President’s Budget Message
THE PRESIDENT’S BUDGET MESSAGE
FY 2008 Budget:
Sustaining the Momentum of Growth
Thirty days ago, when I delivered the President’s State of the Nation Address before the 14th Congress of the , I did so with pride and confidence in what the Administration has accomplished during the last six years.
But, only because those achievements came from the sweat of the nation’s brow.
I would like to think that we – all of us, as a nation and as a people, from the lowly balut vendor who, nevertheless, puts his faith in this Administration, to the tax-paying citizens of this country – have contributed to these achievements.
Today, as I submit to Congress our P1.227-trillion Budget for 2008, I do so with the same pride and confidence. That, with your help, all our efforts to see the fruition of our aspirations will not be for naught.
The budget that I propose for 2008 is a balanced budget, the first time in over 10 years that our government has been able to do so. The budget will be balanced, and the revenue agencies must deliver or else. It signifies my Administration’s commitment to sustain our growth momentum towards eventual economic takeoff.
That we have achieved this fiscal target two years earlier than scheduled is an indication of our discipline and strong resolve to put our house in order, sooner rather than later.
With big help from Congress, we have effectively implemented a tight fiscal consolidation program which improved revenue collection, streamlined spending, and reduced the level of government debt and deficit.
The value-added tax, whose rate we broadened from 10 percent to 12 percent, has generated as much as P100.7 billion in revenues from November 2005 until June this year.
Our prudent approach to spending, involving expenditure rationalization and matching sources of revenues enabled us to grow our economy while keeping a tight rein on our deficit.
Administrative measures, including improved audits and data matching, were directed at enhancing efficiency in tax collections.
Setting our country’s finances in order does not mean that we skimp on important programs and services to the public. It does mean that we focus our efforts and resources on those very priorities that would have the greatest impact on the economy and on the lives of our people.
In 2007, with an improving fiscal situation, we poured investments into those sectors that will enhance our chances of becoming a truly modernized nation — infrastructure, education and health, among others.
At the same time, we began to tap the natural advantages of five distinct regions in our country. These super regions offer boundless opportunities to spread and multiply development across the entire country.
The Super Regions is our blueprint for building a future. For 2008, while we give priority to infrastructure, education and health, as well as housing and science and technology, we shall continue to develop the advantages of the five super regions as well. The budget will sustain major infrastructure projects in all superregions, long demanded by local government units and regional development councils, industries and investors, and local communities.
Our hard work is paying off.
In the first quarter of 2007, the country’s GDP grew at a record high of 6.9 percent, the highest since 1990, outperforming other Asian economies such as (6.1 percent), (5.3 percent), (6.0 percent), (4.3 percent), and (4.0 percent).
This, following three years of accelerating economic growth ranging from 5.0 to 6.4 percent in real terms, despite volatility in the political environment.
Market interest rates are dropping, enabling the acceleration of bank-lending activities and stimulating investments. Inflation is on the downtrend, registering 2.2 percent in March 2007, the lowest in two decades. The peso is appreciating, brought about by strong dollar inflows from portfolio and foreign direct investments.
All these phenomena benefit the stock market, which is on an all-time high.
Strong export earnings and OFW remittances have likewise contributed to a robust currency and to building up our international reserves.
As of July this year, our gross international reserves (GIR) has reached US$28.0 billion, exceeding the GIR forecast range of US$25.5 to US$26.0 billion for 2007. At this level, the country can cover 5.1 months of imports of goods and payment of services, well above the survival levels of three months worth of imports that bedevilled us prior to 1999.
Given a strong GIR, we were able to pre-pay part of our foreign debt. From a national government debt-to-GDP ratio of 78.5 percent, in 2004, we are now down to 64.2 percent by end of last year. This year, we are targeting to further lower the ratio to 58.3 percent.
Employment has been averaging over 91 percent for the last three years compared to 89.7 percent of the previous six years. Our debt reduction strategy of zeroing the budget deficit and intensifying revenue mobilization buoy up investor and private business confidence.
From a budget deficit of P210.7 billion in 2002, we have significantly reduced the deficit to P64.8 billion in 2006. This year, we hope to lower it further to P63 billion.
Our record for the consolidated public sector is even better, with the deficit being reversed – from a deficit of P218.7 billion in 2002 to a surplus of P13.9 billion last year. Thanks to reforms in the power sector.
Improvements in tax efforts, indicated by increasing revenue collections, coupled with disciplined spending, have helped trim down the country’s deficit, paving the way for a balanced budget by 2008, two years ahead of schedule.
Now is no time for complacency. We are at the threshold of making tough choices. Either we sustain an accelerating growth that we have long envied our neighbors for, or lose the momentum and return to the slow, jerking steps that our economy has been used to .
Going for Gold: Towards a Balanced Budget
Why go for a balanced budget?
Expansionary spending, or expanding expenditures by borrowings, has been employed in the past to support government and the economy. This traditional way of pump priming is no longer an option.
We cannot bequeath to our children and their children’s children a legacy of debt. It is not fair, nor does it make economic sense, to perpetuate such an act.
Deficit spending inevitably leads to large government debt that necessarily requires debt servicing which eats up the budget. Too much interest payments take away resources from productive expenditures.
Balancing the budget veers us away from borrowing, And from onerous interest payments that must – unavoidably – go with it.
With this ambitious but attainable goal, we hope to finance our disbursements next year, amounting to P1.24 trillion, entirely by revenues.
And, given the good performance of the economy, we can reduce the budget deficit, balance the budget, and channel more funds to infrastructure development and social services.
To sustain our debt and deficit-reduction effort, I have directed the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BoC) and other revenue-collecting agencies to plug tax leakages more strategically and beef up both their tax and non-tax collection efforts.
Repairing the roof for leakages and instituting good governance measures are my Administration’s strategy to put our house in order.
Additional tax measures to eliminate deficit spending would be a last resort.
But, we shall continue to push for revenue reform measures in Congress. With Congress’ help, we hope to see the passage of the Fiscal Incentives Bill which aims to rationalize the fiscal incentives system to make it an efficient and effective tool for investment promotion.
The simplified tax scheme for individual income tax earners, on the other hand, is meant to help the country without necessarily burdening the citizens it serves. The SNITS, or Simplified Net Income Taxation, will ease income tax administration by reducing tax categories and lessening the number of tax rates.
Focusing the Budget: Payback Time
With the economy on the upswing, revenues on the upturn, and the deficit going in the opposite direction, we need to sustain the momentum by managing our finances – both on the revenue and expenditure sides – well.
On the spending aspect, we shall work towards a sustainable budget by putting funds at the right place at the right time, by managing resource allocation effectively, and by ensuring the desired results through increased capability and accountability.
To keep the 2008 budget within the ceiling of P1.227 trillion, we have employed a more strategic approach to allocation. We now have Forward Estimates to determine the future cost of ongoing programs and policies for the next three years. That way, we know the fiscal space or the headroom which we can direct optimally to fund new programs or expand existing ones.
This approach will address more systematically the binding constraints to more investments and broad-based development that could sustain the momentum of growth.
We shall be gradually transforming the budget so that eventually Congress appropriates funds in the context of what matters most to our people: performance and results.
We have started developing, under our Organizational Performance Indicator Framework, major final outputs and performance indicators for each agency in the Executive Branch to make sense, and make more transparent, how each agency performs and what their outputs are.
It’s payback time for our countrymen who helped carry the burden of new taxes and government austerity measures. In 2008, we shall use the available fiscal space to funnel more funds to infrastructure and basic services.
Laying the cornerstone: Infrastructure
Better infrastructures mean a better life for our people: more investment opportunities coming in, more stable and productive jobs, greater inroads to poverty reduction.
Studies show that reliable and efficient infrastructure contributes significantly to economic and human development.
How?
Infrastructure development helps stimulate a conducive investment climate for investors. It reduces transaction costs and links producers to global supply chains and distribution systems, creating thereby job opportunities.
Transport infrastructure, in particular, has been shown to be important to poverty reduction, even more important perhaps than education and agriculture programs.
Access to power, water, and sanitation also has significant impact on the quality of life and the future of our people, particularly the poor and the marginalized.
