B. Na Onal Government Fiscal Program

Technical Notes on the 2016 Proposed National Budget Produced by: Department of Budget and Management August 2015

Produc on Team: Knowledge Management-Technical Working Group Lead Writer Joy S. Almazan Wri ng Team John E. Lansangan John Alliage Morales Rupert Mangilit Mercelle Therese Matundan Ranel Ram Cheng Jose Escalante Data Coordinator Jeannie S. Ponio Design & Layout Nardsunga Jeannie S. Ponio Emmie Alma M. Albangco

Informa on Coordina on: Fiscal Planning and Reforms Bureau Budget Technical Bureau Budget & Management Bureaus Other DBM oﬃ ces/units Key government agencies

Editors: Overall: Francis Y. Capistrano Style: Deedee Sta. Cruz-Espina

Adviser: Undersecretary Laura B. Pascua About the Technical Notes on the 2016 Proposed Na onal Budget

“The President shall submit to Congress, within thirty days from the opening of every regular session as the basis of the general appropria ons bill, a budget of expenditures and sources of ﬁ nancing, including receipts from exis ng and proposed revenue measures.” - Sec on 22 Ar cle VII of the 1987 Cons tu on

To further increase ﬁ scal transparency, the Aquino administra on has been improving the informa on presented in the annual proposed Budget that it submits to Congress.

The Na onal Expenditure Program (NEP), the proposed budget in the form of the general appropria ons bill, has increased from one volume in fi scal year 2011 to three volumes in 2016. These expanded versions of the NEP are the results of eff orts to show in greater detail the reduc on of lump sum funds, as well as to present programs, ac vi es, and projects. Likewise, with the adop on of the Performance-Informed Budget structure, the NEP now presents the agencies’ performance targets alongside their proposed appropria ons. Moreover, the NEP exhibits the new informa on that the government has introduced in the Budget of Expenditures and Sources of Financing (BESF): from the medium-term macroeconomic and fi scal program to the es mates of tax incen ves.

This publica on, the Technical Notes on the Proposed Na onal Budget, which broadly discusses the policies, strategies, and priori es that shaped the proposed Budget, is a supplement to the President’s Budget Message. Beginning with the 2015 Proposed Budget, the government has produced this publica on to provide narra ve descrip ons of the ﬁ gures presented in the NEP and BESF. Produced by the Department of Budget and Management (DBM), it comprehensively discusses the policies and reforms embedded in the proposed Budget; the government’s ﬁ scal program and macroeconomic assump ons; and key priority programs, their objec ves, targets, and accomplishments so far.

In addi on, the Development Budget Coordina on Commi ee (DBCC) has seen it fi t to publish the Fiscal Risks Statement together with the proposed Budget. This document, fi rst introduced in 2013, discusses and quan fi es the macroeconomic, external, environmental, and other risks to the government’s fi nances, and presents measures being taken to mi gate these risks. Moreover, to cater to non-technical audiences, the DBM sustains the publica on of the annual People’s Proposed Budget, which presents simplifi ed informa on on the proposed Budget using plain language and illustra ons.

The government hopes that this edi on of the Technical Notes, together with the other Budget publica ons, enables Congress and other stakeholders to easily understand and straigh orwardly scru nize the proposed Budget for 2016. TABLE OF CONTENTS

I. INTRODUCTION AND PRINCIPLES OF THE PROPOSED BUDGET 1 A. Spending Within Means: A New Millieu of Fiscal Sustainability 3 B. Inves ng in the Right Priori es: Resources Focused on the Requirements of Inclusive Growth 4 C. Delivering Measurable Results: Transforming the Way Government Implements the Budget 7 D. Empowering Ci zens Through the Budget: Greater Fiscal Openness and Wider Spaces for Engagement 12 E. Consolida ng PFM Reforms Beyond 2016 13 II. FINANCING THE NATIONAL EXPENDITURE PROGRAM 15 A. Macroeconomic Environment 15 B. Na onal Government Fiscal Program 21 III. DIMENSIONS OF THE PROPOSED 2016 NATIONAL BUDGET 30 A. The Budget by Sector 30 B. The Budget by Expense Class 37 C. The Budget by Region 40 D. The Budget by Department and Special Purpose Fund 41 E. Appropria ons for 2016 44 IV. EXPENDITURE PRIORITIES 48 A. Good Governance and An -Corrup on 48 Comba ng Corrup on 48 Streamlining Public Financial Management 49 Op mizing the Delivery of Frontline Services 50 Strengthening Ins tu ons 51 Meaningful Ci zens’ Par cipa on 52 Pursuing Electoral Reform 53 B. Making Growth Inclusive 56 Social Protec on and Social Services 56 Social Protec on 56 Sustainable Livelihood Program 58 Community Driven-Development 59 Social Pension for Indigent Senior Ci zens 59 Supplementary Feeding Program 60 Basic Educa on 61 Hiring More Teachers and Providing Be er Training 62 Basic Educa on Facili es 62 Tools and Equipment Upgrade 63 Textbooks and Instruc onal Materials 63 Assistance for Private Educa on 63 School-Based Feeding Program 64 Universal Health Care 65 Universal Health Insurance 66 Health Facili es Enhancement Program 66 Human Resource for Health Services 67 Family Health and Responsible Paren ng 67 Na onal Immuniza on Program 68 Preven ve and Promo ve Healthcare 68 Early Childhood Care and Development 68 Socialized Housing 70 Socialized Housing 70 Housing for Uniformed Personnel 71 C. Sustaining the Momentum of Growth: Expansion and Job Crea on 74 Transport Infrastructure 74 Road Transport 75 Mass Transport 77 Seaports 78 Air Transport 79 PPP Projects in Transport Infrastructure 79 Agriculture Development 81 Rice Program 82 Corn Program 83 High Value Crops Development Program 83 Coconut Program 83 Livestock and Poultry Program 84 Agriculture Infrastructure and Facili es 84 Fisheries Program 84 Other Assistance to Farmers and Fisherfolk 85 Agrarian Reform 85 Tourism Development 86 Tourism Infrastructure Development 87 Tourism Promo on 88 Manufacturing Resurgence 89 Adequate Infrastructure Support 89 Improving the Business Climate 89 Building Compe veness of Industries 90 Enhancing Support for the MSMEs 90 Human Resource Development 91 Improve Power Security and Facili es 92 D. Climate Change Adapta on and Disaster Risk Build Back Be er 94 Reduc on and Management 94 Mapping and Monitoring Environmental Hazards 99 Ecosystems Management 100 A Climate-Resilient Philippines 101 E. Just and Las ng Peace and the Rule of Law 102 Inves ng in Peace and Development 103 Asser ng Na onal Sovereignty 104 Modernizing Territorial Defense 105 Strengthening Public Safety and Law Enforcement 106 Toward the Swi Delivery of Jus ce 106 Forging Just and Las ng Peace 107

LIST OF TABLES AND FIGURES

I. INTRODUCTION AND PRINCIPLES OF THE III. DIMENSIONS OF THE PROPOSED 2016 PROPOSED BUDGET NATIONAL BUDGET

Table Table 1 PREXC Pilot Departments 1 Average Na onal Expenditure-to-GDP Ra o of Post-EDSA Administra ons Figure 2 Sectoral Breakdown of the 2016 Budget 1 Fiscal Space, 2009 to 2016 3 Average Share of Social Services, Economic Services, and Debt Burden to Total Budget, II. FINANCING THE NATIONAL EXPENDITURE 1986-2016 PROGRAM 4 Sectoral Breakdown of the 2016 Budget (COFOG) A. Macroeconomic Environment 5 Sectoral Alloca on as % of GDP 6 Subsectors of the General Public Services Table Sector 1 Growth Rate of GDP and its Components, 7 Subsectors of Defense Sector 2004-2015 (First Semester and Full Year) 8 Subsectors of the Public Order and Safety 2 Unemployment and Underemployment Rates, Sector 2004-2015 9 Subsectors of the Economic Aff airs Sector 3 First Semester Poverty Incidence Among 10 Subsectors of the Environmental Protec on Popula on, 2006-2014 Sector 4 Philippine Macroeconomic Indicators, 2010- 11 Subsectors of the Housing and Community 2018 Ameni es Sector 5 Budget Sensi vity to Macroeconomic 12 Subsectors of the Health Sector Parameters, 2016 13 Subsectors of the Recrea on, Culture, and Religion Sector B. Na onal Government Fiscal Program 14 Subsectors of the Educa on Sector 15 Subsectors of the Social Protec on Sector Table 16 Breakdown of the 2016 Budget by Expense 1 Highlights of Fiscal Performance Class 2 Fiscal Aggregates, FYs 2014-2018 17 FY 2016 Infrastructure Budget 3 Revenue Eff ort of Asian Countries, 2009-2014 18 Alloca on By Regionalized and Non- (as % of GDP) Regionalized Budget 4 Breakdown of Revenues, 2014-2018 19 Breakdown of 2016 Budget by Region and 5 Major Reforms Undertaken to Improve Tax Expenditure Per Capita Yields 20 Top Ten Departments 6 Na onal Government Financing, 2014-2016 21 Special Purpose Funds 22 Summary of the Na onal Expenditure Program Figure 23 Unprogrammed Appropria ons 1 Tax Revenue Collec ons, 2004-2014 24 Breakdown of 2016 Off -Budget Accounts By 2 Impact of Proac ve Debt Management Department 3 Outstanding Debt of the Na onal Government, 2004-2014 4 PPP Projects in the Pipeline IV. EXPENDITURE PRIORITIES 17 Treatment of Public Health Diseases and Other Infec ous Diseases A. Good Governance and An -Corrup on 18 Budget for the ECCD Program, DOH 19 Accomplishments of the Socialized Housing Table and Finance Corpora on, 2011-2014 1 Highlights of the Offi ce of the Ombudsman 20 Housing Program for Informal Se ler Families Budget, 2014-2016 Residing in Danger Areas in Metro Manila, 2 Summary of New Projects to be Funded NHA under the MITHI Fund 21 Housing Program for Informal Se ler Families 3 Status of BUB projects, 2013 to 2015 Residing in Danger Areas in Metro Manila, 4 Summary of BUB Projects per Implemen ng SHFC Agency 22 Budget Alloca on for Socialized Housing Projects and Programs Figure 23 NHA Fund Releases for Typhoon Yolanda, 1 How the Philippines fared in the Corrup on 2013-2015 Percep ons Index 2 BUB Alloca ons Per Region (2013 to 2016) Figure 1 DepEd Budget, 2010-2016 B. Making Growth Inclusive 2 Total Grantees of the ESC and SHS Voucher System Table 3 Textbooks and Instruc onal Materials for 1 Poverty Incidence Among Popula on, % Distribu on, FY 2016 2 Expenditures and Benefi ciaries of Pantawid 4 Budget Distribu on of First 1,000 Days Pamilyang Pilipino Program Interven on Package, FY 2016 3 Number of CCT Family Benefi ciaries, 5 NHA Housing Delivery by Administra on 2013 to 2015 4 Benefi ciaries of Sustainable Livelihood Pro- C. Sustaining the Momentum of Growth: gram Economic Expansion and Job Crea on 5 Social Pension: Financial and Physical Accom- plishments and Targets Table 6 Supplementary Feeding Program: Financial/ 1 Gross Regional Domes c Product based on Physical Accomplishments and Targets percent share, 2011-2014 7 Net Enrolment Rate of Kindergarten to 2 Philippines’ Rank in the Global Secondary Students, 2010 to 2014 Compe veness Index and Infrastructure 8 Comple on Rate and Na onal Achievement Pillar, 2006 to 2014 Test Rate (Elementary and Secondary) 3 Road Transport: Previous Year’s Accomplish- 9 Accomplishments and 2016 Targets of ments & Targets for 2015 and 2016 DepEd 4 Major Road Transport Projects in 2016 10 Number of Classrooms Constructed Through 5 Major Rail Transport Projects the DPWH and the PSIP, 2013-2015 6 Social Ports to be Constructed/Rehabilitated 11 2016 Budget for Basic Educa on Facili es in 2016 Fund 7 List of Airports for Expansion or 12 Total Budget of the DOH, 2010-2016 Rehabilita on in 2016 13 Philhealth coverage for 2015 and 2016 8 PPP Transport Projects in 2016 (Indigent Benefi ciaries) 9 List of PPP-Awarded Projects 14 Projects under the Health Facili es 10 Summary of Rice Importa on, 2008-2014 Enhancement Program (HFEP) 11 Breakdown of Produc on Targets for HVCCs 15 Distribu on of Health Care Prac oners (in metric tons) Across the Philippines for 2016 12 Breakdown of Farm-to-Market Roads for 16 Budget and Number of Benefi ciaries of Family Construc on/Rehabilita on in 2016, DA Health, 2015-2016 13 Budget and Target for the Fisheries Program in 2016 14 Seed Buff er Stocking, FY 2016 Figure 15 Alloca on for the Moderniza on of 1 Climate Change Budget, 2009-2016 Interna onal Gateways and Other Tourism 2 Climate Change Expenditures in 2015 Airports 3 Calamity/NDRRM Funds, 2010-2016 16 Alloca on for Tourism Ports in 2016 17 List of Industry/Sectoral Roadmaps E. Just and Las ng Peace and the Rule of Law 18 Programs on Training for Work 19 Rural Electrifi ca on Program Table 1 Major Milestones in the Bangsamoro Peace Figure Process, 2010-2015 1 Tourism Budget, 2004-2015 2 Highlights of the Proposed ARMM Budget for 2016 D. Climate Change Adapta on and Disaster 3 Accomplishments under the Sajahatra Risk Reduc on and Management Bangsamoro Program 4 Other Na onal Government Investments in Table ARMM 1 Top 5 Countries Most Aff ected by Climate 5 Status of Other Peace Tables and Prospects Change, 1994 to 2013 for 2016 2 Examples of 2016 Programs Falling Under the 6 PAMANA Alloca ons, 2014-2016 Priority Areas of NCCAP 7 AFP Budget, 2014-2016 3 Releases and Fund Sources for Yolanda- 8 AFP Moderniza on: Releases under the old Related Projects and revised programs 4 Highlights of Projects funded by Yolanda 9 Witness Protec on Program: Amount vis-à- Releases, 2013-2015 vis witnesses covered 5 2016 Yolanda CRRP Budget By Agency 6 Flood Control and Drainage Projects Figure Constructed and Maintained 1 ARMM Budget, 2010 to 2016 7 Alloca ons for Quick Response Funds, 2011 2 Budget of the Judiciary to 2016 8 Forecas ng Capabili es Under Project NOAH 9 Status of Large-Scale and Coastal Geohazard Mapping, 2010-2014 10 Status of the Na onal Greening Program Acronyms

4Ps Pantawid Pamilyang Pilipino DBCC Development Budget Coordina on Program Commi ee ADB Asian Development Bank DBM Department of Budget and AFCS Automa c Fare Collec on System Management AFP Armed Forces of the Philippines DENR Department of Environment and AFPMP AFP Moderniza on Program Natural Resources APIS Annual Poverty Indicator Survey DepEd Department of Educa on ARBs Agrarian Reform Benefi ciaries DFA Department of Foreign Aff airs ARMM Autonomous Region in Muslim DFAT Department of Foreign Aff airs and Mindanao Trade ASAP Accelerated and Sustainable DND Department of Na onal Defense An -Poverty DOE Department of Energy BESF Budget of Expenditures and DOF Department of Finance Sources of Financing DOJ Department of Jus ce BFAR Bureau of Fisheries and Aqua c DOTS Directly Observed Treatment Short Resources Course BHS Barangay Health Sta ons DPWH Department of Public Works and BIAF Bangsamoro Islamic Armed Forces Highways BIR Bureau of Internal Revenue DSWD Department of Social Welfare and BPLS Business Permits and Licensing Development Systems DTI Department of Trade and Industry BRT Bus Rapid Transit ECCD Early Childhood Care Development BSPMC Barangay Subproject Management EEZs Exclusive Economic Zones Commi ee eFPS Electronic Filing and Payment BUB Bo om-Up Budge ng System CALABARZON Cavite, Laguna, Batangas, Luzon ESC Educa on Service Contrac ng CALAx Cavite Laguna Expressway EVS Educa on Voucher System CAR Cordillera Administra ve Region FIES Family Income and Expenditure CARP Comprehensive Agrarian Reform Survey Program FMRs Farm-to-Market Roads CARS Comprehensive Automo ve FNSP Families in Need of Special Resurgence Strategy Protec on CCET Climate Change Expenditures GASTPE Government Assistance to Students Tagging and Teachers in Private Educa on CCT Condi onal Cash Transfer GCI Global Compe veness Index CDO Court Deconges on Offi cers HFEP Health Facili es Enhancement CHED Commission on Higher Educa on Program CHRIS Comprehensive Human Resource HUDCC Housing and Urban Development Informa on System Coordina ng Council CLLEx Central Luzon Link Expressway ICT Informa on and Communica ons Comelec Commission on Elec ons Technology CPA Ci zens Par cipatory Audit IFC Interna onal Finance Corpora on CPEIR Climate Public Expenditure and IRAP Interna onal Road Assessment Ins tu onal Review Program CRRP Comprehensive Rehabilita on and ITS Integrated Transport System Recovery Plan KALAHI-CIDSS Kapit-Bisig Laban sa Kahirapan- CSO Civil Society Organiza on Comprehensive and Integrated DAR Department of Agrarian Reform Delivery of Services LGSF Local Government Support Fund PESFA Private Educa on Student LGU Local Government Unit Financial Assistance LGU-PFM LGU Public Financial Management PFM Public Financial Management LPRAT Local Poverty Reduc on Ac on PHIC Philippine Health Insurance Teams Corpora on LRT Light Rail Transit PHIC-TSEKAP PHIC-Tamang Serbisyo sa MCIA Mactan-Cebu Interna onal Airport Kalusugan ng Pamilya MDGs Millennium Development Goals PNP Philippine Na onal Police MILF Moro Islamic Libera on Front PNR Philippine Na onal Railways MITHI Medium-Term Informa on and PRRI Philippine Rice Research Ins tute Technology Harmoniza on PSF People’s Survival Fund Ini a ve PSIP PPP for School Infrastructure MMDA Metro Manila Development Project Authority RA Republic Act MRT Metro Rail Transit RATE Run A er Tax Evaders NAIA Ninoy Aquino Interna onal RAY Reconstruc on Assistance on Airport Yolanda NAPC Na onal An -Poverty Commission RRP Rehabilita on and Reconstruc on NCCAP Na onal Climate Change Ac on Program Plan RSBSA Registry System on Basic Sectors NCDC Na onal Child Development in Agriculture Centers SACASOL San Carlos Solar Energy NCR Na onal Capital Region SEC Securi es and Exchange NCDDP Na onal Community-Driven Commission Development Program SETUP Small Enterprise Technology NDRRMF Na onal Disaster Risk Reduc on Upgrading Program and Management Fund SGH Seal of Good Housekeeping NEA Na onal Electrifi ca on SGLG Seal of Good Local Governance Administra on SHFC Socialized Housing and Finance NEDA Na onal Economic and Corpora on Development Authority SHS Senior High School NEP Na onal Expenditure Program SLP Sustainable Livelihood Program NFA Na onal Food Authority STAR Southern Tagalog Arterial Road NHA Na onal Housing Authority STEP Special Training for Employment NHTS-PR Na onal Household Targe ng Program System for Poverty Reduc on TESDA Technical Educa on and Skills NIA Na onal Irriga on Administra on Development Services NNC Na onal Nutri on Council TPLEX Tarlac-Pangasinan-La Union NSRP North-South Railway Project Expressway OPAPP Offi ce of the Presiden al Adviser TRAMS TSA Repor ng and Monitoring on the Peace Process System PAMANA Payapa at Masaganang TSA Treasury Single Account Pamayanan TWSP Training for Work Scholarship PCF Performance Challenge Fund Program PCOS Precinct Count Op cal Scanner UHC Universal Health Care PEI Produc vity Enhancement ZBB Zero-Based Budge ng Incen ve Technical Notes on the 2016 Proposed Na onal Budget

I. INTRODUCTION AND PRINCIPLES OF THE 2016 PROPOSED NATIONAL BUDGET

“Sa sama-sama na ng pagsulong sa Daang Matuwid, nara ng ng a ng bansa ang bagong yugto ng kaunlaran... Sa paggugol na matuwid, nagtatatag tayo ng ma bay na saligan ng tuloy-tuloy na pag-unlad.1”

- President Benigno S. Aquino III President’s Budget Message 2016

The Philippines has reached new heights in the A Budget for Inclusive Growth through Sustained state of its poli cal and economic aff airs—the Reform. S ll, the country faces challenges in collec ve ac on of the people calling out for sustaining the country’s upward growth and in change, supported by a State that is fervently li ing more Filipinos out of poverty. The year commi ed to its reform agenda, has made 2014 saw a slowdown in GDP growth to 6.1 from possible this remarkable accomplishment. In the 7.1 percent in 2013. The rate at which poverty past fi ve years, the Aquino administra on has level decreases could have been faster if not for demonstrated that good governance leads to the slight increase in poverty incidence in 2014 be er government performance, which, in turn, by 1.2 percentage points from 24.6 percent leads to be er results and meaningful benefi ts to in 2013. The impact of climate change, the the people. As it seeks to build on its achievements increase in food prices, and the government’s and ably confront current and new challenges, below-program spending led to these setbacks. the government con nues to anchor its ac ons The government acknowledges that in order to on this belief: good governance will provide the sustain rapid growth and poverty reduc on in the necessary founda on for sustained and inclusive long-term, it needs to not only accelerate public growth in 2016 and beyond. spending per se but also strengthen the capability of the agencies to deliver services fast and with A er decades of a cyclic anemic growth, the impact (see pages 52 to 53 for more discussions Philippine economy has grown by leaps and bounds, on improving ins tu onal capacity). fi nally emerging to be among the fastest-growing economies in Asia. The newfound confi dence Therefore, the government must scale up and of the inves ng public, coupled by government complete its good governance reforms, especially eff orts to hike investments in infrastructure and in public fi nancial management (PFM); and plant other strategic services, enabled the country’s the seeds for their irreversibility beyond 2016. gross domes c product (GDP) to grow by an Since the beginning of its term, the Aquino average of 6.3 percent in 2010 to 2014, surpassing administra on has taken steps to reform the the average GDP growth of 4 percent from 1986 way public funds are being allocated and spent. to 2011. As a result, the unemployment rate had The Zero-Based Budge ng that the government decreased from 7.5 percent in 2009 to 6.8 percent introduced in 2010 signalled the end of the in 2014; and underemployment from 19.1 to 18.4 incremental and leakage-prone alloca on of percent in the same period. Likewise, poverty scarce resources. With the help of Congress, the incidence had fallen from 28.6 percent in the fi rst government enacted on me its fi rst expenditure semester of 2009 to 25.8 percent in the same plan, the 2011 Budget, ending a decade of period in 2014, with subsistence poverty falling. frequent budget re-enactments and marking the start of a new tradi on of promptness in the

1Transla on: “Through our journey on the Straight Path, our country has reached a new stage of prosperity... Through the honest and eﬀ ec ve management of public expenditures, we are providing a strong founda on for sustained progress.” 1 Technical Notes on the 2016 Proposed Na onal Budget

budget process. Commi ng itself to the diffi cult assert that good governance provides a solid yet necessary process of ins tu onal reforms, it founda on for sustained and inclusive growth— approved and launched the comprehensive PFM now, and beyond its term. Thus, the 2016 Budget Reform Roadmap2, which was dra ed by reform- was cra ed to consolidate game-changing PFM oriented career government offi cials with the reforms that were introduced since 2010: those support of interna onal ins tu ons3. It engaged that ensure that the government spends within with civil society organiza ons (CSOs) and other its means, invests in the right priori es, delivers reform-oriented stakeholders in the process of measurable results, and empowers ci zens crea ng broader spaces for their par cipa on in through greater fi scal openness—the principles the budget process4. of good PFM that support inclusive growth. The following pages discuss how the 2016 Budget was The Aquino administra on designed the proposed shaped by these principles and reforms. P3.002-trillion Na onal Budget for 2016 to

At a Glance: The 2016 Proposed Na onal Budget

1. Magnitude. The proposed Na onal Budget to fi nance the defi cit, amor ze maturing for 2016 is P3,001.8 billion, nearly double outstanding debt, and maintain suffi cient the General Appropria ons Act (GAA) for available cash. 2010. e. The na onal government’s outstanding a. It is 15.2 percent more than the GAA for debt will diminish to 41.8 percent of GDP, 2015, the highest increase in the last six or P6.423 trillion. years. Excluding interest payments, it represents a 16.8-percent growth year on 3. Distribu on. Expenditures will be focused on year. the impera ves of inclusive development b. It corresponds to 19.5 percent of the (see pages 30 to 37 for more informa on on GDP, a larger share of the economy than the dimensions of the Budget) in 2015 with 18.7 percent of GDP and in a. Social Services will con nue to receive the 2010 with 16.4 percent. lion’s share of the Budget with 36.8 percent, followed by Economic Services with 27.6. 2. Financing. 89.8 percent of the Budget will Meanwhile, the Debt Burden will drop to be funded by revenues (see pages 22 to 14.0 percent from 20.6 percent in 2010. 24 for more informa on on the na onal b. Infrastructure outlays will increase 28.7 government’s fi scal program) percent year on year to P766.5 billion, a. Revenues will increase by 18.5 percent reaching the global benchmark of 5.0 year on year, driven mostly by tax percent of the GDP. Personnel Services revenues. will s ll be the largest expenditure item b. The revenue eff ort will increase to 17.5 with P810.8 billion or 27.0 percent of the percent of GDP in 2016. If achieved, this total Budget. will be the highest so far since 1998 with c. The share of the Budget distributed to 15.7 percent of GDP. the regions reaches P1,717.8 billion c. The defi cit will be kept at 2.0 percent of or 57 percent of total, with the budget GDP or P308.72 billion. for Visayas and Mindanao rising at 26.5 d. Gross borrowings will reach P674.8 billion percent and 26.0 percent year on year,

2Through Execu ve Order No. 55 series of 2011 (Direc ng the Integra on and Automa on of Government Financial Management Systems). 3Career senior offi cials of the Commission on Audit, the Department of Budget and Management, and the Department of Finance began the process of developing this Roadmap in 2009, taking off from the fi ndings of the Public Expenditure and Financial Accountability assessment of the World Bank in 2007. The PFM Reform Program con nues to be supported by the Australian Department of Foreign Aff airs and Trade (DFAT), the World Bank, the Interna onal Monetary Fund, and other development partners. 4In 2010, the DBM and CSOs developed and signed onto the Principles of Construc ve Engagement. 2 Technical Notes on the 2016 Proposed Na onal Budget

faster than those of Luzon and the Na onal Management Fund, the Con ngent Fund, Capital Region. and Alloca ons to Local Government d. The Department of Educa on con nues Units. to receive the largest alloca on of P435.9 billion, followed by the Department of 4. The Budget is composed of P2.139 trillion Public Works and Highways with P394.5 in New General Appropria ons for the billion.* approval of Congress, and P930.7 billion e. Lumpsum Special Purpose Funds have in Automa c Appropria ons authorized been reduced from 17 under the 2009 by exis ng laws. (See pages 45 to 46 for Budget to 3 under the 2016 Budget: the more informa on) Na onal Disaster Risk Reduc on and *inclusive of transfers from special purpose funds

A. Spending Within Means: and other proposed bills). Moreover, sustaining A New Milieu of Fiscal Sustainability the Sin Tax Reform Law beyond 2016 will support the next administra on to scale up universal This proposed Budget for 2016 was designed to healthcare program. ensure that the succeeding administra on, and the next genera on of Filipinos, inherit a healthy Debt and Cash Management. Since 2010, the treasury. government, through the DoF and the Bureau of the Treasury (BTr), has recalibrated its borrowings Through a combina on of reforms to increase and liability management strategy to improve the revenues and reduce the burden of debt, the country’s debt profi le (see pages 26 to 28 for more government has established a new milieu of informa on on borrowings and debt). By sustaining fi scal sustainability. For one, it has successfully such strategies, the next administra on can reduce kept the fi scal defi cit to within 2.0 percent of the na onal government’s outstanding debt below GDP since 2013, from a high of 3.7 percent of the benchmark 40 percent of GDP by its second year GDP in 2004 and 2009 (see pages15 to 16 on the in offi ce. na onal government’s fi scal performance). To keep the fi scal defi cit within 2 percent of GDP The BTr has also been implemen ng key reforms in the medium term, the proposed 2016 Budget as part of the PFM Reform Roadmap. On top of supports the con nua on of revenue, debt, and these reforms is the Treasury Singe Account (TSA), expenditure management reforms. which will enable the government to op mize its cash resources and manage its borrowings. Revenue Reform. The 2016 Budget supports the TSA provides the BTr with a consolidated view of con nuing eff orts of the Department of Finance the government’s cash posi on on a daily basis (DoF) and its revenue collec ng agencies, the and enables the na onal government to save an Bureaus of Internal Revenue (BIR) and Customs es mated P1.0 billion to the cost of funds that it (BoC). For one, it supports the moderniza on had needed to borrow in the past despite fl oa ng of the BIR’s and the BoCs’ collec on systems cash balances in the collec ng bank accounts through investments in new technologies and the of the government (see page 51 on budgetary intensifi ca on of campaigns against tax evaders, support for the rollout of TSA). The BTr is also smugglers, and their collaborators within the strengthening its capacity to manage con ngent government (see pages 49 to 50 for budgetary liabili es and ensure the sustainability of debt alloca ons for these programs). The government, over the long term (see the 2015-2016 Fiscal Risks therefore, seeks the support of the Congress to Statement for more informa on). ins tu onalize these reforms through legisla on, including the Customs Moderniza on and Tariff Expenditures. Aside from its ini a ves to allocate Act, the Fiscal Incen ves Ra onaliza on Law, and resources on the right priori es and use these the Tax Incen ves Management and Transparency with impact, the government con nues to Act (see page 25 for more informa on on these implement reforms that ins ll greater discipline in

3 Technical Notes on the 2016 Proposed Na onal Budget

expenditure management. By improving medium- or the expansion of exis ng ones that are aligned term expenditure planning5, the government with the Philippine Development Plan (PDP) and has widened the fi scal space6: the por on of the Philippine Investment Program, as further the Budget is available for new programs and spelled out for the budget year in the Budget projects or the expansion of exis ng ones to Priori es Framework (see pages 5 to 6). The support the achievement of socio-economic agencies were also tasked to jus fy that their development goals. This has enabled the proposals were ready for implementa on: for government to restructure the Budget towards instance, these should be disaggregated into the administra on’s priority programs. specifi c programs and projects, as well as specifi c loca ons where these would be implemented; Figure 1. Fiscal space, 2009 - 2016 roads, reforesta on, and other similar projects should have network plans and be geo-tagged; benefi ciaries of social services were precisely targeted; monitoring and evalua on mechanisms were established; measures were in place to strengthen the agencies’ ability to absorb addi onal resources; among others. Through this two-stage process, the government allocated more me to scru nize new proposals and ghtened collabora on among oversight agencies in appraising proposed programs and projects7. This process also emphasized that the quality of new programs and projects accommodated in the Budget determined their successful In cra ing the 2016 Budget, the government implementa on. adopted the Two-Tier Budge ng Approach (2TBA) to ghten the evalua on of proposed B. Inves ng in the Right Priori es: expenditures. The 2TBA entails a two-stage process in evalua ng the agencies’ budget Resources Focused on the proposals. The fi rst er of this process involves Requirements of Inclusive Growth the evalua on of forward es mates, or the cost of government’s opera ng expenditures and This Budget con nues to demonstrate the ongoing programs and projects over a three-year administra on’s commitment to focus scarce period. In se ng hard budget ceilings per agency government resources on programs and projects for the year, the process considers not only the that have the greatest impact in transforming the requirements of their ongoing expenditures lives of the people. considering infl a on and foreign exchange rates, but also their current absorp ve capaci es and Since 2010, the administra on has been status of accomplishments and fund u liza on. As restructuring the Budget to fulfi l the requirements a result of this more stringent review of forward of inclusive growth. So far, expenditures for social es mates, the fi scal space further doubled from and economic services have been increased to the 2015 level to P582.7 billion or 19.4 percent of P65 for every P100 in the 2016 Budget, from the total Budget for 2016 (see Figure 1). P54 when the administra on assumed offi ce in 2010 and P45 in 2005 (see pages 30 to 37 for In alloca ng this fi scal space under the second more discussions on the Budget by sector). The er of the 2TBA, the government mandated all gradual increase in spending has enabled the agencies to propose new programs and projects government to provide ample social safety nets

5The Medium-Term Expenditure Framework is a three-year rolling budge ng that sets out government’s expenditures plan within available resources. 6The fi scal space is computed as the diff erence between a) the obliga on budget ceiling, which is determined based on the available revenues and the borrowing program, and b) the forward es mates or the cost of opera ng and ongoing programs and projects. 7The Development Budget Coordina on Commi ee (DBCC), composed of the Departments of Finance (DOF) and Budget and Management (DBM) and the Na onal Economic and Development Authority (NEDA), established a subcommi ee on program and project appraisal that reviewed the new and expanded programs and projects under the Tier 2 of the 2TBA. 4 Technical Notes on the 2016 Proposed Na onal Budget and basic social services to the poorest, while The Budget Priori es Framework. Building on boos ng spending on infrastructure and other the above men oned budge ng reforms, the strategic support services that invigorate key job- government launched the Budget Priori es genera ng sectors. Framework in preparing the 2014 Proposed Budget. This annual policy document10 guides Reforms for Alloca ve Effi ciency. Good departments and agencies in preparing their governance—especially in the way public funds budget proposals and aligning these with the are allocated and spent—is a fundamental priority programs with the key results areas of the tool in achieving inclusive development. The Aquino Social Contract and those spelled out in the administra on began its budget reform agenda PDP. In dra ing the 2016 Budget, the government, by introducing the Zero-Based Budge ng (ZBB) to through the DBM, scaled up and further improved rigorously examine the effi ciency and eff ec veness the Budget Priori es Framework. One such of exis ng programs and projects in mee ng their improvement involved its integra on with the socio-economic objec ves, and to revamp or even second er of the 2TBA so that the fi scal space cancel those that were fraught with leakages or was allocated exclusively for new or expanded otherwise failed to deliver results. In the following programs and projects, which were most aligned year, the President defi ned the Key Results Areas with priority development goals. The budget was of the Aquino Social Contract8, reorganized his also made more deeply aligned with the fi ndings Cabinet into fi ve clusters according to these presented in the Socioeconomic Report of NEDA, areas, and mandated these groups to set concrete par cularly the gaps and defi ciencies it iden fi ed and measurable targets and align their budgets in mee ng the targets under the PDP and its along these key results areas. The government, Midterm Update. through the DBM, also introduced the Program Budge ng Approach9 to strengthen collabora on among agencies as they implement cross-cu ng programs and meet common goals.

Priority Goals and Programs of the 2016 Budget:

• Good Governance and An -Corrup on. In • Making Growth Inclusive. To reduce pursuit of Daang Matuwid, the 2016 Budget poverty incidence to between 18 and 20 intensiﬁ es the pursuit against corrup on percent by end-2016, next year’s between and strengthens the integrity of public expenditure plan expands the beneﬁ ciaries ins tu ons through greater transparency, of social protec on and universal healthcare accountability, and par cipa on. It also programs, ensures the successful rollout of boosts their capacity to deliver services and the K to 12 Basic Educa on Reform program, enable private enterprise to do business in and con nues to provide socialized housing the country. (See pages 49 to 56 for priority (see pages 57 to 74 for priority investments investments for good governance). in social protec on and basic social services).

8Through Execu ve Order No. 43 issued on May 13, 2011 (Pursuing our Social Contract with the Filipino people through the reorganiza on of the Cabinet Clusters). 9Similar to this approach is the Medium-Term Informa on and Technology Harmoniza on Ini a ve or MITHI for technology investments (see page 51 for more informa on on MITHI). 10Issued by DBM as a Na onal Budget Memorandum (NBM), together with or shortly a er the annual Budget Call. The 2016 Budget Priori es Framework was enforced through NBM No. 124 issued on March 30, 2015. 5 Technical Notes on the 2016 Proposed Na onal Budget

• Sustaining the Growth Momentum. To • Managing Disaster Risks. To minimize sustain rapid economic growth and create the impact of the new normal of more more employment opportuni es, especially intense and frequent calami es, this in the countryside, this Budget hikes Budget invests in the resiliency of the infrastructure spending to 5 percent of GDP; locali es most vulnerable to shocks and and boosts strategic support to agriculture, disasters. It also supports the con nuing the resurgence of the manufacturing sector, reconstruc on and rehabilita on of and the tourism program (see pages 75 communi es devastated by Super to 94 for priority investments in economic Typhoon Yolanda (see pages 95 to 102 expansion and job genera on). for priority investments in climate change adapta on and mi ga on).

• Forging Just and Las ng Peace. To establish an enabling environment of peace, security, and the rule of law, the 2016 Budget supports government eﬀ orts to build peace and implement the Comprehensive Agreement on the Bangsamoro; modernize the police and military; and strengthen the jus ce system (see pages 103 to 109 for priority investments in peace, security, and rule of law).

Focus Geographic Areas. To achieve inclusive development, the Budget must have increasing spa al focus to help bring greater prosperity to the poorest locali es. Thus, the Budget Priori es Framework con nues to iden fy strategic interven ons that must be implemented in the 44 poorest and most climate-vulnerable provinces.

