigationefficiency.

3.2.4. Put up the following post-harvest facilities:

One hundred eighty seven (187) food terminals from July 2010 to April2011 benefiting 1,155 small farmers and fishers. These food terminals

provide affordable basic food commodities to around 457,859 householdswho are able to save not only from low-priced commodities but also fromcuts in transportation expenses and reduction of middlemen costs. Thesavings on transportation cost ranges from P8P200 for every trip to themarket.

Thirteen (13) or 68% of the targeted 19 Corn Post Harvest TradingCenters (CPHTC) in major corn producing areas nationwide. These



23/59

centers ensure continuous supply of corn even during the wet season,guarantee premium quality, and open opportunity for other investments inthe corn industry.

A total of 1,342 small scale composting facilities in the different regions

nationwide, reaching 100% of the target, and generating 5,368 jobs. Thisforms part of the governments promotion of organic farming through theOrganic Fertilizer Production Project, which will enable farmers to producetheir own organic fertilizer to reduce dependence on expensive syntheticfertilizers.

A total of 56 units of flatbed dryers from July 2010 to April 2011, attaining100% of the target and generating 402 jobs. These will reduce post-harvest losses during the drying stage of palay and ensure quality dryingduring the rainy season.

Four (4) cold chain facilities[20] from July 2010 to May 2011 would enablefarmers of high value crops to store their fruits and vegetables in theappropriate temperature and prolong the quality and shelf life ofperishable crops, obtaining for the farmers a better selling price for theirproduce. These facilities were turned over to three (3) cooperatives inBenguet, Palayan City, and San Jose City, benefiting 139 farmers.

Ten (10) units of Village-Type post-harvest facilities as of June 2011, inkey corn production areas and strategic demand sites nationwide. Thirty-one (31) more units are expected to be completed and operational by theend of 2011.

3.3. Fostered a culture of self-reliance

3.3.1 Some of the strategies under the Food Staple Self-Sufficiency programinclude the termination of direct input subsidies to farmers and front-loading ofirrigation investments in 2012 and 2013 to increase output as early as possible,thus decreasing the need to import rice. These actions are already bearing fruitas seen in the bumper crop harvest from January to March 2011.

3.3.2 The countrys rice importation dropped significantly by 80% from an importvolume of 2.02 million MT from July 2009 to June 2010 to 386,243 MT from July

2010 to June 2011. The decrease in volume of actual rice import arrivals can beattributed to the good harvest and the comfortable stock position of the country.Likewise, rice shipments were scheduled better. From here on, NFA bufferstocks will consist mainly of palay purchased from local farmersa long standingdemand of the rice farmers. From January to June 2011, the government throughthe NFA has procured some P7.64 billion worth of palay from all over thecountry. This is 16% of the NFA stock. The NFA targets to increase this volumefrom the harvest from the main cropping season later this year.



24/59

The total rice imported in 2010 was 2.38 million MT. For 2011, the governmentshall import 64% less or 860,000 MT, with 200,000 MT imported by thegovernment, and 660,000 MT by the private sector. For 2012, rice imports shallfurther decline to 500,000 MT, with 100,000 MT imported by the government and400,000 MT imported by the private sector.

3.3.2. The government was able to increase the average farm gate price of palayby 2.89% within a short period, thereby immediately increasing the farmersincome. Strategic reserves and placements made it possible for the price of riceto remain stable, thereby assuring the affordability and availability of rice to thepublic.

3.3.3. Production in the crops subsector was also up by 8.19% and the maincontributors were palay, corn, sugarcane, and banana. The country has regainedits status as net sugar exporter for the current crop year, having recovered fromthe sugar shortage in 2009-2010 when the country imported raw and refined

sugar.

3.3. Other Agribusiness Interventions

Livestock. Today, the Philippines is both avian flu-free and foot-and-mouthdisease (FMD) free. The OIE[21], or the World Animal Health Organization, lastMay 2011 certified the Philippines as FMD-free without vaccination. Thisaccreditation opens the gates for the countrys hog raisers to export meatproducts.

4. Improving National Productivity and Competitiveness

4.1. National Competitiveness Council (NCC). NCC was reconstituted throughthe issuance of EO No. 44, s. 2011. NCC is working on improving the Philippinestanding on competitiveness indicators where the Philippines had the lowestrankings including infrastructure, governance, and ease of doing business.