Given the high correlation of infrastructure spending with growth and poverty reduction, we shall continue to provide a hefty 22.5 percent increase for infrastructure outlay in the coming year, from P94.6 billion this year to P116.0 billion next year. This is even bigger than the 3.1 percent growth rate slated for the infrastructure sector this year.
About 77.8 percent (P90.3 billion) of the 2008 outlay for infrastructure will go to the Department of Public Works and Highways (P75.31 billion) and the Department of Transportation and Communications (P14.97 billion) to build the much needed highways, railways, ports, airports, and other transport facilities that will link strategic areas and business centers crucial to trade and investments.
Transport, including nautical highways, and tourism infrastructure will be given priority. But, we are not forgetting to provide for digital infrastructure as well. Schools will be equipped with computers, both server and workstations, and assisted in the reduction of connectivity costs.
In 2006, some 4,170 public schools (87 percent) have already been provided with computers. Of this number, some 1,930 have internet connection.
We developed a Comprehensive and Integrated Infrastructure Program (CIIP) last year, amounting currently to P2.1 trillion, to raise the overall competitiveness of our infrastructure facilities. The CIIP hopes to generate a more purposive infrastructure program for our country. While it is faring well in technological infrastructure, ranking 37th among 61 Asian countries, the lags behind in basic infrastructure.
To address this issue, I have requested that half (P952 billion) of the P2.1 trillion infrastructure projects programmed for the period 2006-2010 be alloted to transport and transport-related infrastructure while some P456.0 billion will go to power and electrification.
Of this P2.1 trillion budget for infrastructure, P881.4 billion or 42 percent will be shouldered by the national government. The remaining amount will be implemented through government-owned and/or controlled corporations, local government units, and the private sector.
In addition to these public infrastructure expenditures, policy reforms that will increase competition in key areas such as aviation and power, will spur investments and job creation.
After the progress we have achieved on the macroeconomic and fiscal fronts, these policy reforms can set off another virtuous cycle where good governance encourages investments, jobs, higher income, and lower poverty incidence.
Investing for tomorrow: Science and Technology
As a vital engine of development – driving productivity, economic growth, and job creation – science and technology is given its rightful place by this Administration as an emerging priority in the medium term.
Since 2006, we have put a stop to the waning budget of the Department of Science and Technology (DOST). We have increased its allocation to P3.6 billion in 2007 and P2.8 billion last year from the 2005 level of P2.4 billion.
This may not even be enough to close the gap between the country’s research and development (R & D) expenditures with those of our neighboring countries.
It shall be enough to refocus the priorities of DOST to those areas that will have the greatest impact: strengthening R & D manpower capacity and the provision of technology, marketing and business development support to SMEs and new entrepreneurs. Not just for today but for the future.
Building human resources: Education, Health, Housing
Education. Alongside our investments on infrastructure, we are investing in education to provide the necessary public goods that are key to private investments. Building our human resources through education is our primary response to the worldwide plea for poverty reduction and betterA quality of life for all.
Education, to raise the quality of our public school system, remains as a top priority in my development agenda. It shall continue to receive the highest allocation among the items in the social services sector.
This year, the budget for education, thanks to Congress, will register a 15.1 percent growth, the largest since 1998, enabling us, with the assistance of the private sector, to build around 8,000 classrooms (2,000 more than what was usually built before) and to reduce the deficiency in desks and chairs.
With our increased budget for education, we were able to hire teachers and to provide them more training. We were also able to reduce book-to-student ratio from 1:5 to 1:1 in key subjects.
Health. Efforts to sustain fiscal health have not hampered our pursuit to improve health and nutrition.
In fact, with the P20 billion savings boon we got from debt servicing due to a strong peso and lower interest rates, we have shifted our concern from debt service to health service. Now, we can provide the poor greater access to better health services as targetted under the Millennium Development Goals (MDGs). Agreed upon in 2000 by 189 heads of State, the MDGs set time-bound and measurable goals to combat poverty, hunger, disease, illiteracy.
The devolution of public health services to LGUs has not stopped the national government from extending a hand to enable the populace to meet its health needs.
As a result, the infant mortality rate has been reduced from 35 for every 1,000 births to 30 in 2003 and 24 in 2006. With the decreasing trend in infant mortality rate, the target of 17/1000 live births will most likely be attained by 2010.
Under-five mortality rate target of 32.24/1000 live births in 2010 was achieved earlier than scheduled. In 2006, we were able to reduce the under-five mortality rate to 32/1000 live births from 48/1000 in 1998 and 42/1000 in 2003.
Maternal mortality rate is also on the downtrend, from a rate of 209/100,000 livebriths in 1993 to 172 in 1998 and 162 in 2006.
Since putting up the Botika ng Barangay (BnB) project, which aims to provide low-priced medicines for the poor nationwide, we have established more than 7,920 BnBs in 2006 alone. This year, some 11,833 BnBs were established. That is way over the 8,800 BnBs we targeted for 2010.
Housing. More than providing a roof over their heads, our housing and resettlement programs offer opportunities for housing beneficiaries and their families to have a more secure life in houses that they can call their own.
Allocation for the housing sector has been increasing to meet the demands in the sector.
From its 2006 allocation of P6.1 billion, the housing and community development sector has been provided P7.6 billion in 2008.
Apart from addressing the housing requirements of the formal and informal sectors, we are also making housing affordable and accessible by reducing interest rates for housing loans.
For a P300,000-housing loan, PAGIBIG members are charged a 6.0 percent interest per annum, way below the previous rate of 9.0 percent.
Truly, we have made life for our people easier and worry-free.
BUDGET HIGHLIGHTS: Beyond the Basics
We crafted a budget for 2008 with high hopes that we can maintain the zero deficit for fiscal years from 2008-2010. The objective is to bring back the national debt to manageable levels by the end of this Administration.
Along this line, we can see our revenue effort reaching, and being maintained at, a high of 17.0 percent of GDP starting in 2008. In more substantive terms, a GDP translated into a P1.53 trillion-yield for government by 2010.
In this fiscal plan, raising efficient and permanent sources of tax collections will continue to be the government’s lifeblood.
But, this will take time. Meanwhile, as we agree with Congress on new tax reform measures, we shall rely this year and in the coming year on revenue administrative measures and privatization proceeds.
Financing the FY 2008 Budget
The P1.24 trillion estimated revenues for next year will raise our revenue effort to 17.0 percent of GDP from only 16.3 percent last year. The amount represents a 10.5 percent increase from the 2007 level, slightly faster than the forecasted nominal growth of the economy.
Tax administration measures. Tax revenues will amount to P1.11 trillion, 14 percent higher than this year’s level. The BIR is expected to mobilize P845 billion in taxes. The BOC, on the other hand, will provide some P254.5 billion.
Higher FDIs, robust corporate tax trends, and higher EVAT receipts are the main sources of satisfactory tax collections.
In noting this target for the next financial year, we commend the contribution that enhanced administration by our collection agencies play in sustaining the robust revenue trend we have seen in recent years.
I also wish to thank our bilateral development partners for supporting our administrative efficiency reforms.
We will further strengthen our governance measures.
The Revenue Integrity Protection Service (RIPS), Run After the Smugglers (RATS), and Run After Tax Evaders (RATE) programs need to move from filing cases to prosecution,
We are now deputizing BIR lawyers to prosecute tax evasion and tax-related cases. Soon, the BOC will follow suit.
As I have said time and again, there will be no sacred cows in the campaign against tax evasion!
I have ordered the setting up of Tax Audit teams which empower the Finance Secretary as lead to examine tax returns. Representatives from the National Statistics Office, Commission on Audit, and the Department of Budget and Management sit in the team as members. I call it the Revenue Enhancement Task Force.
We have also created an Anti-Smuggling Task Force under the Presidential Anti-Smuggling Group to help the Revenue Enhancement team intensify national collection efforts and bring tax collection back on track, following a shortfall in the first half of the year.