Focus Geographic Areas of the 2016 Budget: opportuni es, such as infrastructure to • Category 1: Provinces* with the Highest connect lagging areas to growth centers Poverty Magnitude. These are provinces and strategic support to promo ng the with opportuni es for growth but the poor growth of agri-based industries, tourism, are largely excluded. Thus, government and other job-genera ng industries. investments here promote greater economic These interven ons also allow the poor ac vity to create addi onal employment to take advantage of these opportuni es

6 Technical Notes on the 2016 Proposed Na onal Budget

through adequate social protec on and • Category 3: Provinces* that are Most human capital investments. (*Pangasinan, Vulnerable to Disaster Risks. These are Quezon, Camarines Sur, Negros Occidental, provinces where the non-poor can slide Iloilo, Cebu, Leyte, Zamboanga del Sur, into poverty, and where the poor can Davao del Sur, and Sulu) slide into deeper poverty, due to their vulnerability to shocks and disasters. Thus, • Category 2: Provinces* with the Highest the Budget supports eff orts on climate Poverty Incidence. A huge propor on of change mi ga on and adapta on in these households in these provinces live below the areas, including ample social protec on for poverty line; they have a smaller popula on the poorest and income diversifi ca on for and have less access to opportuni es. the rural sector, as well as reforesta on, Thus, government interven ons in these fl ood control, and other interven ons in provinces focus on providing adequate the country’s major river basins. Build Back social safety nets and ample basic social Be er eff orts are also being intensifi ed here services. Moreover, infrastructure to support vic ms of recent calami es, projects in these areas not only create such as by reloca ng them to safer zones short-term jobs but also connect these and nurturing agribusiness and other provinces to growth centers and a ract economic ac vi es that create livelihood investments in job-genera ng sectors, such opportuni es for them. (*Ilocos Norte, as agribusiness and tourism. (*Apayao, Ilocos Sur, Abra, Benguet, Cagayan, Masbate, Eastern Samar, Northern Samar, Quirino, Isabela, Nueva Vizcaya, Zambales, Zamboanga del Norte, Camiguin, North Pampanga, Aurora, Cavite, Laguna, Cotabato, Saranggani, Lanao del Sur, and Rizal, Quezon, Albay, Catanduanes, Maguindanao) An que, Iloilo, Bohol, Eastern Samar, Leyte, Northern Samar, Southern Leyte, Zamboanga del Sur, Zamboanga Sibugay, Dinagat Island, Agusan del Sur, Surigao del Norte, and Surigao del Sur)

C. Delivering Measurable Results: Faster Budget Execu on. Since 2010, the Transforming the Way Government government has been execu ng reforms that Implements the Budget streamline the budget execu on processes. For one, the mely enactment of the General Appropria ons Act (GAA)—for fi ve straight This Budget intensifi es government eff orts to fi scal years so far since the 2011 GAA—has ensure that each peso is spent properly and with not only meant that a fresh Budget is ready for direct, immediate, and substan al benefi ts to the implementa on at the start of each fi scal year, people. but also has put an end to the frequent re- enactments of the Budget in the past. Similarly, It must be emphasized that merely speeding up government eff orts to Reduce Lump Sum Funds spending is not enough: greater focus must be and disaggregate these into detailed programs trained to addressing ins tu onal weaknesses and projects has also closed an avenue for abuse that hamper the agencies from spending public and has eliminated a key bo leneck in the process funds and delivering services quickly and with of execu ng the Budget. This reform has not only measurable impact, in accordance with the promoted greater transparency but has also appropria ons approved by Congress. Thus, this ensured that programs and projects are readily Budget scales up the PFM reforms that transform implementable on day one of the fi scal year. the way government agencies implement programs and projects. Furthermore, the government has adopted new policy regimes to establish a speedy, predictable, 7 Technical Notes on the 2016 Proposed Na onal Budget

and transparent manner of releasing budgets. Ins tu onal Strengthening. To date, the Aquino Foremost of which is the GAA-as-Release administra on con nues to implement reforms Document regime where the Budget, upon that strengthen the capability of government its eff ec vity, already serves as the allotment agencies to deliver crucial public services release document for appropria ons. Building effi ciently, eff ec vely, and accountably. Recently, on earlier eff orts to disaggregate the Budget into the President issued Administra ve Order (AO) greater detail, this reform reduces the processes No. 4614 to implement measures that address involved releasing appropria ons to the agencies ins tu onal impediments to fast and eff ec ve and limits the budget items that s ll require budget execu on: poor planning and program the processing and release of Special Allotment and project design, diffi cul es in procurement, Release Orders11. Similarly, the government has and other bo lenecks. adopted the release of comprehensive No ces of Cash Alloca on (NCAs) covering the fi rst semester This Budget scales up the said measures. To requirements of the agencies. Such move has strengthen procurement—the most cited reason reduced the processes involved in the previous for the inability of the agencies to implement regime of monthly or quarterly NCA releases, and programs and projects—AO No. 46 directed to lengthened the validity of NCAs. create more Bids and Awards Commi ees (BACs) and to assign full- me support staff . Both the The government has implemented innova ons 2015 and the 2016 Budgets provide for the hiring to speed up mely disbursements and payments of more technical staff who will man these BAC to suppliers. In 2014, it adopted the Checkless secretariats on a full me basis. These measures Payment Scheme12 to enable bank-to-bank build on earlier procurement innova ons adopted, direct payments to government’s suppliers such as the early procurement policy that allows and streamline processes associated with the the agencies to conduct biddings before the issuance of paper checks. It also rolled out the start of the fi scal year, and the expansion of the Cashless Purchase Card (CPC) program to enable Philippine Government Electronic Procurement the agencies to use electronic means for their System. everyday purchases. Piloted in the Armed Forces of the Philippines and the DBM13, the CPCs To improve program and project planning and can be used for low-value items, such as offi ce design, AO No. 46 directed all agencies to submit and medical supplies, meals, transporta on of implementa on plans for programs and projects, offi cial documents, airline ckets, and minor and requirements for the release of remaining construc on repairs. The CPCs do not only reduce allotments15. Building on these improvements, the use of cash advances and manual processes; the agencies were required to submit only as fi nancial transac ons are recorded in real- me implementa on-ready proposals in the process and through an online-based pla orm, payments of cra ing the 2016 Budget. The AO No. 46 also are liquidated and se led almost instantaneously, directed agencies to convene Full-Time Delivery thereby reducing anomalies previously associated with cash advances.

11The annual Guidelines on the Release of Funds spells out the items for comprehensive release through the GAA-as-Release Document and those for later release as spelled out in the Nega ve List (for 2015, refer to Na onal Budget Circular [NBC] No. 556). Items in the Nega ve List include: the remaining lump-sum funds within the agency budget, the details of which have not been submi ed prior to the eff ec vity of the GAA; Special Purpose Funds, including Budgetary Support to Government Corpora ons and the Miscellaneous Personnel Benefi ts Fund; other items subject to compliance with the condi ons or requirements specifi ed under the General or Special Provisions as well as the Affi rma on or Veto Message; and all automa cally appropriated items, including Special Accounts in the General Fund. 12The Expanded Modifi ed Disbursement Direct Payment Scheme (ExMDPS), as promulgated through C The pilot implementa on (Phase 1) for the AFP units was concluded in October 15, 2014. Meanwhile, the DBM pilot implementa on started on August 8, 2014. By end-2015, the use of CPC to pay for travel expenses will be implemented. 14“Direc ng all heads of departments and agencies to implement measures to facilitate budget execu on for fi scal year 2015,” issued on March 30, 2015. 15This includes, for instance, the complete disaggrega on of project lis ngs for remaining lump sum funds as well as the submission of network plans (e.g. for farm-to-market roads), implementa on guidelines, and other documentary requirements, under the special provisions of the 2015 GAA. 16Sec ons 62 to 65 of the General Provisions of the Na onal Expenditure Program (NEP). 17Sec on 66 of the General Provisions of the NEP. DBM also issued NBC no. 559 on June 26, 2015 to provide implemen ng guidelines for the realignment of funds under the 2015 GAA. 8 Technical Notes on the 2016 Proposed Na onal Budget

Units to closely monitor the progress of programs Other policies to control in-year adjustments and projects, quickly address implementa on are built into the proposed Budget. Rules on the issues, and report on their performance. To support Realignment of Funds have also been clarifi ed17 these changes, the Budget enables agencies to in providing the heads of agencies limited yet hire addi onal technical staff , including those reasonable fl exibility to manage their fi nances. required for BACs and Full-Time Delivery Units. Moreover, the magnitude of Special Purpose Funds (SPFs) in the GAA has been reduced by alloca ng The government likewise further strengthens funds in crea ng or fi lling up posi ons, and for the capacity of the DPWH to serve as the lead compulsory re rement benefi ts under per nent construc on agency of the government. Through agencies, thereby improving the presenta on of this policy, infrastructure projects can be unloaded budgets to be received by the agencies during from other agencies, such as the Departments of the fi scal year and reduce in-year adjustments Educa on, Health, and Agriculture, enabling them (see pages 43 to 44 for more informa on on 2016 to focus on their core service delivery mandates. alloca ons for SPFs). The reforms implemented so far have enabled the DPWH to, among others, reduce allowable indirect The Unifi ed Accounts Code Structure (UACS) costs for projects, and improve the quality of is founda onal to the success of the PFM projects such as the thickness of roads. This Budget Reform Roadmap, as it provides a government- supports the hiring of 1,300 more civil engineers wide classifi ca on framework for all fi nancial to carry out more projects at a given me. transac ons throughout the budget cycle and as well as a uniform accoun ng of funds and Budget Integrity. Budget integrity means that, transac ons between DBM, DoF-BTR, and the at any given me, each peso of the Budget is Commission on Audit (CoA). The UACS18 func ons spent according to the appropria ons approved like a barcode for budge ng, treasury cash by Congress. Thus, the PFM reforms have been management, accoun ng, and audit; enables the implemented and scaled up to ensure that the accurate prepara on of accountability reports, agencies implement programs and projects and thereby eliminates problems associated with with greater accountability. To address gaps the fragmented coding structure in the past. iden fi ed by the Supreme Court’s ruling on the Beginning in 2014, all items of appropria on in the Disbursement Accelera on Program, Congress Budget have been assigned with a UACS code. For has already ghtened the defi ni on of savings its use in 2016, the UACS was scaled up by aligning and the parameters for their use in augmen ng the classifi ca on of public expenditures with defi cient budget items under the 2015 GAA. interna onal standards (see pages 31 to 37 for the For one, savings cannot be declared based on new presenta on of the Budget by Sector) and by the discon nuance or non-commencement of a tagging the loca on of programs and projects19. program, ac vity, or project (PAPs) due to the fault or negligence of the agency concerned. Moreover, The administra on believes that greater budget non-exis ng PAPs cannot be augmented using integrity and speed in budget execu on can be savings, though this does not anymore require the achieved by shi ing to the One-Year Validity of existence of an object of expenditure or allotment Appropria ons20. The current set-up, in which class within the PAP to be augmented. These rules appropria ons for opera ng expenditures and have been adopted and further clarifi ed under capital outlays are valid for two fi scal years, the proposed 2016 Budget16 in view of the shi promotes delays in the delivery of services. to the one-year validity of appropria ons. Moreover, the carry-over of con nuing appropria ons to the following fi scal year on top of

18UACS has also been integrated in the budge ng systems of DBM, including the Online Submission of Budget Proposals (OSBP) and the Uniﬁ ed Repor ng System (URS). To support agencies in implemen ng UACS, a website (uacs.gov.ph) and a Help Desk hotline (telephone 791-3002; email [email protected]) have been established. 19For 2016, programs, ac vi es, and projects are tagged at the regional and provincial level. Their tagging at the city, municipality, and barangay level will be implemented for the 2017 Budget. 20Sec on 56 of the General Provisions of the NEP provides that all appropria ons shall be available for release and obliga on un l December 31, 21The Seal of Good Housekeeping was expanded in 2013 to the Seal of Good Local Governance. Aside from the original standards for ﬁ nancial transparency and accountability, the Seal now also covers disaster preparedness, social protec on, business friendliness, public safety, and environmental protec on. 9 Technical Notes on the 2016 Proposed Na onal Budget

new appropria ons for the year, also complicates that will implement such projects must also the tracking and accoun ng of fund u liza on. comply with the good fi nancial housekeeping standards under the SGLG. They should be among Alterna ve Service Delivery Schemes. Aside the 44 poorest and most vulnerable provinces25 from strengthening the capacity of the na onal under the Budget Priori es Framework and meet agencies, the government has also been leveraging other selec on benchmarks26. The Budget also alterna ve means of delivering services through streamlines the process of releasing the Internal the local government units (LGUs) and the private Revenue Allotment and special shares in the sector. na onal government revenues by manda ng the BTr to directly and regularly release such to the In pursuing meaningful local devolu on, the LGUs27. na onal government has been implemen ng reforms to strengthen fi nancial stewardship The government also introduced the Public-Private among the LGUs. Ini a ves of the Department of Partnership (PPP) Program in 2010 to boost the the Interior and Local Government (DILG), such rollout of infrastructure and other big- cket projects as the Full Disclosure Policy, the Seal of Good with the fi nancial and technical support from the Local Governance (SGLG)21, and the Performance private sector. As of July 2015, 10 PPP projects Challenge Fund, have established mechanisms to worth P189 billion have already been awarded push the LGUs to meet performance standards and are in various stages of implementa on, while and reward them through addi onal resources for another 13 projects worth P518 billion are already their priority projects. Supported by the European being bid out. Compare this to the performance of Union, the government22 is also implemen ng the past three administra ons, which completed the LGU PFM Program to boost the capacity of six unsolicited PPP projects worth about P16.4 the LGUs in fi scal and expenditure management billion. Moreover, the Philippines’ PPP program and thereby strengthen their transparency and has been recognized interna onally: for instance, accountability. in a 2011 study by the Economist Intelligence Unit, the Philippines ranked eighth overall in Asia-Pacifi c Building on these reforms, this Budget enables the and the fi rst in Southeast Asia when it comes to performance-based downloading of funds to the providing an enabling environment for PPPs28. To LGUs. Under the Local Government Support Fund, sustain the gains achieved by the PPP program, the P18.2 billion in addi onal resources23 is allocated government seeks the enactment of the proposed for the LGUs’ implementa on of priority programs PPP Act29(see pages 28 to 29 for more informa on and projects in their respec ve locali es. Of this on PPPs; and pages 80 to 81 for PPP projects amount, P11.7 billion is for priority local poverty supported by the 2016 Budget). reduc on projects iden fi ed through Bo om- Up Budge ng (BUB) (see page 54), which would Stronger Performance Accountability. To be implemented by ci es and municipali es that strengthen the link between expenditures meet the good fi nancial housekeeping benchmarks and results, the administra on introduced the of the SGLG and the LGU PFM Program24. A fund Performance-Informed Budge ng (PIB) scheme of P6.5 billion will be released to provinces to in cra ing the 2014 Budget. Through this reform, rehabilitate and upgrade their roads. Provinces

22Through the DBM, DILG, and the Department of Finance-Bureau of Local Government Finance. The LGU PFM Program also helps strengthen the capacity of these and other na onal agencies overseeing LGUs. 23Lodged under the Local Government Support Fund (LGSF). 24See Special Provision No. 2 of the LGSF under the NEP. 25As iden fi ed in the Updated Philippine Development Plan 2011-2016 26Other selec on standards include their comple on rate of projects under the Special Local Road Fund (Motor Vehicle User’s Charge), percentage shares of unpaved roads, and percentage shares of fair-to-good roads. See Special Provision No. 3 of the LGSF under the NEP. 27Sec on 83 of the GPs of the NEP. 28“Evalua ng the Environment for Public-Private Partnerships in Asia-Pacifi c: the 2011 Infrascope.” 29Amending the Build-Operate-Transfer (BOT) Law (RA No. 7718). 30PIB builds on the Organiza onal Performance Indicator Framework (OPIF). Prior to introducing PIB, the government reviewed and refi ned the MFOs and performance indicators of agencies under OPIF. 31In contrast, under the current PIB structure, MFOs and their respec ve performance indicators do not include the locally-funded and foreign- assisted projects of agencies. 10 Technical Notes on the 2016 Proposed Na onal Budget the performance indicators and tangible targets Table 1. PREXC Pilot Departments that agencies commit to deliver through their respec ve budgets were presented in the GAA 1. Department of Social Welfare and 30 itself . The government further scaled up the Development PIB in the cra ing of the 2015 Budget by refi ning 2. Department of Tourism the organiza onal outcomes of agencies and 3. Department of the Interior and Local assigning indicators and targets to thereto. This Government-Offi ce of the Secretary enhancement did not only strengthen the results 4. Department of Environment and Natural chain in government—from inputs to outputs Resources and then to outcomes—but also enabled the 5. Department of Foreign Aff airs public to hold the agencies accountable for their 6. Na onal Kidney and Transplant Ins tute performance.

Further scaling up the PIB, the government Rewarding Performance. Parallel to the rollout this year introduced the Program Expenditure of the PIB, the Aquino administra on sought Classifi ca on (PREXC). Currently being piloted to strengthen performance management in in six agencies (see Table 2), the PREXC entails government and link public sector compensa on the restructuring of all the ac vi es and projects to performance. Thus, it developed and of the agencies under a set of major programs implemented the Performance-Based Incen ve consistent with their mandates31. All of these System (PBIS) in 201232. To qualify for the PBIS, major programs will have output and outcome na onal government agencies must fi rst meet indicators, and will be organized clearly along the good governance condi ons, such as compliance organiza onal outcomes to which they contribute. with the Transparency Seal, and achieve their This system ghtens the link among the agencies’ respec ve performance targets consistent with outputs and their outcomes, and enables them to the PIB. Individual public servants of qualifying provide a cost to fulfi lling each of these outcomes. agencies are then rewarded with a performance- By presen ng the agencies’ budgets, programs, based bonus depending on their individual and and targeted results in a more intui ve manner, their respec ve bureaus’ performance33. The 2016 the PREXC facilitates the evalua on of the cost Budget supports the sustained rollout of the PBIS and eff ec veness of programs, agency heads through an alloca on of P16.8 billion. be er manage results, and strengthen their accountability to the results they deliver. This Building on the PBIS, the government proposes should enable oversight agencies of the Execu ve to restructure public sector salaries and benefi ts (DBM and NEDA), Congress, and the general public beginning 2016 to make these compe ve to to more eff ec vely review the budget proposals those off ered in the private sector in a manner and fi nancial performance of agencies against that matches compensa on with performance. their commi ed performance. Soon a er the At present, public sector remunera ons are about submission of the proposed 2016 Na onal Budget, 45 percent less on average than those off ered in the government will publish an advocacy volume the private sector, with those in the upper rungs showing how the PREXC was implemented in the receiving about 70 percent less than private proposed budgets of the pilot agencies for the sector counterparts. The proposed compensa on year. The PREXC will be implemented across all adjustments should enable the government to agencies in the proposed 2017 Budget. retain exis ng quality staff as well as a ract new blood to further strengthen the agencies’ ability

32Through Execu ve Order No. 80 issued on July 20, 2012 33Within an agency, bureaus, services, or oﬃ ces are ranked as “good,” “be er,” and “best” based on their performance. Individual employees within each bureaus are likewise ranked accordingly. 34The development of CHRIS is ongoing a er the contract was awarded to the winning developer in the 2nd quarter of 2014. Implementa on to the ﬁ ve pilot agencies are expected to be completed by mid-2016. 35The development of BTMS began in 2015 and the systems developer is currently being procured. It is expected to go live in January 2017 at the DBM and BTR. Soon a er, it will be rolled out to implemen ng agencies. 11 Technical Notes on the 2016 Proposed Na onal Budget

to perform. Once fi nalized, the government will D. Empowering Ci zens Through the present the proposed salary and compensa on Budget: Greater Fiscal Openness and adjustments to Congress. Wider Spaces for Engagement Leveraging Technology to Integrate PFM Systems. The government, with the support of interna onal This Budget ac vely seeks the pursuit of greater development partners, will develop and rollout transparency, accountability, and par cipa on in technology pla orms that will harmonize, governance, especially in how public funds are streamline, and automate the PFM func ons managed. across the agencies. This endeavour is part of the PFM Reform Roadmap (see pages 50 to 51 for more Fiscal Transparency. The Aquino administra on informa on on 2016 alloca ons for these projects). believes that fi scal transparency not only gives For instance, the Comprehensive Human Resource ci zens greater access to informa on on how Informa on System (CHRIS)34 will facilitate and their taxes are spent, but likewise leads to be er automate all human resource management performance and accountability. The policy against func ons of the na onal government, including lump sum funds (see page 43), the PIB, (see page its payroll system. The system will eventually cover 52) and the UACS, and harmonized budget and 36 the full life cycle of HR management and personnel fi nancial accountability reports exemplify how services expenditures; from recruitment and hiring fi scal transparency can become real and tangible. and through re rement. Since the 2011 Budget, the Aquino administra on To improve and streamline processes for budget has been strengthening fi scal transparency. It execu on and budget accountability, the Budget has introduced the Transparency Seal to require and Treasury Management System (BTMS)35 will the agencies to disclose key informa on on their serve as a common and integrated system to websites, including their approved budgets, replace the exis ng disintegrated budget, treasury, accountability reports, status of programs, and 37 and fi nancial management and repor ng systems contracts awarded . The government has also of the DBM and the DoF-BTr. This ICT pla orm pursued the Open Government Data, launching an interlinks and streamlines key PFM processes open data portal (data.gov.ph) to make informa on and covers budget management, commitments in open and electronic formats accessible to 38 management, payments management, receipts ci zens . In addi on, the government, through management, cash management, and accoun ng the Development Budget Coordina on Commi ee and fi scal repor ng. The BTMS, which will be (DBCC), now publishes other budget reports linked to TSA (see page 51) and use the UACS as its according to global standards, including the Mid- 39 backbone, will enable the government to maintain Year Report, Year-End Report , and the Fiscal fi scal discipline through eff ec ve resource Risks Statement. Through the DBM, it has been alloca on and u liza on and provide reliable and publishing the People’s Budget since 2011 to mely informa on on which fi nancial decisions provide ci zen-friendly summaries of the proposed can be based. and enacted Budgets.

36The DBM and COA issued Joint Circular No. 2014-1 to promulgate modifi ed formats for Budget and Financial Accountability Reports to be submi ed by implemen ng agencies to both oversight agencies. Sec on 87 of the GPs of the NEP also reiterate the mely submission of these reports. 37Sec on 89 of the General Provisions of the NEP. In addi on, agencies are required to publish the following: annual reports and audited fi nancial statements on accounts deposited outside the Treasury (Sec. 85); reports on COA fi ndings and recommenda ons (Sec. 86); and disclosures on infrastructure projects (Sec. 88). 38Sec on 25 of the GPs of the NEP. Open Data Government is led by the Offi ce of the Presiden al Spokesperson, DBM, and the Presiden al Communica ons Development and Strategic Planning Offi ce. 39Sec on 90 of the GPs of the NEP also requires the government to publish a Post-Budget Report within the following year.

12 Technical Notes on the 2016 Proposed Na onal Budget

Such eff orts have enabled the government to bring and community organiza ons a voice and vote in the Philippines’ performance at par with global the Na onal Budget process (see pages 54 to 56 fi scal transparency best prac ces. For one, the for more informa on on projects iden fi ed and Interna onal Monetary Fund’s Fiscal Transparency funded through BUB). The government further Evalua on has shown that the country exhibits improved the BUB in preparing the 2016 Budget45 good and advanced prac ces in several areas by, among others, linking the process to those of of its new Fiscal Transparency Code40: from the the Na onal Community-Driven Development disclosure of fi scal risks to ci zen’s engagement Program and local development councils; enabling in the budget process. The Interna onal Budget that LGUs that meet governance standards to Partnership’s Open Budget Survey (OBS) Tracker implement projects (see page 54); and launching a (www.obstracker.org) also shows that the BUB monitoring portal (openbub.gov.ph). Philippines now publishes all eight essen al budget documents: an improvement from its performance The Philippines’ par cipatory budge ng ini a ves in the 2012 OBS when it published only four41. are already being recognized worldwide. For However, legisla ve support is needed to make one, the introduc on of the BPAs allowed the these fi scal transparency policies and ini a ves Philippines to rank eight in the world in aspects permanent through the proposed Freedom of of public engagement in the 2012 OBS. Moreover, Informa on Act and the proposed Public Financial the BUB won the gold award in the inaugural Open Accountability Act. Government Partnership (OGP) Awards in 2014 in New York, USA. Moreover, the COA’s Ci zen Par cipatory Budge ng. Alongside transparency Par cipatory Audit46 was also recognized with a reforms, the administra on has been widening Bright Spot Award during the OGP Summit held spaces for the engagement of ci zens—such in 2013 in London, UK. While such par cipatory as civil society organiza ons (CSOs) and other budge ng mechanisms are s ll in their early stages, stakeholder groups—in the PFM. The Principles of they are already being recognized worldwide as Construc ve Engagement42 that the government, examples of innova ons that empower ordinary through DBM, and CSOs jointly cra ed in 2010 ci zens in the PFM. has led to the establishment of mechanisms for meaningful ci zen’s par cipa on in budge ng. It E. Consolida ng PFM Reforms Beyond fi rst introduced the concept of Budget Partnership 2016 Agreements (BPAs)43 process between government agencies and CSOs in the cra ing of the agencies’ The Budget is among the most potent tools that any budget proposals as well as in the monitoring government must wield eff ec vely to achieve its and evalua on of the programs and projects socio-economic goals and set the pace and tone of implementa on. governance. Since 2010, the Aquino administra on has been leveraging the budget as an instrument Beginning with its pilot rollout in preparing the for good governance—the founda on of its proposed 2013 Budget, the government has agenda for inclusive development. been implemen ng and expanding the Bo om- Up Budge ng (BUB)44 Process to give local CSOs

40Published on June 30, 2015. 41The OBS Tracker regularly measures the availability of the eight prescribed budget documents, while the full OBS survey also measures comprehensiveness. The Open Budget Index is based on the full OBS. The results of the 2015 OBS (full survey) will be released in September 2015. 42Transparency, accountability, integrity, partnership, consulta on and mutual empowerment, respect for internal processes, sustainability, and na onal interest. 43Through Na onal Budget Memorandum No. 109. BPAs were subsequently improved in Na onal Budget Circular No. 536, and were expanded to budget execu on under Na onal Budget Circular No. 539. 44For a me called “Grassroots Par cipatory Budge ng” 45Through Joint Memorandum Circular No. 5 of the DILG, DBM, Department of Social Welfare and Development, and the Na onal An -Poverty Commission. 46In partnership with the Aﬃ liated Network for Social Accountability in East Asia and the Paciﬁ c and supported by the Australian DFAT. 13 Technical Notes on the 2016 Proposed Na onal Budget

In its remaining months in oﬃ ce, the Aquino administra on is commi ed to consolidate the PFM reforms and secure their irreversibility beyond its term. The 2016 Budget is designed to achieve this goal. For one, it con nues to bankroll good governance ini a ves, par cularly those that leverage technology and innova ons to streamline, automate, and reduce human discre on in cri cal PFM func ons. Through its general and special provisions, this Budget helps in establishing a policy framework for greater eﬃ ciency, transparency, and accountability in the PFM. However, the GAA, given its me- bound nature, is not enough. For this reason, the enactment of the Public Financial Accountability Act47 is necessary for the permanency of a comprehensive and interna onally aligned policy framework for the PFM.

Moreover, the manner by which the proposed Expenditure Plan for 2016 is cra ed and therea er enacted, implemented, and accounted for, should, in the process, nurture a solid cons tuency that will provide the necessary support and demand the con nua on of reforms. Certainly, the demonstrable dividends of good governance must be delivered to mo vate the people—par cularly the CSOs, the private sector, the academia, the media, the interna onal development partners, and other key stakeholders—to take ac on and engage the government in sustaining beneﬁ cial reforms beyond 2016.

The Aquino administra on was thrust into power in 2010 through the ci zens’ shared yearning for change. Thus, beyond the installa on of a permanent policy framework and the improvements in the systems and processes of government, the success of the PFM reform agenda for the long haul will depend anew on the collec ve ac on of the ci zens.

47Already ﬁ led by Senate President Franklin Drilon (Senate Bill [SB] No. 2750), Senate President Pro Tempore Ralph G. Recto (SB No. 2719), and Senator Juan Edgardo Angara (SB No. 2777). The bill will soon be ﬁ led in the House of Representa ves.

14 Technical Notes on the 2016 Proposed Na onal Budget

II. FINANCING THE NATIONAL EXPENDITURE PROGRAM

The government expects to generate suffi cient especially to the poorest and most vulnerable in resources to fi nance the projected disbursement society. program of P3.005-trillion1 in 2016 considering the con nued robust growth of the domes c Recent Economic Performance. Since the Aquino economy, and reforms that increase effi ciency administra on assumed offi ce in 2010, the in revenue collec ons. While defi cit spending economy has been sustained at the strongest con nues to be necessary to accelerate economic average GDP growth of 6.3 percent annually from growth and poverty reduc on, the government’s 2010 to 2014: higher than the average growth fi scal consolida on eff orts have been reducing of 4 percent of GDP from 1986 to 2010, and the borrowing requirements and the burden of highest that has been achieved so far by any post- servicing outstanding debts, thereby improving the EDSA administra on2. The country has con nued investor confi dence on the health of the treasury. to be the second-fastest growing economy in Asia, This sec on discusses the macroeconomic outpacing its neighbors in the region for the third underpinnings of the proposed 2016 Budget and straight year since 2012. the na onal government’s fi scal program in the medium term. However, the GDP growth eased and fell below target in 2014 at 6.1 percent due to, among others, A. Macroeconomic Environment a slowdown in government spending: the growth of public construc on slowed down to 6.3 percent a er growing by a huge 18 percent in 2013. On The 2016 Budget is built on the resilient top of the ins tu onal issues that con nued to macroeconomic environment fostered under weaken the agencies’ absorp ve capacity, external the Aquino administra on. Even as the domes c events such as the impact of Super Typhoon economy had been stuck in periods of cyclic, Yolanda as well as the Supreme Court’s decision anemic growth—with weak agriculture and to declare certain provisions of the Disbursement manufacturing sectors, vulnerability to external Accelera on Program (DAP) agencies invalid, to an shocks, and chronic poverty—the country has extent, also dampened public spending. This trend, managed to sustain a strong GDP growth in the last unfortunately, con nued to pull down the growth three years, revitalized the manufacturing sector, in the fi rst semester of 2015 with 5.3 percent—the improved the quality and supply of jobs, and lowest fi rst semester performance since 2012— reduced poverty beginning in 2009. These gains a er public construc on grew only by 4.3 percent. will move the country toward achieving inclusive development in the longer term. Nonetheless, the government expects the economy to regain its momentum in the la er quarters To sustain this upturn, the administra on designed of 2015, as private investments and consumer the Budget for its fi nal term to address the challenge confi dence con nue to fl ourish and drive growth. of sustaining rapid growth and poverty reduc on. On the part of the government, disbursements This 2016 Na onal Budget is thus designed to are expected to speed up during the rest of the support inclusive growth—characterized by a year, par cularly because the agencies are seen sustained rapid GDP growth of 7 to 8 percent in to eff ec vely facilitate programs that will reduce 2015 and 2016, as well as a reduc on of poverty poverty and increase jobs. So far, government incidence to 18 to 20 percent by end-2016—by spending con nues to accelerate as it increased intensifying reforms that improve the pace of public by 6.2 percent in the fi rst fi ve months of 2015. In spending, by sustaining the crea on of jobs, and par cular, public spending on infrastructure and by ensuring the high-impact delivery of services

1 The proposed obliga on Budget for 2016 is P3.002 trillion, while the disbursements program (cash-based) is P3.005 trillion considering the an cipated payables from 2015 that will be made in the following year. 2 Aquino I (1986-1992) – 3.4 percent; Ramos (1992-1998) – 3.1 percent; Estrada (1998-2000) – 2.3 percent; Arroyo (2001-2010) – 4.8 percent.