4.2. Tourism Industry. In 2010, visitor arrivals surpassed the 3.3 million target forthe year reaching an all-time high of 3.52 million, 16.67% higher than the 2009visitor arrivals of 3.01 million. In just the first year of the Aquino administration, a15.60% increase in visitor arrivals was recorded from 3.2 million arrivals in theperiod July 2009-June 2010 to 3.7 million arrivals in the period July 2010-June

2011.

More particularly, in the first six months of the Aquino Administration, visitorvolume grew by 21%, faster than the first semester of 2010s 12% growth. Totalreceipts from visitors increased by 11.3% from $2.24 billion in 2009 to $2.49billion in 2010. This may be attributed to the confidence in the newadministration, as well as the improved economic conditions in tourist sourcemarkets.



25/59

The continued growth in visitor volume is the result of sustained marketing andpromotions efforts undertaken jointly by the public and private sectors in keysource markets, such as attendance to travel fairs, invitational programs and veryselective advertising.

The Civil Aeronautics Board (CAB) granted new permits to operate regular airservices to the following: Korean Airlines, Gulf Air, Continental Airlines, PakistanInternational Airlines, which are expected to provide weekly seat capacity of12,090 from Korea, Bahrain, Guam, and Palau. The CAB also granted permitsto Jin Air, Jetstar Airways, Air Busan, Mandarin Airlines, Air Nippon Airways, andJeju Air. These airlines are expected to bring in 1,498 and 2,265 tourists weeklyfrom Japan and Korea, respectively.

The DOT further estimates that there will be an additional 37,623 potentialJapanese tourists and 56,888 potential Korean tourists in the country with theseadditional seat capacities.

It may be noted that in 2010, Korean tourists accounted for the biggest chunk ofvisitor arrivals or 21.04% (740,622) while Japanese visitors accounted for10.19% (358,744) of total tourist arrivals.

4.3. Pocket Open Skies Policy. EO Nos. 28 and 29 were issued on 14 March2011, which aims to reorganize the Philippine Air Negotiating Panel andPhilippine Air Consultation Panel; and authorize the CAB and the Philippine AirPanels to pursue more aggressively the international civil aviation liberalizationpolicy. The Implementing Rules and Regulations (IRR) was approved by the CABBoard and published in Manila Bulletin on 09 May 2011. It is also available in the

CAB website.

4.4. Encouraging Local Innovation. The DOST is concentrating its efforts oninnovating and promoting technology as economical solutions to exigent socio-economic matters that affect our country. This includes the development of theovicidal/larvicidal (O/L) trap. This is a simple tool to lessen the incidence ofdengue. The O/L trap consists of a tin can containing an organic solution thatattracts and terminates the eggs and larvae of mosquitoes. As of May 2011, theDOST distributed four traps per household or a total of 200,000 O/L traps to50,000 households nationwide.

Another innovation that the DOST is developing is a prototype of the AutomatedGuideway Transit (AGT) System, a monorail-type rapid mass transit system thatemploys a rubber tire on concrete form of conveyance. Unlike the common light-rail type train systems available in the country, the AGT System requires lessspace for its structural support, making it suitable for the narrow spaces that areavailable in the cities. It is also cost-efficient, Philippine-made, andenvironmentally-friendly.



26/59

Yet another important DOST innovation is the landslide sensor. A landslidesensor is an automated borehole sensor column that is buried in the ground. Itgathers data on ground movement and soil moisture content, and sends itautomatically to a computer that runs predictive models for landslides calledDynaslope. A landslide sensor is currently deployed in Benguet and there are

plans to install more sensors in provinces such as Southern Leyte, Albay, andBohol within the year.

C. HUMAN DEVELOPMENT AND POVERTY REDUCTION

The anti-corruption call Kung Walang Corrupt, Walang Mahirap further servesas a means to achieve a higher end, which is to reduce poverty and improve thequality of life of the Filipino people. It increases investments and advanceseconomic development to further free-up resources for much needed socialinterventions. Towards this end, a convergence approach has been adopted,with opportunities for education, housing, health care, employment, and

livelihood made available. With savings arising from eliminating wasteful andcorrupt practices, programs and projects for social intervention can be funded.These include the following:

1. Building Capacities of the Poor and Marginalized

1.1 Expanded coverageof the CCT or the Pantawid Pamilyang Pilipino Program(Pantawid Pamilya). The government has reached the targeted 1 millionhouseholds in 2010, and intends to cover an additional 1.3 million households fora total of 2.3 million households by the end of 2011.