From a tax effort of 11.2 percent in 2007, the BIR is expected to attain an 11.6 percent level in 2008 through a more robust implementation of administrative reforms. These reforms will include stronger implementation of the RVAT, which is targeted to result to P34.5 billion of incremental collections, or 3.9 percent of BIR’s total projected revenues.
Some P254.8 billion collected by BOC will come mainly from the P172.7 billion VAT on imports, P64.6 billion higher due to RVAT. With the BIR component, the total RVAT is placed at P99.1 billion.
Fully aware of the need to raise tax efficiency, we have put up the National Program Support for Tax Administration Reform (NPSTAR) to improve tax efficiency administration and revenue collection of the BIR.
The NPSTAR aims to improve the registration process: clean up taxpayer registry; improve taxpayer e-services, e-filing, and e-payment; and increase the collection of arrears. In effect, this will help improve taxpayer compliance, tax enforcement and control, and enhance the BIR’s capacity to undertake a sustainable and long-term reform program.
Information technology will help the BIR bring in more taxes in the coming months. Its Revenue Watch Dashboard, an online facility, will monitor revenue collections in real time from the national level down to the examiners.
The Local Government Unit Revenue Assurance, on the other hand, will share information between the BIR and the LGUs to uncover fraud and non-payment. The system will be implemented in line with ongoing initiatives to identify revenue sources through the use of third party information.
We will continue to support BIR’s Tax Administration and Computerization Project which established an Integrated Tax System (ITS) designed to provide a standard processing framework for the Bureau’s tax collection and administration.
For this purpose, we are setting aside P814.5 million to enhance and upgrade the ITS.
Other equally important measures include improvement in taxpayer services, strengthening of audit functions through taxpayer profiling and industry benchmarking, acquiring scanners, and monitoring bonded warehouses.
Again, I urge everyone to make it a habit to demand receipts for purchases.
By plugging the leakages in the tax system, we are also increasing the equity of the tax burden.
Privatization proceeds. Too much government is not prudent. It has drawbacks, crowding out initiative and hard work and the private economy.
To raise more non-revenue cash, we will privatize the 120-hectare Food Terminal Inc. (FTI) complex in Taguig City next year. We expect the FTI sale to generate some P15 billion.
With FTI privatized, the government will not only be assured of getting the revenue but also of continuous operations of services of the only agro-industrial-commercial estate in Metro Manila.
We only need some P29.6 billion in privatization proceeds to help us deliver the promised 2008 balanced budget.
We estimate that some P3 billion is forthcoming from the lease and development of the Fujimi property in . The Presidential Commission on Good Government-held MERALCO shares may yield P6-10 billion and the sale of the Iloilo Airport is timely placed to yield P1 billion.
The proceeds from privatization is but a small chunk of the total non-tax revenues of P127.3 billion programmed for next year. These include collection from privatization, fees and charges, and dividends remitted by state-owned firms.
The Bureau of Treasury’s income from its investments in government’s securities will contribute some P57.3 billion next year from this year’s P55.1 billion. We expect revenues from other sources to increase by 16.0 percent, to P40.5 billion from P34.9 billion this year.
We will make sure government-owned and controlled corporations and government financial institutions increase the dividends they remit to state coffers. I have issued a memorandum directing them to remit more than the minimum 50 percent of net income stated under their charters.
Borrowing strategy. A government has to borrow even when it does not have a deficit.
The reason is — government is constantly paying off old debts. When the government’s spending is equal to its revenues, it still has to borrow the funds it needs to pay off creditors.
We have, however, trimmed down our borrowing program, from P394 billion in 2007 to P346 billion in 2008. It is our commitment to narrow the budget gap this year as our financing requirements declined.
With our commitment to balance the budget by the end of 2008, we can now reduce our dependence on borrowings and reallocate more resources to the needs of our people, such as farm-to-market roads, irrigation, schools, and health centers.
We are now in a position to improve our economic growth without borrowing.
Our financing requirements in 2008 will rely mostly on longer-term domestic bills and bonds and on concessional ODA project and program loans. The relative mix of foreign to domestic borrowings will improve from the current year’s 32:68 to 36:64 in 2008 in favor of domestic market.
The strategy to increase reliance on longer-term domestic notes and bonds will be pursued to further develop the domestic capital market. Some P245.3 billion or 92.9 percent of the domestic borrowing will be in the form of notes and bonds.
Buoyant revenue collections reflect improvements in tax administration and the longer term benefits of sound tax policy reforms.
I must admit…. much of our strides in the area of fiscal triumph during the last three years, I credit to the last Congress.
Now, once again, I solicit this fruitful partnership with the 14th Congress. Please join me and my Administration’s crusade towards achieving fiscal stability and strength.
The FY 2008 budget will be a test of our credibility. We cannot afford second chances.
Dimensions of the FY 2008 Budget
This Administration’s priorities are right and essential. Infrastructure, basic education, health, housing, and science and technology are drivers that will sustain our growth momentum.
The institutionalization of our Medium Term Expenditure Framework (MTEF) ensures that these priority sectors under our Medium-Term Public Investment Program are amply funded.
Through our multi-year budgeting system, we are able to map out the requirements and headroom for ongoing and new projects on a three-year basis.
The continued decline in the share of interest payments in the national budget is but one of the quick rewards of our ongoing fiscal reforms.
By object of expenditure. We are making further improvements in the composition of the national budget by reducing unproductive expenditures and increasing the shares of infrastructure, education, health, housing, and science and technology.
To ensure that we steer a course away from the numerous pitfalls of unproductive spending, I propose, in this budget, to continue the aggressive program of governance reforms and to promote a mix of high-growth expenditures.
For this reason, capital outlays will increase to P 201.9 billion, or 18.7 percent, in 2008 from this year’s P170 billion. The amount makes up 16.5 percent of the budget and a high 2.8 percent as a percentage of GDP. Central to this is the P116 billion essential to infrastructure development, attracting investments and making the country more competitive.
Maintenance and Other Operating Expenses (MOOE) will get P141.5 billion, or 11.5 percent, of the national budget. The 8.1 percent marginal increase in MOOE provisions allows for inflationary measures, greater social services, and a larger allocation for the maintenance of roads and bridges.
On the other hand, Personal Services (PS), with P384.8 billion, account for 31.4 percent of the budget next year. The amount is 11.3 percent higher than this year’s allocation of P345.7 billion.
The increase is brought by the additional P30.8 billion to cover the annual requirement of the salary increase in 2007 and the proposed compensation reform in government effective July 2008.
Other PS requirements are also being provided for the recruitment of new police officers and teachers, the adjustment of foreign service allowances, and the full implementation of pension adjustment under PD 1638 (AFP), RA 8551 (PNP), and RA 9263 (BFP and BJMP), which increased from P31.9 billion to P38.2 billion.
Over the years, allocations to local government units (LGUs) have continually increased, which is expected in an expanding economy like ours. For 2008, LGUs will get P168.6 billion, roughly 17.8 percent of the budget pie. The amount is P28.2 billion higher, or 14.8 percent, than this year’s P147.2 billion.
If the LGU share continues to rise, the situation is a complete turnaround when it comes to interest payments.
Interest payments for next year is projected to reach P295.8 billion, representing only 24.1 percent of the budget compared to this year’s 28.0 percent.
As we commission more and larger capital projects, an appreciable reshaping of the shares of these objects of expenditure in the national budget is imminent.
We also have to continually demand value for money in our expenditure programs and expect the desired bang for every buck spent.
By sectoral allocation. Our budget proposal is premised on the requirements to provide enhanced services to our countrymen. The budget will fund massive programs for the poor, especially health, housing, farm and fisheries modernization, livelihood, job training, and law enforcement.
Although we are committed to the development of infrastructure, let it be known that my Administration recognizes that this proposed P1.23 trillion budget handsomely funds improvements in the way services are accessed and delivered, and provides for strategic investments in wellness and social services.
We have increased, as we always do, the budget for Social Services. An allocation of P368.9 billion in 2008 will given to this sector to respond to rising costs and increased demand for health, quality education and other social services. It has also the largest allocation, cornering 30.1 percent of the national budget.