15 Technical Notes on the 2016 Proposed Na onal Budget

Table 1. Growth Rate of GDP and its Components, 2004-2015 (First Semester and Full Year)

Par culars 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Projec on Actual Projec on S1 (2015 BESF)

Real GDP Growth 6.7 4.8 5.2 6.6 4.2 1.1 7.6 3.7 6.7 7.1 6.5-7.5 6.1 7.0-8.0 5.3

Household Final Consump on Expenditures 6.0 4.4 4.2 4.6 3.7 2.3 3.4 5.6 6.6 5.6 5.4 6.1 Government Final Consump on Expenditures 2.0 2.1 10.6 6.9 0.3 10.9 4.0 2.1 15.5 5.0 1.7 2.9 Capital Forma on -2.2 3.0 -15.1 -0.5 23.4 -8.7 31.6 2.8 -4.3 27.7 5.4 14.3 Exports 12.8 5.0 12.6 6.7 -2.7 -7.8 21.0 -2.5 8.6 -1.0 11.3 5.0 Less: Imports 6.2 3.3 3.5 1.7 1.7 -8.1 22.5 -0.6 5.6 4.4 8.7 10.6

Source: PSA (NSCB)

other capital outlays grew by 28.5 percent in May the same period in 2013 and in 2014. S ll, these 2015 compared to the previous year. trends show the poor popula on’s increasing vulnerability to climate change. Despite the dampened GDP growth, unemployment and underemployment rates fell Economic Projec ons for 2016. The government to their lowest levels in a decade. In 2014, the will con nue to aim for a rapid GDP growth of 7 labor market generated 1.02 million new jobs, to 8 percent in the medium term. To achieve this exceeding targets set for the year and bringing the accelerated growth, it has taken measures to unemployment rate down to 6.8 percent as of year- address the slowdown that has been experienced end: down from 7.1 percent in 2013, 7.3 in 2010, in recent months. Moreover, while most and 11.8 in 2004. It is notable that a record-low macroeconomic factors are so far foreseen to be unemployment rate of 6 percent was registered stable over the medium term, the government in the third quarter of 2014. Underemployment con nues to be vigilant against possible shocks also fell to 18.4 percent in 2014 from 19.8 percent from the global economy. The Philippines can the year before. The services sector, par cularly expect some fallout from geopoli cal events such wholesale and retail trade, and motor vehicle as the Greek debt crisis, the recent stock market repair provided the most jobs in 2014. crash in China, and the expected normaliza on

Table 2. Unemployment and Underemployment Rates, 2004-2015

Par culars 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Projec on Actual Projec on April LFS (2015 BESF)

Unemployment Rate 11.8 8.7 7.9 7.3 7.4 7.5 7.3 7.0 7.0 7.1 6.7-6.9 6.8 6.6-6.8 6.4 Underemployment Rate 17.6 21 22.7 20.1 19.3 19.1 18.8 19.3 20.0 19.8 n.a. 18.4 18 17.8 Sources: PSA (NSO); NEDA

Poverty incidence has decreased from 28.6 of US monetary policy, but the country’s strong percent in the fi rst semester of 2009 to 25.8 economic fundamentals would provide the percent in the same period of 2014. However, a necessary buff er to weather these challenges. slight rise in poverty incidence was seen in the In addi on, the country’s hos ng of the Asia- fi rst semester of 2013 at 24.6 percent in the Pacifi c Economic Coopera on (APEC) mee ngs a ermath of Super Typhoon Yolanda and other and the expected ASEAN integra on provide recent calami es. It is likewise noteworthy that opportuni es to expand partnerships that would the country’s high growth path and crea on of help boost growth. Ul mately, the government more jobs, together with the government’s eff orts will con nue to target a poverty reduc on rate to reform the delivery of services, brought about of 18 to 20 percent by end-2016, despite the a decline in extreme poverty, from 13.3 percent setbacks that compelled it to recast its original in the fi rst semester of 2009 to 10.5 percent in poverty incidence target of 16.6 percent. 16 Technical Notes on the 2016 Proposed Na onal Budget

Table 3. First Semester Poverty Incidence Among Popula on, 2006-2014

Par cular 2006 2009 2012 2013 2014 2015 2016 Target Target

Poverty Incidence, full year 26.6 26.3 25.2 20.0-23.0 18-20 First semester 28.8 28.6 27.9 24.6 25.8 Source: PSA (NSCB)

GDP Growth. To sustain a rapid growth of 7 to 8 in the fi ve years under the current administra on percent from 2015 to 2018, the government is was 3.8 percent, well below the 5.1 percent intensifying reforms to boost public expenditures, average posted in 2007 to 2009. The low infl a on especially in infrastructure, in a way that delivers rate regime con nued in early 2015, which was the target socio-economic results. Improving pegged at a low of 1.2 percent in the month of the pace of infrastructure spending is cri cal in June—the lowest monthly infl a on rate since expanding the capacity of the domes c economy 1995—a ributed to ample food supply and to absorb more investments and catalyze greater reduced fuel and electricity prices. produc vity and job genera on, especially in manufacturing that has seen a resurgence in The government is confi dent that infl a on rates recent mes, and in agriculture albeit this sector will remain stable at 2 to 4 percent this year un l has remained fl at. 2018. In par cular, the lower prices of oil and other commodi es in the interna onal market Aside from eff orts to accelerate public spending, has contributed to a manageable infl a on overall. the government remains op mis c on the Nonetheless, food infl a on must be managed: Table 4. Philippine Macroeconomic Indicators, 2010-2018

Par culars 2010 2011 2012 2013 2014 2015 2016 2017 2018 Program Adjusted Proposed Proposed Proposed

Real GDP Growth (%) 7.6 3.7 6.7 7.1 6.1 Budget Assump on 7.0 - 8.0 7.0 - 8.0 7.0 - 8.0 7.0 - 8.0 7.0 - 8.0 Infl a on Rate (%) 3.9 4.6 3.2 3.0 4.1 2.0 - 4.0 2.0 - 4.0 2.0 - 4.0 2.0 - 4.0 2.0 - 4.0 364-Day T-bill Rate (%) 4.3 2.4 2.0 0.7 1.8 2.0 - 4.0 2.0 - 4.0 2.0 - 4.0 2.0 - 4.0 2.0 - 4.0 Forex Rate (P/US$) 45.11 43.30 42.25 42.45 44.40 42 - 45 43 - 46 43 - 46 43 - 46 43 - 46 Exports Growth (%)* 33.7 -6.9 7.6 3.6 9.0 8.0 5.0 6.0 8.0 10.0 Imports Growth (%)* 26.9 9.5 1.9 -0.7 2.4 10.0 1.0 12.0 13.0 14.0 Source: PSA; Assump ons adopted by DBCC as of June 30, 2015 *Actuals per PSA (NSO); Projec ons based on BPM6 Concept prospects for further domes c growth, given the rice infl a on, in par cular, has remained at strong private sector confi dence. Foreign direct double digits even if world prices have declined by investments (FDIs) have grown by leaps and an average of 15 to 30 percent, depending on the bounds, from $1.07 billion in 2010 to $6.2 billion quality. Agricultural output needs to be improved in 20143, demonstra ng that the country has not only to temper the rise in food prices but also won the trust of foreign investors. Thus far, good to boost produc vity in the countryside. governance measures have enabled the country to leapfrog in interna onal compe veness and The threat of El Niño and perennial disasters is of doing business surveys. par cular concern because of the possible eff ects on agricultural produc on, including increasing Infl a on. Infl a on, or the increase in prices, has food prices. Thin power supplies can also raise the so far been maintained within the targeted range, cost of electricity and rate of infl a on. The global ending at 4.1 percent in 2014. Average infl a on economic outlook remains largely unpredictable

3Bangko Sentral ng Pilipinas 17 Technical Notes on the 2016 Proposed Na onal Budget

and uneven especially due to the vola lity in percent by 2018. Opportuni es for expanded oil prices, and the slower growth currently growth are available in 2015 and beyond with experienced by the European Union and China. the commencement of the ASEAN Economic Moreover, domes c prices are s ll heavily reliant Community and the recent accredita on of the on remi ances from overseas Filipino workers Philippines in the European Union’s General (OFW), earnings from the business process System of Preferences Plus (GSP+) program. outsourcing (BPO) industry, and sustained FDIs. Merchandise imports accelerated by 2.4 percent Interest Rates. Since 2010, the DBCC has been in 2014, owing to the robust growth of consumer using the 364-day Treasury bill (T-bill) rate as the goods and raw materials imports. Prospects in bellwether rate for budgetary purposes. Domes c 2015, however, show a slowdown due largely to interest rates are s ll rela vely low, although T-bill signifi cant downward adjustments in oil prices. rates have slightly risen in the primary market and Nonetheless, imports are also expected to grow remained broadly steady in the secondary market by 12.0 percent in 2016 and up to 14.0 percent in 2015. The trend in the T-bill rate will be largely by 2018, as industries recover and construc on infl uenced by the availability of ample liquidity, ac vi es pick up resul ng in increased demands the policy stance that the Bangko Sentral ng for imports of raw materials, especially iron and Pilipinas (BSP) will take, and the ac ons that the steel. na onal government will take with regard to fi scal discipline. In the medium term, T-bill rates are Employment Genera on Prospects. On the expected to remain within the 2.0 to 4.0 percent back of reforms that boosted economic growth, range. sustained a stable macroeconomic environment, and nurtured investors’ newfound confi dence, Foreign Exchange. While deprecia ng from PhP the Philippine government is asser ng that good 42.45/1 USD in 2013 to PhP 44.40/1 USD in 2014, governance leads to good business. In turn, more the Peso is expected to remain stable amidst job and livelihood opportuni es are created. So global vola li es brought about by a number of far, unemployment and underemployment are factors: uneven economic growth and divergent at its lowest in a decade. In the fi rst quarter of monetary policies across advanced economies, 2015, unemployment went further down to 6.6 specifi cally: the normaliza on of the monetary percent and underemployment to 17.5 percent. policy in the United States; the quan ta ve This downtrend is a promising sign that the easing in the Eurozone and in Japan; and the government’s target to reduce unemployment cuts in policy rates by major central banks. S ll, within 6.6 to 6.8 percent in 2015 and 6.5 to 6.7 favorable domes c prospects support the stability percent in 2016 will be met. of the Peso. Steady OFW remi ances, robust BPO earnings, increased tourist receipts, acquiring Poverty Reduc on Prospects. While poverty investment grade status, and the comfortable has gone down to less than 25 percent since level of the BSP’s gross interna onal reserves are 2010, a series of unprecedented events has expected to keep the Peso-Dollar exchange rate forced the government to recast its Millennium within the PhP 43.00-46.00/1 USD range between Development Goal of reducing poverty to 16.6 2015 and 2018. percent. Communi es, especially in the Visayas, are s ll recovering from the destruc on brought External Trade. A con nued expansion of about by Super Typhoon Yolanda and the series merchandise exports is expected beyond the of natural disasters that struck the Philippines 9-percent growth in 2014, which could be in 2013. Just the same, as more jobs are being accelerated modestly by the recovery of the created, the challenge remains to ensure that electronics, the machinery and transport, and the the increase in employment rate would li more garment export industries. Over the medium term, Filipinos out of poverty and meet the government the improved outlook for tradi onal and non- target of reducing poverty to 18 to 20 percent tradi onal exports and the con nued recovery of GDP. Aside from growing the economy faster of various industries could lead to a con nued and crea ng more jobs, the government needs to export growth of 8.0 percent in 2016 up to 12.0 de ly keep the infl a on rate stable, par cularly

18 Technical Notes on the 2016 Proposed Na onal Budget the price of rice: the staple food that comprises Infl a on. Government revenues, and subsequently 20 percent of total household budget of poor the budget balance, benefi ts from increases in the families. prices of taxable goods and services: a percentage point increase in infl a on contributes an es mated Impact of Macroeconomic Fluctua ons on P20.8 billion in addi onal revenues and eff ec vely Government’s Fiscal Health. The uninterrupted reduces the need to borrow by the same amount. growth and a stable macroeconomic environment Infl a onary pressures notwithstanding must should enable the government to collect suffi cient be mi gated not only to protect the purchasing resources to bankroll public investments and to power of consumers, especially the poor, but lower the cost of borrowings needed to fi nance also to enable the government to control costs of the defi cit. Thus, the government con nues to delivering services. proac vely manage vola li es and mi gate the sensi vity of the fi scal program to these factors. Interest Rates. The current low interest exchange regime must be sustained, as upward fl uctua ons GDP Growth. A more produc ve economy in interest rates are generally disadvantageous generates more revenues and, in turn, reduces to the government and the market alike. While the government’s need to borrow to fi nance the a percentage point increase in T-Bill rates defi cit. A percentage point increase in real GDP generates an es mated P600 million in addi onal growth contributes an es mated P21.6 billion revenues from withholding taxes on income from in addi onal revenues, which consequently fi nancial instruments, the cost of servicing the reduces borrowing requirements to fi ll the fi scal government’s debts is increased by P3.2 billion defi cit by the same amount. At the same me, and, as a net eff ect, exerts a P2.6-billion upward the government con nues to rollout reforms pressure on the budget balance. to improve revenue collec on effi ciency to 17.5 percent of GDP in 2016 from 13.4 percent in 2010. A percentage point increase in the 180-day London Inter-Bank Off ered Rate—the benchmark interest Meanwhile, the pace of public spending, rates for foreign borrowings—results in addi onal especially capital outlays, aff ects GDP growth. debt servicing of P4.2 billion, with no addi onal As es mated by the Na onal Economic and revenues generated to off set this increased cost. Development Authority, a 10-percent increase in The greater sensi vity of the Budget to foreign capital outlays pushes GDP growth up by 0.161 interest rate fl uctua ons only validates the percentage points, compared with the growth government’s strategy to increase domes c over of current opera ng expenditures that has a foreign borrowings. 0.04-percentage point impact on GDP growth. While this projec on demonstrates the larger Foreign Exchange. The deprecia on of the Peso contribu on of reforms to restructure the budget against foreign currencies improves revenue to increase infrastructure outlays, it also manifests collec ons, par cularly customs du es and taxes: the need to speed up public spending. each P1 deprecia on of the Peso against the US

Table 5. Budget Sensi vity to Macroeconomic Parameters, 2016 (in billion pesos)

Indicator Change 2016 Revenues Disbursements Budget Balance*

Peso-to-US dollar Exchange Rate P1 deprecia on 10.5 2.1 8.4 T-Bill Rates (all maturi es)** 1 percentage point increase 0.6 3.2 (2.6) LIBOR (180-day) 1 percentage point increase 4.2 (4.2) Inﬂ a on Rate 1 percentage point increase 20.8 20.8 Real GDP Growth Rate 1 percentage point increase 21.6 21.6 Growth Rate of Imports 1 percentage point increase 4.3 4.3

Source: DOF, BTr * A nega ve fi gure in the budget balance means an increase in the defi cit. ** Based on programmed Government Securi es fl oata ons for the year. Revenue impact accounts for interest income from the 20 percent withholding tax. 19 Technical Notes on the 2016 Proposed Na onal Budget

Dollar, for instance, increases revenues by P10.5 • Public Debt: Amidst a challenging global billion. However, its impact on improving the environment, the government’s debt por olio budget balance is off set by an es mated P2.1 has signifi cantly improved. The debt-to-GDP billion in addi onal disbursements to service ra o as well as the debt burden on the Budget foreign-denominated debts. This impact gives has been declining steadily, and risks to the credence to the government’s strategy to reduce sustainability of debt con nues to be limited. foreign borrowings. A debt sustainability analysis conducted by the government shows that the debt-to-GDP Imports. A posi ve growth in the value of ra o is expected to con nue declining over merchandise imports increases the tax base for the long-term, reaching a li le over 30 percent customs du es and taxes: P4.3 billion for every of GDP a er ten years. However, natural percentage point growth in imports. Borrowing disasters may possibly raise outstanding debt requirements to fi nance the fi scal defi cit are projec ons to around 36.4 percent. likewise reduced by the same amount. Generally, the growth of imports does not aff ect expenditures; • Con ngent Central Government Obliga ons: rather, imports growth is aff ected by government Risks coming from the fi nancial sector, expenditures, especially the delivery of goods and government-owned or -controlled corpora ons services which have imported components such (GOCCs), public-private partnerships (PPPs), and as foreign-assisted projects. local government units con nue to be monitored and mi gated. In par cular, con ngent liabili es Fiscal Risks. The government, through the DBCC, arising from the implementa on of the PPP keeps vigilant against risks to the government program are es mated to reach 5.8 percent fi nances, including macroeconomic and external of GDP in 2016. As such, the government has developments, the public debt por olio, provisioned P30 billion in the Risk Management con ngent liabili es, and climate change. The Program in 2015 to respond to poten al calls on 2015-2016 Fiscal Risks Statement (FRS), published government guarantees in PPP contracts, and by the DBCC alongside the Proposed Budget for has introduced reforms to be er take stock of 2016, discusses the sources of fi scal risks and and manage con ngent liabili es from PPPs. measures being taken to address these. Among the key points highlighted by the FRS are (please refer • Climate Change: As could be gleaned from the to the 2015-2016 FRS for a more comprehensive preceding points, the country’s vulnerability discussion): to natural disasters remains to be a major source of fi scal risk. In 2014, total damages • Macroeconomic Risks: The country’s economic to infrastructure and agriculture, and indirect growth fundamentals remain intact amidst economic losses wrought by three major an uncertain external environment. S ll, the typhoons amounted to P53.4 billion. Thus, it government needs to con nue being vigilant is crucial for the na onal government to have against domes c and external challenges ample budget buff ers to cover for the costs of to the economy. For one, underspending by post-disaster rehabilita on and reconstruc on. key government agencies and ins tu onal And that is why it con nues to leverage public impediments to fast and eff ec ve service fi nance to build climate resiliency (see pages delivery must be cured to boost economic 95 to 102 for more informa on on 2016 growth. Moreover, the ongoing episode of provisions for climate change adapta on and mild El Niño con nues to pose a risk to the disaster risk management). agriculture and fi shery sector and may lead to infl a onary pressures. The careful monitoring of external risks also need to con nue, especially the uneven prospects of growth across the globe which could aff ect trade and remi ances, and the marked decline in oil prices which could dampen revenue collec ons.

20 Technical Notes on the 2016 Proposed Na onal Budget

B. Na onal Government Fiscal Program

The country’s economic health in the past decades This new regime of fi scal stability has raised has recovered from worse to good: from being the Philippines’ profi le among global investors, the Sick Man of Asia, it has emerged to be the evidenced by the investment grade credit ra ngs4 region’s next ger. Such upturn is backed by the that the country achieved for the fi rst me in 2013. Aquino administra on’s commitment to fi scal Through these credit upgrades, the country’s credit consolida on. When it assumed offi ce in 2010, it default swap levels, another measure of investor implemented reforms on revenue administra on confi dence, has narrowed further, surpassing and strategic debt management to arrest the single A-rated Asian neighbors such as Thailand ballooning fi scal defi cit, ease the burden of debt and Malaysia. This means that the Philippines is payments on the Budget, and expand available among the most trusted sovereign bond issuers in resources for urgent social and economic services. the Asean5 at this me. Banking on its improved credit-worthiness, the Philippines can now aff ord As a result of revenue administra on reforms, to lower its interest rates on bonds issued, thus the government was able to improve revenues lowering the cost of borrowing. by 58 percent from P1,207.9 billion in 2010 to P1,908.5 billion in 2014. Combined with strategic More important, this renewed economic vigor debt management eff orts, the government curbed has enabled the government to expand available the country’s defi cit from 3.7 percent in 2009 resources for crucial social and economic services to 0.6 percent in 2014 and reduced the na onal a er decreasing the burden of interest payments government’s outstanding debt from 52.5 percent from 24.8 percent of revenues in 2009 to 16.8 in 2009 to 45.4 percent in 2014. percent in 2014. All of these reforms ensure that the next administra on will inherit a be er- managed coff ers.

Table 1. Highlights of Fiscal Performance

Par culars 2009 2010 2011 2012 2013 2014

Revenues Total revenues P1,123.2 B P1,207.9 B P1,359.9 B P1,534.9 B 1,716.1 B 1,908.5 B Total revenue growth -6.6% 7.5% 12.6% 12.9% 11.8% 11.2% As % of GDP 14% 13.4% 14% 14.5% 14.9 15.1% Tax eff ort 12.2% 12.1% 12.4% 12.9% 13.3% 13.6% Disbursements Total disbursements P1,421.7 B P1,522.2 B P1,557.7 B P1,777.8 B P1,880.2 B 1,981.6 B Total disbursements’ growth 11.9% 7.1% 2.3% 14.1% 5.8% 5.4% As % of GDP 17.7% 16.9% 16.0% 16.8% 16.3% 15.7% Debt Management Total NG Debt P4,396.6 B P4,718.2 B P4,951.2 B P5,437.1 B P5,681.1 B P5,735.2 B Fiscal Defi cit (P298.5 B) (P314.5 B) (P197.7 B) (P242.8 B) (P164.1 B) (P73.1 B) Fiscal Defi cit-to-GDP -3.7% -3.5% -2% -2.3% -1.4% 0.6% Interest payments as % of GDP 3.5% 3.3% 2.9% 3% 2.8% 2.5% Interest payments as % of revenues 24.8% 24.4% 20.5% 20.4% 18.9% 16.8% NG outstanding debt as % of GDP 52.5% 51.7% 49.3% 51.9% 47.0% 45.4%

Sources: BTr, DoF, DBM

4Fitch Ra ngs (27 March 2013), Standard and Poor’s (8 May2014), Moody’s (11 December 2014), Japan Credit Ra ng Agency (JCRA) (July 2015) 5Department of Finance

21 Technical Notes on the 2016 Proposed Na onal Budget

Overview of the Medium-Term Fiscal Program. to further expand government spending to the The 2016 Proposed Budget consolidates reforms op mal 20 percent of GDP, thereby upholding a implemented since 2010 to sustain the regime rapid economic growth and furthering poverty of sound fi scal management and debt reduc on reduc on. However, in order to support this while providing more elbow room for development growth, revenue administra on reforms must be spending. sustained and scaled up to further improve the revenue genera on at 18 percent of GDP by 2018. To support the delivery of crucial services for To absorb this greater demand for spending, inclusive growth, the na onal government’s reforms that will strengthen the capacity of the expenditure program in 2016 will reach P3.005- government agencies to take in more resources trillion: 17.5 percent higher year on year and (see pages 24 to 25) must be intensifi ed. Moreover, equivalent to 19.5 percent of GDP. Almost 90 if fi scal consolida on eff orts would be con nued, percent of this amount will be funded by revenues, the country should see the further contrac on of which will increase by 18.5 percent year on year the government’s outstanding debt to below the to P2.697 trillion. This budget leaves a fi scal defi cit global benchmark of 40 percent of GDP by the of P308.7 billion, or equivalent to 2.0 percent of next administra on’s second year in offi ce (see GDP, which is consistent with both the Philippine pages 27 to 28). Development Plan and the goal of reducing the debt stock to 41.8 percent of GDP. Revenues. Even without passing new tax measures, except for the Sin Tax Reform Law6, total revenue Sustaining the fi scal defi cit at 2.0 percent of collec ons increased due to aggressive eff orts to GDP un l 2018 will provide greater room for plug tax leakages, pursue smugglers, tax evaders, pump priming while maintaining the reduc on and their collaborators in the government; of outstanding debts as a propor on of GDP. At and revamp the Bureau of Customs (BOC). The these levels, the next government will be able increase in the excise taxes on alcohol and tobacco

Table 2. Fiscal Aggregates, FYs 2014-2018 Par culars 2014 2015 2016 2017 2018 Actual Program Proposed Proposed Proposed

Levels (in billion pesos) Revenues 1,908.5 2,275.2 2,696.8 3,040.0 3,390.2 Disbursements 1,981.6 2,558.9 3,005.5 3,379.9 3,766.8 Fiscal Balance (73.1) (283.7) (308.7) (340.0) (376.6) Obliga on Budget * 2,019.1 2,606.0 3,001.8 3,350.0 3,750.0 Percent of GDP (%) Revenues 15.1 16.3 17.5 17.9 18.0 Disbursements 15.7 18.4 19.5 19.9 20.0 Fiscal Balance (0.6) (2.0) (2.0) (2.0) (2.0) Obliga on Budget 16.0 18.7 19.5 19.7 20.0 Growth Rate (%) Revenues 11.2 19.2 18.5 12.7 11.5 Disbursements 5.4 29.1 17.5 12.5 11.4 Fiscal Balance ** (55.4) 288.1 8.8 10.1 10.8 Obliga on Budget 11.0 29.1 15.2 11.6 11.9 GDP (in billion pesos) 12,642.7 13,919.1 15,376.6 16,998.0 18,788.2

Notes: * 2014 Budget is based on GAA level ** A posi ve growth rate indicates an improvement in the ﬁ scal balance, while a nega ve growth rate implies a deteriora on in the ﬁ scal balance.

6 Republic Act No. 10351

22 Technical Notes on the 2016 Proposed Na onal Budget products through the Sin Tax Reform Law in 2012 Table 4. Breakdown of Revenues, 2014-2018 has since enabled the government to expand (in billion pesos) resources for universal healthcare (see pages 66 Par culars 2014 2015 2016 2017 2018 to 67 for more discussions on this topic). (Actual) (Assessment (Es mate) (Es mate) (Es mate) Program) While the Philippines’ revenue eff ort has steadily increased since 2010, it s ll falls short of the REVENUES 1,908.5 2,275.2 2,696.8 3,040.0 3,390.2 % of GDP 15.1% 16.3 17.5 17.9 18.0 performance of other Asian countries today. In % Growth 11.2% 19.2% 18.5% 12.7% 11.5% 2014, for instance, the Philippines’ tax eff ort Tax 1,720.1 2,127.6 2,543.3 2,885.0 3,238.3 was the lowest among its Asian neighbors (see BIR 1,334.8 1,673.9 2,025.7 2,314.6 2,559.3 Table 3): hence, the need to intensify revenue BoC 369.3 436.6 498.7 551.4 660.9 administra on reforms as well as to pass Others 16.1 17.1 19.0 19.0 19.0 Nontax 186.5 145.6 151.4 152.9 149.9 necessary legisla on to curb tax leakages and BTr 93.4 60.6 58.3 55.8 49.7 improve collec on effi ciency (see page 25). Fees & Charges 32.8 36.4 40.0 44.0 47.1 Others 60.2 48.6 53.2 53.2 53.2 Priva za on 1.9 2.0 2.0 2.0 2.0 Table 3. Revenue Eff ort of Asian Countries, 2009-2014 (as % of GDP) Source: DBCC

Country 2009 2010 2011 2012 2013 2014 oﬃ ces at P19.0 billion. The remainder will be Cambodia 11.9 13.2 13.2 15.2 14.9 15.7 sourced from non-tax revenues (P151.4 billion), Indonesia 15.1 15.4 16.3 16.3 15.7 15.5 such as fees and charges and interest income; Lao PDR 14.9 15.7 16.4 17.7 18.1 17.2 Malaysia 22.3 20.0 21.0 22.1 21.7 20.6 and from priva za on proceeds (P2.0 billion). In Myanmar 10.7 11.4 12.0 23.3 22.3 24.2 the medium term, revenues are expected to grow Philippines 14.0 13.4 14.0 14.5 14.9 15.1 further, buoyed by the improvement of the tax Singapore 14.3 14.5 14.9 15.7 15.4 15.7 revenue eﬀ ort to 16.5 percent of GDP by 2016, as Thailand 16.4 17.3 18.0 18.3 18.1 17.1 well as the sustained expansion of the economy Vietnam 25.8 27.6 26.1 22.9 22.1 21.5 that enlarges the tax base. Source: 2015 Asian Development Outlook Tax Revenues. Through revenue administra on The government expects revenues to increase to reforms, tax revenues had gone up from P981.6 P2.697 trillion. About 94.3 percent of this will be billion or 12.2 percent of GDP in 2009 to P1.536 sourced from tax revenues collected by the Bureau trillion or 13.3 percent of GDP in 2013. These of Internal Revenue (BIR), at P2.026 trillion; by the levels further improved to P1.720 trillion or 13.6 BOC at P498.7 billion; and the other government percent of GDP in 2014 (see Figure 1).

Figure 1. Tax Revenue Collec ons, 2004-2014 (in billion pesos)

2000 1500 1000 500 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Tax Revenues 604.9 705.7 859.9 932.9 1,049.20 981.6 1,093.60 1,202.10 1,361.10 1,535.70 1,720

Note: Breakdown of revenue collec ons available in Fiscal Sta s cs Handbook uploaded in the DBM website (www.dbm.gov.ph)

23 Technical Notes on the 2016 Proposed Na onal Budget

Revenues to be collected by the BIR is es mated Non-tax Revenues and Priva za on. Non-tax to increase by 21 percent from P1.674 trillion revenues will contribute P151.4 billion, which this year to P2.026 trillion next year. The growth is equivalent to 1.0 percent of GDP, to the is a ributed to the intensifi ed tax collec on government coff ers in 2016; and P152.9 billion campaign and effi cient tax administra on as well in 2017; and P149.9 billion in 2018. This decline as to the Sin Tax reform. The la er, for instance, will is due to the decreasing income of the Bureau of contribute PP56.9 billion in incremental revenues. the Treasury (BTR)11 and of the Judiciary on the Due to a more eff ec ve tax administra on, taxes interest from Fiduciary SA/forfeited/confi scated on net income and profi ts will increase by 25 bonds. percent, from P993.6 billion this year to P1,243.4 billion next year. Similarly, taxes on property and About 26.4 percent, or P40.0 billion, of the non- on domes c goods and services are expected tax revenues in 2016 will come from fees and to accrue by more than 100 percent7 and 14.2 charges collected by various government agencies percent8, respec vely. (Refer to Table C.3 of the such as the Departments of Foreign Aff airs and BESF for details of the tax revenue program.) Finance, and the Land Transporta on Offi ce. The remaining P111.4 billion will be provided by Collec ons by the BOC will con nue to register income from Treasury opera ons (P36.5 billion), a double-digit increase at 14.2 percent year- na onal government income collected by the BTr on-year, from 436.6 billion in 2015 to P498.7 (P21.7 billion), and other non-tax revenues (P53.2 billion in 2016. While the BOC collec ons will be billion) such as proceeds from the Malampaya boosted by excise tax collec ons and value-added royal es, dividends from GOCCs, and bid tax on imports, the low prices of oil in the global premiums from the government’s Public-Private market dampens Customs’ possible tax take. This Partnership (PPP) projects. year alone, the agency es mates a P75-billion in foregone revenues9 due to declining oil prices. Priva za on, on the other hand, is seen to contribute a steady P2.0 billion in the medium The improving performance of the two main term that will come from the DOF-Priva za on revenue collec ng agencies yielded higher and Management Offi ce (P500 million) and from revenues for the government to fund its inclusive the Presiden al Commission on Good Government growth Budgets. The BOC, for instance, had (P28 million), among others. improved its tax eff ort from 2.6 percent of GDP in 2013 to 2.9 percent10 in 2014. The BIR’s tax eff ort Tax Expenditures. Based on the Tax Expenditures slightly increased to 10.6 percent of GDP in 2014 Report of the DOF, the grant of income tax from 10.5 percent in 2013, though its collec ons holidays, reduced income tax rates, and duty have been increasing signifi cantly over the years exemp ons to investments resulted in P144 in terms of nominal value. billion foregone revenues for the government in 2011. This amount is equivalent to 10.6% of To further improve the tax revenue performance revenues or 1.5% of GDP in 2011. This amount, over the medium term and match the revenue however, could s ll be higher considering that the eff orts of the country’s Asian neighbors, report covered only 29 percent of the investment the administra on con nues to pursue key promo on agency-registered fi rms.12 organiza onal, administra ve, and legisla ve reform measures (see Table 5). The DOF seeks Annually, the government suff ers heavy revenue Congress’ approval of essen al revenue reform losses from these tax privileges—revenues measures, par cularly the Fiscal Incen ves that could have been used to fi nance cri cal Ra onaliza on and the Tax Incen ve Management socio-economic ac vi es. To manage these tax and Transparency Act. incen ves which are mostly unaccounted for,

7 From P5.0 billion in 2015 to P10.1 billion in 2016. 8 From P692.5 billion in 2015 to P791.1 billion in 2016. 9 P400 B Customs collec on goal doable (2015, July 22). Malaya Business Insight. 10 DOF 11Par cularly the income on NG deposits at the Bangko Sentral ng Pilipinas. 12DOF: Tax incen ves cost gov’t at least 1.5% of GDP in 2011 (2014, April 3) Retrieved July 20, 2015 from h p://www.dof.gov.ph/?p=9417. 24 Technical Notes on the 2016 Proposed Na onal Budget

Table 5. Major Reforms Undertaken to Improve Tax Yields Reforms Introduced/Lead Agency Accomplishments

Run A er Tax Evaders (RATE)/ Cra ed to strengthen tax collec ons, RATE was able to improve number of income tax BIR returns fi led by self-employed individuals and professionals. In the fi rst year of the Aquino administra on, income tax returns fi led increased to 541,561 in 2011 from 501,915 in 201013. Tax evasion cases fi led have also risen to 352, with total tax dues of P67.03 billion as of April 2015, from 27 in 2010. (Of the the 27 cases fi led in 2010, 23 were fi led during the Aquino administra on.) Oplan Kandado/BIR Implemented in 2009 through Revenue Memorandum Order (RMO) No. 3 - 2009 to intensify compliance on tax laws. Among the sanc ons for non-compliance with tax requirements include temporary closure of establishments. From 2010 to 2014, 1,122 establishments14 have been temporarily closed. Restructuring of the Excise Tax The law aims to increase government revenues and discourage smoking. Since its on Alcohol and Tobacco through passage in 2012, the new Sin Tax law was able to generate P103.38 billion in 2013 and the passage of RA 10351/DOF P112.8 billion in 2014. Run A er the Smugglers (RATS)/ Since its incep on in 2005, 18215 smuggling-related cases have been fi led as of October BOC 2014. With the Administra on’s intensive crackdown against smugglers, cases fi led rose tenfold, from 18 in 2010. The Bureau of Customs has fi led 182 smuggling-related cases before the Department of Jus ce (DOJ), of which 130 are pending preliminary inves ga on at the DOJ, and 38 have been elevated or fi led as cases before the courts. The Bureau has also taken signifi cant steps to improve its Run-A er-The Smugglers (RATS) program, which includes capacity- building for more eff ec ve inves ga on, case profi ling, and case build-up. Established by the Bureau in July 2005 and formally launched in 2006, the RATS program is mandated to detect and prosecute smugglers and other customs and tariff law violators. Organiza onal measures/OP Crea on of new offi ces under DOF (Offi ce of Revenue Agency Moderniza on & Customs Policy Research Offi ce) to review current systems in revenue genera ng agencies; and reorganiza on of the Bureau of Customs Fiscal Incen ves Ra onaliza on The FIR aims to enhance transparency and accountability in the grant and administra on (FIR)/DOF of tax incen ves. Based on a 2011 DOF es mates, foregone revenues from redundant incen ves amount to P144 billion.16 In 2016, the total es mated investment tax expenditures amounts to P201.5 billion. (See Table K.1 of the 2016 BESF for the breakdown.) Tax Incen ve Management and TIMTA aims to enhance transparency and accountability in the grant of tax incen ves by Transparency Act (TIMTA)/DoF ins tu onalizing a system of monitoring and repor ng tax expenditures. Customs Moderniza on and This measure aims to promote and secure interna onal trade, protect government Tariff Act (CMTA)/BOC revenue and modernize customs and tariff administra on by adop ng customs policies and procedures which are consistent with interna onal agreements and customs best prac ces. Fiscal Regime for Mining This is a plan to design a scheme which adopts a single fi scal regime and a simple formula Industry/ Mining Industry in determining sharing arrangement. A bill has been dra ed and submi ed to the Coordina ng Council Presiden al Legisla ve Liaison Offi ce. Valua on Reform Act (VRA) The VRA aims to reform the country’s real property valua on system to make it effi cient and equitable. While the real estate comprises about 50-75 percent of the country’s wealth, it only contributes 6 percent to the gross na onal product in the past 10 years.17 The Valua on Reform Act (HB No. 05288) has already been approved on Third Reading. LGU Income Reclassifi ca on This measure is being pushed to ra onalize income requirements for LGU conversion to make an LGU’s income class refl ec ve of its fi nancial capability.

13 BIR: Running A er Tax Evaders Pays Dividends (2012, August 14). GMA News Online. Retrieved July 3, 2015, from h p://www.gmanetwork. com/news/story/269648/economy/ﬁ nance/bir-running-a er-tax-evaders-pays-dividends 14BIR 15Customs’ an -smuggling campaign scores (2014, October 22). Retrieved July 19, 2015 from h p://www.dof.gov.ph/customsngbayan/?p=8161. 16Financing the 2015 Budget. 2015 Budget Briefer, Congressional Policy and Budget Research Department, October 2014. 17Valua on Reforms: Valua on Reform Act (2014, January 15). Retrieved from h p://www.valua onreforms.org.ph/2014/01/valua on-reform- act/

25 Technical Notes on the 2016 Proposed Na onal Budget

several reforms, such as the Fiscal Incen ves services as scarce funds are channelled to pay for Ra onaliza on (FIR) and the Tax Incen ves debts. A decade ago, in 2005, the Debt Burden21 Management and Transparency Act (TIMTA), took up 31.8 percent or P301.5 billion of total are currently being pushed by the government. government expenditures, more than the share of Congress is expected to approve the TIMTA soon. Both reforms will help ensure transparency and Figure 2. Impact of Proac ve Debt accountability in gran ng tax incen ves. Management

In 2016, investment tax expenditures is projected to reach about P201.6 billion, 11.9 percent higher than the 2015 level of P180.2 billion. These investment incen ves are provided to business ac vi es under the Investment Promo on Agencies, such as the Board of Investments (BOI), the Philippine Economic Zone Authority (PEZA), and the authori es managing the duty free ports and economic zones, to help enhance investments and job crea on. For instance, the BOI can provide income tax holidays to business ac vi es Source: DoF “falling within the Investment Priority Plan18.”Of the total amount provided for investment tax Social Services in the same year. As of end-2014, expenditures, 73.6 percent, or P148.5 billion was this had been reduced to a mere 16.6 percent of set aside for investors in the PEZA. (See Table K.2 total expenditures. of the FY 2016 BESF Tables for details.) With the government’s proac ve debt Disbursements. Na onal government management, debt burden on expenditures disbursements19 will reach P3.005 trillion, which has substan ally decreased. As a percentage of is equivalent to 19.5 percent of GDP and 17.5 revenues, interest payments had decreased to percent higher than this year’s P2.559 trillion 16.8 percent in 2014 from 31.7 percent in 2006. program. This amount will be used not only to As a percentage of expenditures, it has declined se le accounts payables from the prior fi scal years likewise to 16.2 percent from 29.7 percent in the but also to support the programs and projects same period. The result—more fi scal space to funded by the P3.002-trillion obliga on Budget20 fi nance social and economic ac vi es. in 2016. The growth in disbursements will enable the government to expand public spending In tandem with its eff orts to expand revenues, for crucial social and economic expenditures, strategic liability management enabled the especially infrastructure and capital outlays (see government to keep the fi scal defi cit to within 2 next sec on for the Dimensions of the Proposed percent of GDP and reduce the debt burden on the Expenditure Program). In the medium term, Budget. The strong performance of social security disbursements are expected to go up to P3.380 ins tu ons, such as the Social Security System, trillion in 2017 and to P3.767 trillion in 2018 to the Government Service Insurance System, and sustain inclusive growth. the Philippine Health Insurance Corpora on; the revenues from the LGUs; and the government Debt Management. A large debt stock constrains fi nancial ins tu ons are expected to yield investments for crucial social and economic higher surpluses next year. Thus, the projected

18 Tax Expenditure Account of the Philippines. Retrieved July 20, 2015 from h p://www.dof.gov.ph/wp-content/uploads/2014/04/PH-TES_ITI- 2011-FINAL.pdf 19 Disbursements refer to the se lement of government obliga ons either in currency, check, or construc ve cash. The la er includes the issuance of Tax Remi ance Advice for the remi ance to BIR of taxes withheld from employees and suppliers, as well as the Non-Cash Availment Authority for direct payments made by interna onal fi nancial ins tu ons to suppliers and consultants of foreign assisted projects. 20 The obliga on Budget refers to the programmed amount out of total appropria ons needed to enable the na onal government to contract the delivery of goods and services in a given fi scal period. The cash Budget, or disbursements, meanwhile pertain to the use of actual cash and other means (see prior footnote) to se le obliga ons incurred by the government for the delivery of such goods and services. 21 Debt Burden is the sum of debt servicing-interest payments and net lending to government corpora ons to service their debts. 26 Technical Notes on the 2016 Proposed Na onal Budget consolidated public sector defi cit is expected management, the country’s gross borrowing will to decline to P129.8 billion in 2016 from P153.5 decline from P710.8 billion this year to P674.8 billion this year. billion next year, which will be used to fi nance the P308.7-billion fi scal defi cit, amor ze P347.7 billion To reduce the exposure to foreign exchange in maturing obliga ons, and maintain suffi cient fl uctua ons and other external risks, the available cash. About 66 percent or P230.1 government recalibrated its borrowing mix toward billion of government servicing for principal domes c lenders and redenominated foreign- payment will be used for domes c debt and the denominated debts through buybacks and other remaining P117.6 billion for foreign obliga ons. approaches. The government also extended The government will also set aside P12.9 billion the maturi es of its debts to reduce near-term for its cash buff er account to handle vola lity in debt amor za on requirements. Moreover, the fi nances. country’s investment-grade credit ra ng allowed the government to reduce the interest rates from Consistent with its fi scal consolida on strategy, domes c and interna onal capital markets. the government will con nue to favor the domes c market for its borrowing requirements, Gross Borrowings. Buoyed by the improving with an 84.5:15.5 fi nancing mix, to lessen foreign revenue collec ons and eff ec ve liability debt exposure and shield the country from foreign exchange risks. Of the total borrowings in 2016, Table 6. Na onal Government Financing, P570.2 billion will be sourced from the domes c 2014-2016 (in billion pesos) market, such as from treasury bills and fi xed rate treasury bonds. The balance of P104.6 billion Par culars 2014 2015 2016 (Actual) Program Proposed will be obtained from external sources, such as concessional loans for foreign-assisted projects Net fi nancing 175.2 296.8 327.1 (P71.2 billion) and from global capital markets Net Foreign Borrowings 12.6 55.1 (13.1) (P33.4 billion). (Refer to BESF Table D.1 for details Gross Foreign Borrowings 141.9 178.1 104.6 on borrowing.) Program Loans 56.6 73.4 54.1 Project Loans 17.6 15.4 17.1 Bonds and Other Outstanding Na onal Government Debt. The Infl ows 67.7 89.4 33.4 government’s fi scal consolida on eff orts had Less: Amor za on 129.4 123.1 117.6 reduced the magnitude of outstanding government debts as a propor on of the economy: from 54.8 Net Domes c Borrowings 162.7 241.8 340.2 22 Gross Domes c Borrowings 387.8 532.7 570.2 percent of GDP in 2009 to 45.4 percent of GDP Treasury Bills (39.2) 40.0 49.5 in 2014. Fixed Rate Treasury Bonds 427.0 492.7 520.7 Less: Amor za on 225.2 290.9 230.1 Change in cash 37.8 7.9 12.9 Figure 3. Outstanding Debt of the Na onal Budgetary accounts 102.2 13.1 18.4 Non-budgetary accounts (64.3) (5.3) (5.4) Government, 2004-2014 NG Transac ons (61.6) 0.3 0.3 (As percentage of GDP) CB Restructurng Outstanding Debt of the National Government, 2004-2014 Transac ons (2.7) (5.6) (5.7) 100% 16.2 14.9 Total Net Financing 80% 29.9 24.6 23.8 26.1 22.4 21.7 21.6 19.8 19 Requirement 73.1 283.7 308.7 60% 40% 30.8 30.2 33.8 38.1 34.4 31.9 31.2 30.8 30.1 29.5 32.9 Gross Borrowings 529.8 710.8 674.8 20% Financing Mix (%) 100 100 100 0% External 26.8 25.1 15.5 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Domes c 73.2 74.9 84.5 Domestic Foreign

Source: 2016 BESF Table D.1 Source: Fiscal Sta s cs Handbook (Table III.B.2), FY 2016 BESF Note: Numbers may not add up due to rounding Table D.3

22Department of Finance

27 Technical Notes on the 2016 Proposed Na onal Budget

The government’s debt management strategies economic growth by tapping private capital to had improved its liability por olio. For instance augment limited government resources. The PPPs in terms of percentage distribu on, foreign- also enabled the government to tap the exper se denominated outstanding debts had been and skills of the private sector to provide adequate reduced from 21.7 percent of GDP in 2009 to 14.9 and effi cient infrastructure. percent in 2014. As a result, the domes c-foreign ra o of outstanding debts had further improved Benefi ts of PPP from 58.6:41.4 in 2009 to 67:33 in 2014. • Addresses the country’s infrastructure gap in a faster way • Encourages infusion of private sector skills and The government had also engaged in bond capital to public sector projects exchange transac ons to extend maturi es of • Allocates risk to the party who can best manage or domes c and foreign debt. In 2014, 88 percent absorb it of the na onal government’s outstanding debt • Forces the public sector to focus on projects which had long term maturi es while 5 percent had due to externali es are not a rac ve to private sector short-term maturi es (i.e., 90 days). Likewise, the • Encourages innova on through use of private sector average maturity of the country’s debt por olio skills had been sustained at 9.9 years23. Although a Source: PPPC, DBM longer debt maturity enables the government Since 2010, the government, through the PPP to fi nance cri cal programs, it can pose a fi scal Center, has put in the pipeline 61 PPP projects with risk to future governments especially if debt is an indica ve cost of P1.212 trillion or USD 26.93 24 not strategically managed . Hence, the need billion. Of this number, 10 projects, amoun ng to fully ins tu onalize eff ec ve public fi nancial to P189 billion, or USD 4.20 billion, have been management. awarded as of July 2015 and are undergoing various stages of implementa on. These projects Con ngent Liabili es. As part of its debt include the Cavite-Laguna Expressway (CALAX), management reform, the Aquino administra on the Southwest Terminal of the Integrated established a Risk Management Program to handle Transport System, the LRT Line 1 Cavite Extension, exposure to con ngent liabili es. These liabili es the Mactan-Cebu Interna onal Airport (MCIA) mostly occur from the payment of government Passenger Terminal Building, the Automa c Fare guarantees and liabili es related to public-private Collec on System, the Moderniza on of the partnership (PPP) agreements. For next year, the Philippine Orthopedic Center (MPOC), the PPP government will sustain its P30 billion alloca on for School Infrastructure Project (PSIP) Phases I for the Risk Management Program to cover and II, the NAIA Expressway Phase II Project, and commitments made by the government as well the Daang Hari-SLEX Link Road26. In addi on, as its obliga ons in the concession agreements 13 projects worth P517.98 billion or USD 11.51 rela ve to PPP projects. billion are currently undergoing procurement.