As of 10 July 2011, a total of 2,201,792 household beneficiaries, or 94.12% ofthe 2,339,241 million households target for 2011, have been registered in theprogram. The registration for the remaining 137,449 households is on-going.

As of 30 May 2011, the cash grants funded cover 1,619,974 householdbeneficiaries.

Overall average compliance rate vis--vis the program conditionalities in 2010 forhousehold beneficiaries belonging to Set 1[22]and 2[23] is high, as may beobserved in the following:

(for pregnant women andchildren 0-5 years old) PROGRAM CONDITIONALITY RATEHealth Visits

96.16%

Education (Day Care)

95.40%

http://www.gov.ph/wp-admin/post-new.php#_ftn22http://www.gov.ph/wp-admin/post-new.php#_ftn23http://www.gov.ph/wp-admin/post-new.php#_ftn23http://www.gov.ph/wp-admin/post-new.php#_ftn22


27/59

Education (Elementary)

96.86%

Family Development Sessions

95.92%

From January to April 2011, high compliance rate to the program conditionalitieswas also recorded:

CONDITIONALITY JanuaryFebruary March April

Health Visits (forpregnant women and

children 0-5 y.o.)

90.82% 91.94% 92.86% 93.72%

Education (Day Care) 90.20% 90.95% 92.82% notavailable

Education(Elementary)

90.27% 90.82% 92.69% notavailable

Family DevelopmentSessions

96.34% 96.47% 96.64% 96.45%

The high compliance rates with the programs conditions indicate that the peopleare responsive to the importance of investing in health and education in order toimprove their quality of life. Currently, the DSWD is converging its core social

protection programs (i.e., Pantawid Pamilya, the Kapit-Bisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of Social Services, and the Self-Employment Assistance-Kaunlaran Program) to ensure that poverty reductionobjectives of the Aquino Administration are accomplished.

1.2 Empowered communities through the Kapit-Bisig Laban sa Kahirapan Comprehensive and Integrated Delivery of Social Services (KALAHI-CIDSS).

The KALAHI-CIDSS is a strategy for community empowerment and povertyreduction that employs a community-driven development (CDD) approach.KALAHI-CIDSS allows communities to identify, analyze and prioritize the projects

that would best solve their immediate needs (e.g., water systems, schoolbuildings, day care centers, barangay health stations, electrification, housing,access roads/trails/bridges, livelihood assistance, environmental protection/conservation programs, and skills training, among others). From July 2010 to 30May 2011, the KALAHI-CIDSS projects have been implemented in 10 regions, 25provinces, 78 municipalities, and 1,759 barangays. The programs capacitybuilding initiatives have been completed benefitting the 40,112 targetedcommunity volunteers. These initiatives cover the conduct of project



28/59

development and management, financial management, procurement,development planning, and infrastructure implementation.

As of 30 June 2011, out of the 570 targeted community projects, 490 communitysub-projects costing P507.94 million, have been completed, benefiting 133,439

households. The sub-projects include the construction of health and day carecenters, pre- and post-harvest facilities, roads, and bridges, among others.

1.3 Enhancing the capacity of the poor for entrepreneurship through the Self-Employment Assistance-Kaunlaran (SEA-K) Program. TheSEA-K is a capabilitybuilding and livelihood program that aims to enable poor families to establish andmanage sustainable community-based credit organizations for entrepreneurshipdevelopment.

From July 2010 to June 2011, a total of P120,058,333 was released to 21,296families as capital seed fund at a maximum of P10,000 per family. Out of which,

P40,349,333 has been released to 5,572 Pantawid Pamilya beneficiaries underthe Sustainable Livelihood Program of the DSWDs Convergence Strategy.

2. Advancing and Protecting Public Health

Universal Health Care or Kalusugang Pangkalahatan is the governmentsresponse to the inequities and lack of access to health care. It envisionsproviding all Filipinos with quality and appropriate health care whenever andwherever needed.

2.1. Pursued Universal Health Care. The National Household Targeting System

for Poverty-Reduction (NHTS-PR) has identified 5.2 million households[24] forenrolment in the Sponsored Program of the Philippine Health InsuranceCorporation (PhilHealth).