With the focus on infrastructure development, particularly transport and communications, including agriculture-boosting farm-to-market roads, the allocation for the economic services sector will climb by 17.4 percent, or P287.5 billion. With a 23.4 percent share, it is the third largest beneficiary of our budget proposal.
Netting out the IRA and debt burden, the social sector will still continue to get the largest share with 41.1 percent, followed by the economic sector with 30.2 percent. General public services and defense follow with 20.1 percent and 8.7 percent, respectively.
As you can see, this budget provides our important sectors longer-term sustainable solutions for us and for future generations.
By department/agency. This budget reflects our values and priorities as a nation.
In developing this budget we have attempted to respond to government requirements and critical needs of the country. It has been a challenging process.
Not counting the Constitutional mandate and this Administration’s policy, education is perhaps the most important investment we make in our budget.
The quality of education we offer our children will determine the quality of the opportunities they will have later in their lives.
For this reason, the Department of Education (DepEd), including the School Building Program, has been set aside some P146.0 billion in 2008, the highest for national government agencies. This is followed by the Department of Public Works and Highways (DPWH) and Department of National Defense (DND) with P94.5 billion and P56.1 billion, respectively.
Other departments which made it to the top ten include the Department of Interior and Local Government (DILG), P52.6 billion; Department of Agriculture (DA), inclusive of its Agriculture and Fisheries Modernization Program, P23.8 billion; Department of Transportation and Communications (DOTC), P22.3 billion; Department of Health (DOH), P16.3 billion; Department of Agrarian Reform (DAR), P13.0 billion; the Judiciary, P10.2 billion; and Department of Foreign Affairs (DFA), P10.1 billion.
By recipient unit, the national government agencies (NGAs) will get the highest share of the budget with 56.1 percent, or P687.9 billion; followed by local government units, with P218.7 billion or 17.8 percent; government-owned and controlled corporations (GOCCs) with P12.7 billion or 1.0 percent; and creditors, with P307.8 billion or 25.1 percent.
The budget for GOCCS is actually a significant increase of 55.4 percent from this year’s P15.7 billion due to the allocation for housing programs.
The Social Payback Agenda
Past budgets had stretched resources too thinly to impact significantly on the lives of our countrymen.
Not this time.
The 2008 budget is focused on priority areas that will make a difference in the life of our people.
Infrastructure: Uniting the archipelago
By 2010, we expect our infrastructure spending to reach four percent of GDP from around two percent. Our infrastructure blueprint, the Comprehensive and Integrated Infrastructure Program (CIIP), will make sure of this.
Our levels of growth at 5 to 7 percent last year and the first half of 2007, I credit most to our infrastructure investments.
The allocation for infrastructure will climb by 22.5 percent in 2008, from P94.6 billion this year to P116.0 billion next year. It will contribute 1.6 percent of the country’s GDP, an improvement from this year’s 1.4 percent.
The two infrastructure agencies – DPWH and DOTC – will get the bulk of the allocation with a total of P90.3 billion, or 77.9 percent. The rest will come from the AFMA component of the Departments of Agriculture and Agrarian Reform, P16.6 billion; School Building Program, P6.4 billion; Allocation to Local Government Units, P1.8 billion; and Autonomous Region in Muslim Mindanao, P1.0 billion.
Part of the P90.3 billion proposed budget for DPWH and DOTC is a P20.4 billion allocation that would fund projects I announced during my July 23 SONA. The amount is 29.4 percent higher than the 2007 budget of P15.8 billion for these infrastructure projects.
Roads and bridges are very important infrastructures. They are drivers, particularly for poverty reduction.
We will continue to build more roads in addition to the existing 29,288 kms traversing the archipelago. For this purpose, we are pouring in some P62.9 billion, essentially targeting road-deficient regions.
These road-deficient regions, which include all of Mindanao , are also either the less economically developed regions or those with some markedly undeveloped provinces.
Road transport continues to be a major means of communication link in the country. We will continue to encourage and foster a healthy growth and development of road transport both in the public and private sector.
Nautical highways to link the entire country. Trading among provinces of the archipelago is now cheaper with the various nautical highways already in place.
Produce are being transported unhampered throughout the country with the alternate routes and reduced costs that roll-on-roll-off (RORO) ports offer.
A 10-wheeler used to pay P32 thousand for transporting goods from Dapitan to Batangas. Now it pays P11 thousand. Fresh fish that cost P20 thousand a ton to move, now travels at P14 thousand.
In 2008, we shall continue to support these RORO ports by making them accessible to everyone.
In fact, some P2.3 billion war chest will be provided in 2008 to construct roads to complete the nautical highways.
As part of my SONA promise, some P1.7 billion is set aside for the access roads to our RORO ports along the western seaboard route from Manila to Dipolog City (Western Nautical) and the eastern sea link that connects Biliran, Leyte to Surigao City (Eastern Nautical).
Aside from the convenience of shorter travel times offered to travelers with the construction of these Strong Republic Nautical Highways, spoilage of farm produce has been lessened. This translates to larger income for farmers.
We must avoid actions that impede the flow of commerce. Instead, we shall strengthen maritime safety and security, particularly in the Visayas and Mindanao . The Philippine Coast Guard’s Mactan Buoy Bridge in Punta Engaño, Lapu-Lapu City, which we are giving some P243 million next year, should do the trick.
The buoy base’s strategic location ensures quick response by the Coast Guard during search and rescue operations. This will greatly benefit various ports that we are expecting to finish this year, e.g. Jagna to Mambajao Port in Camiguin; and Maripipi in Biliran, and Esperanza and Cawayan in Masbate .
Decongestion of Metro Manila . We will continue to decongest Metro Manila.
We will sustain the implementation of programs and projects designed to build new centers for government, business and housing in Luzon, Visayas and Mindanao .
As I said during my SONA last month, the Department of Agrarian Reform will move to Davao .
To offer options to people to convince them to resettle outside of Metro Manila, we are setting aside some P9.0 billion for the construction of roads and other transportation channels at the outskirt of Metro Manila to decongest traffic in the area.
Infrastructure improvements will increase the attractiveness of rural areas as investment locations, reducing congestion in the Metro Manila area. For this purpose, P38.0 billion will be provided for national arterial, secondary, and local roads and bridges.
Some P23.2 billion will continue to fund critical bottlenecks along national roads and bridges to speed traffic out of Metro Manila. We have set aside some P124 million to construct roads to support the development of Subic and Clark .
We will also develop the Luzon Urban Beltway with P5.2 billion, more than double this year’s allocation of P2.1 billion. This involves priority projects such as the LRT Line I South Extension Project, P2.04 billion; LRT Line I North Extension Project, P1.72 billion; Tarlac-Nueva Ecija-Aurora-Dingalan Port, P515 million; and Marikina-Infanta-Real Road, P700 million.
To improve transport within Metro Manila, we will invest in rail transport services by providing P3.0 billion to MRT-3.
Access to major tourism destinations. They say that tourism is a unique industry. It can effectively create its own demand through the creation of attractions and provision of supporting infrastructure.
“Build it and they will come!”
For 2008, we have allocated some P3.8 billion for roads to enhance tourism. A bulk of the amount will go to Southern Tagalog (P1.6 billion) and the Cordillera Administrative Region (P1.1 billion).
Because of the archipelagic nature of our country, our tourist attractions are dispersed. Airports – and even ROROs – can serve as easy access points to meet transportation demand.
The construction, repair and rehabilitation of airports and air navigational facilities will be allocated some P7.8 billion, of which 55.1 percent – or P4.3 billion – will be distributed nationwide.
The remaining P3.5 billion will implement, among others, the New Communications and Navigation Surveillance/Air Traffic Management Systems Development Project, P2.5 billion; the Laguindingan Airport Development Project, P678.3 million; and Selected Airports Development Project, P292.9 million.
The Dipolog and Pagadian airports, which I promised to be improved by year’s end, will be supported next year with allocations of P185.2 million and P201.2 million, respectively.
To continue to improve the services of the Cotabato airport, some P217 million will be made available to ensure safer flight operations in Central Mindanao .
The Ozamis Airport , which opened on July 8 and was bankrolled partially by the province’s local officials, will be infused with a P95 million budget amidst the increasing number of flights in the region.