Public-Private Partnerships (PPPs). As an alterna ve The PPPs, however, pose key fi scal risks, such as source of fi nancing, the PPPs are “broadly defi ned con ngent liabili es that could arise from the as (a) contractual agreement(s) between the government’s fi nancial guarantees including debt Government and (a) private fi rms targeted and equity guarantees; or when the government towards fi nancing, designing, implemen ng, and fails to deliver its commitments in the PPP opera ng infrastructure facili es and services contracts and hence must provide a monetary that were tradi onally provided by the public compensa on to the private concessionaire. For 25 sector .” The Aquino administra on launched instance, “if the government failed to increase and expanded the PPP Program in 2010 to expand tariff on a public facility [as commi ed] on investments in infrastructure and thereby spur me, or [deliver a commi ed road right of way

23 Year-End Report on the 2014 Na onal Budget 24 Congressional Policy and Budget Research Department 2015 Budget Briefer 25 Deﬁ ni on li ed from the website of the Public-Private Partnership Center. Retrieved from (h p://ppp.gov.ph/?page_id=27574). 26 PPP Center 28 Technical Notes on the 2016 Proposed Na onal Budget

Figure 4. PPP Projects in the Pipeline

Source: PPP Center purchase], then the private-sector investor might have to be compensated. If the government failed to fulﬁ ll [or remedy] some terms stated in the PPP contracts, it might also have to buy out the private- sector investment27.” To handle these risks, the government created a Con ngent Liability Fund, currently called the Risk Management Program, to pay for valid con ngent liabili es. It is lodged under the Unprogrammed Fund. (Please refer to the Fiscal Risks Statement for more details of the risks associated with PPPs.)

27 Remo, M. (2013, May 13). Government may set aside P30 B for PPP breaches. Retrieved July 20, 2015 from h p://business.inquirer. net/121497/govt-may-set-aside-p30b-for-ppp-breaches

29 Technical Notes on the 2016 Proposed Na onal Budget

III. Dimensions of the Proposed 2016 Na onal Budget

Under the Aquino administra on, the Na onal A. The Budget by Sector Budget has nearly doubled the P1.541-trillion GAA for 2010. As a result of reforms to improve Aﬃ rming the administra on’s commitment to the quality and pace of public spending, the ensure that no one should be le behind as the proposed expenditure program for 2016 will country progresses, about 64 percent of the total reach 19.5 percent of GDP—the highest so far Budget for next year will go to social and economic since 19861 (see Table 1). As revenues con nue services. Broken down by sector, the 2016 Budget to grow drama cally, the government will have con nues to allocate the largest share (36.8 enough resources to support development needs percent) to social services, followed by economic that have been underfunded through the years services (27.6 percent), general public services when debt payments squeezed the already limited (17.3 percent), interest payment (13.1 percent), ﬁ scal space. Meanwhile, to execute this Budget, defense (4.3 percent), and net lending (0.9 percent) necessary measures have been put in place to (see Table 2). address the weaknesses that hamper the ability of the agencies to deliver services with greater speed Table 2. Sectoral Breakdown of the 2016 Budget and impact. (in million pesos) Par culars 2015 2016 Growth % Table 1. Average Na onal Expenditure-to-GDP Adjusted Proposed Rate Share Ra o of Post-EDSA Administra ons Economic Services 706,991 829,596 17.3 27.6 Administra on Period Average Ra o Social Services 952,740 1,105,897 16.1 36.8 Defense 115,785 129,074 11.5 4.3 Corazon C. Aquino 1986-1992 17.0 General Public Fidel V. Ramos 1993-1998 17.7 Services 431,120 517,936 20.1 17.3 Joseph E. Estrada 1999-2000 18.5 Net Lending 26,500 26,500 0 0.9 Gloria Macapagal-Arroyo 2001-2010 17.2 Debt Payment- Benigno S. Aquino III 2011-2016 17.5 Interest Payment 372,863 392,797 5.3 13.1 TOTAL 2,606,000 3,001,800 15.2 100.0 Note:1986-2013 based on actual expenditures (obliga ons) as reported in the Fiscal Sta s cs Handbook; 2015 based on the enacted Budget; and 2016 based on the proposed Budget.

The succeeding sec ons describe how the design of The sectoral makeup of public expenditures has the 2016 Proposed Budget will support the current drama cally improved over the course of the administra on’s thrust for inclusive and sustained Aquino administra on, driven by its emphasis on development through good governance, and how poverty reduc on and sustained economic growth. it will equip the succeeding administra on with To bankroll its agenda for inclusive development, a budget that provides las ng and measurable it implemented game-changing reforms such as impact. Zero-Based Budge ng and the Budget Priori es Framework.

1 excluding the 2015 Budget, the highest expenditure-to-GDP ra o since 1986 was 19.1 percent in 2000. 30 Technical Notes on the 2016 Proposed Na onal Budget

Historical Pa erns of Expenditures per Sector, the Budget in 1997. This enabled it to increase 1986-2016 investments in Social and Economic Services, which reached a combined 59.1 percent in the The Social and Economic Services sectors same year. However, the Debt Burden increased garnered the highest shares of total government anew—to 21.0 percent in 2000—during the expenditures under the Aquino Administra on, abridged term of President Joseph E. Estrada. averaging 35.6 percent and 25.8 percent, respec vely, from 2011 to 2016. At the same The fi rst few years of the Arroyo Administra on me, the Debt Burden has eased to an average saw the drama c increase of the debt service annual share of 16.7 percent—the lowest so far payments, leading to the declara on of a fi scal seen in the last fi ve administra ons. crisis. The share of Debt Burden to total Budget Table 3. Average Share of Social Services, rose to an alarming 31.8 percent in 2005, similar Economic Services, and Debt Burden to Total to the level in 1992. This consequently decreased Budget, 1986-2016 the total share of Social and Economic Services to 45.3 percent—the lowest since 1988. The Administra on Period Economic Social Debt Services Services Bur- passage of new tax measures, most notably the den increase in the Value-Added Tax rate in 2005, eventually led to the decrease of the Debt Corazon C. Aquino 1986-1992 23.2 22.2 33.8 Burden to 20.6 percent in 2010. Fidel V. Ramos 1993-1998 25.5 28.0 21.4 Joseph E. Estrada 1999-2000 24.2 32.2 19.9 Gloria Macapagal-Arroyo 2001-2010 22.9 28.6 25.7 Upon its assump on to offi ce, the Aquino Benigno S. Aquino III 2011-2016 25.8 35.6 16.7 administra on jumpstarted the rollout of bold Note: 1986-2014 fi gures are based on actual expenditures; public expenditure management reforms to 2015 fi gures are based on enacted; and 2016, on proposed. reshape budget priori es and increase social and economic investments without passing new Under the administra on of President Corazon taxes except for the Sin Tax Reform Law. As a C. Aquino, the Debt Burden had the highest result of eff orts to de ly manage government’s share of the Budget among all sectors as liabili es, reduce spending on leakage-prone a result of the decision to honor the debts programs and projects, and align expenditures incurred by the Marcos regime. The Debt with the Philippine Development Plan, the Burden, which peaked at 36.1 percent in 1987 Aquino administra on successfully raised the before dwindling down to 31.3 percent in combined share of Social and Economic Services 1992, severely constricted the fi scal space for to 64.4 percent under the 2016 Budget, the development spending. highest in the last three decades; and to reduce the Debt Burden to 14.0 percent, the lowest in The Ramos Administra on further reduced the same period. the Debt Burden to as low as 16.2 percent of New Classifi ca on of the Budget by Sector Thus, beginning with the 2016 Proposed Budget, the government adopted the Classifi ca on About the New Classifi ca on. The current method of Func ons of Government (COFOG), an for compu ng the Budget by sector involves the interna onal standard developed by the a ribu on of the total budgets of the agencies to Organiza on for Economic Co-opera on and fi ve sectors. For instance, the whole budget of the Development (OECD) and published by the United Department of Labor and Employment-Offi ce of Na ons Sta s cal Division, to classify budgetary the Secretary (DOLE-OSEC) falls under the Social outlays according to func on or sector. Rather Services sector. While this method enables a broad than tagging a whole agency’s budget under one presenta on on how the Budget is distributed sector under the current classifi ca on, the use among the fi ve major sectors, it unfortunately of COFOG categorizes agencies’ programs and falls short of providing an accurate presenta on projects (or budget items) according to func on of how public expenditures contribute to mee ng so that an agency’s contribu on to mul ple socio- the government’s socioeconomic objec ves. economic objec ves is accurately refl ected. For 31 Technical Notes on the 2016 Proposed Na onal Budget

instance, DOLE-OSEC’s budget is now distributed Table 5. Sectoral Alloca on as % of GDP among the General Public Services, Economic Aff airs, and Social Protec on. As such, the COFOG Func on 2015 2016 accurately refl ects the alloca on of resources to the real func ons of government. General Public Services 8.24 8.08 Defense 0.63 0.64 Public Order and Safety 0.85 0.89 COFOG classifi es expenditures according to Economic Aff airs 3.25 3.43 ten government func ons or sectors. The fi rst Environmental Protec on 0.04 0.04 fi ve sectors—General Public Services, Defense, Housing and Community Ameni es 0.08 0.1 Public Order and Safety, Economic Aff airs, and Health 0.69 0.82 Recrea on, Culture, and Religion 0.06 0.04 Environmental Protec on—are generally aimed at Educa on 2.82 3.17 the collec ve benefi t of society—through robust Social Protec on 2.07 2.32 economic growth backed by an environment of Note: stability and good governance. These sectors Nominal GDP (2015): 13,919,080 ensure that economic growth is sustained in a Nominal GDP (2016): 15,376,569 manner that creates jobs and opportuni es. The fi rst sector, General Public Services, which includes Table 5 shows the ra o of the sectors vis-à-vis public debt transac ons and transfers to local GDP for 2015 and 2016. As shown in the table, governments and government corpora ons, could educa on and health spending as a percentage of be considered to represent the government’s GDP has increased. opera ng or overhead expenditures. General Public Services. This sector represents Meanwhile, Housing and Community Ameni es, 41 percent of the 2016 Budget, which is roughly Health; Recrea on, Culture, and Religion, the por on of the Budget for the government’s Educa on, and Social Protec on sectors are overall overhead expenses. This sector represents aimed at benefi ng ci zens, especially the poor expenditures for general administra on, such as and marginalized. These sectors ensure that they lawmaking, fi scal management, foreign aff airs, are provided with the necessary educa on, skills, governance, and other regulatory services. Unlike and training so that they land be er and high- the old classifi ca on, this sector also includes paying jobs as a result of uninterrupted economic public debt transac ons, intergovernmental growth and increased produc vity. transfers, and the general administra on expenses of all the agencies. The subsidies to local Overview of the Budget by COFOG. Spread government units (LGUs) in the old classifi ca on according to the COFOG, General Public Services were broken down per sector under which these will take 41.4 percent of the total Budget, followed expenditures fall. Net Lending and Debt Service- by Economic Aff airs (17.6 percent), Educa on (16.2 Interest Payment were separate sectors in the old percent), and Social Protec on (11.9 percent) (see classifi ca on (see Table 6). Table 4).

Table 4. Sectoral Breakdown of the 2016 Budget (COFOG) (in thousand pesos) Func on 2015 2016 Growth Rate % Distribu on (2015-2016) 2015

General Public Services 1,146,441,763 1,242,996,081 8.42 41.41 Defense 87,751,991 99,070,945 12.9 3.3 Public Order and Safety 118,814,022 136,834,952 15.17 4.56 Economic Aﬀ airs 452,293,733 527,132,573 16.55 17.56 Environmental Protec on 5,140,227 5,499,518 6.99 0.18 Housing and Community Ameni es 10,964,345 15,051,431 37.28 0.5 Health 96,552,825 125,419,137 29.9 4.18 Recrea on, Culture, and Religion 7,852,396 6,091,492 -22.43 0.2 Educa on 392,387,531 487,488,294 24.24 16.24 Social Protec on 287,801,167 356,215,577 23.77 11.87 TOTAL 2,606,000,000 3,001,800,000 15.19 100

32 Technical Notes on the 2016 Proposed Na onal Budget

Of the P1.2 trillion allocated for this sector, Table 6. Subsectors of the General Public Intergovernmental Transfers account for 38.9 Services Sector percent. This includes P428.6 billion in automa c (in thousand pesos) appropria ons for the Internal Revenue Allotment Func on Amount % of (IRA) of LGUs, which was a 10-percent increase Sector from the 2015 level due to increased revenue collec on. A policy for 2016 will involve the Bureau GENERAL PUBLIC SERVICES 1,242,996,081 100 of the Treasury directly releasing to the LGUs the Execu ve and legisla ve organs, fi nancial and fi scal IRAs and special shares in the na onal government aff airs, external aff airs 68,241,443 5.49 revenues. Intergovernmental Transfers account Foreign economic aid 223,037 0.02 for 16.1 percent of the total Budget. General services 253,185,422 20.37 Basic research 300,000 0.02 More than a third or 33.7 percent of the sector’s R&D general public services 67,180 0.01 General public services, budget represents Public Debt Transac ons (or not elsewhere classifi ed (n.e.c) 17,472,252 1.41 the Debt Burden), including the P392.8 billion Public debt transac ons 419,297,000 33.73 payment of interests and P26.5 billion net lending Integovernmental transfers 483,166,482 38.87 to the government corpora ons. The share of the Governance/government debt burden to the total P3-trillion budget is at ins tu ons and regulatory regime 1,043,265 0.08 14 percent. This por on has decreased over the past fi ve years due to the country’s defi cit control mechanisms, smarter borrowing, and prudent adaptability to the changing dynamics of territorial debt management. This Budget is anchored on security. The defense sector budget includes the policies that rely on domes c borrowing alloca on to military defense, civil defense, to reduce the country’s exposure to external foreign military aid, research and development shocks, lengthen the maturi es of country’s debts (R&D), among others. to lessen the burden on the present Budget, and begin conver ng external debts to peso denomina on to lessen risks in the country’s debt Table 7. Subsectors of Defense Sector por olio. (in thousand pesos) Func on Amount % of Meanwhile, General Services account for 20.4 Sector percent or P253 billion of the Budget, which modestly increased by 8 percent over that in DEFENSE 99,070,945 100 Military Defense 97,327,685 98.24 2015. This subsector represents expenditures Civil Defense 426,582 0.43 for the overall planning of sta s cal services Foreign military aid 8,607 0.01 and the administra on of general personnel R&D defense 19,668 0.02 services involved, including among others, human Defense against cybercrimes 17,813 0.02 resources, civil service, records and archives, Defense n.e.c 1,270,590 1.28 prin ng opera ons, and motor pools. This sector was allocated P99 billion, which is About 5.5 percent of the General Public Services equivalent to 3 percent of the total budget. Almost sector will go to the Execu ve, Legisla ve, 98 percent of this will go to Military Defense to Financial, and External Aff airs. It is notable support the Armed Forces of the Philippines’ that the 2016 Budget will fund programs that con nuing moderniza on to strengthen its ability seek to automate public fi nancial management to protect the country’s territory and sovereignty func ons, such as the Comprehensive Human (see Table 7). Resource Informa on System for HR and payroll management and the Treasury Single Account for Public Order and Safety. This sector was allocated cash management. P136 billion to strengthen the country’s judicial system, law enforcement, prison management, Defense. The Budget invests in upgrading the and fi re protec on, among others, in order to capabili es of the armed forces to further build its foster a climate of peace and security.

33 Technical Notes on the 2016 Proposed Na onal Budget

The country’s Police Services, including the in the country’s public infrastructure, which Philippine Na onal Police (PNP), the Bureau of facilitates transport of goods and services, links Immigra on, the Na onal Bureau of Inves ga on, people with opportuni es, and reduces the cost the Philippine Coast Guard, and the Philippine of doing business. This Budget will support the Drug Enforcement Agency, among others, was government’s priority Transport Infrastructure allocated P92.2 billion. This Budget seeks to Program with an alloca on of P245.8 billion. This increase police visibility by procuring patrols and program seeks to complete the pavement of all other tools, as well as meet the standard police- na onal arterial and secondary roads; provide to-popula on ra o. addi onal funding to boost the Mindanao Logis cs Infrastructure Network; improve airport, Table 8. Subsectors of the Public Order and seaport, and mari me transport systems; fund Safety Sector bus rapid transits to decongest roads and provide (in thousand pesos) alterna ve ways of public commu ng; and Func on Amount % of Sector support alterna ve means of commu ng through be er rail transport systems. PUBLIC ORDER AND SAFETY 136,834,952 100.00 Police services 92,219,303 67.39 Agriculture, Forestry, Fishing, and Hun ng, as Fire protec on services 10,701,742 7.82 Law courts 18,871,462 13.79 central to sustaining the country’s eff orts on self- Prisons 9,519,176 6.96 suffi ciency and poverty reduc on, was allocated R&D public order and safety 69,314 0.05 P108.0 billion, equivalent to 20.5 percent of Public order and safety n.e.c 5,453,955 3.99 total Economic Aff airs budget. In par cular, the Agriculture Development Program will receive

Set aside was P18.9 billion for Law Courts to Table 9. Subsectors of the Economic support the fair and speedy delivery of jus ce to Aff airs Sector every Filipino regardless of age, gender, or social (in thousand pesos) standing. Of this, P16.46 billion was allocated to the Judiciary for the swi disposi on of cases. Func on Amount % of Sector The rest of the subsector budget will go to the Department of Jus ce to ensure that indigents ECONOMIC AFFAIRS 527,132,573 100.00 receive free legal service, and to ensure that the General economic, commercial, and labor government is properly represented in legal cases. aff airs 34,848,610 6.61 Agriculture, forestry, fi shing, Economic Aff airs. Represen ng 17.6 percent of and hun ng 107,965,171 20.48 the total Budget, the Economic Aff airs sector was Fuel and energy 4,411,855 0.84 allocated P527.1 billion. This alloca on includes Mining, manufacturing, and construc on 872,779 0.17 expenditures for the government’s ac vi es that Transport 352,752,284 66.92 promote economic growth, compe veness Communica on 4,121,476 0.78 of industries, and job crea on. In the old Other industries 4,735,720 0.90 classifi ca on, economic services included outlays R&D economic aff airs 7,386,114 1.40 for the environment, which is now under a Economic aff airs n.e.c 10,038,564 1.90 diff erent classifi ca on in the COFOG system. P83 billion, which will be used to increase yields in The Budget Priori es Framework for 2016 states the con nuing work to reach self-suffi ciency, link that as growth is in the process of becoming up the agriculture sector with the industry and inclusive, economic expansion must be accelerated service sectors with increased produc on of raw to ensure that the unemployed and the poor— materials, and improve the sector’s resilience to who are currently being provided with be er disasters and the eff ects of climate change. educa on, social safety nets, and healthcare— and have access to more and be er quality jobs. Environmental Protec on. Recent calami es, which more greatly aff ect poor communi es, Transport will take 66.9 percent of the sector’s have upended signifi cant gains in poverty total alloca on, or about P352.8 billion to invest reduc on. This reality indicates that the poor 34 Technical Notes on the 2016 Proposed Na onal Budget has yet to reach a higher living standard so that Table 11. Subsectors of the Housing and they become resilient even in the face of natural Community Ameni es Sector disasters and the drama c macroeconomic (in thousand pesos) changes, such as food infl a on. The challenges brought about by the changing climate and the Func on Amount % of Sector vulnerabili es of the grassroots communi es can be dealt with: the 2016 Budget will fund eff orts HOUSING AND COMMUNITY on building resilience among them; using natural AMENITIES 15,051,431 100.00 resources in a sustainable way; and protec ng the Housing development 118,702 0.79 environment. Community Development 1,397,596 9.29 Water supply 12,801,025 85.05 Street ligh ng 659,600 4.38 The Environmental Protec on sector was R&D 5,000 0.03 allocated P5.5 billion, broken down as follows: n.e.c 69,508 0.46 waste management, P1.22 billion; waste water management, P526 million; pollu on abatement, This sector also covers the budgets of housing P1.55 billion; biodiversity protec on, P1.17 billion. regulatory offi ces, such as the Housing and Urban Though this COFOG sector accounts for less than Development Council, the Land Registra on one percent of the total Budget for 2016, other Authority, and the Housing and Land Use ways of classifying expenditures demonstrate Regulatory Board. Hpwever, note that the actual how climate change adapta on and disaster risk provision of housing facili es for poor families is reduc on and management is one of the fi ve key part of the Social Protec on sector.

Table 10. Subsectors of the Environmental Health. To support the universal healthcare agenda Protec on Sector of the Aquino Administra on, the Health sector (in thousand pesos) budget for 2016 is P125.4 billion, accoun ng for Func on Amount % of Sector 4.2 percent of next year’s Budget and increasing by 29.9 percent over 2015 levels. ENVIRONMENTAL PROTECTION 5,499,518 100.00 Waste management 1,223,677 22.25 Accoun ng for the largest share of this sector’s Waste water management 525,884 9.56 Pollu on abatement 1,545,935 28.11 total budget at 36.8 percent is the Public Health Protec on of biodiversity and Services subsector, which was allocated with landscape 1,173,198 21.33 P46.1 billion or an increase of 77 percent over the R&D 123,319 2.24 2015 level. In par cular, this will support primary Environment protec on n.e.c 907,505 16.50 healthcare providers, such as barangay health sta ons and rural health units with well-trained priori es of the Aquino administra on. For one, human resources, essen al equipment, and other based on the Climate Change Expenditure Tagging requirements, so these units can successfully be exercise, a preliminary total of P129.3 billion or 4.3 accredited by the Philippine Health Insurance percent of the 2016 Budget is for various climate Corpora on (PHIC). The accredita on of these change adapta on and mi ga on programs and health units will allow poor households with projects that cut across sectors (see page 95 to 96 health insurance subsidized by the na onal for more informa on). government to avail of their healthcare benefi ts. It is noteworthy that the alloca on for Public Housing and Community Ameni es. The Health Services is larger than the P32.0 billion budget for this sector covers expenses for the allocated for Hospital Services, demonstra ng the development of safe and aff ordable housing. Administra on’s greater emphasis for providing This sector will receive P15.05 billion. Of this primary healthcare that provides preven ve alloca on, P12.80 billion, or 85 percent, will fund and promo ve healthcare to poor and far-fl ung the construc on of potable water supply systems, communi es. especially in the rese lement communi es for informal se ler families living in danger zones and As primary healthcare facili es are being the families aff ected by Super Typhoon Yolanda. modernized, the government con nues to

35 Technical Notes on the 2016 Proposed Na onal Budget

Table 12. Subsectors of the Health Sector the ci zenry, a cri cal component in building a (in thousand pesos) par cipatory and ci zen-centered government. This will cover promo on of government work Func on Amount % of through its informa on channels, as well as the Sector monitoring of children’s television. HEALTH 125,419,137 100.00 Medical products, appliances, Educa on. To address the unequal access to and equipment 1,059,799 0.85 opportuni es partly caused by the lack of access Outpa ent services 63,991 0.05 to quality educa on is a step toward dealing with Hospital services 31,950,668 25.48 the broader wealth and income inequality. Thus, Public health services 46,144,143 36.79 R&D 705,097 0.56 educa on is one of the most important factors in Health insurance 43,835,766 34.95 improving the economic and social status of the n.e.c 1,659,673 1.32 poor. When the poor have access to educa on, their skills are enhanced, thus providing them with be er opportuni es to fi nd be er and high-paying subsidize the Health Insurance premiums of poor jobs. As a whole, a well-trained and educated indigent households. This subsector was allocated workforce leads to higher produc vity, which is P43.84 billion or 34 percent of the total Health crucial to sustaining economic growth. Toward sector budget. this end, the government introduced cri cal reforms in the educa on system by including a Recrea on, Culture, and Religion. The expenses year of kindergarten and two addi onal years of involved in this sector, formerly lumped under senior high school. This reform requires a boost in the Educa on sector in the old classifi ca on, funding key educa on inputs, such as classrooms, pertain to the promo on of cultural heritage, textbooks, and most important, teachers. In 2016, broadcas ng and publishing services, and senior high schools will open na onwide, signalling recrea on and sports. Strengthening the na onal the start of the full 12-year basic educa on cycle. iden ty is a vital ingredient in sustaining the country’s development; thus, about two-thirds, or Thus, the Educa on sector was allocated P487.5 P3.41 billion, of the sector’s total budget will go to billion—increasing by 24.2 percent from 2015— Cultural Services. to ensure the success of the K to 12 Program and con nue the equally important eff orts in this front. Moreover, the country’s eff orts to deliver The Pre-Primary and Primary Educa on subsector informa on on public goods and services through Broadcas ng and Publishing Services will be funded P475.9 million. Through this budget, Table 14. Subsectors of the Educa on Sector the Aquino administra on con nues to inform (in thousand pesos)

Func on Amount % of Sector Table 13. Subsectors of the Recrea on, Culture, and Religion Sector EDUCATION 487,488,294 100.00 (in thousand pesos) Pre-primary and primary educa on 169,914,736 34.86 Func on Amount % of Sector Secondary educa on 144,779,548 29.70 Post-secondary non-ter ary RECREATION, CULTURE, and educa on 62,373 0.01 RELIGION 6,091,492 100.00 Ter ary educa on 36,732,495 7.54 Recrea onal and spor ng Educa on not deﬁ nable by services 655,265 10.76 level 10,918,824 2.24 Cultural services 3,832,841 62.92 Subsidiary services to Broadcas ng and publishing educa on 5,065,561 1.04 services 1,184,795 19.45 R&D 3,445,043 0.71 Religious and other community School buildings 88,921,023 18.24 services 380,160 6.24 Educa on n.e.c 9,781,651 2.01 R&D 20,095 0.33 Pre-primary, primary, and n.e.c 18,336 0.30 secondary 17,867,040 3.67

36 Technical Notes on the 2016 Proposed Na onal Budget will receive about P170 billion or 34.9 percent of Table 15. Subsectors of the Social the sector; followed by the Secondary Educa on, Protec on Sector with a budget of P144.78 billion, or an equivalent (in thousand pesos) of 29.7 percent. As enrolment is expected to increase, an an cipa on for a demand in the Func on Amount % of Sector number of classrooms will be addressed through SOCIAL PROTECTION 356,215,577 100.00 a P88.9 billion alloca on to construct School Sickness and disability 44,994 0.01 Buildings. The Department of Educa on will Old age 115,197,581 32.34 administer 94 percent, or P83.35 billion, of this Survivors (Gender, IDPs, budget. Meanwhile, quality Ter ary Educa on Calamity Vic ms) 50,000 0.01 through the state universi es and colleges will Family and children (street families) 5,640,097 1.58 be funded P36.7 billion: a 30.6-percent increase Unemployment 4,253,269 1.19 from 2015. Housing development 32,522,736 9.13 CCT 62,665,628 17.59 Social Protec on. The government aims to assist Social exclusion n.e.c 821,144 0.23 everyone in securing be er jobs and to raise their Confl ict-aff ected areas 7,938,824 2.23 Social Protec on n.e.c 127,081,304 35.68 incomes and living standards. Equal opportunity for all means that everyone can maintain their Note: SOCIAL PROTECTION, net of the Pension and Gratuity Fund, livelihoods and avoid falling into poverty even P249.01 billion when faced with disasters and calami es. As such, disadvantaged sectors, such as senior ci zens, billion for DSWD to provide indigent senior ci zens people with disabili es, children, and women, are a monthly pension of P500. provided access to social safety nets as they work toward raising their living standards. Families B. The Budget by Expense Class in the informal sector are highly vulnerable to poverty and other natural hazards because of While Current Opera ng Expenditures2 s ll their loca on in danger zones. account for a lion’s share of the 2016 Budget (70 percent or P2.09 trillion), alloca ons for Capital Thus, the Social Protec on sector was allocated Outlays increased to 27 percent (P883.8 billion) P356.2 billion—an increase of 23.8 percent from 19.4 percent (P514.1 billion) in the 2015 from 2015—in order to provide adequate social Budget. (see Table 16). This increase refl ects the protec on to the poorest sectors. Of this amount, Aquino administra on’s commitment to ensure the Pantawid Pamilyang Pilipino Program, a maximum economic impact of the Budget (see centerpiece poverty reduc on program of the pages 19-20 for more informa on on the impact Aquino administra on, was allocated P62.67 of the Budget to GDP). In par cular, this refl ects billion to ensure that 4.6 million households will the government’s heavy investment in the receive be er protec on. country’s infrastructure: next year, it has proposed a P766.54-billion infrastructure program, which Meanwhile, Socialized Housing will receive a is equivalent to 5 percent of GDP to meet the boost in 2016 with a total budget of P32.4 billion. increasing demands of a growing economy and This alloca on increased by 290 percent over the popula on. 2015 alloca on of P9.8 billion in order to speed up the building of socialized housing. Personnel Services. This expense class con nues to get the largest share of the Budget at P810.81 The alloca on for Old Age (Senior Ci zens) accounts billion, 8.7 percent more than its alloca on in for 32 percent of the sector’s total budget, owing 2015. Personnel services (PS) makes up 27.0 to the P107.2-billion budget for the Pension and percent of the total Budget. Gratuity Fund for re ring government employees. Apart from this, this subsector allocates P7.99

2 Current opera ng expenditures refer to the sum of alloca ons for salaries, maintenance expenditures, interest payments, subsidies to Gov- ernment-Owned-and-Controlled Corpora ons, and other mandatory expenditures. 37 Technical Notes on the 2016 Proposed Na onal Budget

Table 16. Breakdown of the 2016 Budget by Expense Class (in thousand pesos) Par culars 2015 2016 Growth Rate % Distribu on (2016)

CURRENT OPERATING EXPENDITURES 1,910,837,446 2,091,060,910 9.4 69.7 Personnel Services 745,964,785 810,811,054 8.7 27.0 MOOE 463,325,230 515,474,960 11.3 17.2 Financial Expenses 1,680,380 1,661,905 -1.1 0.1 Allotments to Local Government Units 311,888,343 342,895,614 9.9 11.4 Interest Payment 372,863,000 392,797,000 5.3 13.1 Subsidies 15,115,708 27,897,044 84.6 0.9 CAPITAL OUTLAYS 668,662,554 884,239,090 32.2 29.5 Infrastructure and Other Capital Outlay 642,688,512 817,316,181 27.2 27.2 Equity 1,042,014 31,004,939 2875.5 1.0 Special Shares to LGUs 25,228,090 35,917,970 42.4 1.2 NET LENDING 26,500,000 26,500,000 0.0 0.9 TOTAL 2,606,000,000 3,001,800,000 15.2 100.0

Across all the agencies, the DepEd s ll has the its neighbors in Southeast Asia, the country’s highest PS alloca on at P274.0 billion. Apart spending for roads, public facili es, and other from being the biggest employer among all the capital outlays will reach P817.3 billion for 2016, government agencies, the DepEd will see a marked or 27.2 percent more than the current year’s level. budget for PS at 19 percent more than that in Of this amount, the DPWH will receive the biggest 2015. This increase will, among others, allow the slice of P369.38 billion, an increase of 30 percent department to hire 62,320 more teachers in view over its current alloca ons. of the K-to-12 curriculum. DepEd’s PS alloca on is 63.3 percent of its total budget for 2016. A notable feature of the fi nal expenditure program of the Aquino administra on is the unprecedented The DILG was allocated P94.3 billion for PS, 75.3 rise in the amount allo ed for infrastructure—for percent of its total budget for 2016, to allow the irriga on, road and transport networks, housing, agency to expand its current police roster to match and other infrastructure projects—which, at or surpass the number of re ring policemen, as P766.3 billion, fi nally hits the benchmark 5 percent well as to cover the increase in the subsistence of the Gross Domes c Product (GDP)3. allowance of all uniformed personnel to P150 per day. Meanwhile, the Defense department’s budget Roads and bridges comprise P277.02 billion or for PS reaches P63.54 billion in 2016, equivalent roughly 36.2 percent of the infrastructure budget. to 54.8 percent of its total budget, will, among The DPWH was allocated P38.9 billion to construct others, help augment the subsistence allowance the proposed road networks under the Mindanao of all army, navy, and air force servicemen from Logis cs Infrastructure Network. P90 to P150 daily. Lodged under the budgets of the DepEd, the It is also noteworthy that PS-related special DPWH, and the State Colleges and Universi es purpose funds (SPFs)—the Miscellaneous (SUCs) was P89 billion, or 11.61 percent of the Personnel Benefi ts Fund (MPBF) and the Pension infrastructure budget, which will bankroll the and Gratuity Fund (PGF)—will signifi cantly building of classrooms across the country. decrease as some of their alloca ons will now be lodged under the budgets of key agencies (see The DOTC, the Light Rail Transit Authority, and the pages 43 and 44 for more informa on). Philippine Na onal Railways will spend at total of P10.71 billion to improve the rail transport systems Infrastructure and Other Capital Outlays. na onwide. These projects include the expansion Commi ed to sustain the economic upswing and of LRT Lines 1 and 2, the commencement of catch up on the infrastructure developments with the North and South Rail Projects, and the

3 Infrastructure outlays for 2015 comprises 4.3 percent of the GDP. 38 Technical Notes on the 2016 Proposed Na onal Budget