As of 19 July, all of the 5.2 million families identified by the NHTS-PR are nowenrolled in PhilHealth under the Sponsored Program. This represents 100% ofthe families classified by NHTS-PR as the poorest Filipino families.

Starting August 2011, PhilHealth will offer the poorest of the poor a no-balancebilling package covering 22 medical and surgical cases[25]. This means that forthe poor patients who belong in the 5.2 million families identified by the NHTS-

PR and enrolled in PhilHealth, no payments shall be required by the public healthfacility or public hospital for the treatment of illnesses such as dengue, diarrhea,pneumonia, typhoid fever or asthma, or for normal or caesarean deliveries duringchildbirth, among others.

2.2. Upgrading the rural health units and government hospitals. A total ofP7.1 billion has been allocated in 2011 for the Health Facility EnhancementProgram (HFEP),[26] P5.70 billion of which shall be used for the improvement of



29/59

rural health units (RHUs) and barangay health stations, while P1.40 billion shallbe used for the enhancement of DOH retained hospitals.

A total of P3.70 billion was also released to various LGUs nationwide for theupgrading of health infrastructure. The amount funded a total of 553 projects for

the civil works and upgrading of equipment for Basic and ComprehensiveEmergency Obstetrics and Neonatal Care (BEmONC) in new or renovated healthcenters and government hospitals.

2.3. Provided more health workers to the unserved and underservedcommunities

2.3.1. Registered Nurses for Health Enhancement and Local Service (RNheals)Program. As of 28 June 2011, the DOH has deployed 9,884 out of the targeted10,000 nurses to 1,331 municipalities. This program aims to help uplift the healthconditions of the poor in the rural and underserved municipalities.

2.3.2. Doctors to the Barrios (DTTB) Program. As of 28 June 2011, 83 doctorswere deployed to 83 5th and 6th class municipalities that had few or no medicalpractitioners, thereby improving access to quality healthcare.

2.3.3. Rural Health Midwives Placement Program (RHMPP). As of 28 June 2011,173 midwives were deployed to 15 regions to provide maternal and child healthcare services in the CCT areas, BEmONC facilities and in the unserved,underserved, and hard-to-reach 5th and 6th class municipalities.

2.3.4. Rural Health Team Placement Program (RHTPP). As of 28 June 2011, 44

dentists, 43 medical technologists and 40 nutritionist-dieticians were alsodeployed to 105 municipalities to provide the community with a completehealthcare package.

2.4 Other health-related accomplishments

TheIligtas sa Tigdas ang Pinas Program. For the period 4 April 2011 to 04 June2011, the DOH allocated P635 million to procure vaccines and other mobilizationrequirements for the nationwide door-to-door vaccination of an estimated 18million children aged 9 to 95 months old. Out of the 18 million target, 15,321,749children or 82% have been vaccinated.

Government effort on Dengue. Due to intensive public information, preventivemeasures and collaboration among government and the private sector, as of July2011, the number of dengue cases is lower by 13.8% with 34,090 compared to39, 556 last year.

3. Providing Access to Quality Education



30/59

3.1. Allocated a bigger budget for basic education. The government allocatedP207.30 billion for basic education in 2011, which is 18.46% higher than the2010 budget of P175 billion. The budget includes P2.30 billion[27] for the1,193,550 kindergarten students for SY 2011-2012, the start of universalkindergarten under the governments K to 12 program. The budget also includes

P5.8 billion for the Government Assistance to Students and Teachers in PrivateEducation (GASTPE) program, which shall benefit 757,806 students for schoolyear 2011-2012, a 9.54% increase over the 2010-2011 period. Furthermore, toensure that more students from marginalized families benefit from the GASTPEProgram, the tuition subsidy for students residing outside Metro Manila wasincreased from P5,000 to P5,500.

3.2. Constructed more classrooms and toilets. From July 2010 to May 2011,2,493 new classrooms had been constructed out of the remaining 3,962classrooms to be constructed using funds from fiscal years 2008 to 2010. Theremaining classrooms are expected to be completed from August to October of

2011. The construction of new classrooms, this time provided for in DepEds2011 budget, commenced, with 9,104 out of 11,683 classrooms already in theprocess of bidding and procurement.

For the period July 2010 to May 2011, about 6,691 classrooms, or 75% of thetargeted 8,871 classrooms due for repairs, have also been rehabilitated. Inaddition, 2,493 toilets or 71% of the targeted 3,501 toilets have been newlyinstalled in schools.