Central Philippines is touted as our tourism super region.
The region will get significant allocations in 2008 amounting to P6.8 billion. The amount includes the P1.5 billion El Nido-Bataraza Roads in Palawan , composed of the 59-km Taytay-El Nido, 65-km Roxas-Taytay, 105.7-km Puerto Princesa-Narra-Abo-abo, and 110-km Abo-Abo-Bataraza-Rio Tuba sections.
Attracting tourists while at the same time dispersing the pressure within the area require development of new attractions and tourist facility areas, and the connecting transportation linkages.
The world-famous island of Boracay in Aklan is now proud of its very own Kalibo International Airport with its state-of-the-art instrument landing system. In May of this year, the Kalibo Airport started receiving direct international flights from Incheon, .
We are infusing some P388 million for the airport to ensure world-class airport services.
To enhance safety and accommodate large aircrafts, we will complete the upgrading and modernization of the facilities of the Dumaguete airport with a P112.2 million budget for 2008.
Our investments in our airports will prepare us to compete with our Asian neighbors when the open skies policy takes effect next year as agreed by the members of the Association of Southeast Asian Nations (ASEAN).
Agri-business infrastructure. We should prioritize opportunities for agribusiness investment and growth.
Some 112,409 hectares of agricultural land and aquamarine areas will be developed into agribusiness enterprise next year to benefit 822,254 farmers and fisher folks nationwide. This is made possible through our P5.2 billion budget proposal for the Ginintuang Masaganang Ani (GMA) Programs.
A total of 2,364 kilometers of road is up for construction by the DPWH next year. Most of these would be farm-to-market roads that the DA and DAR would jointly fund.
The total budget for farm-to-market roads next year will amount to some P5.0 billion. Of this amount, P4.2 billion will be set aside for DA for the repair or rehabilitation and construction of 3,126 km farm-to-market roads.
The budget for the North Luzon Agri-Business Quadrangle (NLAQ) will be more than doubled in 2008 with P1.4 billion. Projects under NLAQ include the 89.5-km
Halsema Highway(
Mt. Data-Bontoc-Banaue Road), P584 million; and the 97.8-km
Bontoc-Tabuk-Tuguegarao Road, P488 million.
Irrigation will prepare us to cope with the recent dry spell brought by the El Niño which had parched large swaths of farmland in the country.
The government will earmark P8 billion for irrigation projects next year, an amount nearly P472 million more than what it is using to bring water to farmlands this year.
The amount is meant to place 22,186 hectares under irrigation, which is a 29.4 percent improvement from this year’s coverage of 17,150 hectares. This is on top of the 76,125 hectares we intend to rehabilitate and restore next year.
Altogether, about 70,338 households will benefit from our irrigation projects in 2008 which will translate into 74,036 jobs.
Some P3.4 billion of the total budget for irrigation consists of locally-funded projects under the National Irrigation Administration e.g., Restoration/Rehabilitation of Existing NIA-assisted Irrigation Systems, P2 billion; Construction/Repair/Rehabilitation of New/Existing National Irrigation Systems Nationwide, P300 million; and Balog-Balog Multi-Purpose Project-Tarlac, P250 million.
Foreign-assisted irrigation projects include the P1.5 billion Casecnan Multi-Purpose Irrigation; P691.8 million Southern Philippines Irrigation Sector Project; and P672.5 million Banaoang Pump Irrigation Project (Ilocos Sur).
Agrarian reform communities play a vital role in building agri-business opportunities within their area of coverage. The increase in the productivity and income of agrarian reform beneficiaries must be sustained.
For this reason, we will provide some P1.0 billion for the construction of the Tulay ng Pangulo Para sa Magsasaka project. The project involves the construction and installation of 400 double-lane, prefabricated bridges with a total length of 1,632 lineal meters. These bridges link various agrarian reform communities to the economic mainstream and open up development potentials.
The P12.5 billion budget of the Comprehensive Agrarian Reform Program next year targets to acquire and distribute 280,000 hectares of land.
We will also prioritize agribusiness investments in Mindanao , our food basket.
As I have said before, the Departments of Agriculture, Agrarian Reform, and Environment and Natural Resources will devote 30 percent of their program budgets to Mindanao .
The ROROs and the airports that we are putting up are also intended to facilitate agribusiness in the country, making it cheaper and competitive.
Peace roads. We will continue to improve the road network in underdeveloped regions as well as roads leading to conflict-affected areas to promote development and to help solve the peace-and-order problems.
Mindanao will have significant allocations in 2008 with P6.8 billion. Projects for Mindanao include the construction and rehabilitation of the 165-km Surigao-
Davao Coastal Road, P2.07 billion; and 88-km Cotabato (Jct. Awang) Upi-Lebak-Maguindanao, P1.01 billion.
Construction is everywhere in Mindanao : the widening of the 10-km Dakak-Dapitan road; improvement of the 83.3-km Sibuco-Siraway-Siocon-Baliguian road; rehabilitation of the 105-km Dinagat Island Network; and renovation of the 66-kilometer Manay-Mati section of Davao-Surigao.
Energizing the barrios. The electrification program has seen an unprecendented success under my watch.
As of June 30, 2007, some 40,056 of the 41,945 barangays nationwide have been energized, attaining a 95.50 percent barangay-level electrification.
In 2008, the power and energy sector will get some P4.3 billion, 57.6 percent higher that this year’s P2.8 billion.
The Expanded Rural Electrification Program under the Department of Energy will be alloted P182.8 million to energize 50 barangays and 3,500 households in sitios and small villages within 60 barangays.
We have also set aside P21.2 million to fund our ‘biofuels program’ to promote the use of indigenous energy and alternative fuels and lessen dependence on energy importation. The amount is intended to achieve a 60 percent self-sufficiency level in 2010.
Expect more completed energy infrastructure investments worth P456.0 billion in the coming years .
These include the Electrification of Upland Dwellers in Northern Luzon, 30 MW Northern Luzon Wind Power Project, Biñan-Sucat 230 kV Transmission Line Project, Bataan LNG Terminal,Abaga-Kirahon-Maramag Bunawan 230kV Transmission Project, Rural Power Project, among others.
Education: Accessing quality learning
A driver of growth and an equalizer of wealth, education plays a critical role in propelling a competitive and sustainable future for our countrymen.
It opens windows of opportunities for those who strive to learn – and more.
Allocation for the Department of Education remains at the pinnacle, with P146.0 billion, including budget for DepEd-School Building Program in 2008, some P 8.64 billion more than the 2007 level.
Notwithstanding the substantial budgetary increases provided to the education sector for the past years, accomplishments are also noteworthy.
We were able to close the classroom gap, constructing some 9,407 classrooms in SY 2005-2006 and 10,541 classrooms in SY 2006-2007, way above the target of 6,000 classrooms per year.
The target of 1:1 textbook-pupil ratio in key subject areas at the elementary and high school levels was achieved as early as SY 2004-2005.
We even surpassed our target of teacher-pupil/student ratio for both elementary and high school levels, with a ratio at the elementary level for three consecutive school years.
At the secondary level, the teacher-student ratio recorded in SY 2004-2005 improved slightly to ratio for SY 2005-2006 and SY 2006-2007.
In SY 2004-2005 and in SY 2005-2006 to SY 2006-2007, classroom-pupil ratio at the elementary level stood at and , respectively, better than our target of one classroom for every 50 students.
Compared with other Asian countries, the has the largest number of enrollees (84 percent) at the secondary level and the lowest proportion of repeaters in the primary school level (1 for every 100 female students and 3 for every 100 male students) in 2004.
The country’s literacy rate is also one of the highest in 2002, with 94 percent of males and 96 percent of females belonging to the 15-24 age bracket are considered literate. For the adult group, 93 out of 100 adults are considered literate.
In 2004, we ranked second among other Asian countries which had the highest primary completion rate, garnering 98 percent, a notable increase from the 86 percent primary completion rate we had in 1991.
While these accomplishments and good ratings have pushed the education sector forward, there are still areas that we need to work on to propel education to greater heights.