Table 17. FY 2016 Infrastructure Budget (3.1 percent)4. This, according to the World Bank, (in million pesos) is a much-needed measure to close the gaps5 resul ng from decades of anemic spending on Par culars 2015 2016 public works and other capital outlays, which had Roads and Bridges 222,477 277,016 been on constant decline since the 1970s, and Basic Educa onal Facili es 60,972 88,978 had languished between 0.9 to 2 percent between Flood Control Structures/Facili es/ 1991 and 2005. Drainage/Protec on Works 48,416 63,293 Housing 10,609 32,527 Maintenance and Other Opera ng Expenditures. Na onal Irriga on 26,339 25,555 Military, Police and Security For 2016, maintenance and other opera ng Equipment 20,000 25,000 expenditures (MOOE) will take up P515.5 billion, Health Facili es 14,043 19,568 or 17.2 percent of the budget, which is 11.3 Mul -Purpose Facili es 13,189 18,729 percent more than the budget in 2015. The P52- Government Buildings 7,942 14,763 billion increase will facilitate the expansion of Farm-to-Market Roads 16,352 14,206 Railways 13,947 10,706 assistance and subsidies under the major social Forestry and Fisheries Infrastructure 5,796 9,217 services programs of the DSWD and the DepEd, Airports/Air Naviga onal Facili es 13,946 9,041 as well as the rou ne maintenance of the DPWH. Water Supply 10,107 7,372 Informa on and Communica on More than three-fourths of the DSWD’s P97.35- Technology 4,661 6,827 Electrifi ca on 2,038 3,574 billion budget for MOOE will go to indigent Ports, Light Houses and Harbors 3,043 2,361 benefi ciaries under its Pantawid Pamilyang Land Transporta on/ Traffi c Pilipino and Kapit Bisig Laban sa Kahirapan- Deconges on 3,819 2,139 Comprehensive and Integrated Delivery of Social Internal Revenue Allotment- Development Fund 77,972 85,724 Services (KALAHI-CIDSS) programs. Meanwhile, Na onal Disaster Risk Reduc on part of the Health department’s MOOE at P74.91 and Management Program (formerly billion will cover free health insurance for 15.44 Calamity Fund) 7,076 16,179 million indigents and 2.8 million senior ci zens Others 13,024 33,480 valued at P58.2 million. TOTAL 595,767 766,255 % of GDP 4.3 5.0 To help in conduc ng clean and orderly elec ons in 2016, the Commission on Elec ons (COMELEC) rehabilita on and capacity expansion of the MRT, will receive P6.9 billion in MOOE to cover the the LRT, and the PNR lines. (See pages 74 to 81 for needed supplies, refurbishment, and other details on Transport Infrastructure.) maintenance and opera ng requirements for the Na onal, and Barangay and Sangguniang LGUs will carry out infrastructure projects with Kabataan elec ons. a budget of P103.18 billion, which is 20 percent of the local development shares from their Alloca ons for Local Government Units (ALGU). respec ve Internal Revenue Allotments (IRA), Transfers to the LGUs will amount to P485.17 and the Local Government Support Fund (LGSF) billion, or about 16 percent of the total Budget. alloca ons under the Bo om-Up Budge ng and This alloca on consists primarily of the Internal the KALSADA ini a ves. Revenue Allotments (IRA) of each of the provinces, municipali es, and barangays; and their special The projected public infrastructure spending-to- shares from the Na onal Revenues, which is 11 GDP ra o for the coming year is at par with or percent more than that in 2015 as a result of the even be er than those of the United States (3.3 BIR’s aggressive income tax collec on in 2014, percent) and countries under the European Union and the addi onal revenues from tobacco excise

4 Gregory, P. (2013). Infrastructure Gap? Look at the Facts. We Spend More Than Europe. Forbes.com. Retreived from h p://www.forbes.com/ sites/paulroderickgregory/2013/04/01/infrastructure-gap-look-at-the-facts-we-spend-more-than-europe/ 5 World Bank. (2014). Philippines: Accelera ng Investment in Infrastructure, Health, and Educa on to Sustain Growth that Beneﬁ ts the Poor. Retrieved from h ps://www.worldbank.org/en/news/press-release/2014/08/07/philippines-accelera ng-investments-in-infrastructure- health-educa on-to-sustain-growth-that-beneﬁ ts-the-poor 39 Technical Notes on the 2016 Proposed Na onal Budget

tax as a result of the passage of RA 10351 (Sin Tax Table 18. Alloca on By Regionalized and Non- Law) in 2012 (see page 45 for table on ALGU and Regionalized Budget other special purpose funds). (in billion pesos) Debt Burden. The share of the debt burden6 in 2014 2015 2016 Growth % Rate Share the 2016 Budget was reduced to P419.3 billion or (2015-2016) (2016) 14 percent, from 15.3 percent in the previous year and 16.2 percent in 2014. This trend is consistent Regionalized with the downward trend of the country’s debt Budget 1,245.5 1,481.7 1,717.8 15.87 57.23 burden under the Aquino administra on (See NCR 274.7 483.3 457.5 -5.34 15.24 Luzon 447.0 499.6 594.0 18.9 19.79 page 27 for more discussions on the government’s Visayas 223.8 235.5 285.4 21.18 9.51 borrowing program). Mindanao 300.0 324.0 380.9 17.56 12.69 Non-Regionalized Budget 1,019.2 1,130.2 1,284.0 14.21 42.77 C. The Budget by Region Na onwide 641.0 660.3 748.0 13.28 24.92 Central Offi ce 378.2 469.9 536.0 15.52 17.86 Of the P3-trillion Budget for 2016, 57.2 percent, or P1.72 trillion, will be distributed to the regions: an increase of 15.9 percent from P1.48 trillion in Excluding NCR where central offi ces of certain 2015. na onal government agencies are located, the Cordillera Administra ve Region has the highest Notable in the regional spread of the 2016 Budget budget per capita at P24,251, followed by is the drama c increase in the budgets of the CARAGA, Region VIII, Region IV-B, and Region IX. regions. Budgets allocated to the NCR, where most na onal government agencies are located, decreased by 5 percent from P416.7 billion to Table 19. Breakdown of 2016 Budget by P457.5 billion. Net of NCR, the budgets for the Region and Expenditure Per Capita country’s major island groups saw an increase of Region Poverty Magnitude Budget Expenditure about 73 percent (see Table 18). This change could Incidence of Poor Per be a ributed to the government’s policy move Among Popula on Capita to further disaggregate the budgets down to the Popula on regions in order to refl ect the spa al strategy of resource alloca on, and ul mately address the NCR 3.9 460,831 457,500,923 34,616.94 I 18.5 876,650 74,013,270 14,460.24 unequal distribu on of public resources across CAR 22.8 373,740 43,493,510 24,250.63 regions. II 22.1 716,754 61,491,468 17,499.99 III 12.9 1,340,361 133,602,982 11,694.02 In comparison, the non-regionalized budget IV-A 10.9 1,425,774 132,645,670 8,865.03 increased by a modest 13.3 percent for the IV-B 31.0 876,238 57,167,205 18,847.16 V 41.1 2,276,848 91,624,154 15,462.17 Na onwide Budget and 15.5 percent for the VI 29.1 2,088,471 106,569,819 13,821.57 Central Offi ce. The Na onwide Budget pertains to VII 30.2 2,094,911 97,087,742 12,821.77 alloca ons to be distributed to the departments VIII 45.2 1,882,934 83,719,999 18,880.09 and agencies of the various regions, as well IX 40.1 1,409,819 66,609,641 17,608.55 as to the mul -user SPFs, including Interest X 39.5 1,759,570 78,827,103 16,350.44 XI 30.7 1,411,063 67,056,120 13,439.99 Payments, Tax Expenditure Fund, NDRRMF, PGF, XII 44.7 1,895,820 63,195,834 13,401.44 MPBF, Con ngent Fund, Budgetary Support to ARMM 40.3 1,001,923 53,466,616 14,979.58 Government Corpora ons, and Alloca ons to CARAGA 55.8 1,854,188 51,741,295 19,454.54 Local Government Units. On the other hand, the 7 Sources of basic data: 2012 Full Poverty Sta s cs and 2016 Central Offi ce budget pertains to alloca ons being projected popula on from PSA managed by central offi ces of the departments and agencies.

6 The sum of interest payments and debt lending 7 As men oned earlier, the budget for NCR also includes alloca ons for na onal government agencies which are located in NCR. These include the Congress of the Philippines, the Oﬃ ce of the President, the Judiciary, the Philippine Na onal Police, and the Armed Forces of the Philippines. 40 Technical Notes on the 2016 Proposed Na onal Budget

D. The Budget by Department and Special Purpose Fund

Adding their respec ve agency-specifi c budgets in June 2016, the DepEd will need to construct and shares from special purpose funds (SPFs), 23,000 classrooms, and hire addi onal teachers the alloca ons of the top 10 departments of the (see pages 37-40 for discussions on the Budget by Execu ve Branch of the na onal government Expense Class). The P12.2-billion alloca on under comprise P1.614 billion or 53.8 percent of the P3- GASTPE for K to 12 will benefi t 708,883 students. trillion 2016 Budget. Department of Public Works and Highways. Top 10 Departments. Providing the biggest As the country’s lead construc on agency, the alloca ons to these 10 departments8 refl ects the DPWH will carry on with building the needed government’s commitment to deliver programs public and social infrastructure with its P394.51 and projects essen al in a aining inclusive billion budget. The agency sustains its year- development. The total alloca ons for these top on-year growth, increasing by 30 percent from 10 departments are nominally higher by P248.7 2015. About 68 percent or P268.38 billion will billion or 18.2 percent than their alloca ons in fund the comple on of all na onal roads and 2015. bridges, while 16 percent or P62.80 billion will fund the construc on and repair of fl ood control Table 20. Top Ten Departments facili es. Likewise, a por on of infrastructure (in billion pesos) funds previously tucked under the budgets of Depart- 2015 2016 Growth the agencies, such as the Department of Health ment Budget Rank Budget Rank Amount % (P24.6 billion to build or restore provincial and DepEd 377.7 1 435.9 1 58.2 15.4% municipal hospitals, barangay health centers, DPWH 304.1 2 394.5 2 90.4 29.7% and rural health units under the Health Facili es DND 154.1 3 172.7 3 18.6 12.1% Enhancement Program) were lodged under the DILG 147.2 4 154.5 4 7.3 5.0% DPWH for 2016. DOH 102.6 6 128.4 5 25.8 25.1% DSWD 108.3 5 104.2 6 (4.1) -3.8% DA 90.2 7 93.4 7 3.2 3.5% Department of Na onal Defense. To strengthen DOF 16.9 11 55.3 8 38.4 227.0% the country’s territorial defense and the DOTC 59.4 8 49.3 9 (10.1) -17.0% government’s commitment to bankroll the AFP DENR 21.7 9 25.8 10 4.1 18.9% Moderniza on Program, the DND was allocated TOTAL 1,365.3 1,614.0 248.7 18.2% P172.73 billion, 12-percent more than the budget * Includes BSGC, MPBF, PGF and other SPFs in 2015. An amount of P25 billion will be released under the regular budget of the armed forces for Department of Educa on. As the Cons tu on its revised moderniza on plan—P5 billion higher mandates, the State should channel the greatest than last year’s P20-billion appropria on—to por on of its budget to basic educa on. Following purchase state-of-the-art materiel for land, air, this mandate, the DepEd will receive the biggest and naval forces (See pages 105 to 106 for details share, at P435.996 billion, among the na onal on DND’s programs). agencies. Owing to the expansion of its banner programs, the agency’s budget is P58.8 billion Department of the Interior and Local Government. more than that of last year. The 15-percent The DILG will receive P154.1 billion to fund eff orts rise in the DepEd budget can be a ributed to in strengthening law enforcement and bringing the implementa on of the Senior High School more power to the local governments. This budget curriculum beginning 2016, and the marked for 2016 will support the Philippine Na onal Police increase in subsidy for the Government Assistance and its ini a ves in reducing the number of street for Students and Teachers in Private Educa on crimes and increasing crime solu on effi ciency (GASTPE) program (See pages 63- 64 for details on the across the country. It will likewise fund eff orts ini a ve). As the K to 12 (senior high school) opens in devolving fi scal and poli cal power to the

8Agency budgets men oned in this sec on are inclusive of provisions under and transfers from Special Purpose Funds (SPF). See pages __ for discussions on SPFs. 41 Technical Notes on the 2016 Proposed Na onal Budget

local governments by improving their respec ve railways, and ports and other public structures business permits and licensing systems, and under the na onwide transport infrastructure equipping them with tools for effi cient planning program was allocated P20 billion, or 40 percent and execu on of projects (See pages 52 to 53 for of the P49.3-billion the DOTC’s budget. This eff orts details on DILG’s programs on good governance). will allow the transport of the country’s workforce, students, and other sectors in the country (See Department of Health (DOH). As a result of pages 74 to 81 for details on this year’s priori es the collec on from sin taxes, or excise taxes on under the Transport Infrastructure Program). alcohol and tobacco, the budget of DOH for 2016 was raised to P128.43 billion, or a 25.1 percent Department of Finance (DOF). With P55.3 billion, increase over the previous year. The addi onal the DOF places 8th among the top execu ve P25.9 billion will be used to con nue the roll-out agencies. The agency will receive P38.4 billion, of the Universal Healthcare Program, under which which is more than a twofold increase over last 15.4 million health insurance packages will be year’s P16.7 billion. This budget will allow the issued to indigent ci zens9 and 2.8 million senior effi cient management of public fi nances, the ci zens. Part of the agency’s budget will also streamlining of the issuance of frontline services fund the Health Facili es Enhancement Program related to doing business, and the achievement of (See pages 65 to 70 for details on the country’s the revenue target of 16.5 percent of the GDP in proposed healthcare spending). 2016. Among the salient features of the agency’s budget is the P726.6 million, which was allocated Department of Social Welfare and Development for the con nued implementa on of the Treasury (DSWD). Despite the slight decrease in its Single Account (see pages 3 to 14 for details on budget—to P104.19 billion from P108.3 billion the government’s public fi nancial management in 2015—the DSWD will carry on with its fl agship program), and the infusion of capital to the Land programs on social protec on under the Aquino Bank of the Philippines and Development Bank of administra on. With the P62.4 billion alloca on the Philippines in line with BASEL III. for 2016, or 59 percent of the agency’s budget, the Condi onal Cash Transfer Program (CCT) will Department of Environment and Natural be able to cover 4.62 million households. An Resources (DENR). Due to the marked increase alloca on of P9.6 billion was made for eff orts in the funds rolled out to its fl agship project, the in bridging the gradua ng CCT benefi ciaries, Na onal Greening Program, the 2016 budget for numbering 75,776, from subsistence to self- the DENR is P25.75 billion, which increased by 19 suffi ciency. percent from 2015. To facilitate the plan ng of the remaining 563 million out of the target 1.5 Department of Agriculture (DA). The DA budget billion seedlings to expand the country’s forest of P93.4-billion for 2016 will allow the agency covers, the NGP will receive a 27.1 percent bigger to focus not only on increasing yields of major alloca on than that of 2015 (see page 100 for agricultural products and high-value commodi es details on the NGP and DENR’s other programs for like coff ee and rubber, but also improve the climate change adapta on and mi ga on). forward linkages of farming communi es to the Industry and Services sectors and boost the Other notable trends in agency budgets. resilience of farms, fi sheries, and their processing Suppor ng the achievement of just and las ng facili es against climate change. This budget also peace and meaningful development remains includes P43.05 billion as support to agriculture- a key priority of the Aquino administra on. related agencies, such as the Na onal Food Towards this, the government proposed a budget Authority (NFA), the Philippine Coconut Authority for the Autonomous Region in Muslim Mindanao (PCA), and the Na onal Irriga on Administra on. (ARMM) in the amount of P30.3 billion—nearly thrice the P10.7 billion it received in 2010 and Department of Transporta on and Communica on 20.1 percent higher than in 2015 (see pages 103 (DOTC). The construc on and repair of airports, to 104 for more informa on). Also in support of

9 As iden fi ed under the Na onal Household Targe ng System 42 Technical Notes on the 2016 Proposed Na onal Budget this goal, the budget of the Judiciary, meanwhile, Moreover, releases from these funds are made will increase by 26.7 percent to P26.7 billion in only when specifi c condi ons are met. 2016 to enable it to deliver swi and fair jus ce (see pages 107 to 108 for more informa on). For instance, the P38.9 billion lodged under the NDRRMF will go to the relief, rehabilita on, The increase in the budgets for State Universi es and reconstruc on eff orts following natural and Colleges (SUCs) indicates the government’s calami es, epidemics, wars, terrorist a acks, commitment to provide the Filipino youth with and other similar events. The People’s Survival access to ter ary educa on. The SUCs will Fund, also lodged under the NDRRMF, likewise receive an aggregate alloca on of P52.87 billion, has specifi c precondi ons. Funds lodged under or 11.6% higher than in 2015. In addi on, the the P18.9-billion Yolanda Rehabilita on and 2016 Budget also provides Commission on Higher Reconstruc on Program, also under the NDRRMF, Educa on with 5.28 billion to mi gate the K to 12 can be exclusively accessed by communi es transi on period through scholarships and other aff ected by the super typhoon (see page 97 for opportuni es for faculty members, among others. more discussions on the NDRRMF).

Special Purpose Funds. For 2016, P1.306 trillion is Similarly, the P4-billion Con ngent Fund for 2016 proposed for SPFs. Of the total, only P79.3 billion may only be used for new or urgent ac vi es and are strictly lump sum funds. A larger amount of projects that need to be implemented or paid P262.1 billion, meanwhile, is for SPFs, which during the year, subject to the approval of the are already disaggregated. Meanwhile, P848.7 President. The fund may also cover government’s billion is for automa cally appropriated SPFs, legal obliga ons arising from fi nal and executory bulk of which are for the IRA of LGUs and interest decisions made by competent authori es, payments. including arbitra on awards, media on se lements, or compromise agreements10. While the total proposed alloca on for SPFs is 10.2 percent higher than in 2015, the administra on Of the total P485.2-billion Alloca ons to LGUs implemented reforms to reduce the number of (ALGU)11, only P36.4 billion are strictly lump sum SPFs, and lodged outlays under key recipient funds. Bulk of this amount, or P35.9 billion, will agencies and to the extent possible, fl esh these be for the special shares of LGUs in the proceeds out into greater detail. Thus, the number of lump of na onal taxes. Such special shares will increase sum SPFs have been reduced from 17 in 2009 by 28.7 percent from 2015 driven largely by the to only three in 2016. Moreover, key SPFs, such expected increase in the collec ons. These special as the Interna onal Commitments Fund, the shares come from proceeds of excise and other School Building Program, and the e-Government taxes gained from, among others, tobacco (P13.1 Fund, were wholly lodged under the budgets of billion), minerals and other natural resources the concerned agencies. Meanwhile, the MPBF (P5.3 billion), and the 12-percent value added tax and PGF have been reduced as alloca ons for the imposed on consumer goods (P15.6 billion). crea on of new or fi lling up of exis ng posi ons, and for re rement benefi ts, have also been lodged Disaggregated SPFs. Of the total SPFs, under the budgets of recipient agencies. P332.97 billion are disaggregated into specifi c government agencies and projects. The Lump-sum funds. Only 2.64 percent of the Budgetary Support to Government-Owned-and Na onal Budget or P79.3 billion comprises funds -Controlled Corpora ons (BSGC), key ALGUs, the that are lump-sum by strict defi ni on. By nature, Miscellaneous Personnel Benefi ts Fund (MPBF), these lump-sum SPFs cannot be disaggregated as and the Pension and Gratuity Fund (PGF), all fall specifi c programs and projects funded for these under the group of disaggregated SPFs. can only be iden fi ed during budget execu on.

10 In this case, the approval of DBM for the release of such funds will suﬃ ce. 11 For 2016, total ALGU amounts to P485.1 billion. Other ALGU funds are considered disaggregated or, in the case of IRA, automa cally appropriated. See succeeding por ons of this sec on for more informa on. 43 Technical Notes on the 2016 Proposed Na onal Budget

The 2016 alloca on for BSGC, which includes Alloca ons for the MPBF and PGF were pared subsidies and equity infusion to GOCCs, will stand down as some alloca ons were channelled to the at P127.1 billion. It is noteworthy that the recipient- largest recipient agencies. The MPBF was allocated GOCCs and the purposes of such budgetary P96.48 billion, about 17 percent lower than the support have been spelled out in the Budget, 2015 budget of P117.38 billion as key alloca ons and that GOCCs have performance informa on for the fi lling up of unfi lled posi ons or the crea on similar to na onal government agencies. Among of new posi ons are now lodged under the largest the GOCCs, the Na onal Irriga on Administra on recipient-agencies, such as DepEd, DOH, DILG, and will have the largest alloca on of P32.7 billion DND. The 2016 MPBF will, among others, allocate to support the expansion of irrigated farmlands, P16.8 billion for performance-based incen ves followed by the Na onal Housing Authority with for 1.54 million government employees (see page P30.5 billion to bankroll its socialized housing 11 for more informa on); P24.6 billion for the programs for informal se ler families and vic ms crea on of new or fi lling up of unfi lled posi ons in of recent calami es. other agencies; and P54.9 billion for the payment of other personnel benefi ts. It is also worth men oning that P30 billion of the BSGC will infuse capital to the country’s The PGF, on the other hand, was allocated P109.2 government servicing banks—the Land Bank of billion or P13.8 percent less than that of 2015. This the Philippines (P20 billion) and the Development budget will pay the pensions, re rement gratuity, Bank of the Philippines (P10 billion)—as required and terminal leave and separa on benefi ts of under the BASEL III scheme12. BSGC also includes 431,705 re ring uniformed and civilian personnel P26.5 billion for net lending to advance the or their benefi ciaries. Nearly half of the PGF, or servicing of GOCCs’ debts. P43.0 billion, will fund the pension requirements of the war veterans and re ring servicemen of the Of the total ALGU for 2016, two components armed forces, while the remaining amount will are considered to be disaggregated. First is the be spent for re ring policemen, forest rangers, budget for the Metropolitan Manila Development and coast guard personnel; as well as re ring Authority (MMDA), which will have P2 billion in employees of the Energy Regulatory Commission, 2016. This, among others, will enable MMDA to the DOJ, and the DOLE. perform its du es in solid waste disposal and management (P1.4 billion), traffi c and transport Automa c Appropria ons. Automa cally management (P85.8 million), and fl ood control appropriated SPFs for 2016 amount to P932.42 and sewerage (P284.2 billion). It is also noteworthy billion, 7.5 percent higher than in 2015, bulk of that the MMDA’s performance informa on are which for the Internal Revenue Allotment of spelled out in the Budget. Second, por ons of the LGUs (P428.62 billion) and Interest Payments to Local Government Support Fund will support the service na onal government’s outstanding debts iden fi ed priority programs and projects of LGUs (P392.80 billion) which comply with good governance standards and have the right capacity to implement these: E. Appropria ons for 2016 P11.7 billion for local poverty reduc on projects iden fi ed through Bo om-Up Budge ng (BUB; The proposed Na onal Expenditure Program (NEP) see pages 54 for more informa on) and P6.5 for 2016 amounts to P3.002 trillion, composed billion for the rehabilita on and upgrading of of: P2.071 trillion in New General Appropria ons provincial roads. Aside from these projects (programmed) for the approval of Congress under 13 being already iden fi ed , the implementa on the General Appropria ons Act (GAA); and P930.7 of good governance standards by LGUs as well billion in Automa c Appropria ons which are as the regular repor ng and disclosure on these already authorized under exis ng laws. projects are non-nego able condi ons for such performance-based downloads to LGUs.

12 BASEL III is an intricate set of reforms designed to improve the ability of a bank and its capital to absorb losses, extend the coverage of fi nancial risks, and withstand periods of fi nancial stress. 13 In par cular, the programs and projects inden fi ed through BUB are spelled out in a dedicated sec on in the Na onal Expenditure Program. 44 Technical Notes on the 2016 Proposed Na onal Budget

Table 21. Special Purpose Funds (in billion pesos) SPECIAL PURPOSE FUNDS 2015 2016

I. Disaggregated SPFs 319.44 351.16 Budgetary Support to Gov't. Corpora ons 62.48 125.32 Alloca on to LGUS 2.19 20.16 Metropolitan Manila Development Authority (MMDA) 2.19 1.96 Local Government Support Fund 18.20* Miscellaneous Personnel Benefi ts Fund 117.38 96.48 Pension and Gratuity Fund 126.67 109.20 Interna onal Commitments Fund 10.72 - II. Lump-Sum SPFs 51.5 79.27 Na onal Disaster Risk Reduc on and Management Fund 14.0 38.9 Con ngent Fund 2.0 4.0 Alloca ons to LGUs 33.47 36.37 Barangay Offi cials Death Benefi ts Fund 0.1 0.05 Share in the Proceeds of Fire Code Fees 0.2 0.2 Share in the Proceeds of Taxes 27.9 35.92 Local Government Support Fund 3.13 0.2 E-government fund 1.0 - Rehabilita on and Reconstruc on Program 1.0 - III. Automa c Appropria ons 816.04 875.24 Budgetary Support to Gov't. Corpora ons** 1.34 1.8 Alloca on to LGUs 389.86 428.64 MMDA*** - 0.02 Internal Revenue Allotment 389.86 428.62 Interest Payments 372.86 392.8 Net Lending 26.5 26.5 Tax Expenditures 25.48 25.5 Total SPFs 1,184.80 1,305.60 * Of the P18.4-billion alloca on under the Local Government Support Fund, P11.7 billion and P6.5 billion are disaggregated into Bo om-Up Budge ng projects and funding for local roads. Only P200 million is strictly lump-sum. ** Comprises of alloca on for 4 government corpora ons that are lodged under the Special Accounts in the General Fund. *** Comprises of alloca on for Re rement and Life Insurance Premiums (RLIP) for MMDA. Numbers may not add up due to rounding.

In addi on, the government seeks Congress’ debts (see page 26 for more informa on). Other approval for Unprogrammed Appropria ons which automa c appropria ons in 2016 are: may only be tapped when windfall revenues are collected. Moreover, on top of their outlays under the Re rement and Life Insurance Premiums – P31.2 Na onal Budget, various government departments billion for the legally-mandated share of the and agencies are authorized under exis ng laws to na onal government in premium payments to collect and retain specifi c income and use these for specifi c purposes—otherwise known as Off -Budget Table 22. Summary of the Na onal Accounts. Expenditure Program (in billion pesos) Automa c Appropria ons. Of the total Budget 2015 2016 % for 2016, P930.7 billion or 31.0 percent represents Growth expenditures which have already been authorized under exis ng laws and do not require the regular New General Appropria ons annual approval of Congress. (Programmed) 1,862.8 2,138.6 14.8 Departments 1,371.0 1,640.7 19.7 Special Purpose Funds 245.7 430.4 75.2 More than 88 percent of automa c appropria ons Automa c Appropria ons 866.2 930.7 7.4 for next year are for the IRA of LGUs and for interest payments on government’s outstanding Total 2,606.0 3,001.8 15.2

45 Technical Notes on the 2016 Proposed Na onal Budget

the Government Service Insurance System for the the 2015 level at P123.93 billion. Unprogrammed life insurance and re rement benefi ts of na onal appropria ons may only be tapped when there: 1) government employees. is excess revenue collec ons in one of the non-tax revenue sources; 2) are new revenue collec ons Net Lending – P26.5 billion for advances by from new tax or non-tax sources; and 3) are newly the na onal government for the servicing of approved loans for foreign-assisted projects. government-guaranteed debts of GOCCs, net of repayments by GOCCs on such advances. Of the P67.5-billion alloca on, P30 billion will be for the Risk Management Program to cover the Tax Expenditure Fund – P25.5 billion for obliga ons arising from concession agreements subsidies to agencies, GOCCs, and LGUs in under Public-Private Partnership (PPP) projects lieu of actual payment of taxes and customs (see page 28 to 29 for more informa on on PPPs). du es. These transac ons do not involve actual cash disbursements. In addi on to these, the Unprogrammed appropria ons for 2016 also government projects a total of P201.6 billion in tax include addi onal budgetary support for expenditures in 2016 from the grant of investment tax incen ves (see page 25 for more discussions on investment tax expenditures; as well as tables Table 23. Unprogrammed Appropria ons K.1 and K.2 of the BESF). (in million pesos) Par culars Amount Special Accounts in the General Fund – P26.0 billion for such Special Accounts in the General Fund Support for Infrastructure and Social Programs 25,000 (SAGFs) where, as authorized by law, proceeds of AFP Moderniza on Program 10,000 specifi c revenue measures and grants earmarked Support to Foreign-Assisted Projects 1,500 by law for specifi c priority projects are recorded. Risk Management Program 30,000 This amount includes expenditures using revenues General Fund Adjustments for Use of from the Motor Vehicle User’s Charge—P12.3 Excess Income by Agencies 200 General Fund Adjustments for the billion for DPWH and P801.8 million for DOTC—for Share of ARMM 800 the maintenance of roads and bridges, installa on TOTAL 67,500 of road safety devices, implementa on of measures against pollu on, among others (see table B.17 of the BESF for more informa on on Earmarked priority government programs. For one, the AFP Revenues, including SAGFs). Moderniza on Program will have an addi onal P10 billion in unprogrammed appropria ons on top of Grant Proceeds – P64.4 million for non-repayable its P25-billion programmed budget (see page 106 transfers received from foreign en es, such as for more details). Such standby appropria ons other governments and mul lateral organiza ons, also provide P25 billion in addi onal funding for in support of par cular projects or programs (see key infrastructure and social programs. Likewise, table B.15 of the BESF for more informa on on another P1.5 billion will be used to fund foreign- foreign-assisted projects, including those funded by assisted projects where releases of funds are grants). subject to the approval of the NEDA Investment Coordina on Commi ee. Pensions of Ex-Presidents and Spouses – P331,000 The shares of the ARMM and LGUs concerned for the pension of former presidents and their will be covered by a fund of P800 million from spouses at the end of their incumbency, as the current year’s collec on of na onal internal mandated by Republic Act No. 5059 and Execu ve revenue taxes, fees and charges, and taxes. The Order No. 145. fund can only be released when actual collec ons exceed the amount appropriated under the ARMM Unprogrammed Appropria ons. On top of the budget. On the other hand, the agencies that have P3.002-trillion Budget program, the na onal revenues in excess of targets may use the excess government also proposes unprogrammed income to augment their current appropria ons, appropria on amoun ng to P67.5 billion for 2016, except personnel services and discre onary and which is lower by about 48 percent than that of representa on expenses. 46 Technical Notes on the 2016 Proposed Na onal Budget

Off -Budget Accounts. Budgetary Accounts and devices, dona ons, and other sources of represent the transac ons—both revenue and income. For 2016, the DOH hospitals will earn an expenditure—refl ected in the annual NEP. On top es mated P9.14 billion and spend P8.87 billion to of the agency budgets and SPFs under the NEP, purchase equipment and augment their opera ng na onal government agencies, including State expenditures. Universi es and Colleges (SUCs) hold off -budget accounts which allow these to retain certain incomes and use the same for intended purposes as specifi ed by specifi c laws and other rules. Table 24. Breakdown of 2016 Off -Budget Accounts By Department For 2016, an es mated P63.4 billion in off -budget (in million pesos) revenues will be collected by several government Department Balance as Revenue Expen- agencies. Of this amount, about P52.30 billion will of December diture 1/ be spent for various earmarked purposes. This 2014 14 leaves a balance of P11.08 billion for the year (see Departmen of Agriculture 432.76 349.89 300.44 Table B.19 of the BESF for a more comprehensive Department of Budget lis ng of revenues and expenditures from Off - and Management 1.48 1.08 1.02 Budget Accounts). Department of Educa on 1,459.67 587.32 50.29 State Universi es and Colleges 23,404.37 17,446.18 16,691.68 Of the es mated off -budget revenue in 2016, Department of Energy 5,393.71 893.81 278.68 27.5 percent or P23.4 billion will be collected by Department of Environ- SUCs through their various internally-generated ment and Natural incomes in the form of tui on and other Resources 120.45 89.35 82.33 miscellaneous fees, among others. Republic Act Department of Finance 370.65 53.02 111.89 Department of Foreign No. 8292 allows the SUCs to generate their own Aff airs 350.15 414.91 392.45 incomes, which they can use to meet their needs. Department of Health 4,178.38 12,894.86 12,143.33 For 2016, SUCs will use about P16.7 billion of their Department of Interior retained incomes to augment their budgets. In and Local Government 1,088.61 968.09 963.94 total, SUCs are es mated to spend a total of 62.7 Department of Jus ce 196.74 339.00 274.08 Department of Labor billion in 2016 using their retained incomes as and Employment 1,203.15 3,828.56 2,103.78 well as na onal government subsidies. As of end- Department of Na onal 2014, SUCs have an accumulated balance of P23.4 Defense 1,973.51 1,868.98 1,646.91 billion from their off -budget accounts; and this is Department of Public expected to increase to P23.5 billion by end-2015 Works and Highways 6,358.10 5,414.48 1,386.86 Department of Science and P24.3 billion by end-2016 (see Table G of the and Technology 318.88 75.50 79.50 BESF for the consolidated statements of receipts Department of Social and expenditures of SUCs). Welfare and Development 426.24 1,320.38 1,007.90 Department of Trade Meanwhile, 20.3 percent or P12.1 billion of the and Industry - 236.30 236.29 Department of Transporta on es mated off -budget revenue will be collected and Communica ons 3,458.52 657.70 527.28 by the Department of Health and its a ached Na onal Economic and agencies and corpora ons. In par cular, DOH- Development Authorit 126.03 1,618.25 2,609.53 retained hospitals are allowed under the DOH- Presiden al Communica ons DOF-DBM Joint Circular No. 2003-1 to retain Opera ons Offi ce 695.49 1,320.06 1,252.25 Other Execu ve Offi ces 66,223.39 1,087.33 1,024.66 incomes sourced through hospital fees, laboratory The Judiciary 2,331.09 10,560.09 8,409.16 fees, rent income from use of equipment and Civil Service Commission 299.25 22.11 20.25 facili es, proceeds from sale of hospital products Commission on Audit 633.18 70.83 40.28 TOTAL 122,236.01 63,377.50 52,304.51

Note: 1/ The balance of oﬀ -Budget Accounts is likely to increase by end-2015

14 As of end-2014, oﬀ -budget accounts have a total balance of P122.2 billion. In 2015, agencies and GOCCs are es mated to receive a total revenue of P60.3 billion, P52.6 billion of which are expected to be spent, leaving a projected addi onal balance of P7.7 billion for 2015. 47 Technical Notes on the 2016 Proposed Na onal Budget

IV. EXPENDITURE PRIORITIES

A. Good Governance and An -Corrup on

Good governance forms the backbone of progress. Figure 1. How the Philippines fared in the State fi nances, in par cular, can bring tangible and Corrup on Percep ons Index inclusive progress to every Filipino when prudently 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 managed across public offi ces. Unfortunately, decades of poor governance in the country have led to anemic economic growth, poverty, and social confl icts. In heeding the people’s overwhelming 85 94 mandate given in 2010, the Aquino administra on 105 of of 117 121 of 174 since then has pushed for bold governance reforms 134 129 177 of 131 141 139 176 of of to strengthen the integrity of public ins tu ons 159 of of of of 163 178 and their capability to deliver services to ci zens. 179 180 180 176 Source: Transparency Interna onal The 2016 Budget will bankroll the government’s con nuing quest for a be er state of aff airs, of corrup on has demonstrated the government’s especially in managing public resources, in order solid commitment to reform. These ac ons have to ensure the eff ec ve delivery of public services, given the government the pla orm it needed to build a robust investment climate, forge las ng introduce ins tu onal reforms. peace, and uphold the rule of law. This Budget also supports the irreversibility of reforms such that For one, it may be recalled that in 2011, a series the government becomes increasingly transparent of exposés laid bare the brazen misuse of savings and accountable to the ci zens, while empowering from unfi lled or non-existent posi ons, which them to know how public ins tu ons operate. were converted to kickbacks, pabaon or send-off money for re ring military generals, and other Comba ng Corrup on. From jailing the corrupt anomalous uses. In response, the government to rolling out technological and policy reforms in pruned the personnel services budget to fund public transac ons, the bold reforms carried out by only its exis ng workforce, and pooled the en re the Aquino administra on have improved the state budget to fi ll up vacancies across the agencies into of governance. These eff orts have gained global the Miscellaneous Personnel Benefi ts Fund. Soon recogni on. The country’s rank in the Transparency a er, reforms like the Comprehensive Human Interna onal’s Corrup on Percep ons Index has Resource Informa on System (CHRIS)2, the Cashless improved signifi cantly, jumping 49 places from Purchase Cards, and the use of Automated Teller 134th of 178 countries in 2010 to 85th of 175 Machine (ATM) Cards for the payment of pensions countries in 2014 (see diagram). This change were developed and introduced. eff ec vely arrested the declining trend in the past from 117th of 158 countries in 2005. To sustain the fi ght against corrup on, the government has invested in the capability of Among the administra on’s major tasks since day the Offi ce of the Ombudsman and its judicial one has been to scour the plaques of patronage and counterpart, the Sandiganbayan, to probe bureaucra c ineffi ciencies that have clung onto the allega ons of gra and corrup on and hand founda ons of governance and deteriorated public down judgments that favor the side of honest and trust in the government. The fi ling of cases against dignifi ed governance. high-level offi cials allegedly involved in grand cases

1 CHRIS is a system that aims to electronically track and manage salaries and beneﬁ ts of employees across government agencies from hiring to re rement. It is designed to help the government gain ghter ﬁ nancial control over the state payroll, and promote transparency in its human resources. 48 Technical Notes on the 2016 Proposed Na onal Budget

Under the fi nal spending program of the Aquino Revenue Administra on. This Budget seeks administra on, P602 million was earmarked for to con nue strengthening the capacity of the the Offi ce of the Ombudsman to boost its resources agencies tasked to collect revenues and reach and capability to prosecute corrup on and other their targets (see pages 22 to 24 for more forms of misconduct. In 2014, the agency acted discussions on the revenue program). For one, upon 40,993 complaints, 123 percent higher unprecedented reforms in the Bureau of Customs than its target for the year (18,378). In the same are expected to make the agency more responsive year, it completed 3,813 fact-fi nding missions and to the changing demands of trade and commerce. conducted 3,013 preliminary inves ga ons. Its While awai ng the passage of the Customs 2016 budget will likewise fund ini a ves like the Moderniza on Bill, which will allow, among Close Watch Program2. others, the full automa on and streamlining of import and export procedures, the government Table 1. Highlights of the Offi ce of the will help the Customs carry out ongoing reforms Ombudsman Budget, 2014-2016 by using P2.05 billion out of its P3.2-billion budget. Budget (in thousand pesos) 2014 2015 2016 Part of this amount will sustain surveillance and Actual Adjusted Proposed enforcement measures under the Run A er The Smugglers (RATS) program and allow it to exceed Close Watch Program its 2015 target of 3 cases per month. Under RATS, (Resident Ombudsman 57 and 64 smuggling cases were fi led in 2012 and Program) 25,021 22,861 17,254 General Inves ga on and 2013, respec vely. Fact-fi nding Ac vi es on Complaints 345,302 256,785 263,747 The Bureau of Internal Revenue (BIR) will have Prosecu on of Complaints, P5.51 billion out of the agency’s P11.3-billion including the Filing of Appropriate before the budget to streamline the collec on of tax and Sandiganbayan 150,816 127,089 128,792 other revenues. Likewise, the BIR will use this Public Assistance Program 58,232 60,163 94,100 budget to act on at least three cases a month under its Run A er Tax Evaders (RATE) ini a ve. In 2014, 123 cases were fi led against high- The passage of Republic Act (RA) 106603 in profi le businesses and individuals that failed to April 2015 provided for the expansion of the properly declare their incomes and pay their tax Sandiganbayan from fi ve to seven divisions. This dues—a 92-percent increase from 64 cases fi led development will allow the an -gra court to act in 2013 and 57 in 2012. Of the BIR’s 2016 budget, on corrup on cases faster and dispose jus ce in P1.23 billion will facilitate the development and at least 418 cases of gra and corrup on in 2016 maintainance of its revenue informa on systems, more effi ciently. Thus, P307 million or 61 percent including the expansion of the Electronic Tax of its P505.9 million budget for 2016 will support Informa on System (e-TIS), a single web-based this expansion. This budget will allow the agency databank for taxpayer informa on (P197.3 to rehabilitate and refurbish its building to make million); and the Electronic Filing and Payment room for the two new divisions; and P39.32 System (eFPS) to ease the fi ling and payment of million to create 62 new posi ons in step with its taxes (P25.7 million). expansion. Leveraging Technology for Public Financial Streamlining Public Financial Management. As Management. Alongside policy reforms to with the previous years, the administra on’s streamline and strengthen public fi nancial valedictory Budget will pursue the strengthening management (PFM) systems (see page 12), the of ins tu ons that manage the government’s government con nues to invest in technologies in resources in fueling the country’s development. order to harmonize and automate these systems through the 2016 Budget.