LGUs and private sector partners have also actively participated in the provisionof new classrooms to schools. LGUs have built a total of 1,662 new classrooms

in school year 2010-2011 alone. Several LGUs have also responded positively tothe Counter-Parting for Classroom Construction Program, which was establishedearly this year. As of June 2011, LGUs have a running commitment ofP760.65 million to build 895 new classrooms this school year on top of theDepEds regular school building program through the counter-parting scheme.

Meanwhile, private sector groups committed to build 251 new classrooms. TheDepEd continues to cultivate its strong partnership with business and civil societyorganizations through school-building initiatives such as the BayanihangPampaaralan, which aims to significantly address the public schools systemsclassroom shortage within the next two years.

4. Providing Decent and Affordable Housing

The Aquino Administration is espousing transparency, decisive action to resolvegovernment inefficiencies, preferential action for the underprivileged, andincreased partnership with stakeholders for the purpose of affording decentshelter to those in need.



31/59

4.1 Closing the housing gap by providing secure tenure and increasing thesocialized housing stock. From July 2010 to June 2011, the Housing and UrbanDevelopment Coordinating Council (HUDCC) and its Key Shelter Agencies[28](KSAs) focused on the review of housing policies and programs to improve thedelivery of housing services. These activities have so far resulted in the provision

of decent housing to 104,903 families.

4.2 Pursued a more responsive housing loan policy. From July 2010 to June2011, amidst the policy reforms being undertaken by the Home DevelopmentMutual Fund (HDMF or Pag-IBIG) to avoid fraudulent activities and make thelending program more responsive to its members, the agency approved therelease of P47 billion worth of loans to a total of 67,660 members for thepurchase of new houses.

4.3 Pursued a More Comprehensive Resettlement Policy. The National HousingAuthority (NHA) released P3.08 billion for resettlement and other programs from

July 2010 to June 2011. This benefitted nearly 25,400 beneficiary-families. Thereview of the NHAs resettlement policies is on-going to include the provision ofbasic social services (e.g., schools, public markets, health care centers) andlivelihood opportunities at the resettlement sites.

4.4 Intensified the implementation of the Community Mortgage Program (CMP).Under the CMP, P692 million was released from July 2010 to June 2011 toorganized informal settler communities for land acquisition, benefiting 11,413beneficiary-families. Of this number, 8,880 families benefited in the first half of2011, which already surpassed the full-year accomplishment in 2010 of 7,109beneficiary-families.

4.5 Partnering with LGUs in providing housing to the homeless. The HUDCCconducted Pabahay Caravans in Region VII (Cebu), Cordillera AdministrativeRegion (Baguio), Region III (Pampanga), Region IV-A (Tagaytay), Region VIII(Tacloban City), Region IX (Zamboanga City) and Region XI (Davao City). Thecaravan brought the various housing programs and services of the shelteragencies, to help the LGUs address their housing needs directly to the LGUs.

HLURB and HUDCC offer assistance in the preparation of the LGUs respectivecomprehensive land use plans and local shelter plans, respectively. The Pag-IBIG Fund has devoted a lending window for LGUs with available land forhousing but lack funds to build units. For LGUs without land for housing, theSocial Housing Finance Corporation (SHFC) may fund 75% of their housingproject cost under the Localized Community Mortgage Program. Under itsresettlement assistance program, the National Housing Authority (NHA) is openfor joint ventures with LGUs that need to relocate informal settlers. The LGUprovides the land while NHA funds the site development.



32/59

Stronger linkages with the LGUs have started to bear fruit. The Pag-IBIG Fundhas just signed a Memorandum of Understanding with the Quezon City LGU forthe housing project in Barangay Payatas for low-income personnel and informalsettlers occupying danger areas. Manila and San Pedro, Laguna are also set toenter into a partnership with Pag-IBIG Fund for their own housing projects. These

projects are in the assessment stage on technical design of units, specificationsand income profiling of beneficiaries.

The SHFC adopted the strategy of expanding partnership with LGUs to have apro-active identification of areas for CMP. More specifically, it has targeted 70%of its portfolio for cities outside the National Capital Region, prioritizing HighlyUrbanized Cities, cities with high population growth rates, and

Documents

PMS - SONA 2011 Technical Report - 25 July 2011