As purveyors of knowledge, teachers are needed to be on top of their turf to transmit correct and comprehensible information to their ward.
For this purpose, we increased by 230 percent, or P655 million, the allocation for Human Resources Training and Development (including teacher’s training, scholarship, and fellowship grants) from P285 million in 2006 to P940 million in 2008 to capacitate 171,617 teachers; and 4,882 school administrators, supervisors, ALS (Alternative Learning System) mobile and non-mobile teachers, and other teaching staff.
To provide teachers adequate classroom supplies and materials, we increased the cash allowance of 519,410 teachers and principals by P106 million, from P153 million in 2007 to P259 million next year.
We doubled the allocation for Basic Education Madrasah to further the development, production, and distribution of textbooks and other instructional materials; training of teachers in English, Arabic, and Islam; and monitoring of implementation of the standard curriculum. With a P200 million budget next year, some 2,668 Madaris teachers will be trained while 800,400 Madaris textbooks will be distributed, 50 percent more than the 2007 levels.
Next year, we will provide 12,100 classrooms: 4,200 classrooms under the special purpose fund (Regular School Building Program), and 7,900 classrooms under the locally funded project. This is 4,768 more than what was constructed this year under the said funds.
Healthy minds require healthy bodies.
To nourish our young ones, we did not only sustain the Malusog na Simula, Yaman ng Bansa Program but likewise beefed up its budget to P2.5 billion, benefiting some 920,000 pupils, from P2.0 billion in 2007.
Committed to meeting the Millennium Development Goal of education for all, we cannot close our eyes to the problem of declining participation rate and cohort survival rate at the elementary level.
Based on a school age population of 6-11 years old, participation rate in the elementary level declined from 90.42 percent in SY 2002-2003 to 84.41 percent in SY 2005-2006. Cohort survival rate also dropped from 69.97 percent to 58.36 percent in the same period.
To arrest the downbeat trend, we fortified the Alternative Learning Program to provide dropouts or out-of-school youth access to basic education in an informal mode that fits the situation and needs of the learner.
Some P240.4 million was set aside for this Program in 2008 to benefit 191,291 learners. This year, some P145 million was appropriated benefiting 147,138 learners.
A child’s lack of interest in school can be a contributing factor to his/her dropping out of school. To build a child’s interest in studying at an early age and to provide a good foundation for learning, we are intensifying allocation for Pre-School Education Program by 300 percent, from P500 million in 2007 to P2.0 billion in 2008.
Also, in support of the MDG on education, we remain steadfast in providing scholarship opportunities to deserving students who, despite financial difficulties, are eager to pursue their studies.
For 2008, Government Assistance to Students and Teachers in Private Education (GASTPE) has been provided P2.9 billion to assist 711,750 grantees, 55 percent more than the 458,872 grantees in 2006.
The Department of Science and Technology (DOST), for its part, will share P1.1 billion of its 2008 budget to provide scholarship opportunities for undergraduate and graduate students taking science and technology-related courses (P347 million), and for those students under the specialized science secondary school program of the DOST-Philippine Science High School (P731 million). These scholarships will support 15,198 scholars next year, up by 13 percent from this year’s 13,493.
In addition, P200 million has been allotted under the Private Education Student Financial Assistance (PESFA) program of the Technical Education and Skills Development Authority (TESDA) to assist 13,800 students, with each student receiving P14,500 a year (inclusive of tuition fees, stipend, and book allowance).
As promised, I added P1.0 billion in the budget of TESDA for the PGMA Training for Work Scholarship Program (TWSP). Some 641,050 are targeted to benefit from this program. In 2006, we were able to provide scholarship certificates to 83,786 beneficiaries. This year, some 111,304 scholars are undertaking the program.
We also have scholarship programs for college and graduate students who intend to pursue higher education. For 2008, we allotted P704 million, P74 million more than the 2007 allocation, for the various scholarship programs implemented by the Commission on Higher Education (CHED). Some 51,207 deserving citizens are expected to benefit from the CHED scholarship programs.
Health: Going for the MDGs
Doomsayers have been too overzealous in their criticism of the reforms we have put in place to address social inequities. The truth is we are in a better position now to bring more equity and care for our poor.
With improved revenue collection, care for the lives of the poor, as required under the Millennium Development Goals, has been given greater attention. In 2008, it is one of our priorities.
The Department of Health is gearing up to catch up with “keeping the promise” by 2015 with regards to the attainment of the MDGs under its responsibility, i.e., reduction of child mortality, improvement of maternal health, and combatting HIV/aids, malaria and other diseases.
The DOH has however, reached the target set by the Medium-Term Philippine Development Plan for 2004-2010 with regards to tuberculosis (TB). It has a 70 percent success rate in detecting the disease and 88 percent for successful cure. Our hospitals, 16 of them nationwide, observe the WHO-recommended strategy of effectively containing the disease.
The TB control program of DOH has been nearly doubled from its 2007 allocation of P139 million to P280 million in the 2008 budget proposal. The amount will cover the purchase of anti-TB drugs, including laboratory expenses.
Additional treatment centers for HIV-AIDS are to be created to detect and hopefully contain a disease described as “hidden and growing”. Treatment centers in Manila have been bolstered with additional centers like Ilocos Regional Training and Medical Center , Vicente Sotto Medical Center , and the Davao Medical Center .
With just eight years until the MDG deadline, the is not complacent in its commitment to achieve the Millennium Development Goals. The Department of Health has for 2008 an allocation of P15.4 billion, a jump of P3.5 billion from its 2007 level of P11.9 billion.
The health of our people is an essential component of national development. With or without the MDGs we shall still be investing more funds into this critical area, for a strong republic needs at its core a strong and healthy citizenry.
An amount of P3.5 billion under the supervision of the National Health Insurance Program will be provided as a security blanket for the health of over 4.7 million indigent households. Boosting the care for many Filipinos is an amount of P1.3 B for the Health Facilities Enhancement Program, which will upgrade Primary level to Secondary care; and Secondary level to full Tertiary care.
The health sector’s budget will also include allocation for preventive care with P484 million for the Expanded Program on Immunization which will protect over two million children from ages 0-11 months old.
The DOH’s Epidemiology and Disease Surveillance efforts, which successfully saw the prevention of the spread of epidemics like the avian flu, will be allocated P120 million, a great improvement from its 2007 level of P22 million
A primary component in the attainment of the MDGs on health is providing quality and reasonably priced medicines. The Botika ng Barangay (BnB), now numbering 7,437 all over the country, will get an increase of P23 million for 3,913 new BnBs, from 75 million in 2007 to P98 million.
Discussions are under way to include private retailers to widen the availability of low-cost, commonly-needed medicines that are usually limited to public health facilities such as hospitals, BnBs, and NFA rolling stores. To further a wide-scale effect in the area of affordable and reliable medicines, a Cheaper Medicines Bill is before Congress awaiting enactment.
Family health, including Family Planning, gets P1.2 billion, up from its 2007 level of P232 million. This provides for basic obstetric care at the rural health level, including Vitamin A and iron supplements for low birth infants.
In compliance with the MDGs, particularly goal one which aims to eradicate poverty and hunger, the budget of the National Nutrition Council includes the Accelerated Hunger Mitigation Program gets P403 million.
Housing: Resettling our people
While not a Millennium Development Goal, the issue of providing affordable housing can be linked to poverty reduction. Poverty alleviation efforts cannot be complete without providing an environment where one can acquire one of the basic necessities of life –shelter. A house to call one’s own will add to a person’s dignity and self respect.
FY 2008 will see the allocation for major housing programs jump by 108.6 percent.
From its 2007 level of P3.5 billion, it now stands at P7.3 billion in 2008. The National Housing Authority will have the bulk of the funds, at P5 billion, which it will use to set up resettlement sites and build new housing units for the squatters along the tracks of the Philippine National Railways stretching from Malolos to Calamba.
Also in 2008, the National Home Mortgage Finance Corporation (NHMFC) will get P1.4 billion. That amount is divided into P500 million, which will go to the Community Mortgage Program to assist 8,476 beneficiaries in purchasing lots from their owners, and the remaining P900 million will be set aside as equity for the payment of mortgages for securitization.