2The CWP is an ini a ve employing resident watchdogs in government agencies to monitor and act on anomalous incidents par cularly in gra - prone oﬃ ces. 3 Oﬃ cial Gaze e. (2015). Republic Act No. 10660 (An Act Amending the Sandiganbayan Law [Pres. Decree No. 1686]). 49 Technical Notes on the 2016 Proposed Na onal Budget

The Bureau of the Treasury will have P726.6 Table 2. Summary of New Projects to be 4 million to support the ongoing implementa on Funded under the MITHI Fund of the Treasury Single Account (TSA), par cularly (in thousand pesos) in developing the TSA Repor ng and Monitoring System (TRAMS) that will provide real- me Approved MITHI Projects Amount % Share informa on on the government’s actual cash Projects in line with the resources. Budget Priori es Framework 3,644,258 75.8 Making Growth Inclusive The Department of Budget and Management (Social Protec on) 1,378,941 31.8 (DBM) will have P62.2 million to rigorously roll Pursuing Just and Las ng Peace 725,368 16.7 out the PFM reforms. Part of this budget was Good Governance 1,030,401 23.8 Climate Change Adapta on earmarked to implement CHRIS (P7.0 million) and and Mi ga on 111,718 2.58 the PFM Systems Tes ng and Training Facili es Sustaining the Growth Momentum (P12.5 million). The DBM will also use this budget (Public infrastructure) 37,830 0.87 to manage the ongoing PFM reforms, such as the Offi ce Produc vity 1,047,417 24.2 Budget and Treasury Management System (see Total 4,331,675 100.0 page 12). Source: DBM-Offi ce of the Chief Informa on Offi cer

The DBM, the DOST-Informa on and Public Audit. To demand accountability from Communica ons Technology Offi ce, and all public offi ces and to improve government the Na onal Economic and Development opera ons and programs, the COA conducts Authority (NEDA) have endeavored to expand independent audits of state fi nances at the the government’s investments in informa on end of each fi scal year. To do this, the agency and communica ons technology (ICT) through proposed a budget of P3.88 billion in 2016 to the Medium Term Informa on Technology undertake 24,020 regular audits of na onal and Harmoniza on Ini a ve (MITHI). Winning the local agencies and government units, 131 special 2013 FutureGov Awards, this landmark ini a ve audits, and 76 audits related to claims of public ensures not only the systema c planning, fraud. budge ng, and evalua on of government-wide ICT projects, but also the consistency of all public Through the Joint Circular 2013-017, which made ICT programs with the government’s Budget way to adopt a harmonized code for the budge ng Priori es Framework. and the accoun ng of every government project, public audit has become much easier and more For 2016, P4.33 billion will bankroll 145 new organized than before (see page 9 for discussions projects iden fi ed through the MITHI, including on the Unifi ed Accounts Code Structure). 39 projects (P631.7 million) to make frontline agency services available online. One of these Op mizing the Delivery of Frontline Services. projects will provide free Internet access across 5 When corrupt prac ces are curbed and the country by 2016 : a P1.32-billion alloca on bo lenecks in the effi cient use of public money to lay the infrastructure needed to provide WiFi are addressed, people reap the dividends of good access in town plazas, public schools and libraries, governance: the visible and measurable outcomes government hospitals and health centers, and 6 of public goods and services are sa sfactorily other public spaces . delivered. Hence, the 2016 Budget invests in the speedier delivery of frontline services.

4 The amount of P700M is allo ed for the transac on fees to the government servicing banks for revenue and payment processing, while P26M is for the development of the TSA systems. 5 Commission on Informa on and Communica ons Technology. (n.d.). Philippine Digital Strategy - Transforma on 2.0: Digitally Empowered Na on. 6 DOST-Informa on and Communica ons Technology Oﬃ ce. (n.d.). Concept Paper on the Free Wi-Fi Internet Access in Public Places Program. Retrieved from h p://icto.dost.gov.ph/wp-content/uploads/2015/03/Free-Wi-Fi-Project-TOR.pdf 7 Department of Budget and Management, & Commission on Audit. (2013). Joint Circular No. 2013-1: Revised Guidelines on the Submission of Quarterly Accountability Reports for Appropria ons, Allotments, Obliga ons, and DIsbursements. 50 Technical Notes on the 2016 Proposed Na onal Budget

Besides providing consular services to Filipinos en es. On top of this, P82.2 million will fund the worldwide, the Department of Foreign Aff airs will ICT requirements for a comprehensive system to have P2.83 billion for processing and issuance of provide up-to-date corporate informa on and 3.4 million more electronic passports in 2016. market trends. Through the agency’s automated applica on and processing systems8, submi ng documents today Strengthening Ins tu ons. This Budget supports takes only at least 30 minutes, half an hour faster ongoing strategies to strengthen the capacity of than before; and passport releasing only 7 to 15 government agencies, both local and na onal, working days, which used to take 10 to 20 days. to deliver services to ci zens with improved speed and greater impact while ensuring greater The Na onal Bureau of Inves ga on will have fi nancial stewardship. P810.3 million out of its P1.2-billion budget not only to reinforce its inves ga on services but Performance-Based Management. Since 201010, also to fast-track the issuance of clearances to 5.4 the government has been establishing mechanisms million more ci zens for the coming year. to incen vize performance and reward government employees who meet or even surpass Business Registra on. Likewise, the Budget their targets. Recognizing the need for a well- will help provide the right environment for mo vated and performance-oriented bureaucracy, businesses, empowering investors regardless the government will sustain the Performance- of origin, experience, and scale of enterprise. Based Incen ve System to recognize and reward To combat red tape and corrup on, the Aquino performing public servants through an alloca on administra on implemented signifi cant measures of P16.8 billion in 2016. to allow the private sector to fl ourish. In March this year, the President, through Execu ve One of the groundbreaking endeavors in Order 181, allowed the one- me produc vity streamlining business registra on in the country enhancement incen ve (PEI) equivalent to was the establishment of the Philippine Business either P5,000 or a month’s worth of basic salary Registry, a database that puts the Department depending on whether the agencies fulfi lled of Trade and Industry (DTI) and other trade and certain condi ons, such as the achievement of commerce agencies9 in a unifi ed registra on at least 90 percent of their 2014 performance portal. The Business Permits and Licensing System targets, and compliance with the Transparency (BPLS) was likewise restructured to fast-track the Seal and the informa on requirements of the issuance of permits and licenses na onwide. At An Red-Tape Act11. As of July 31, 2015, the the DILG’s end, part of its budget will help the BPLS government has already released P28.21 billion reach its 2016 target of 1600 compliant LGUs. of PEI to at least 268 agencies.

Supported by P133 million out of its P631.3-million The government also recognizes that its pay budget, the Securi es and Exchange Commission structure needs to be as compe ve as the private aims to issue 11,500 registra ons and licenses sector’s so as to retain performing public servants to corpora ons, investment instruments such as and a ract new blood into the bureaucracy. Thus, bonds and equi es, and par cipants in the capital the 2016 Budget proposes P50.6 billion for salary market; and to monitor and evaluate 70,780 increases and other compensa on adjustments. reports, en es, and disclosures on investment

8 Offi ce of the President. (2012). The SONA 2012 Technical Report. 9 The PBR also includes BIR, SEC, Home Development Mutual Fund (Pag-IBIG), Social Security System, Philippine Health Insurance Corpora on, LGUs, and other agencies issuing permits and licenses. 10This was made possible through Administra ve Order No. 25, s.2011, which formed the inter-agency task force on the government’s unifi ed system for results-based assessment of the performance of government agencies and employees 11Offi cial Gaze e. (2015). Execu ve Order 181 s. 2015: Implementa on of the Provisions of the FY 2015 General Appropria ons Act on the Grant of the FY 2015 Produc vity Enhancement (PEI) to Government Employees. Retrieved from h p://www.gov.ph/2015/05/15/execu ve-order- no-181-s-2015/ 51 Technical Notes on the 2016 Proposed Na onal Budget

Good Local Governance. In 2010, the DILG Building on these current reforms to strengthen introduced the Performance Challenge Fund ﬁ nancial stewardship and service delivery among (PCF) to incen vize the LGUs that earn the Seal the LGUs, the administra on will enable the of Good Housekeeping (SGH)—a tle extended downloading of funds to those that perform, to local governments that perform well especially enabling them to execute projects funded by in the areas of disaster preparedness, ﬁ scal the na onal government. Of the P18.4 billion housekeeping, business-friendliness, and public safety. The DILG awards SGH recipients in the form Criteria for provinces planning to avail of of subsidy in order to jumpstart priority projects. LGSF funding for provincial roads: From an ini al 30 towns in 2010, 248 ci es and municipali es were conferred with the SGH in 2014 1. Compliance with the Seal of Good Financial House- and were therefore declared eligible to access the keeping P470-million PCF alloca ons for this year12. In 2. Inclusion in the Focus Geographical Areas under the Budget Priori es Framework 2016, the agency plans to spend P1 billion for the 3. Special road fund comple on rate PCF to subsidize local projects and monitor the 4. Percentage share of unpaved roads status of the funded projects, among others. 5. Percentage share of fair-to-good roads

Source: Special Provisions under the LGSF, 2016 NEP Another breakthrough in devolving power to every town and city is the LGU Public Financial Management allocated under the Local Government Support (LGUPFM) 2 Project. Launched in February 2012, Fund (LGSF), P11.7 billion will fund local poverty the project seeks to develop tools that allow the reduc on projects iden fi ed through the BUB.14 LGUs to be er manage their fi nances, as well as These projects will be implemented by the strengthen the coordina on between the LGUs and BUB-par cipa ng municipali es that meet the the na onal agencies mandated to monitor the standards of the Seal of Good Local Governance, former’s capacity to plan and implement projects. and demonstrate a track record of solid Stronger fi scal planning and management in the engagement with local communi es and civil local level ensures that public services are delivered society groups. down to the smallest barangay. With funding from the European Union, the implemen ng agencies Moreover, the 2016 LGSF earmarks P6.5 billion to of LGUPFM 2— the DILG, the DBM, the NEDA, and upgrade and restore provincial roads, which will the Bureau of Local Government Finance—render be implemented by provincial governments that technical and instruc onal support to the LGUs. The met good governance standards and established project will con nue to roll out systems and tools, monitoring and evalua on mechanisms. such as the following: Meaningful Ci zens’ Par cipa on. Democracy - Manuals on budget opera ons and electronic is stronger when power trickles down to the budge ng; greater lot of people. The 2016 Budget supports - Harmoniza on of Bo om-up Budge ng (BUB) the empowerment of the basic sectors and with the local budge ng process; and units of society. Alongside its pursuit of reforms - An integrated local fi scal management system. that make more informa on on state fi nances available to the public (see pages 12 to 13 for In February 2015, the Roadmap and fi scal transparency reforms), the government Implementa on Strategy was formally launched, has sought to deepen the people’s stake in the providing the LGUs with tools to iden fy, design, governance through programs, such as the BUB and implement the right approaches in genera ng and the Ci zens Par cipatory Audit (CPA). revenues, managing expenditures, and monitoring the status of funded projects13.

12Performance Challenge Fund. (n.d.). Benefi ciaries Per Seal of Good Housekeeping. Retrieved from h p://pcf.dilg.gov.ph/benefi ciaries.php?- year=2014®ion=&province=&citymun= 13DBM-Local Government Unit Public Financial Management Offi ce. (2015). LGU PFM Reform Roadmap and Implementa on Strategy Launched Retrieved from h p://lgupfm.ph/web/lgu-pfm-reform-roadmap-and-implementa on-strategy-launched-3/ 14 The 2016 round of BUB allows local government units to implement programs alongside government agencies. Before, BUB-funded projets are carried out exclusively by agencies. 52 Technical Notes on the 2016 Proposed Na onal Budget

Table 3. Status of BUB Projects, 2013 to 2015

Completed Ongoing Pipelined Proposed Dropped* Total

2013 4,609 722 258 2,001 1,810 9,400 2014 5,919 4,325 6,304 3,189 2,001 21,738 2015** 101 671 6,109 7,505 189 14,575 TOTAL 10,629 5,718 12,671 12,695 4,000 45,713

* “Dropped” refers to those which, upon valida on of agencies, were deemed not feasible. Figures are exclusive of dropped projects that are replaced, split, or merged. Source: DBM-Reforms and Innova ons Unit (RIU) ** As of Second Quarter 2015

Bo om-up Budge ng (BUB). Since 2012, the million for the People’s Par cipa on Partnership BUB has tapped civil society organiza ons in program, a venue for the LGUs and the CSOs to indigent communi es to iden fy an -poverty share their experience and exper se in planning interven ons, which, when approved, would be and implemen ng community-based programs funded by the Budget. In cra ing the 2016 Budget15, for socio-economic expansion. the government opened even wider spaces for greater ci zen par cipa on and strengthened To bring more power to the farmers, the urban their voice and vote in the process. For one, the poor, and other basic sectors in engaging with government introduced improvements to scale the local governments, the Na onal An -Poverty up the LGU and the CSO engagement: among Commission (NAPC) will set aside P79.2 million of others, it allowed local governments to directly its P198-million proposed budget to conduct 624 implement projects, supported the crea on of consulta ons with basic sector groups, among project management offi ces to render support in others. execu ng and tracking BUB-funded projects, and forged direct links with the Na onal Community- Ci zen’s Par cipatory Audit. To provide more Driven Development Program and the Local ci zens an offi cial pla orm to exact accountability Development Councils. from public offi ce, the COA will carry on with the CPA with a 275-percent increase in budget (P25 From 2013 to 2015, 45,713 projects worth P89.4 million) for 2016. Under its second phase17, which billion have been approved under the BUB began in January 2015, the audit teams comprised (see table above). Of these, 10,629 have been of reform-oriented ci zen groups monitor the completed and 18,389 are ongoing or already status of farm-to-market and tourism roads, rural lined up. Armed with a P24.71-billion budget health programs, and other local projects. The for 2016, the BUB will fund 14,326 projects to CPA won the Bright Spot Award in the 2013 Open be implemented with 16 na onal agencies (see Government Summit in London. succeeding table) Addi onally, the NAPC was allo ed P22 million for The proposed alloca ons in Regions III, IV-A, VI, the ci zen-led audit of projects under the BUB. VII and VIII, which make up 43 percent of total alloca ons, are among the biggest na onwide. Pursuing Electoral Reform. The 2016 Budget also sets the stage for fair and honest elec ons. The The DILG will have P350 million to assist the LGUs Commission on Elec ons (COMELEC) proposed in formula ng their Local Poverty Reduc on a P15.65-billion budget. An alloca on of P6.26 Ac on Plans for the 2017 Budget prepara on16. billion will fund the simultaneous Na onal and The alloca on will also help in honing the capacity Local elec ons on May 9, 2016—45 percent of the ci zen groups to par cipate in cra ing an - bigger than the budget for 2010 (P4.31 billion). poverty programs. The DILG proposed another P22 P6.69 billion was allocated for the barangay and

15 As enabled by the DBM-DILG-DSWD-NAPC Joint Memorandum Circular No. 5, dated October 1, 2015. 16 LPRAP serves as the framework of BUB priority programs as collec vely drawn up by the local government and the CSOs. 17 Oﬃ cial Gaze e. (2015). Par cipatory Audit Enters Second Phase. Retrieved from h p://www.gov.ph/2015/01/22/par cipatory-audit-enters- second-phase/ 53 Technical Notes on the 2016 Proposed Na onal Budget

Table 4. Summary of BUB Projects per Implemen ng Agency

Number of Projects Amount Appropriated (in 000) Amount Projects Proposed 2013 2014 2015 2016 2013 2014 2015 (2016, in 000)

DA 2,676 5,343 3,427 1,791 4,279,138 7,482,853 4,328,284 2,633,595 Farm-to-Market Roads, Post-harvest Facili es, and merch- anized threshers BFAR 481 787,185 Support for Local Fisherfolk DAR 83 318 103,368 475,288 Livelihood Programs and Local Access Roads DENR 326 541 308 151 302,928 400,603 322,508 159,292 Na onal Greening Program DEPED 318 2,473 1,399 437,643 1,451,191 1,492,509 Basic Educa on Facili- es DILG 645 1,907 2,606 972 1,132,496 2,820,677 5,748,659 4,077,702 Potable water system, drainage lining, fl ood control, and community water- works DOE 21 67 35 31 27,847 70,882 84,680 43,783 Household and Si o Electrifi ca on Pro- gram DOH 785 2,200 1,412 607 829,117 1,356,570 1,482,191 565,304 Health Facili es En- hancement Program, Access to Medicines and Human Resour- ces for Health DOLE 81 851 457 917 108,890 510,357 443,278 1,048,440 Capacity Develop- ment Programs (e.g. seminars on livelihood assistance) DOT 2 223 248 179 1,400 175,372 350,041 196,662 Tourism Development Assistance/Programs DSWD 796 3,426 2,039 1,864 947,097 2,953,564 2,704,326 2,165,675 Sustainable Devel- opment Program, Protec ve Services and KC-NCDDP DTI 7 877 631 558 136,606 531,210 613,126 565,642 Livelihood Program NEA 87 56 53 22 136 75,607 102,717 27,283 Electrifi ca on Projects PHILHEALTH 38 49,718 DPWH 5 30,481 Roads and bridges, fl ood control TESDA 725 347 752 395,654 297,367 711,390 Livelihood Training LGSF 1,250 5,945 2,828,955 11,700,388 Local Infrastructure Projects NIA 88 107,200 Irriga on Projects NCIP 56 32,607 Support for Ancestral Land and Domain Security Program TOTAL 5,870* 19,506* 19,007* 14,326 8,397,100 20,047,086 20,905,841 24,714,948

* Figures for 2013 to 2015 comprise of alloca ons for programs approved for funding under the enacted GAA.

54 Technical Notes on the 2016 Proposed Na onal Budget

Figure 2. BUB Alloca ons Per Region (201318 to 201619)

2,500,000

2,000,000

1,500,000

1,000,000

500,000

- ARMM CAR CARAGA NCR I II III IVA IVB V VI VII VIII IX X XI XII 2013 761,60 306,90 605,30 220,30 90,800 317,10 583,10 1,053, 634,10 667,20 622,10 641,10 708,80 578,60 606,90 2014 1,683, 809,68 1,076, 145,73 1,044, 734,56 758,48 780,04 975,86 1,900, 1,884, 2,052, 1,833, 1,019, 1,496, 800,77 1,049, 2015 313,92 962,50 1,004, 250,64 1,607, 1,162, 1,627, 1,786, 965,00 1,695, 1,803, 1,892, 1,871, 979,00 1,337, 761,00 879,94 2016 115,50 1,216, 331,51 1,903, 1,395, 1,953, 2,145, 1,146, 1,989, 2,175, 2,281, 2,254, 1,160, 1,626, 916,50 1,064, Sources: DBM-RIU (2013 data), GAA (2014, 2015), 2016 NEP the Sangguniang Kabataan elec ons on October A Legacy of Good Governance. The government’s 31, 2016. To allow Filipinos overseas to vote for ongoing reforms have gained the momentum in na onal offi cials, the Comelec proposed a budget redeeming public confi dence and improving the of P192.9 million to fund the Overseas Absentee country’s global reputa on. While alloca ons Vo ng. for good governance are generally lower than most of the administra on’s budget priori es, The government will employ anew the precinct this situa on does not diminish the founda onal count op cal scanner (PCOS) machines to reduce impact of these reforms in making social and vo ng me and avoid electoral fraud. In 2015, the economic development happen. As the Aquino Comelec received P11.44 billion to acquire 23,000 administra on has demonstrated in its last fi ve units of Precinct Count Op cal Media Readers to years in offi ce, good governance leads to good complement the exis ng 81,896 PCOS machines. performance, which in turn creates direct and Currently, the agency holds parallel biddings for meaningful benefi ts and results for the ci zens. both the refurbishment of the exis ng PCOS machines and the procurement of 70,977 new With reforms laid out and reinforced, the agencies units. While Comelec has yet to fi nalize whether op mize their capability to build roads and schools, it would refurbish the exis ng PCOS machines or increase workers’ outputs and incomes, sustain lease brand-new ones, the parallel bidding only the na on’s food basket, and help communi es shows the agency’s resolve to push for the full build resilience to climate change. With improved automa on of next year’s elec ons. service delivery, social and economic gaps are bridged, thereby bringing prosperity to every Filipino, regardless of birth, gender, and origin.

18 For the ini al round of BuB, the government chose 609 ci es and municipali es, which, based on the mapping done by the Na onal An - Poverty Commission in 2011, are among those having the highest magnitude of poor individuals. No city or municipality in Regions II and III fall under the NAPC’s focus areas. Of the 609, 595 submi ed poverty reduc on proposals for BuB. 19 Tenta vely, ARMM will have no 2016 alloca on in an cipa on of the passage of the Bangsamoro Basic Law and the subsequent establishment of the new Bangsamoro region. Meanwhile, na onal government agencies will implement P25.1 billion in socioeconomic programs for the region. See pages 103 to 104 for details. 55 Technical Notes on the 2016 Proposed Na onal Budget

B. Making Growth Inclusive

Social Protec on and Social Services Table 1. Poverty Incidence Among Popula on, %3

In the past decade, poverty reduc on eff orts lost 2009 2012 2013 2014 2015 2016 steam as the country’s full-year poverty incidence Target Target among popula on went up to 26.3 percent in 20091 Poverty from 24.9 percent in 2003, breaking what used to Incidence 28.6 27.9 24.6 25.8 20.0-23.0 18.0-20.0 be a steady deadline in the poverty rate from 34.4 percent in 1991. Evidently, this setback was largely a result of poor governance: the inability to spur goal to 18 to 20 percent from 16.6 percent under sustained growth, especially in the countryside; the country’s Millennium Development Goals. the insuffi cient spending on an -poverty measures due to weak revenue collec on and ineffi cient In the face of these challenges, the Aquino resource alloca on; the poor design of programs administra on remains commi ed to improving and their inadequate coverage, and the defi cient people’s living standards by providing adequate targe ng of benefi ciaries; among others. social protec on as well as eff ec vely delivering educa on, healthcare, and socialized housing Commi ed to further reduce poverty levels, the services. The 2016 Budget supports this Aquino administra on has ins tuted reforms in commitment by increasing the spending for Social alloca ng resources for delivering social protec on Services by 16.1 percent to P1.1 trillion. and social services to the Filipino people. One such reform is the Zero-Based Budge ng (ZBB) Social Protec on. The results of a 2007 study approach that scru nizes the performance of conducted by the Asian Development Bank4 exis ng programs and revamps, if not cancels, revealed that poor coverage and inadequate those which fail to meet the objec ves and those benefi ts of social protec on programs in the which are fraught with leakages. Combining Philippines had been among the cri cal constraints improved revenue eff ort with more disciplined to reducing poverty. The already-limited resources resource alloca on, ZBB and other reforms have available to deliver social safety nets had been not only increased the share of Social Services in worsened by poor targe ng of benefi ciaries, poor the Budget—from 27 percent in 2005 to 37 percent coordina on among implemen ng agencies, and in 2015—but also focused resources on eff ec ve lack of con nuity. Resources had been spread too programs, such as the Pantawid Pamilyang Pilipino thinly on too many programs that failed to improve Program (4Ps), the K to 12 Basic Educa on Reform, the lives of the people. and Kalusugang Pangkalahatan. Thus, the Aquino administra on has focused the These eff orts and the newfound strength of the Budget on programs that provide ample social economy brought forth an aggregate reduc on safety nets to the poorest families while suppor ng in poverty incidence to 24.6 percent in 20132. them in improving their lives. One such move is to However, this fi gure slightly increased by 1.2 improve and expand the 4Ps. The administra on percentage points to 25.8 percent in the fi rst has seen the program’s poten al because it has an semester of 2014 due to the destruc on brought established mechanism for targe ng benefi ciaries about by natural and man-made disasters, as and linkages with the delivery of educa on and well as food infl a on. This setback prompted the healthcare services. Therefore, funding for the 4Ps government to adjust its 2016 poverty incidence increased from P6.6 billion in 2009 to P62.3 billion

1 Philippine Sta s cal Authority (n.d.). Poverty incidence among popula on. Note: Poverty es mates for 1991 to 2009 were based on the Family Income and Expenditure Survey (FIES). 2 This fi gure indicates the poverty incidence among popula on in the fi rst semester of 2013 (Source: PSA). Beginning 2013, the PSA adopts the Annual Poverty Indicator Survey (APIS) to update its es mate of poverty incidence more regularly than before. 3 Figures from 2009 to 2014 are taken from Philippines Sta s cs Authority; while targets for 2015 and 2016 were based on the 2014 Socioeco- nomic Report of the Na onal Economic and Development Authority. 4 Asian Development Bank. (2007). Philippines: Cri cal Development Constraints. Retrieved from h p://www.adb.org/sites/default/fi les/publica on/29274/cdc-philippines.pdf 56 Technical Notes on the 2016 Proposed Na onal Budget

Table 2. Expenditures and Beneﬁ ciaries of realize these goals, the 2016 Budget increased the Pantawid Pamilyang Pilipino Program investments for social protec on by 1.3 percent to P94.8 billion. Par culars 2015 2016

Regular CCT P58.37 billion P59.38 billion Pantawid Pamilyang Pilipino Program. The No. of Benefi ciaries 4.31 million HHs 4.40 million HHs government will con nue to fund the 4Ps so that of which: benefi ciary-families can send their children to Extended CCT P5.4 billion P5.19 billion school, access maternal healthcare services, and No. of Extended Benefi ciaries achieve sustainable livelihood. As of March 26, 15-18 years old 1.2 million 1.15 million 2015, the 4Ps or the Condi onal Cash Transfer Modifi ed CCT P3.95 billion P3.29 billion (CCT) program has covered 4.4 million households No. of Benefi ciaries 126,963 HHs 218,377 HHs in 80 provinces. Of its P62.32-billion allotment, I nerant 3,956 488 15.26 percent had already been used in the fi rst Homeless Street Families 7,007 2,115 Indigenous People 116,000 163,950 quarter of 2015. Families in Need of Special Protec on (FNSP) 51,824 By the end of 2016, 1 million recipient-households are expected to rise from survival to subsistence; Total P62.32 billion P62.67 billion while 150,000 households should be able live a in 2015 to cover 4.4 million indigent households life of self-suffi ciency. iden fi ed through the Na onal Household Targe ng System for Poverty Reduc on (NHTS- Regular CCT. This program will support 4,402,253 PR). households with a P59.4-billion budget, and, as result of its expansion in 2014, includes 1.15 The government has also expanded the program’s million children aged 15 to 18 to support their coverage. In the beginning, families were provided secondary educa on. a monthly cash grant of P500 on the condi on that mothers availed of maternal healthcare services, Through the program, the enrolment rate among and another P300 for each of up to three children benefi ciaries has remarkably increased compared aged 0 to 14 who were enrolled in elementary. with non-benefi ciaries. In par cular, impact The expansion now covers children up to age 18 evalua on studies in 2012 and 2014 reveal the and provides a P500 monthly grant for each child enrolment among day care and pre-school had a 10 a ending high school. With the expansion, school percentage point diff erence, primary school-aged enrolment increased, and the number of maternal children with 4.5 percentage point diff erence, and infant deaths decreased among program and also a 5 percentage point diff erence in benefi ciaries. Moreover, 4.4 million household- regular a endance in school, compared to non- 5 benefi ciaries of CCT have now been covered Pantawid benefi ciaries in the control group . by the Philippine Health Insurance Corpora on Addi onally, more pregnant women have (PhilHealth) since 2012. benefi ted from antenatal care compared with non-CCT benefi ciaries, more children have also As the 4Ps succeeds in bridging 25,000 household- undergone de-worming and have taken Vitamin benefi ciaries from subsistence to self-suffi ciency, A supplements, among others. There was a 15 the government will next expand investments percentage point diff erence in regular weight in programs that provide sustainable livelihood monitoring of children aged 0 to 5, and a 10.5 and adequate social protec on for the elderly. percentage point diff erence in mothers availing Moreover, the social protec on programs will antenatal care services. Moreover, in 2014, 70 further address the needs of communi es that are percent of mothers under the program delivered most vulnerable to climate change. Addi onally, in health facili es compared to the na onwide 6 the NHTS-PR will be updated to address its average of 56 percent . weaknesses and eventually be ins tu onalized. To

5 Department of Social Welfare and Development, World Bank, Australian Aid, & Asian Development Bank. (2013). Philippines Condi onal Cash Transfer Program Impact Evalua on 2012. Retrieved from h p://bit.ly/1J9c990 6 ______. (2014). Evalua ng the Pantawid Pamilya Program Using Regression Discon nu y Design, Second Wave Implementa on Results. 57 Technical Notes on the 2016 Proposed Na onal Budget

Table 3. Number of CCT Family Beneﬁ ciaries, 2013 to 2015

Indicator 2013 2014 2015 (as of Q1) Target Accomplishment Target Accomplishment Target Accomplishment

No. of household 3,809,169 3,935,394* 4,461,732* 4,478,562 4,436,732* 4,425,845 benefi ciaries * Includes Modifi ed CCT benefi ciaries.

The CCT program does not only aim to reduce households, as well as 488 i nerant families, 2,115 poverty through fi nancial assistance, but also homeless street families, 163,950 indigenous invests in the families’ ability to stand on their people, and 51,824 families in need of special own—contrary to presump ons that the program protec on10. promotes dependency. It is a long-term strategy to eradicate poverty, aptly designed with condi ons NHTS-PR Update. Prior to the Modifi ed CCT, the that benefi ciaries needed to fulfi l7. Through NHTS-PR—also known as “Listahanan”11—did families’ compliance with these condi ons, not cover i nerant and homeless families who working Pantawid members are more likely to be were diffi cult to track, and indigenous groups more op mis c in seeking addi onal work than in that belong to Geographically Isolated and non-Pantawid households8. Disadvantaged Areas. The situa on called for a much needed upda ng of the NHTS-PR to cover Modifi ed CCT. The government introduced the those families and enable the government to Modifi ed CCT in 2014 to provide social protec on be er provide them with support. The ongoing for the homeless and i nerant poor families, as update of the NHTS-PR is supported by a budget of well as households of indigenous groups. As P1.94 billion in the 2014 Supplemental Budget12. of March 26, 2015, the program has covered An addi onal P129 million was allocated under 218,3779 ac ve households. The benefi ciaries the 2016 Proposed Budget to further support the include families aff ected by the Zamboanga Siege NHTS-PR upda ng. and typhoon Yolanda that happened in 2013. Sustainable Livelihood Program. The Sustainable For 2016, the Modifi ed CCT program will have Livelihood Program (SLP) seeks to improve the the needed funding to support 218,377 indigent socio-economic status of the poor and gives

Table 4. Benefi ciaries of Sustainable Livelihood Program Indicators 2013* 2014 2015 (January-April) Target Actual Target Actual Target Actual 4Ps Non-4Ps 4Ps Non-4Ps 4Ps Non-4Ps benefi ciaries benefi ciaries benefi ciaries benefi ciaries benefi ciaries benefi ciaries

No. of families served through micro-enterprise development 83,355 158,228 19,962 77,912 123,890 - 265,175 31,535 -

No. of families served through employment facilita on 35,723 13,758 - 33,402 9,627 - 113,647 1,666 - Total 119,078 171,986 19,962 111,314 133,517 - 378,822 33,201 - *Includes con nuing appropria ons; based on DSWD’s Physical Report of Opera ons (BAR1)

7 Philippine Sta s cs Authority (2013, March 9). Beyond the Numbers. Retrieved from h p://www.nscb.gov.ph/beyondthenum bers/2013/03082013_jrga_cct.asp 8 Department of Social Welfare and Development, World Bank, Australian Aid, & Asian Development Bank. (2012, 2014). 9 Department of Social Welfare and Development. (2015). Pantawid Pamilyang Pilipino Program: Program Implementa on Status Report, 1st Quarter 2015. Retrieved from: h p://pantawid.dswd.gov.ph/images/1stquarterreport2015042215.pdf 10 DSWD defi nes these families as those who were aff ected by man-made and natural disasters (e.g. Typhoon Yolanda, Bohol earthquake, and Zamboanga siege) 11 In August 2013, DSWD coined the term “Listahanan” to refer to the NHTS-PR 12 Supplemental Appropria ons for 2014, or R.A. 10652, was approved on December 23, 2014. 58 Technical Notes on the 2016 Proposed Na onal Budget priority to gradua ng 4Ps benefi ciaries. The SLP opera ons, and hence was renamed KALAHI- provides families an op on to choose between CIDSS-Na onal Community - Driven Development the micro-enterprise development track and Program (NCDDP). The expansion took shape the employment facilita on track. The micro- based on a World Bank study13 that showed the enterprise development track targets families posi ve eff ects of the program on reducing poverty with limited access to formal credits needed to rates per capita. The results of the study also put up a business or livelihood. The employment noted an increase in the ci zen’s access to public facilita on track assists benefi ciaries to fi nd a services, such as roads. Furthermore, the results suitable job according to their labor skills. Families also showed that community assemblies became then undergo relevant training, and are either an eff ec ve way of promo ng par cipa on, given employment assistance or business capital transparency, and accountability for their own and access to fi nancial ins tu ons. projects.

Between 2010 and 2014, 487,791 families had The NCDDP was allocated P10.98 billion to support benefi ed from this program. In 2015, the number 13,357 barangays in 627 municipali es across 58 of targeted families for the year increased to provinces. This fund will allow the program to 378,882 under P4.9-billion budget, from 111,314 expand avenues of par cipa on in local planning, families in 2014. As of March 2015, the SLP has budge ng, and program implementa on. already assisted 33,201 families out of 378,822 Compared with the 2015 funding, this budget targeted for the said year. decreased by P6.03 billion because of the reduc on in the municipali es covered from 826 in 2015 to For 2016, the SLP was allocated P9.61 billion to 627 in 2016. However, program benefi ciaries will assist 378,822 families. The program will help the increase by 15 percent to 220,050 households in gradua ng CCT benefi ciaries transi on to self- 2016. suffi ciency. With an increased funding of P4.68 billion in 2016 from the 2015 alloca on, the The NCDDP allows communi es in poor program will be able to cover 170,470 families municipali es to iden fy problems and issues, in providing micro-enterprise subsidies. Skills thus inspiring real solu ons. It empowers the and technical-voca onal trainings will be given civil society in local planning and budge ng, and to 208,352 benefi ciaries to prepare them for capacitates them to par cipate as implementers employment. of the services they iden fy. The KALAHI-CIDDS- NCDDP experience is enriching and further Community-Driven Development. The developing the implementa on of Bo om- government envisions an empowered ci zenry, Up Budge ng (BUB). In par cular, the NCDDP where the poor families and their communi es can community volunteers were engaged in the stand on their own and become co-implementers 2016 BUB implementa on as members of local of projects that benefi t them. In 2003, the poverty reduc on ac on teams (LPRAT) wherein government began to realize this vision through they, together with representa ves from the LGU, the Kapit-Bisig Laban sa Kahirapan-Comprehensive NGAs, and civil society organiza ons, outlined the and Integrated Delivery of Services (KALAHI- programs and projects that would address the CIDSS), a mechanism that enables the people to municipality’s needs (see pages 53 to 54 for more par cipate in decision-making in their barangay’s discussions on BUB). local development projects. The system included the elec on of members to the Barangay Social Pension for Indigent Senior Ci zens. The Subproject Management Commi ee (BSPMC), the government sees to it that senior ci zens— body responsible for iden fying, implemen ng, especially the indigents—feel the eff ects of and monitoring community projects. inclusive growth of the country. Consistent with the Expanded Senior Ci zen’s Act, the government In 2013, the KALAHI-CIDSS expanded to become a expanded in 2016 the coverage of the program’s na onal scale of community-driven development benefi ciaries by lowering the age requirement to

13 World Bank. (2011). Impact Evalua on KALAHI-CIDSS Final Survey. Retrieved from h p://siteresources.worldbank.org INTEAPREGTOPSOCDEV/Resources/APPC_Philippines_Complete_web.pdf 59 Technical Notes on the 2016 Proposed Na onal Budget

Table 5. Social Pension: Financial and Physical Accomplishments and Targets 2013 2014 2015 2016 (Target) (Target)

Total No. of beneﬁ ciaries served 255,763 452,836 939,609* 1,182,941** Amount P1.6 billion P2.8 billion P6.0 billion P7.5 billion

* As of ﬁ rst quarter of 2015, 897,482 beneﬁ ciaries of the total target have been served by the program, with P1.20 billion budget; based on Budget Accountability Report (BAR) 1 ** includes aged indigent senior ci zens 60 years old and above

60 years old from 65 years old and above in 2015 Sustaining Prosperity for All. The government has and from 77 and above in 2013 and 2014. taken signifi cant steps to improve the lives of the poor, vulnerable, and marginalized14. The reforms For 2016, the program’s proposed budget of under the government’s social protec on strategy P7.51 billion will cover the monthly social pension led to the development of mechanisms that of P500 each for 1,182,941 senior ci zens for meaningfully mi gate individual and life-cycle subsistence and medical needs. Of the total risks—from concep on to old-age. These reforms benefi ciaries, 243,332 will come from indigenous will hopefully prevent the retrogression of the peoples’ groups. The 2016 budget is P1.55 billion condi ons of the poor and the disadvantaged higher than the P5.96 billion alloca on in 2015. and, more importantly, empower families-at-risk with greater access to opportuni es to a ain Supplementary Feeding Program. As part of economic independence. its social protec on and human development strategy, the government seeks to further The enhancements of social protec on programs, improve the health and educa on of children. The such as the 4Ps, enable ci zens to become more DSWD and the DepEd will con nue to work hand self-suffi cient a er gradua ng from the program, in hand to stamp out hunger and malnutri on, par cularly through educa onal assistance and with a proposed alloca on of P4.05 billion to eventually through livelihood programs. Moreover, feed 2,150,621 children in local government-run the program becomes a tool for enhancing day care centers na onwide. Children aged 2 to 5 the convergence of the na onal agencies. The years old will receive hot meals fi ve days a week coordina on of the DSWD with the DOH and the for 120 days. This alloca on increased by P693 DepEd widens the benefi ts provided depending on million compared from last year’s P3.36 billion. the social protec on needs of target sectors. This collabora ve approach to social protec on and The program likewise monitors the improvement poverty reduc on should be sustained beyond in the children’s nutri onal status by comparing 2016, especially when it comes to providing 4Ps their ini al weight with that a er 120 days. To graduates with sustainable livelihood. ensure such improvement, the budget per meal increased to P15 from P13 in 2015.

Table 6. Supplementary Feeding Program: Financial/Physical Accomplishments and Targets

Indicators 2013 2014 2015* 2016 (Targets)

Amount P 2.90 billion P 4.0 billion P177.23 million P4.05 billion Beneﬁ ciaries 1,692,843 1,819,925 1,671,306 2,150,621 * As of First Quarter of 2015

14 Na onal Development and Economic Authority. (2014). Philippine Development Plan 2011-2016 Midterm Update 60 Technical Notes on the 2016 Proposed Na onal Budget

Basic Educa on classroom construc on backlog as of 2010, and further close in on other resource gaps (see Table Quality basic educa on for all is not only a 9). cons tu onal right but also an ingredient needed to achieve inclusive growth: by giving everyone, Through basic educa on investments and the whether rich or poor, the opportunity to develop delivery of social protec on packages that their human capaci es and thereby improve their incen vize families to send their children to school social and economic situa on. Thus, the Aquino (see pages 56 to 58 for the 4Ps), the comple on administra on has decisively addressed the rate of students in elementary and high school saw resource gaps that curtailed the eff ec ve delivery a marked improvement over the last 5 years (see of educa on to the Filipino youth. It also pursued Table 8). Na onal Achievement Test scores in both the K to 12 Basic Educa on Program (K to 12)—a elementary and high school had also increased diffi cult yet necessary reform—to make Philippine between 2010 and 2013, from 68 percent to 70, basic educa on interna onally compe ve and and 48 percent to 54, respec vely. Meanwhile, a uned to the needs of a growing and more net enrolment in kindergarten had increased by complex global economy. Ul mately, these eff orts 22.1 percentage points from 2010 to 2014. should raise basic educa on comple on and achievement: outcomes which had been hard to To sustain the K to 12 Program and allow the reach in previous decades. DepEd to carry out the fi rst year of the Senior High School (SHS) program in 2016, the government The K to 12 expands basic educa on from 10 proposed to further increase the agency’s budget years to 12. The program does not only decongest to P436 billion next year (see fi gure below). Of the basic educa on curriculum to allow more this amount, P91.98 billion or 21.1 percent will be me for mastery of either technical-voca onal or spent for the needs of the SHS program. academic courses especially in math, languages, Figure 1. DepEd Budget, 2010-2016 and science15; but also equips graduates with (in billion pesos) the right skills and knowledge to either become 500 immediately employable or ready for higher P436.0 P377.7 educa on. Moreover, the K to 12 ins tu onalizes 450 400 P309.4 P293.4 the provision of kindergarten educa on, 350 P238.4 considering the importance of pre-school in se ng 300 P207.0 solid founda ons for further educa on. A er the 250 P174.7 DepEd rolled out this program in School Year (SY) 200 2012-2013, Congress passed the Enhanced Basic 150 Educa on Act of 2013 law that ins tu onalized 100 this game-changing reform. 50 0 2010 2011 2012 2013 2014 2015 2016 Aside from revamping the basic educa on (NEP Level) curriculum, the government also massively increased investments in basic educa on in order Table 7. Net Enrolment Rate of Kindergarten to close lingering gaps in the supply of teachers, to Secondary Students, 2010-2014 classrooms, and textbooks. For one, the DepEd Level 2010 2011 2012 2013 2014 budget has been increased by a cumula ve 116.26 percent since 2010 to P377.8 billion16 in 2015 (see Kindergarten 57.2% 74.4% 77.4% 75.9% 79.3% Elementary 98.5% 99.6% 97.4% 95.8% 94.5% Figure 1). This boost in the budget enabled the Secondary 92.5% 89.8% 90.0% 88.2% 86.2% government to fi nally seal in December 2013 the Source: Department of Educa on

15 Uyquiengco, M. (n.d.). Beneﬁ ts of K-12 Educa on for Filipino Students. The Asian Parent Philippines. Retrieved from h p:// ph.theasianparent.com/advantages-new-k-12-curriculum/ 16 The above-men oned ﬁ gure indicates DepEd’s all-in budget, including transfers from Special Purpose Funds.

61 Technical Notes on the 2016 Proposed Na onal Budget

The proposed crea on of new teaching posi ons Table 8. Comple on Rate and Na onal will entail a budget of P16.88 billion in 2016. Achievement Test Rate (Elementary and Of this amount, P3.96 billion will fund 17,371 Secondary) non-teaching posi ons to be deployed to 5,899 Level 2010 2011 2012 2013 schools that off er the SHS. Consequently, school Comple on Rate managers will be able to focus on curriculum Elementary 72% 71% 74% 79% implementa on, unload non-teaching func ons Secondary 75% 74% 75% 75% from teachers, and provide schools on the ground Na onal Achievement Test* with suffi cient administra ve support. Elementary 68% 67% 69% 70% Secondary 48% 49% 51% 54% A modifi ed pre-service educa on training was Source: Department of Educa on also introduced in line with the requirements * NAT score is the average of Mean Percentage Score (MPS) of fi ve subject areas. MPS is the ra o between the number of of this program. In 2013, the DepEd started correctly answered items and the total number of test ques ons. training Grades 3 and 9 teachers to teach the new curriculum, as well as Grades 4 and 10 teachers, Hiring More Teachers and Providing Be er to prepare them for SY 2015-2016. A budget of Training. As of June 2015, the government P3.53 billion will train K to 12 teachers, including has fi lled up 129,030 posi ons since 2010. An 49,590 K to 10 and 78,319 SHS teachers across the addi onal 39,066 teachers will be hired in 2015, country. of which 32,563 items have been approved for crea on on May 21, 2015. However, the DepEd Basic Educa on Facili es. During the past years, s ll needs to create 62,320 more teaching items shortages in classrooms and teachers had aff ected for Senior High School. The crea on of new the quality of educa on. Public schools lacked teaching posi ons will also bring opportuni es to 66,800 classrooms, overcrowding the exis ng teachers from state universi es and colleges and classrooms. private higher educa on ins tu ons who will be possible to be displaced as the SY 2016 starts.

Table 9. Accomplishments and 2016 Targets of DepEd

Equipment/Facility 2010 Backlogs Achievements Plans (2016)

Classrooms 66,800 2010 backlog closed in December 2013 47,553 new construc on with 66,813 constructed

Total of 86,478 constructed as of Feb- (43,000 K to 12 and SHS classrooms, ruary 2015; 45,671 more by June 2016 and 4,553 SHS workshop facili es)

Teachers 145,827 128,105 hired as of December 31, 2014 62,320 new teacher items

Expected to be closed by 2015; 39,066 more hired by end-2015

Chairs 2,573,212 1:1 student-seat ra o since December 4,355,514 more seats 2012

4.1 million chairs delivered as of June 30, 2015

Textbooks 61.7 million 1:1 student-book ra o since December 103.2 million copies of textbooks and 2012 instruc onal materials

135.6 million textbooks delivered as of March 15, 2015

62 Technical Notes on the 2016 Proposed Na onal Budget

To plug the shortage, 86,478 classrooms for Tools and Equipment Upgrade. This Budget also K to 10 have been built as of February 2015. In seeks to provide be er tools and equipment addi on, 5,871 classrooms for K to 10 and 39,800 for Science and Math courses, as well as in the for SHS will be built this year, funded by the 2014 Technical-Voca onal areas being implemented and 2015 Budgets. Moreover, 6.6 million school through the SHS program. Thus, P2.39 billion seats have already been delivered from 2010 was proposed to bankroll the purchase of these to June 2015. Students do not have to share tools and equipment. The upgrading of Technical- seats anymore, thus crea ng a more conducive Voca onal facili es (see pages 92 to 93) will enable surrounding for learning. the students to meet the demands of the labor market, most essen ally to meet interna onal The government could not have closed the 2010 standards, so they can get good jobs a er they classroom backlog and built more classrooms graduate. required by K to 12 had it not leveraged the Public- Private Partnership (PPP) Program. On its own, Textbooks and Instruc onal Materials. In 2010, the DepEd would have only constructed 80,944 students in public schools used to share books and classrooms from 2010 to February 2015. Through instruc onal materials because of the shortage of the PPP for School Infrastructure Project (PSIP), 61.7 million textbooks. Moreover, public schools the government was able to build 5,534 more u lized outdated books. To address these gaps, classrooms during the same period. Construc on new textbooks and instruc onal materials were of school buildings and facili es has been turned procured in line with the new curriculum. In over to the DPWH since 2013 in order to centralize 2015, P3.47 billion was allo ed to acquire 88.7 all construc on projects of the government (see million learning materials. As of March 2015, 30.7 page 41 for more informa on). Since 2013, the million books and learning materials for Grades DPWH has completed 12,741 classrooms17, while 4 and 10 have been procured and are currently 14,649 classrooms have been completed through being delivered; the remaining materials s ll to PSIP Phases 1 and 218 during the same period. be procured include those intended for School Year 2016-2017. Cumula vely, a total of 135.6 For 2016, a total of P82.26 billion was proposed million textbooks have been delivered from 2010 to build 43,000 more classrooms, repair and to 2015, thereby closing the 2010 gap. rehabilitate 20,000 exis ng ones, and purchase 4,355,514 addi onal school seats. In addi on, This Budget allocated P4.18 billion to procure 4,553 laboratories designed for Technical- 103.2 million more copies of textbooks and Voca onal subjects of the SHS will be built. This instruc onal materials, including Grade 2 and budget will also cover the annual amor za on for Grade 8 learners’ materials and teachers’ guides, classrooms already constructed through the PPP and Grades 11 and 12 learning materials. and by the Na onal Housing Authority. Assistance for Private Educa on. The Government Assistance to Students and Teachers in Private Table 10. Number of Classrooms Constructed Educa on (GASTPE) previously consisted of Through the DPWH and the PSIP, 2013-2015 the Educa on Service Contrac ng (ESC) and Target Completed Ongoing Alloca on and Construc on the Educa on Voucher System (EVS) that both Delivered provided ﬁ nancial assistance to students in private schools. In 2011, the Aquino administra on DPWH 14,742 12,741 139 P14.1 billion started phasing out the EVS to give way for the PSIP expansion of the ESC, which was found to be the Phase I 9,303 9,053 243 P16.4 billion Phase II 4,370 1,277 1,554 P3.9 billion be er mode of providing support to students and 1,539* teachers in private schools because schools were automa cally given slots based on the number of * under construc on students to whom they could give grants.

17 Department of Educa on (2015). CY 2013 Basic Educa onal Facili es Fund Batch 1-7 (As of July 31, 2015). 18 Public-Private Partnerships Center (2015). Status of PPP Awarded Projects (As of August 20, 2015). 63 Technical Notes on the 2016 Proposed Na onal Budget

Table 11. 2016 Budget for Basic Educa on Figure 3. Textbooks and Instruc onal Facili es Fund Materials for Distribu on, FY 2016 Par culars Physical Financial

Construc on of New Classrooms 43,000 P61.80 billion School Seats 4,355,514 P3.41 billion Repair and rehabilita on 34,930 of facili es 20,000 P4.01 billion Public-Private-Partnership P4.18 billion K to 10 (Amor za on) P1.63 billion SHS Provision for annual payment of school buildings 68,340 (through NHA) P40 million Construc on of TechVoc Laboratories 4,553 P11.38 billion Total P82.26 billion program that will assist over 1 million students and * numbers may not add up due to rounding addi onal 708,883 grantees under the SHS Voucher In implemen ng the ESC, the DepEd works with System. Financial support through this system will the Private Educa on Assistance Commi ee increase to meet the cost of studying in private (PEAC), a trust fund created by and between schools and encourage par cipa on of the private the Philippine and US governments to provide sector in the SHS implementa on at the same me. fi nancial assistance to qualifi ed private school students. It seeks to downsize classes in public Currently, about 855,000 private JHS students high schools to manageable levels, especially are enrolled under this scheme. The SHS Voucher in areas experiencing shortage of classrooms Program will ensure that the public schools’ coverage and teachers. As of May 2015, there have been will be minimized, thus avoiding conges on and 855,652 private school students subsidized by the poor learning outcomes. The program will also ESC in the 2014 Budget. engage the private sector in construc ng and equipping classrooms and laboratories. This The DepEd proposed to further expand the ESC ini a ve will enhance school diversity, dynamism, through the SHS Voucher Program in the 2016 and empowerment, as well as give the students Budget to involve private senior high schools and their families the liberty to choose in which in accommoda ng the upsurge in number of ins tu on they wish to be educated. students. Through the vouchers, public JHS completers will have the op on to con nue School-Based Feeding Program. To address their SHS in private schools. Thus, JHS graduates malnutri on among students—a key cause for are given more op ons for their SHS educa on. dropouts and poor achievement—the DepEd An alloca on of P21.19 billion will fund the ESC expanded the school-based feeding program in 2014, focusing on students who were wasted19 or Figure 2. Total Grantees of the ESC and SHS those who were shedding off weight below their Voucher System ideal height. In SY 2014-2015, the government provided school-based feeding for 562,262 wasted students with a budget of P1.1 billion20. In school year 2015-2016, the number of students who would 708,883 have received in-school feeding, iron supplements, ESC and materials would have increased to 1.16 million P21.19 billion SHS Voucher System with a budget of P2.72 billion. In addi on, the 2015 alloca on supported the Gulayan sa Paaralan Program, where 8,040 target schools with no 1,099,671 func onal gardens would be given P10,000 each to enable them to provide healthy food to their students. 19 The World Health Organiza on defi nes “wasted” as children with a marked defi cit in ssue and fat mass for their height. Defi ni on retrieved from h p://www.eho.int/nutgrowthdb/about/introduc on/en/index.html 20 The budget for the School-based Feeding Program is lodged under DSWD. 64 Technical Notes on the 2016 Proposed Na onal Budget

The alloca ons for school-based feeding was Universal Health Care doubled to P4.2 billion to feed 1,385,039 wasted and 533,425 severely wasted students from Inclusive growth compels the government to Kinder to Grade 6 for SY 2016-2017 for 120 days. safeguard the health of the country’s greatest resource—its people. When the Aquino Securing the Future. To ensure the country’s administra on assumed offi ce in 2010, key health- con nued economic growth, the youth of today must related Millennium Development Goals (MDGs), acquire new skills and enhance their current ones. par cularly maternal mortality and access to Their development should feed into this virtuous reproduc ve healthcare, had not been achieved. cycle—economic growth generates more jobs and Moreover, only 87 percent of the popula on—and skilled workers contribute to further economic only 10 percent of the indigents under the NHTS- expansion. In addi on, diversifi ed knowledge and PR of the DSWD—had health insurance coverage. skills enable workers and entrepreneurs to adjust to Furthermore, resource gaps had prevented the changes in the world of work. government in deploying enough healthcare facili es and professionals in the communi es. The reforms have enabled agencies to collaborate and work together effi ciently. The convergence of In 2010, the Aquino administra on launched the DepEd and the DPWH, for instance, facilitated the Universal Health Care (UHC) program, or the construc on of suffi cient classrooms to close the Kalusugang Pangkalahatan, to make health the 2010 gap and prepare schools for changes services, facili es, and fi nancing available and brought about by the K to 12. The an cipa on of accessible to all Filipinos. To address the inequi es the teachers’ displacement will be addressed by in the health system and deliver improved health the CHED’s K to 12 Transi on Program, s ll another outcomes, the UHC sought to: a) expand Na onal outcome of the collabora on between the DepEd Health Insurance coverage to lessen the poor’s and the CHED. Graduates who wish to join the out-of-pocket expenses; b) improve hospitals, world of work a er SHS will be given trainings by health facili es, and services and ensure that the Technical Educa on and Skills Development these are available at the community level; and Authority to help them acquire suffi cient skills. c) substan ally upgrade health interven ons to address the country’s MDGs and refocus Likewise, the DepEd’s partnership with the DOH government eff orts on cost-eff ec ve preven ve improved schoolchildren’s health, allowing and promo ve healthcare. them to par cipate in school more eff ec vely. Furthermore, the government’s collabora on With the support of Congress, two vital healthcare with the private sector has resulted in the reform measures were enacted. The enactment prompt delivery of outputs and has enabled of the Sin Tax Reform Law in 2012 did not only private ins tu ons to par cipate and invest in increase government revenues for crucial government projects and services. healthcare programs but also imposed higher taxes to discourage vices. Furthermore, through the partnership forged by the DepEd and the DSWD in the 4Ps program, the With the implementa on of Sin Tax Law, excise enrolment rate among children has increased fast tax collec ons from tobacco and alcohol products 3 pages under Social Protec on (see pages 56 to signifi cantly increased to P103.38 billion in 2013, 58 for details on 4Ps). higher by P47.69 billion or 85.6 percent than the previous year’s level. For 2014, excise tax revenues The K to 12 basic educa on program shows the on the same products registered an increase of government’s achievement of introducing cri cal P10.64 billion to P114.02 billion. At the same reforms that align the country’s basic educa on me, the country’s adult smoking prevalence system with interna onal standards. As a result, had declined from 31.0 percent in 2008 to 25.4 be er learning opportuni es await Filipino percent in 201321. The decline is equivalent to 3.2 children.

21 Oﬃ cial Gaze e. (2014). Na onal Nutri on and Health Survey. Retrieved from h p://www.gov.ph/2015/03/19/ph-wins-bloomberg-philanthro- pies-mpower-award/ 65 Technical Notes on the 2016 Proposed Na onal Budget

Table 12. Total Budget of the DOH, 2010-2016 (in billion pesos) 2010 2011 2012 2013* 2014** 2015** 2016**

Total Appropria ons for Health P31.1 P33.9 P47.7 P55.8 P90.8 P102.2 P128.4 Percentage Share of DOH to Total Na onal Budget 2.02% 2.06% 2.62% 2.78% 4.01% 3.92% 4.28%

* Baseline for DOH Budget inclusive of Sin Tax **inclusive of Sin Tax

million smokers, aver ng approximately 32,000 the Department of Health (DOH) and the Philippine smoking-related deaths. Health Insurance Corp., also 1) expanded the cases covered by health insurance and, in the Addi onally, the Responsible Parenthood and process, increased per-family premiums from Reproduc ve Health Act of 2012 provided ci zens, P1,200 in 2011 to P2,400 from 2012 onwards, and especially the poor, greater access to reproduc ve 2) pushed for the improvement of ins tu onal healthcare services. healthcare facili es, both public and private, so that these could be accredited by the PhilHealth To pursue the Kalusugang Pangkalahatan, the and, in turn, improve the access of its enrollees government proposed to hike the health sector’s to quality and aff ordable healthcare services. budget by 4.28 percent to P128.4 billion in 2016, However, all these needed to be accompanied P26.2 billion more than the 2015 level. This by the necessary health requirements including budget will primarily address gaps in the delivery drugs and medicines, and manpower. of health services and facili es and further support the devolu on of healthcare programs to For 2016, the government proposed P43.8 billion the local government units. to fund PhilHealth premium subsidies for the poor and vulnerable. This budget will sustain Universal Health Insurance. The Aquino the coverage of 15.4 million targeted families. In administra on expanded the coverage of the addi on, the government envisions expanding Na onal Health Insurance Program (PhilHealth) coverage and delivery of NHIP benefi ts, enhancing as a pillar of the Kalusugang Pangkalahatan, not the quality of health facili es for be er access only to reduce out-of-pocket expenses for health of the benefi ciaries. This will provide PhilHealth services but also to improve health care facili es premium subsidies to 2.8 million poor senior and services for ci zens, especially the poor and ci zens. vulnerable. Health Facili es Enhancement Program. To So far, indigent enrollees to the PhilHealth have enhance the people’s access to healthcare increased to 14.71 million in 2014 from 4.95 services, the government commits to improve million in 2012. To achieve this, the government government health facili es as well as make quality increased investments in the PhilHealth coverage and aff ordable healthcare services available to the for the poor and near-poor22: from P2 billion in poorest communi es. Thus, the government has 201123 covering 3.79 million families, to P35.30 spent heavily in this regard, through the Health billion in 2014 covering 14.71 million families. The Facili es Enhancement Program (HFEP) that seeks 2015 Budget allocated P37.06 billion to subsidize to improve government-run hospitals and expand 14.71 million24 families. Aside from increasing the reach of rural and barangay health facili es. public spending on health insurance subsidies for the poorest of the poor, the government, through

22 Quin le 1 is defi ned as the poorest rung of Filipino families, as iden fi ed by the Na onal Housing Targe ng System (NHTS) by DSWD. Quin le 2 comprises of families falling under the second poorest er. 232011 is the year when the government stopped paying for the NG-LGU arrearages. 24Department of Budget and Management (2015). DOH Agency Profi le 2015

66 Technical Notes on the 2016 Proposed Na onal Budget

had deployed 425 doctors, 64,022 nurses, and Table 13. Philhealth Coverage, 2015-2016 9,137 midwives in barangay health sta ons. In (Indigent Benefi ciaries) 2015, the DOH was allocated P4.3 billion to hire Par culars 2015 2016 398 doctors, 13,500 nurses, 3,100 midwives in barangay health sta ons , 214 den sts, 787 public Na onal Health Insurance health associates, and 308 medical technologists. Program P37.1 billion* P43.9 billion** Indigents covered by NHTS-PR 15,441,850 15,441,850 Table 15. Distribu on of Health Care Senior ci zens enrolled 2.8 million Prac oners Across the Philippines for 2016 * The FY 2015 budget for NHIP is P37.19 billion. Region No. of Human Resources **The FY 2016 budget for NHIP is P43.89 billion. for Health (HRH) per Region Since 2010 to end-2014, the government, through the DOH, had spent a total of P46.38 billion to NCR 375 CAR 794 construct 6,173 health facili es, par cularly I. ILOCOS REGION 1252 2,626 rural health units and 2,862 barangay II. CAGAYAN VALLEY 1043 health sta ons. The DOH will boost the delivery III. CENTRAL LUZON 1512 of HFEP25 in 2016 with a proposed funding IV-A. CALABARZON 1652 of P26.98 billion. This amount will cover the IV-B. MIMAROPA 831 V. BICOL REGION 1543 renova on of 3,886 birthing facili es and 796 VI. WESTERN VISAYAS 1637 Philippine Health Insurance Corpora on-Tamang VII. CENTRAL VISAYAS 1737 Serbisyo sa Kalusugan ng Pamilya (PHIC-TSEKAP)- VIII. EASTERN VISAYAS 1859 accredited barangay health sta ons. It will also IX. ZAMBOANGA PENINSULA 1041 fund the construc on of 3,200 school-based X. NORTHERN MINDANAO 1208 XI. DAVAO REGION 832 barangay health sta ons and comple on of the XII. SOCCSKSARGEN 741 construc on and rehabilita on of all 2,623 rural CARAGA REGION 916 health units na onwide. ARMM 1199 CENTRAL OFFICE 946 TOTAL HRH DISTRIBUTION 21,118 Table 14. Projects under the Health Facili es Enhancement Program (HFEP) Par culars 2015 2016 For 2016, the DOH seeks to hire 946 doctors, 15,727 nurses, 3,100 midwives, 324 den sts, (No. of BHS upgraded) 713 public health associates, and 308 medical Birthing facili es 1,661 3,886 technologists in its proposed budget of P7.07 PHIC-TSEKAP accredited BHS 17,541 796 Rural Health Units/City Health Centers 2,617 2,623 billion. These healthcare workers will be deployed School-based BHS 3,200 3,200 down to farthest communi es. Compensa on of these health workers will be at par with those Human Resource for Health Services. The serving in urban areas so as to encourage them to suffi cient number of qualifi ed health care render service even in far-fl ung areas. prac oners in the farthest barangays is as important as the availability of health insurance Family Health and Responsible Paren ng. and facili es. Health care workers have been The government’s surging investments in unevenly distributed across the country, with most health insurance, health facili es, and medical of them fl ocking in Metro Manila, other ci es, and professionals should ensure that no mother other already crowded areas. The shortage has risks her life in giving birth. Birthing facili es and also been exacerbated by the increasing migra on qualifi ed medical professionals have been scarce, of healthcare prac oners abroad. especially in the rural areas, such that only 60 percent of all deliveries in 2013 occurred at health Thus, the government con nues to invest in the facili es and about 62 percent of live births were Doctors to the Barrios and Rural Health Prac ce delivered by medical professionals. As a result, Programs. From 2010 to 2014, the government maternal mortality remained alarmingly high: 221

25 Consists of 3,664 infrastructure and 3,543 equipment 67 Technical Notes on the 2016 Proposed Na onal Budget

women per 100,000 live births died in 201126 from Nearly P4 billion will be immunize 2.2 million 162 per 100,000 live births in 2006. It remained children and provide pneumococcal vaccina on far from the MDG goal of reducing maternal to 1.2 million senior ci zens and 429,000 mortality to 52 per 100,000 by 2015. Moreover, infants. Vaccines under this program include the contracep ve prevalence rate rela vely BCG (against tuberculosis), Hepa s B, DPT- increased at 55.1 percent in 201327 compared HEPB-HIB (against diphtheria, tetanus, pertussis, with the MDG target of 100 percent. hepa s B, and Haemophilus Infl uenza B), and MMR (against measles, mumps, and rubella); as well as for inac ve polio, old age vaccines, and Table 16. Budget and Number of Benefi ciaries PCV 13 (Pneumococcal conjugate vaccine against of Family Health, 2015-2016 pneumonia, blood infec ons, and meningi s). Par culars 2015 2016 Preven ve and Promo ve Healthcare. The ba le Family Health and Responsible against diseases such as tuberculosis and malaria Paren ng P3.27 billion P3.28 billion had improved in the past years. From 118.7 Micronutrient Supplementa on prevalence rate per 100,000 people in 1990, No. of children below 5 years old 4.4 million 4.4 million malaria spread had lowered to 7.9 per 100,000 Family planning in 2013, based on PSA-NSCB’s latest sta s cs No. of benefi ciaries of FP on the Philippines’ progress on MDG indicators. commodi es and services 2.7 million 2.7 million Furthermore, through the directly observed No. of women provided with treatment short course (DOTS), TB had been sub-dermal implant for contracep on 1 million 1 million cured at a rate of 88 percent in 2013, higher than 73 percent in 2001.

Table 17. Treatment of Public Health Diseases To further address maternal mortality and and Other Infec ous Diseases improve access to reproduc ve health services, Par culars 2015 2016 the proposed Budget for 2016 allocated P3.28 billion to provide, among others, family planning Budget P788.5 million P793.0 million commodi es and micronutrient supplements for No. of persons treated of malaria 4,365 3,885 children under 5 years old. This program should No. of mass drug treatment help address the rising prevalence of wasted for schistosomiasis 2.58 million 2.48 million children who are too thin for their height28 and No. of mass drug treatment stunted children who are too short for their age29. for ﬁ lariasis 17.6 million 17.9 million

Na onal Immuniza on Program. The Under the TB control program, P1.08 billion will be government, through the DOH, has also expanded used to treat 253,381 cases. An alloca on of P793 the immuniza on program to ensure that infants, million will support the detec on and treatment children, mothers, and senior ci zens have access of other public health diseases such as malaria, to vaccines. By ensuring that vaccines are provided schistosomiasis, and ﬁ lariasis. Moreover, P1.06 from birth to adolescence, and even extending to billion will be used to diagnose and treat 35,000 old age, the DOH seeks to signiﬁ cantly decrease HIV/AIDS cases, among others. the people’s out-of-pocket expenditures for the treatment of diseases. Early Childhood Care and Development. Consistent with the mandate of the Early Years

26Philippine Sta s cs Authority-Na onal Sta s cal Coordina on Board. (2015). Sta s cs at a glance of the Philippines’ Progress based on the MDG indicators. Retrieved from h p://www.nscb.gov.ph/stats/mdg/mdg_watch.asp 27 Philippine Sta s cs Authority, & ICF Interna onal. (2014). Philippines Na onal Demographic and Health Survey 2013 28The number of wasted children aged 0 to 5 increased from 6.9 percent in 2008 to 7.9 percent in 2013, based on the latest Food and Nutri on Research Ins tute’s Na onal Nutri on Survey. 29The prevalence of stunted children decreased from 32.3 percent in 2008 to 30.3 percent in 2013, based on FNRI’s NNS. 68 Technical Notes on the 2016 Proposed Na onal Budget

Act of 2013, the government commits to scale up Figure 4. Budget Distribu on of First 1,000 Days investments in Early Childhood Care Development Interven on Package, FY 2016 (ECCD). The First 1,000 Days Interven on Package will be launched for P3.45 billion. This package will 69 M 2 M cater to the needs of children aged 0 to 2 who are not covered by public services and facili es, such as schools or day care centers. The program will be piloted in 10 provinces with the largest number of DOH NNC the poor, who are covered by the Accelerated and 1.32 B Sustainable An -Poverty (ASAP) Program. 1.9 B DSWD ECCD BFAR Table 18. Budget for the ECCD Program, DOH 217 M

Par culars 2016

Total ECCD Program P3.45 billion and post-natal care. Furthermore, the DSWD DOH P1.9 billion will provide childminding services, and train A. Well Children 0-11 months social welfare and development offi cers in the Immuniza on 671,111 municipali es in order to be er provide services. Iron supplementa on for low birth-weight infants 263,075 The ECCD council will establish Na onal Child Vitamin A supplementa on 335,555 Development Centers (NCDC) through an alloca on Iron supplementa on for lacta ng women 12.8 million of P69 million. These centers will develop policies 12-23 months and programs and provide technical assistance to Measles immuniza on 671,111 ECCD service providers, including the monitoring Vitamin A supplementa on 671,111 of benefi ts and outcomes of ECCD services. Mul ple micronutrient powder 122,983 Vitamin A supplementa on of high-risk cases 134,222 The Bureau of Fisheries and Aqua c Resources Deworming 2.7 million (BFAR) will have P2 million to provide parents B. Sick Children and caregivers assistance through training in fi sh Oral rehydra on with Zinc supplement 1.2 million preserva on and other livelihood programs. An bio cs and other medical supplies 134,222

Of the total amount, the DOH will have P1.9 billion A Healthier Ci zenry. The government, through for health interven ons, such as immuniza on its Philippine Development Plan, commits to “improve human capabili es through be er and vitamin and iron supplementa on for infants. 30 Moreover, the Na onal Nutri on Council (NNC) health and nutri on .” The 2016 Budget seeks to will have P217 million to monitor and promote directly address the disadvantages that the poor the development of children aged 1 to 23 months: and vulnerable experience insofar as healthcare benefi ciaries of the NNC’s endeavors include is concerned. By expanding healthcare programs, 97,228 infants aged 1 to 5 months who will benefi t they will have a be er chance at par cipa ng in from Growth and Development Assessment, and contribu ng to the economic growth of the Monitoring, and Promo on; and 500 barangays country. from the covered 10 provinces, which will receive training on breas eeding and complementary As men oned, the government needs to intensify feeding for infants 6 to 23 months. interven ons to meet key health-related MDGs, par cularly in reducing the maternal mortality The DSWD will have P1.32 billion for various ra o, a aining universal access to reproduc ve programs targe ng CCT benefi ciaries, especially health, and reversing the spread of HIV and AIDS. those focusing on mothers who avail of prenatal To achieve this, the government will further strengthen the capacity of the implemen ng

30 Na onal Economic and Development Authority. (2014). Philippine Development Plan 2011-2016 Midterm Update. 69 Technical Notes on the 2016 Proposed Na onal Budget

agencies to deliver services fast and with impact. same period, the Socialized Housing and Finance For one, more healthcare professionals should Corpora on (SHFC) also has assisted 60,188 ISFs be hired and deployed to rural health units and to gain land tenure security by approving a total barangay health centers and provided addi onal of P6.63 billion worth of community mortgages training. Eff orts to improve the planning, budge ng, through its major programs—the Community procurement, execu on, and monitoring and Mortgage Program and the High Density Housing evalua on of healthcare programs should ensure Program. that public health services are promptly delivered especially to the poorest families (see pages Much remains to be done to provide decent and 8 to 10 for more discussions on strengthening safe homes to the ISFs. The NHA and the SHFC, for ins tu onal capacity). instance, need to address the backlog of 17,184 households, based on the targets set from 2011 Furthermore, stronger collabora on within to 201431; and speed up the delivery of addi onal the government—among na onal government 205,128 housing units32 that stemmed from the agencies and between na onal and local onslaught of Yolanda and other recent natural governments—should improve healthcare and calami es33. Moreover, while the government other public services. The coopera on among remains commi ed to provide in-city housing for the DOH, the DSWD, and the DepEd through the ISFs, the increased cost of land and zoning food assistance programs should help improve issues, as well as the ins tu onal capacity of the schoolchildren’s health. By working with the government housing agencies had made this goal DPWH and the local government units, the DOH more diffi cult to realize. is able to promptly and eff ec vely renovate and construct barangay health sta ons and rural The government will invest P33.03 billion for health units, making health services available to various socialized housing programs and projects every ci zen, even those in far-fl ung communi es. in 2016, of which P25.6 billion will be used to provide housing assistance for calamity vic ms. Socialized Housing Socialized Housing. Alloca ons for housing The Aquino administra on is commi ed to for informal se lers total P5.85 billion. Of this provide safe, decent, and aff ordable shelters amount, P4.3 billion will help the Na onal Housing to informal se ler families (ISF): those who live Authority to relocate 12,148 ISFS living in danger with uncertainty as they occupy land they do not zones in Metro Manila. own; who constantly face the risk of natural and man-made calami es; and who, despite such The SHFC will have a total budget of P1.9 billion condi ons, choose to stay if only to keep their in 2016: of which P909 million will be used to means of livelihood. Through the annual Budget, Figure 5. NHA Housing Delivery the Aquino administra on invests heavily in by Administra on socialized housing not only for the ISFs, but also for calamity vic ms especially those who were aff ected by Typhoon Yolanda, as well as soldiers, policemen, and other uniformed personnel.