The Home Guarantee Corporation which operates a credit guarantee program that provides risk cover and task incentives for housing credits extended by finance institutions, is slated to receive P900 million in government equity.
The Pag-IBIG Fund has lowered its interest rates for housing loans amounting to P300,000 to P700,000 to only seven percent. That means a loan package amounting to P750,000 will only pay P4,990 in monthly amortization form a previous amount of P6,860 a month. With these rates there will be a substantive increase in the number of people in the lower income brackets who can avail of PAGIBIG loans.
The Department of Social Welfare and Development has its own housing initiative in the Core Shelter Assistance Project (CSAP). Government assistance to CSAP for 2008 is P125 million for 5,000 units; with each P50,000 worth of unit having P25,000 in funding.
Meanwhile, the highest policy making and coordinating office on shelter, the Housing and Urban Development Coordinating Council (HUDCC), gets a P25.4 million shot in the arm for 2008 with its allocation of P102 million compared to its 2007 allocation of P76 million.
S & T: Enhancing Investment
The biggest investment by far in the next year’s budget is for the future.
Science and technology is the future. Our priorities reflect its importance as the Department of Science and Technology receives the largest increase in appropriations for FY 2008. From P3.6 billion in 2007, DOST gets a big shot totaling P1.7 billion, bringing its budget up to P5.3 billion.
With the increase, DOST can provide more scholarships to college students enrolled in science courses and to highschool students enrolled in science high schools as funds for scholarships have climbed to P1.4 billion from a 2007 level of P882 million.
Philippine Science High School (PSHS) will get P737 million from the previous P434 million. The 2008 allocation for PSHS is expected to benefit 3,158 scholars.
Other DOST programs getting additional allocations are: Technology Incubation for Commercialization, P40 million; Engineering Research and Technology for Development, P161 million; National Technology and Innovation System, which provides S & T assistance to entrepreneurs and investors, P300 million.
As part of the government’s investment in the area of research and development, a total of P1.29 billion will be given to the University of the Philippines Engineering Research and Development for Technology program (P795 million) and its “National Science Complex and Technology Incubation Fund” (P500 million).
Also important is the area of Information Communications Technology (ICT) where the ultimate aim is an ePhilippines: a society electronically enabled, with access to technologies that provide quality education, efficient government service, and greater sources of livelihood.
In recent economic history, and this is true across the globe, nothing has made an impact as great as ICT.
Information technology is critical in transforming business, making a more efficient and effective government; and empowering citizens and communities. Markets, which were once unreachable because of distance and costs, are now open through cyberspace and e-commerce.
Clearly this is one bandwagon we cannot afford not to be a part of.
Fortunately, for many years now, we have been enjoying growth in this sector, especially in the area of business process outsourcing or Cyberservices, 72 percent in 2006 alone, 12 percent better than the 60 percent target for the year. Contact centers in the ICT sector comprise 52 percent of the total workforce. In 2005, ICT as an industry contributed to $2.1 billion dollars in revenue, beating out traditional industries like mining or agriculture.
Our advantage in this area, as described by market think-tanks, includes agent skills, cost of labor, language skills, as well as resources and infrastructure. As a country, we are one of the most favored offshore destination in Asia , with Think-tank IDC even ranking Manila as the 2nd best offshore destinations in the Asia Pacific region.
The ICT sector is one of our Super-Regions, the Cyber Corridor, stretching from Baguio to Manila to Cebu to Davao .
The Cyber Corridor will be further strengthened by the institutional and regulatory steps that have been undertaken to strengthen the industry. One measure is a bill to establish a Department of Information and Communications Technology. It signals the government’s commitment to the sector and ensures focused execution of ICT-related programs, making them current with the realities of the information age.
A Cybercrime Prevention Act is also pending in Congress for effectively combat and prevent cybercrime.
The CICT’s training arm (NCI-National Computer Institute, TTI-Telecommunications Training Institute, ADOC-APEC Digital Opportunity Center ) conducted 124 training/seminars benefiting 1,321 participants in 2006.
Education also benefited from computerization.
As of 2006 the Department of Education has provided 87 percent of public highschools (4,170) with computers and 40 percent (1,930) with internet connectivity.
Governance Initiatives
In a world of competing nations, improving governance is a necessity, not a choice.
Public confidence in government – in its laws, rules, processes and actions – is the rock upon which investments, both local and foreign, are built. When the public believes in the ability of the national government to fulfill its promises and enforce its laws, everything falls in its proper place. Fiscal stability is met; a conducive investment climate is fostered; and economic growth is sustained.
Anti-corruption efforts
Corruption is widely viewed as that which solely holds us back from sustained economic growth. It brings discredit to government and dissipates our efforts to build a strong .
We cannot allow this continuing menace to dispel our hard-won gains and stain our governance efforts.
From a P22 million appropriation this year, the Presidential Anti-Graft Commission (PAGC) will get a 312 percent increase next year, raising its budget to P91 million.
The Office of the Ombudsman, meanwhile, will get P980 million for 2008. A 77 percent conviction rate is certainly a tremendous performance.
One of the essential tools in combating corruption is the protection of whistleblowers. These courageous people risk life and limb to speak out against corrupt practices, where others dare not.
For 2008, the Department of Justice (DOJ) is allocating P84 million of its P6.2 billion budget to witness protection.
We hope that, by providing better security to witnesses, more fearless citizens will come out to report corrupt deeds and activities.
Building credibility in the electoral system. Election is one of the most important pillars of democracy. It is the occasion when citizens exercise their right to be heard and have a say in how to run the government and who should run it.
To ensure a free, orderly, honest, and peaceful conduct of elections, we will modernize our electoral process through the use of the Automated Election System.
To bring this into reality, we have provided the Commission on Elections (COMELEC) a modernization fund of P2.6 billion to help bring integrity to the ballot.
The Administrative Region of Muslim Mindanao (ARMM) has been provided P267 million to ensure the conduct of clean and orderly elections in the area next year.
I hope that Congress is one with us in this advocacy. I hope, too, that it will support the poll watchdog fund my Administration is proposing to strengthen vigilance in guarding this vital democratic process.
Modernizing government’s accounting system. The Commission on Audit will get P4.1 billion in 2008, some P46 million higher than its 2007 appropriation of P4.06 billion.
To improve the government-wide accounting system, the COA has launched the electronic Government Accounting System (e-NGAs), which aims to simplify the government financial system and generate timely and reliable accounting reports.
As of July 2007, some 260 or 65.4 percent of 397 government entities (148 national government agencies, 98 LGUs, and 14 GOCCs) have fully implemented eNGAs.
e-Government. In today’s age of Information Technology, competitiveness depends highly on the ability to adapt to fast-changing trends and technologies. With computers getting smaller and more powerful, and economies trade goods across the world in real time, governments are feeling increased pressure to adopt means to cope with a fast and modern world.
ICT provides government the tool to improve policy outcomes, ensure high quality services, and attain greater citizen involvement. Following the Five Stages of E-government of the UN-American Society for Public Administration (UN-ASPA) the National Computer Center , through its Memorandum Circular No. 2002-1 and 2003-1, laid out the guidelines for the creation of government agency websites. Of 375 government agencies, 348 or 92.8 percent have complied by the third quarter of 2006.
The e-Government Fund illustrates the government’s commitment to fund strategic information and communication technology that allow “interconnectivity, resource sharing, and other collaborative processes.” Notable ICT projects which tapped the e-Government Fund include the BIR’s Integrated Computerization Projects and the National Computer Center ’s Electronic Governance and Local Government Units (eLGU). For 2008, agencies that have no funding source for their ICT projects may make use of the P1 billion alloted to the e-government fund.
The country’s compliance to good governance ranks among the top 25 in the UN e-Governance Compliance Survey. Specifically cited was “the innovative ways the government is employing technology to improve public administration”.
Peace and order. Our primary guardian in protecting the streets, the Philippine National Police (PNP) will get a P40.5 billion allocation for 2008 which includes fund for its continuing five-year modernization plan of hiring 15,000 new police personnel.
With P686.9 million for 2008, the PNP will be able to hire 3,500 policemen, 15 percent of whom will be females to be assigned at the women’s desk. Some P176.2 million will be for the acquisition of 5,000 new firearms and P394 million for 500 patrol vehicles.
Some P100 million will be used for the construction of new police stations. A developed economy needs a good strong security network with which to protect it.
The premier criminal investigative arm of the government, the National Bureau of Investigation, will get P759.9 million for 2008, which is P20 million more than its 2007 budget.
An essential element of the justice system is that an accused person is deemed innocent until proven guilty in a court of law. While not everyone can afford the services of a legal counsel, this should not hinder a person from getting a fair trial.
In the spirit of the Miranda doctrine, the Public Attorneys Office is allocated an increase of P47 million, from a 2007 budget of P638.7 million to P685 million for 2008. Justice is not about putting the guilty in jail but about everyone having his day in court with the fair opportunity of clearing his name and protecting his dignity.
The Bureau of Jail Management and Penology (BJMP) will get an increase of P129.6 million in the 2008 budget for a total of P3.4 billion. Of this amount, some P95.3 million will go to the PS requirements of 500 new Jail Officer I positions. Some P1.1 billion will go to the subsistence allowance of inmates.
Prisoners are entitled to basic human rights and deserve some dignity. Overcrowded jails have lead to the deterioration of prisoners’ physical condition. To address this problem, P36.9 million will go to the construction of additional jail facilities. A provision of P29.4 million and P3.3 million will go to the purchase of firearms and handcuffs, respectively.
For the Defense sector, an increase of P7.6 billion is noted. From P53.8 billion in 2007, the sector now has full use of P61.4 billion. Included in its mandate is the protection of the State from threats, both natural and man-made. It has a P5.0 billion modernization program allocation for the year.
National competitiveness measures
In a world where markets cuts across national boundaries, we dare not step back and lose opportunities for development.
The race is on. It’s either we run with the crowd or be left behind.
To sustain our growth momentum, I created a task force in October 2006, through Executive Order No. 571, to help improve the country’s competitiveness. The EO embodies the collective desire of the government and the business sector … “to strengthen our industry, agriculture, and service sectors…” to be able to create jobs and increase wages/incomes.
The private sector shall work closely with the government to help address bottlenecks constraining the country’s international competitiveness.
The closer we work together, the sooner we can arrest the country’s declining competitiveness.
Under the task force are working groups on six critical areas: infrastructure, energy, transaction costs and flows, public and private sector management, financing, and human resources.
Infrastructure. We will pursue a policy framework that promotes competition and a regulatory environment that advances productivity and competitive costs.
We will make the RORO transport system a road network that connects the entire archipelago, with the DOTC as the lead agency, to reduce total shipping costs, particularly from Manila/Davao to .|/p>
Operations in Subic , Batangas, and Clark will be fasttracked to serve as strong alternative ports.
A pocket open-sky policy for the Clark and Subic airports will be pursued to expand economic opportunities for all Filipinos.
Energy. Various measures will be undertaken to address issues on power supply and power rates. Part of these will be the amendment of the Electric Power Industry Reform Act (EPIRA) to enable open access and more competition in the power sector.
Energy-saving programs, such as the
Enercon Driveand the Power Patrol Program, shall be pursued, and included in the school curricula.
Transaction cost and flows. To lessen transaction costs and flows, the Bureau of Immigration has implemented the use of the Alien Certificate of Registration and Identification Card (ACR-iCard), which has a five-year validity period, to ensure an automated, accurate, fraud-proof and tamperproof registration, identification, and monitoring of resident aliens in the country. The provision is covered by Memorandum Circular RMA 2007-001 issued on April 4, 2007.
Public and private sector management. We have implemented quality management systems for government offices in five key agencies (DTI, SEC, BIR, BOI, BoC) to be ISO 9000-certified. We are targeting 20 percent of our government offices to be ISO-certified by 2010.
Private Sector Volunteerism will be promoted through the Big Brother-Small Brother Program, an industry chain program initiated and driven by a big company (Big Brother) to help small and medium enterprises (SMEs) enhance productivity.
Financing. Former US President Herbert Hoover once said, “Competition is not only the basis of protection to the consumer, but is the incentive to progress.”
For competition to flourish, we must involve more players in the world of business.
We are furthering access to financing of SMEs and enhancing the role of microfinancing regulators and practitioners
The SME Unified Lending Opportunities for National Growth (SULONG) Program, a lending program by government financial institutions, gives SMEs greater access to short- and long-term funds.
Human resources. Despite our good ranking in labor force competitiveness (11th out of 55 countries surveyed by the 2007 World Competitiveness Yearbook report), a number of Filipinos cannot find jobs commensurate with their skills. This mismatch leads to unemployment and underemployment.
To address the mismatch in skills and labor demands, relevant government agencies will work with private industry associations and the academe to improve or revise the school curricula, particularly courses related to cyberservices, medical tourism, HRM, and semiconductor/electronics.
We shall implement the National Manpower Summit Agenda which outlines the provision of scholarship grants to skills or occupations deemed highly employable or critical. There will be annual career guidance counseling meetings as well as skills and professional registry set up at national and local levels.
To address the brain drain, we shall institutionalize a “brain gain”. We are promoting “services exporting” as an alternative to “manpower exporting”.
Other schemes include refining existing incentive schemes, i.e., business opportunities, tax holidays, housing and non-wage benefits, etc. to encourage Filipino expatriates to return to the country. Improving the investment climate to generate entrepreneurial activities for overseas Filipino investors (OFIs) is another alternative.
Salary Increases
The government has in the Congressional pipeline the third tranche of the Salary Standardization Law (SSL III), called Government Compensation and Classification Bill, which aims to make government salaries more competitive with those of the private sector, more performance-based, and characterized by a simplified position classification system. In the meantime, while the bill is up for consideration, an amount of P30.8 billion will provide for the annual needs of the 10 percent salary increase given to government employees in July of 2007 plus a second installment of compensation adjustment under the bill.
Veterans of the Arnd Forces of the Philippines (AFP) and pensioners of the Philippine National Police (PNP), Bureau of Fire Protection (BFP), and Bureau of Jail and Management Penology (BJMP) will enjoy the full implementation of their pension adjustments in 2008. Total obligations for the pension and gratuity fund for these agencies during the same period stands at P38.2 billion.
CONCLUSION: Counting the Gains
The die is cast.
Pushing for a balanced budget next year — a formidable challenge – is a commitment we cannot forego.
It is not a one-time roll of the dice that could mean success or failure we can either crow or cry about. Pushing for a balanced budget, rather, is an ever-present aspiration within a nation’s psyche. Ambitious goal but not unattainable.
The signs are good.
This year saw some of the strongest economic numbers in recent memory. On a nationwide scale, we have focused on the imperatives of growth – infrastructure projects from north to south, east to west, to unite the archipelago, and not just in the physical sense.
We have watched the emergence of the Super Regions, each with unique traits, that “when harnessed together … are larger than the sum of its parts.”
The national debt servicing is on a steady decline, from 28.0 percent of the budget in 2007 to 24.1 percent in 2008. That means more allocation to more productive components of the budget – to infrastructure, education, health and other social services.
Sustaining the momentum of growth requires that we work on both sides of the development equation. Spending without consideration of its long-term impact on the economy, on the people, and on the nation is an irresponsible act. That, we cannot – will not – do.
Our expenditure reforms, the OPIF and the Medium-Term Expenditure Framework as good examples, are in place. They are there to help government maximize its resources, whether financial or human.
Governance initiatives, for its part, contribute to our collective aspiration for a graft-free society.
As I submit this 2008 Budget for consideration of Congress, one thing is certain. We – the Executive Branch and the Legislature – will be forced to answer tough quetions and make even tougher decisions.
Political will and moral leadership will see us through this demanding task as we embark on a new chapter in our nation’s budget history.
For our 2008 financial roadmap to take us where we want to go, we need the approval of our legislators.
I therefore, ask Congress, the honorable representatives of our people, to pass the proposed budget for 2008 favorably and swiftly.
Marami pong salamat!