It is noteworthy that the Na onal Housing Authority (NHA), through its various housing produc on programs, had been able to provide assistance to construct and repair 433,908 housing units from 2011 to 2014, more than what the

NHA had achieved in past administra ons. In the Source: NHA

31 The ﬁ gure represents the combined backlogs of NHA and SHFC. 32 These housing units will be built using funds lodged under the Yolanda Comprehensive Rehabilita on and Recovery Plan (CRRP) 33 NHA and SHFC provide housing units and community mortgages using subsidies from the na onal government. In addi on, other government en es contribute to the Na onal Shelter Program through their opera ons, such as the Home Development Mutual Fund (end-user ﬁ nancing and housing guarantees) and the Home Guaranty Corpora on. 70 Technical Notes on the 2016 Proposed Na onal Budget

Table 19. Accomplishments of the Socialized Housing and Finance Corpora on, 2011-2014

2011 2012 2013 2014

Community Mortgage Program No. of Projects 171 100 123 128 No. of Informal Se ler Families Assisted 15,875 9,287 12,537 13,120 Loan Amount P982.1 million P548.7 million P765.5 million P817.2 million High Density Housing No. of Projects - - 1 20 No. of Informal Se ler Families Assisted - - 212 9,157 Project Cost - - P80.76 million P3.43 billion Total SHFC Accomplishments (2011-2014) No. of projects: 543 No. of ISFs assisted: 60,188 Total Project Cost: P6.63 billion Source: Socialized Housing and Finance Corpora on cover 1,882 ISFs living in Metro Manila’s danger Table 21. Housing Program for Informal Se ler zones and P1 billion for its Community Mortgage Families Residing in Danger Areas in Metro Program that will benefi t 19,015 benefi ciaries. Manila, SHFC The funding for the SHFC’s Housing Program for ISFs in Danger Areas in Metro Manila, however, 2013* 2014 is smaller than the amount allo ed in 2015 Social Housing Finance Corpora on considering the available fund balances released Target - 6,400 in prior years. Accomplishments 212 9,157 Relocated families - 326 In addi on to the NHA’s and the SHFC’s programs Appropria on P80.76 M P3.7 B to provide housing units and community *Fund source: Overall savings mortgages to ISFs, the DILG has implemented programs to help ISFs a ain decent homes. For The Interim Shelter Fund will have P643 million to one, its Interim Shelter Fund, which began in support 31,826 benefi ciaries in 2016. 2014, has already provided rental assistance to 12,513 benefi ciaries. Through this program, the Some P25.6-billion under NHA will provide housing government has provided rental assistance of assistance to 87,405 vic ms of Typhoon Yolanda. P18,000 per benefi ciary-family while awai ng the A total of P22.7 billion has been released34 to comple on of the housing units allo ed for them. provide housing assistance for 77,881 vic ms from 2013 to 2015. In total, the government Table 20. Housing Program for Informal Se ler should be able to provide 205,128 housing units Families Residing in Danger Areas in Metro for Typhoon Yolanda vic ms by end-2016. Manila, NHA

2011* 2012 2013 2014 Housing for Uniformed Personnel. Apart from providing socialized housing for ISFs and calamity Na onal Housing Authority (Provision of in-city and vic ms, the government’s ini a ve to provide oﬀ -city housing units) permanent housing facili es for the low-income Target 24,917 - 30,816 17,550 personnel of the AFP, the PNP, and other uniformed Accomplishments 21,518 - 20,698 9,888 Relocated families 13,798 - 9,523 2,119 services had already beneﬁ ed 56,722 uniformed Appropria on P10 B - P10.2 B P5.5 B personnel since it began in 201135 up to end- *Fund source: Savings 2014. While the proposed Budget for 2016 does

34 Of this amount, P238.6 million came from Realignment/Savings; P2.2 billion, from Overall Savings; P11 billion, from the Na onal Disaster Risk Reduc on and Management Fund; P8 billion, from Supplemental Appropria ons; and P1.3 billion, from the Rehabilita on and Reconstruc on Program. 35 Oﬃ cial Gaze e. (2011). Administra ve Order No. 9 s. 2011: Direc ng the Na onal Housing Authority to Formulate, Implement, and Manage a Housing Program for the Military and Police Personnel. Retrieved from h p://www.gov.ph/2011/04/11/administra ve-order-no-9-s-2011/ 71 Technical Notes on the 2016 Proposed Na onal Budget

Table 22. Budget Alloca on for Socialized Housing Projects and Programs

Balances from Previous Budgets Addi onal Budgetary Support Par culars from 2011-2014 2015 2016 (as of June 30, 2015) Enacted Proposed

Total Socialized Housing P10.15 billion P33.03 billion I. Projects P8.57 billion P31.45 billion 1. Housing Program for ISFs residing in danger areas in Metro Manila SHFC P2.72 billion P3.74 billion P909 million No. of benefi ciaries (2,969)* 7,754 1,882 NHA P11.11 billion P3.59 billion P4.30 billion No. of benefi ciaries 21,179 8,108 12,148 2. Micro-medium rise building P350 million P770 million** - No. of housing units 472 472 3. Interim shelter fund P17.13 million P475 million P643 million No. of benefi ciaries of rental assistance 16,335 26,367 31,826 Housing alloca on for calamity vic ms P25.6 billion

II. Programs P1.58 billion P1.58 billion 1. Community Mortgage Program (SHFC) P1.00 billion P1.00 billion No. of beneﬁ ciaries 17,282 16,500 19,015 2. Rese lement Program (NHA) P577 million P577 million No. of beneﬁ ciaries 7,215 7,215

* Excess against targets ** Includes P70 million in administra ve and social prepara on costs

not allocate funds for this project, the NHA has the na onal government has taken addi onal an available funding of P5.71 billion—including measures to address the es mated total housing P5.61 billion in balances as of end-2014 and P100 need of 5.6 million from 2011 to 201637. For million under the 2015 Budget—to benefi t 17,550 instance, the Home Development Mutual Fund uniformed personnel. (or Pag-Ibig Fund) supports the Na onal Shelter Program through its end-user fi nancing program. Safe and Decent Homes for the Poor. In addi on From 2011 to the fi rst semester of 2012, the to programs funded by the annual Budget, Pag-Ibig Fund had provided low-cost housing

Table 23. NHA Fund Releases for Typhoon Yolanda, 2013-2015

Purpose 2013 2014 2015

Implementa on of FY 2013 Emergency Housing Assistance for Calamity Vic ms Programs P238.6 million - - Assistance to households in “no-build” zones P2.2 billion - - Construc on of addi onal permanent housing for Typhoon Yolanda vic ms in Regions IV-B, V, VI, VII, and VIII - P11 billion - Construc on of permanent housing for vic ms of Typhoon Yolanda - - P8 billion (Supplemental Appropria ons)

P1.3 billion (Rehabilita on and Reconstruc on Program) Total Fund Releases for Typhoon Yolanda: P22.7 billion

36 Housing and Urban Development Coordina on Council, as cited in Na onal Economic and Development Authority (2014). 72 Technical Notes on the 2016 Proposed Na onal Budget loans to 69,108 households. The Home Guaranty Corpora on (HGC) had also guaranteed a total of P198 billion during the same period37, as invested funds from private developers and ﬁ nancing ins tu ons. In sum, the support coming from the HDMF and the HGC had covered 97,258 households in the same period38. In 2016, the HGC plans to expand its Bankers-Builders-Buyers (BBB+B) program by extending guaranty lines to provincial and rural banks.

Policy measures need to be set in place to provide a more sustainable environment for socialized housing. The LGUs should be capacitated to help the na onal government construct socialized housing units, and toward this end, the Housing and Urban Development Coordina ng Council (HUDCC) and the NHA further strengthen their partnerships with the LGUs and provide the la er with training. The passage of the Na onal Land Use Act will also support the government’s climate change adapta on and mi ga on eﬀ orts and ensure that residen al areas are established in safe loca ons.

Through this administra on, housing units built for families living in danger zones, vic ms of various disasters, and personnel with meager income, among others, have surpassed those constructed during the previous administra ons. Thanks to the various housing agencies—ensuring that the ci zens live in a decent and safe environment. Although with notable increase in construc on especially due to the adverse eﬀ ects of Typhoon Yolanda, the government con nues to seek the comple on of needed housing assistance through the 2016 Budget. In addi on, the na onal government’s engagement with the ISFs and the urban poor must be sustained beyond 2016 so that the beneﬁ ciaries themselves have a stake in the planning, design, and implementa on of socialized housing projects.

37 The men oned amount covers both new and outstanding guaran es (Source: HGC) 38 Na onal Economic and Development Authority. (2013). Socioeconomic Report 2010-2012: The First Two Years of the Aquino Administra on. 73 Technical Notes on the 2016 Proposed Na onal Budget

C. Sustaining the Momentum of Growth: Economic Expansion and Job Crea on

The Aquino administra on believes that the The Aquino administra on designed the 2016 country’s rapid growth trajectory should be Budget to boost infrastructure spending in order to sustained in a way that translates to a be er quality interconnect opportuni es across the archipelago; of life for all Filipinos by crea ng more economic as well as to intensify investments in these sectors: opportuni es, par cularly in the countryside. develop agriculture, revive manufacturing, and sustain the gains of tourism. Thus, this Budget The Philippine economy has grown by leaps and provides for increased investments for economic bounds, making an impact in li ing people out aff airs1 to P527.1 billion in 2016 from P452.3 billion of poverty by crea ng more jobs and reducing this year to support the growth and the poten al unemployment in the process (see pages 16 for crea ng jobs in priority industries. Along with to 17 for more discussions). However, crea ng eff ec ve fund management and prompt project opportuni es has been concentrated in a few implementa on, these focused investments will growth centers. The Na onal Capital Region (NCR), help enhance job and livelihood opportuni es and Southern Tagalog, Central Visayas, and Central guarantee the sustainability of inclusive growth. Luzon contributed a total of 5.0 percentage points to the 6.8-percent GDP growth achieved in 2012, Transport Infrastructure according to the Philippine Sta s cs Authority. At constant prices, the NCR accounted for 35.7 Low public investments, ineffi ciencies, corrup on, percent of the country’s total economic output, and poor revenue genera on had plagued the followed by Region IVA or the CALABARZON at 17.4 Philippine’s infrastructure sector, according to percent. It is no wonder why poverty incidences in the World Bank. From 2006 to 2010, the na onal these four regions were among the lowest in 2012. government infrastructure spending had only These regions consistently remained among the averaged 1.8% percent of GDP, below the ideal biggest contributors to GDP growth in 2013 and level of 5 percent for developing countries. The 2014.

Table 1. Gross Regional Domes c Product based on percent share, 2011-2014 (at constant 2000 prices)

REGION/YEAR 2011 2012 2013 2014 PHILIPPINES 100.0% 100.0% 100.0% 100.0%

NCR METRO MANILA 35.6% 35.7% 36.3% 36.3% CAR CORDILLERA 2.1% 1.9% 1.9% 1.8% I ILOCOS 3.1% 3.1% 3.1% 3.1% II CAGAYAN VALLEY 1.8% 1.8% 1.8% 1.8% III CENTRAL LUZON 9.3% 9.2% 9.0% 9.3% IVA CALABARZON 17.4% 17.4% 17.4% 17.2% IVB MIMAROPA 1.8% 1.7% 1.7% 1.6% V BICOL 2.0% 2.0% 2.0% 2.0% VI WESTERN VISAYAS 4.1% 4.1% 4.0% 3.9% VII CENTRAL VISAYAS 6.2% 6.3% 6.3% 6.5% VIII EASTERN VISAYAS 2.6% 2.3% 2.2% 2.0% IX ZAMBOANGA PENINSULA 2.0% 2.1% 2.0% 2.0% X NORTHERN MINDANAO 3.8% 3.8% 3.7% 3.7% XI DAVAO REGION 3.8% 3.8% 3.8% 3.9% XII SOCCSKSARGEN 2.7% 2.7% 2.8% 2.8% XIII CARAGA 1.2% 1.2% 1.2% 1.3% ARMM MUSLIM MINDANAO 0.8% 0.8% 0.7% 0.7%

Source: Philippine Sta s cs Authority

1 Alloca ons for the Economic Aﬀ airs sector are based on the Classiﬁ ca on of the Func ons of Government (COFOG). 74 Technical Notes on the 2016 Proposed Na onal Budget inadequacy and poor quality of infrastructure On the back of these reforms, the government also pulled down the country’s rank in the has hiked public infrastructure spending to an Infrastructure Pillar of the Global Compe veness equivalent of 3.4 percent of GDP in 2014 and 4.3 Index (GCI) to 98th of 139 countries in 2009 from percent in 2015; and another 5 percent in 2016. 88th of 122 countries in 2006. Moreover, a study These increases enabled the government to close done in 2000 es mated that the “misuse of the lingering gaps in the supply of classrooms resources in public works was between 20 percent (see page 62) and be on track in comple ng all and 40 percent2,” exacerba ng the problem of na onal roads and bridges (see page 77). To inadequate resources and poor quality. secure these gains, the 2016 Budget does not only boost government spending on strategic Thus, the government introduced reforms to transport infrastructure by almost 8 percent year address these issues, such as pu ng in place on year to P245.8 billion4, but also heightens the stricter standards selec ng projects, improving reforms that address ins tu onal weaknesses quality standards and cost structures, streamlining (see pages 8 to 9) that have delayed the roll-out procurement systems, and professionalizing the of key transport infrastructure projects. government’s manpower. Through compe ve and transparent bidding, for instance, the DPWH Road Transport. To ensure greater mobility of has curbed corrup on and generated savings goods and people as well as reduce transport amoun ng to P48.6 billion from July 2010 to May costs, the Aquino administra on has implemented 2015. Measures were also taken to boost the PPP reforms to upgrade the quality and adequacy of the Program (see page 80), revamp the design and na onal roads and bridges system. For instance, implementa on of farm-to-market roads and the DPWH, has increased the minimum thickness irriga on (see page 85), and a une infrastructure of concrete pavement from 230 millimeters (mm) investments to the needs of priority industries, to 280 mm to ensure durable roads and safe such as tourism (see page 88). The improved travel. In addi on, the Interna onal Roughness quality and availability of infrastructure was Index (IRI) has been included as a criterion when recognized interna onally, as the country’s rank it comes to na onal primary roads—a road in the GCI Infrastructure pillar improved to 91st constructed or rehabilitated must have an IRI of place in 2014 from its 2010 rank (see table below). not more than three5 before the DPWH accepts a contractor’s work.

By the end of 2016, the government should have built permanent bridges along na onal roads, and paved all na onal arterial and secondary roads. It Table 2. Philippines’ Rank in the Global also seeks to reduce travel me by 20 percent. To Compe veness Index and Infrastructure meet these targets, the 2016 Budget earmarked Pillar, 2006 to 2014 P203.77 billion for na onal roads and bridges Year No. of economies/ Ranking under the DPWH budget. This alloca on will also countries covered be used to develop road networks and access 2006 125 88 roads to ports, airports, and tourism des na ons. 2007 131 94 2008 134 92 2009 133 98 With the comple on of all na onal roads and 2010 139 104 bridges, the government moves to the next phase 2011 142 105 of road construc on—the rehabilita on and 2012 144 98 construc on of local roads. As part of developing 2013 148 96 2014 144 91 the countryside, the government, through the DPWH, increased the budget for Mindanao

2World Bank. (2014). Philippines: Mee ng Infrastructure Challenges. 3Oﬃ ce of the President. (2015). The 2015 SONA Technical Report. 4Transport infrastructure investments in 2015 amounted to P220.7 billion. 5IRI for asphalt and concrete pavement should not be more than 3.0 m/km. 75 Technical Notes on the 2016 Proposed Na onal Budget

Table 3. Road Transport: Previous Year’s Accomplishments & Targets for 2015 and 2016

Performance Indicator 2011 2012 2013 2014 2015 2016 (Target) (Target)

% of Na onal Road Network paved 83% 84% 88% 90% 97% 100% 25,879 km* 26,306 km 27,568 km 28,085 km 30,316 km 31,242 km

% of bridge along na onal roads made 96.40% 96.90% 97.40% 98% 99.5% 100% permanent 333,597 lm* 335,391 lm 336,865 lm 342,172 lm 344,248 lm 345,978 lm

% of roads and bridges covered by the Interna onal Road Assessment Program (iRAP) safety audits 15% 28% 38% 41% 48% 55% (Target is 100% by 2030) *km = kilometers; lm = lineal meters Logis cs Infrastructure Network to P20.6 the number of buses entering Metro Manila. billion from P10.1 billion in 2015 to address the bo lenecks in the Mindanao road network and The Metro Manila Development Authority thus lower the cost of logis cs as well as enhance (MMDA), on the other hand, will tap P376.07 linkages to ports and other vital produc on million for traffi c management next year, of facili es. The network, which is es mated to which, P234 million will be used to complete the benefi t more than 15 million people, covers Traffi c Signaliza on System of 50 new warranted Regions 10, 11, 12, and 13. intersec ons; while P110 million will be set aside to put up a complete fi ber op c communica on To support DPWH’s eff orts to decongest traffi c, the system for all 366 signalized intersec ons, DoTC’s budget for road transport was increased by inclusive of 50 new ones. These eff orts are 33 percent, from P3.6 billion in 2015 to P4.8 billion intended to increase travel speed which will in 2016. Of this amount, P2.8 billion will bankroll ul mately rebound to greater economic benefi ts the Integrated Transport Systems Project to cover for Metro Manila. the acquisi on of land and other prepara on works to develop the North Bus Terminal. The The DOTC will also invest P1.96 billion in said terminal will cater to provincial buses coming modernizing the mass road transit systems. For from Central and Northern Luzon, thus reducing instance, it will con nue to develop the Bus

Table 4. Major Road Transport Projects in 2016

Par culars 2015 2016

Road Transport Na onal Roads and Bridges (DPWH) Php 171,565 M Php 203,769 M Percentage of Na onal Road Network paved 97% 100% (Total length - 31,242 km) 30,316 km 31,242 km Percentage of bridge along na onal roads made permanent 99.5% 100% (Total length - 345,978 lm) 344,248 lm 345,978 lm Of which: Mindanao Logis cs Infrastructure Network Php 10,082 M Php 20,598 M Road Upgrading Php 37,447 M Php 39,840 M Construc on of ﬂ yover/interchanges Php 2,174 M Php 2,365 M Road Transport (DOTC) Php 3,617 M Php 4,795 M Of which: Integrated Transport Systems Project Php 1,234 M Php 2,800 M Cebu Bus Rapid Transit Project Php 1,386 M Php 1,336 M Metro Manila BRT - Line 1 Php 478 M Php 188 M Metro Manila BRT-Line 2 - Php 20 M PUV Ra onaliza on Php 177 M Php 251 M 76 Technical Notes on the 2016 Proposed Na onal Budget

Rapid Transit (BRT) systems in key congested Tapping the 2014 Supplemental Appropria ons, metropolitan areas. The ongoing Cebu BRT the government released P1.2 billion this year to Project, which will cover Bulacao to Talamban in rehabilitate the MRT-3 and thereby increase the Cebu City, will benefi t 330,000 passengers a day passenger capacity to 800,000 a day from 500,000 when it begins full opera ons in 2018. The Metro a day in 2016. Part of the funds will be used to Manila BRT Line-1, which will run along Quezon replace the signalling system and upgrade the Avenue, from Quirino Highway to Manila City escalators and elevators in the MRT-3 sta ons. In Hall, will benefi t 279,476 passengers a day when addi on, the 2016 Budget allocated P1.5 billion to it starts opera ons in 20186. augment the funds set aside for the rehabilita on and expansion of the MRT-3; and P3.6 billion Mass transport. The worsening road conges on was earmarked for the MRT-3 subsidies to cover in Metro Manila is cos ng the economy P876 equity rental payments and systems insurance billion yearly, which is equivalent to about 8 requirements. From 2010 to 2015, the government percent of GDP, a JICA study7 reported. Several has spent a total of P8.3 billion to rehabilitate the measures, such as the truck ban and the number MRT-3, including the purchase of 48 train cars, coding scheme have been undertaken to mi gate which are expected to be delivered beginning the traffi c conges on especially during peak hours. fi rst quarter of 2016. Thus, the government’s eff orts to provide more effi cient and aff ordable modes of mass public The construc on of the Light Rail Transit (LRT) transporta on must be intensifi ed to cater to the Line 2 East Extension Project has also kicked off needs of the growing popula on in the metro and this year to accommodate an addi onal 75,000 ease the impact of conges on on the country’s commuters in Rizal. Civil works for the sta ons growth poten al. is currently under procurement. This project, expected to be opera onal by the third quarter Thus, the 2016 Budget allocated P15.7 billion of 20179, was allocated P2.9 billion in the 2016 to support ongoing eff orts to integrate railway Budget. The LRT Line 1 Cavite Extension and systems in Metro Manila and to provide a fast, Opera on and Maintenance is expected to be environment-friendly, and aff ordable solu on to rolled out within this year. It will extend the mass transport. With this budget, the government current Line 1 by 11.7 kilometers, from Baclaran targets to decrease the load factor of the Metro to Bacoor, Cavite. About P1.6 billion was allocated Rail Transit (MRT) system by 8 percent, from the to this project. baseline fi gure of 171.4 to 157.7 in 2016; and to reduce transfer me from 10 minutes to 5 minutes8. The 2016 Budget also supports the ongoing rehabilita on and expansion of the Philippine Na onal Railways (PNR) to provide safe and fast public transporta on. For one, an amount of P1.3 billion was allocated to repair, restore, and expand the PNR Metro South Commuter Line. Moreover, a er the NEDA approved the North-South Railway Project (NSRP)-South (Phase II), the following are in the offi ng: a commuter railway opera ons between Tutuban and Calamba; long-haul railway opera ons between Tutuban and Legaspi, Government targets to decrease overloading in the MRT by including extended long-haul rail opera ons on 8% next year. (Photo credit: DOTC). the branch line between Calamba and Batangas; and extension between Legaspi and Matnog10. For

6 Amojelar, D. (2015, February 22). DOTC: Metro Manila to have its ﬁ rst bus rapid transit opera on by 2018. Interaksyon.com. Retrieved from goo.gl/2NMIU3 7 World Bank. (2015 January). Philippine Economic Update: Making Growth Work for the Poor. 8 2016 performance targets of DoTC as reﬂ ected in the 2016 Na onal Expenditure Program (NEP). 9 Department of Transporta on and Communica ons. Groundbreaking for P2.27-B LRT-2 Masinag Extension Tomorrow. (2015, June 8). Retrieved from h p://goo.gl/yMeKzt 10Na onal Economic and Development Authority. (2015). NEDA Board Approved Projects as of May 30, 2015. Retrieved from h p://goo.gl/Qa9IKU 77 Technical Notes on the 2016 Proposed Na onal Budget

this project, P800 million was set aside that would Set aside for mari me transport was P2.0 billion cover right-of-way acquisi on and rese lement to provide ports and pursue the Mari me Safety of informal se lers. In addi on, the NSRP North Capability Improvement Project (MRRV). Of this (Phase I), which will operate from Tutuban to amount, P1.2 billion will fund the construc on Malolos, was allocated P400 million. and rehabilita on of 44 ports and harbors (refer to the 2016 NEP for the complete list of Table 5. Major Rail Transport Projects ports). Ten of these ports will be constructed or rehabilitated in the Bangsamoro area, such Par culars 2015 2016 as those in the provinces of Tawi-tawi, Basilan,

LRT Line 2 West Extension 200 M 2,059 M Sulu, and Maguindanao. Four other ports will be LRT Line 2 East Extension 2,400 M 2,913 M constructed or rehabilitated to spur tourism in LRT Line 1 Cavite Extension 1,157 M 1,625 M Basilisa, Dinagat Island; Lubang Island, Occidental LRT Line 1 Dasmarinas - 100 M Mindoro; Concepcion, Iloilo; and Talisay, Rehabilita on of LRT Line 1 & Line 2 2,820 M 1,244 M North-South Rail Project Phase I Table 6. Social Ports to be Constructed/ (Tutuban to Malolos) 300 M 400 M Rehabilitated in 2016 North-South Rail Project Phase II No. Port 2016 Proposal (Tutuban-Calamba-Batangas- Legaspi-Matnog) 800 M 1 Brgy. Dayki n Wharf Development, PNR Repair, Restora on & Buenavista, Marinduque Php 35,000,000 Expansion Project (DOTC & PNR) 2,297 M 1,320 M 2 Viga Port Development Project MRT 3 Rehabilita on & Capacity 2,569 M 1,500 M Viga, Catanduanes 10,000,000 Expansion 3 Brgy. Caub, del Carmen, Surigao del Norte 10,000,000 With the infrastructure projects and reforms 4 Laguimanoc Port, Campo Padre currently being implemented and will be escalated Burgos, Quezon 25,000,000 in 2016, the DoTC targets to increase urban mass 5 Socorro Feeder Port, Surigao transport ridership to 2.2 million per day from 1.2 del Norte 50,000,000 6 Alobo Sta. Cruz, Marinduque 15,000,000 million; and reduce transport costs by 8.5 percent 7 Tingloy Port, Tingloy, Batangas 10,000,000 11 by 2016 . 8 Brgy. 6 Wharf, Dapa, Surigao del Norte 20,000,000 Seaports. Mari me transport is considered the 9 Cas lla Port, Cas lla, Sorsogon 50,000,000 “backbone of interna onal trade and a key engine in 10 Pitogo Port, Brgy. Pamilihan, Pitogo, Quezon 10,000,000 driving globaliza on and compe veness. Around 11 Capandanan, Riverlanding, 80 percent of global trade by volume and over 70 Lingayen 25,000,000 percent by value are carried by sea, according to 12 Pangapisan North, Riverlanding, the UN Conference on Trade and Development12.” Lingayen 5,000,000 Thus, the Philippines, being an archipelagic 13 Brgy. Sering Port, Socorro, Surigao del Norte 10,000,000 na on, needs an integrated and eﬃ cient inter- 14 Gumaca Port, Quezon 20,000,000 island transport system to boost trade and 15 Dinahican Port, Infanta, Quezon 50,000,000 tourism and spur economic growth par cularly in 16 Canaman Riverlanding, Camarines Sur 10,000,000 the countryside. Toward this end, the government 17 San Jose Port, Camarines Sur 15,000,000 has been pursuing key investments, together with 18 Victoria Port, San Roque, Laguna 10,000,000 19 Badoc, Ilocos Norte 10,000,000 the private sector, to improve mari me transport. 20 Mongpong, Sta. Cruz, Marinduque 10,000,000 For instance, the P17.0-billion moderniza on of 21 Coastal Ports (Ham c Port, the Davao Sasa Port, a PPP project, was rolled Bugasong Port, An que) 40,000,000 out this year. The port is considered a vital hub TOTAL Php 440,000,000

in the Brunei-Indonesia-Malaysia-Philippines East Source: DOTC ASEAN Growth Area13.

11Periabras, R. (2014, September 30). DOTC Plans to Cut Transport Costs by 2016. The Manila Times. Retrieved from h p://goo.gl/44w5Gu 12Mari me Industry Authority. (2013). Philippine Mari me Industry Prospects and Challenges in 2013 and Beyond. Retrieved from h p://goo.gl/JY2pg3 13 Dy, R. (2015, May 12). The Davao Port PPP: A Case of Sound Project Analysis. BusinessWorld. 78 Technical Notes on the 2016 Proposed Na onal Budget

Batangas. Various social ports na onwide will also The 2016 Budget will provide P9.0 billion to be established or rehabilitated to promote the modernize interna onal and domes c airports, mobility of people and goods. expand crowded secondary airports, and convert turboprop airports to A320-capable airports to Air transport. To support the increasing tourist lower airfare (See page 88 for more discussions on arrivals and meet interna onal air transport tourism airports). safety and quality standards, the government will con nue to rehabilitate and construct Philippine PPP Projects in Transport Infrastructure. The airports and terminals. The Ninoy Aquino government introduced the PPP Program in Interna onal Airport (NAIA) Terminal 1, one of 2010 to bring in private sector capital in order to the country’s premier gateways, underwent a accelerate infrastructure development. As of July massive rehabilita on in 2014. The P1.1-billion 2015, 10 projects valued at P189.0 billion have fund allocated for this rehabilita on project been awarded (see Table 9), of which, one has strengthened the facility’s structural integrity. already been completed while the remaining nine projects are in various stages of implementa on. With the remarkable results of the program, Table 7. List of Airports for Expansion or the PPP Center won a Gold Award for Best Rehabilita on in 2016 Central Government Promoter during the 2014 (in thousand pesos) Partnerships Award given by the United Kingdom- Airport 2016 Budget based Partnerships Bulle n.

Expansion of crowded key secondary airports Siquijor Airport 40,800 Table 8. PPP Transport Projects in 2016 Cotabato Airport 51,540 (in million pesos) Ozamiz Airport 20,000 Conversion of turboprop airports to A320 Project Budget capable airports Tuguegarao Airport 194,634 DPWH 21,128 Cauayan Airport 198,000 1. Laguna Lakeshore Expressway Dike Calbayog Airport 203,601 2. CALA Expressway San Jose Airport 185,679 3. Daang Hari-SLEX Link Road Siargao Airport 264,142 4. Tarlac-Pangasinan-La Union Toll Improvement of key secondary airports Expressway (TPLEX) for safety and comfort 5. NAIA Expressway Sanga-sanga Airport (Tawi-tawi) 577,700 6. Manila North Expressway, including harbor Virac Airport 32,600 link projects Roxas Airport 95,400 7. NLEX-SLEX Connector An que Airport 10,000 8. NLEX EAST Expressway, Phase I and II Source: DoTC 9. Plaridel By-Pass Road (Arterial Road Bypass (See Table 15 for list of interna onal and other tourism Porject, Phase II) airports) 10. CamSur Toll Expressway 11. Central Luzon Link Expressway (CLLEX), Moreover, to decongest this terminal by 3.5 Phase 2 (Cabanatuan-San Jose Sec on) million passengers per year, the servicing of fi ve 12. R-7 Expressway 13. Southern Tagalog Arterial Road (STAR) Project of the biggest airlines was transferred to NAIA Terminal 3. DOTC 3,700 Integrated Transport System 2,800 The country’s avia on industry was upgraded Regional Airports 700 by the United States Federal Avia on Authority PPP Strategic Fund 200 from Category 2 to Category 1, which means that the Philippines meets interna onal avia on The Road Ahead. In the last fi ve years, the standards. In the same year, the European Union government has proven that economic growth li ed the ban against Philippine aircra opera ng can be achieved and made inclusive by prudently in Europe. These developments will translate to priori zing scarce resources. Infrastructure is more interna onal fl ights; and, with the li ing of impera ve in a aining sustainable and inclusive the ban, a wider market for Philippine carriers. 79 Technical Notes on the 2016 Proposed Na onal Budget

Table 9. List of PPP-Awarded Projects (amounts in billion pesos)

Projects (PHP) (USD) Implemen ng Agency Status 1 Daang Hari-SLEX Link Road (Mun nlupa-Cavite Expressway) Project 2.01 0.04467 Department of Public Start of opera on: 24 July 2015 Works and Highways STATUS: COMPLETED

2 PPP for School Infrastructure 16.43 0.36511 Department of Educa on 9,103 classrooms (97.92%) Project(PSIP) Phase I COMPLETED AND DELIVERED. This is out of the 9, 303 classrooms iden ﬁ ed for construc- on 193 classrooms (2.082%) with ongoing construc on (as of 31 July 2015)

3 NAIA Expressway (Phase II) Project 15.86 0.35249 Department of Public Construc on ongoing; 44.53% Works and Highways complete (as of 20 July 2015)

4 PPP for School Infrastructure 3.86 0.08582 Department of Educa on 1,277 classrooms (29.22%) Project(PSIP) Phase II completed/ substan ally completed out of 4,370 classrooms targeted to be built 1,554 classrooms (35.56%) with ongoing construc on; and 1,539 classrooms (35.22%) under pre- construc on phases (as of 30 June 2015) 5 Moderniza on of the Philippine 8.69 0.19311 Department of Health Ongoing procurement of Orthopedic Center (MPOC) Project Independent Consultant (IC); Awai ng issuance of Cer ﬁ cate of Possession for the Project Site 6 Automa c Fare Collec on System 1.72 0.03822 Department of Ongoing limited public trial for (AFCS) Project Transporta on and LRT-1; Pre Full system accep- Communica ons tance for LRT Line 2

Ongoing pre-opera on ac vi es (i.e. Installa on of equipment & machines, Opera onal Readiness Test-Phase 3) 7 Mactan-Cebu Interna onal Airport 17.52 0.38933 Department of Construc on ongoing; (MCIA) Passenger Terminal Transporta on and Groundbreaking Ceremony Building Project Communica ons held last 29 June 2015 8 LRT Line 1 Cavite Extension and 64.90 1.44222 Department of Ongoing pre-handover and O&M Project Transporta on and pre-construc on ac vi es; Communica ons Ongoing procurement of IC 9 Southwest Integrated Transport 2.50 0.05556 Department of Contract signed on 24 April System (ITS) Project Transporta on and 2015; Ongoing pre-construc on Communica ons ac vi es and IC procurement 10 Cavite Laguna Expressway (CALAx) 55.51 1.23356 Department of Public Contract signed on 10 July Proj- Works and Highways ect 2015; Ongoing IC Procure- ment and Nego a on TOTAL PROJECT COST P189.0 B $4.20009 B (Amounts reﬂ ected are NEDA Board-approved project costs.) Source: PPP Center; data as of August 2015

80 Technical Notes on the 2016 Proposed Na onal Budget growth and poverty reduc on. Hence, to further indicates14. A year a er, the growth declined to 0.90 elevate infrastructure investments in the medium percent15. Given the sector’s weak performance term, public infrastructure investments should and low produc vity, poverty incidence stood at further increase to P849.9 billion in 2017 and 38.3 percent among farmers and 39.2 percent to P939.4 billion in 2018, assuming that the among fi shermen in 2012, the highest among the next administra on keeps public infrastructure basic sectors, per data from the PSA. spending at 5 percent of GDP. The Aquino administra on recognizes the However, to absorb more infrastructure outlays in importance of good governance in the agriculture the future and, more urgently, to ensure the full sector as one of the pillars of inclusive development. roll-out of current projects in 2015 and in 2016, However, poor governance—indicated in the past the capacity of key agencies must be increased. by the inappropriate alloca on of resources16; To this end, the government con nues to pursue the pillage of public funds that were meant for measures to facilitate improvements in budget farmers and fi sherfolk; and the weak capacity of execu on, such as crea ng Full-Time Delivery public ins tu ons to deliver support services for Units and addi onal Bids and Awards Commi ees, the sector—has hindered the sector’s growth as well as hiring of manpower needed to improve and the improvement of farmers’ and fi sherfolk’s and speed up project planning and design, incomes. Adding to this challenge is the sector’s procurement, and implementa on (see pages 7 high vulnerability to risks posed by climate to 10 for more discussions). change, which could cause the rural poor to fall deeper into poverty due to the destruc on that Agriculture Development could be brought about by calami es. Therefore, strengthening the ability of the concerned public ins tu ons to respond is paramount.

To be er this situa on, the Aquino administra on has ins tuted reforms in order to increase the transparency and accountability in u lizing funds for the sector. One such change is the disaggrega on of lump-sum funds that once prevailed in the sector and led to anomalies. The Photo from www.gov.ph government has pushed for be er planning and design of programs and projects for the sector: The agriculture and fi sheries sector plays a from establishing network plans for farm-to- crucial role in a aining inclusive growth and market road projects to designing programs that reducing poverty. Its contribu on to the country’s enhance the resistance of crops against pests and employment is important: It accounted for other factors that may arise due to climate risks. 30.9 percent of the total employment in 2013, Addi onally, several gains in the country’s quest according to the Philippine Sta s cs Authority for agrarian reform have been achieved, such as (PSA), with 10.4 million farmers and 1.4 million comple ng the coverage of all remaining lands fi sherfolk employed in the sector. to be acquired, as well as winning back the Coco Levy Fund for the benefi t of coconut farmers. In 2011 and in 2012, the sector registered growths of 2.4 percent and 2.8 percent, respec vely. Through the government’s various interven ons, While showing a modest progress, the sector’s agricultural produc vity and incomes have performance was far from the annual growth improved. The rice sector had consistently posted targets of 4.3 percent in 2011 and 5.3 percent an average annual growth of 3.76 percent from 2010 in 2012, as the Philippine Development Plan to 2014. Interven ons that generate incremental

14 Na onal Economic and Development Authority. (2014). Philippine Development Plan 2011-2016 Midterm Update with Revalidated Results Matrices. 15 The indicated 2013 growth rate in agriculture and ﬁ sheries excludes forestry. 16 Aquino, A., et al. (2013). An Overview of Policies and Public Sector Investments in Philippine Agriculture. 81 Technical Notes on the 2016 Proposed Na onal Budget

harvest area and improve crop intensity, as well as Table 10. Summary of Rice Importa on, yield enhancing measures have resulted in an all- 2008-2014 me high yield of 18,896,826 MT, bridging the 4.00 MT/ha yield level and a 96-percent level of self- Year Authorized Imports (MT) Actual Imports (MT) suﬃ ciency in rice. The incomes of rice and corn 2008 2,679,801.50 2,390,748.14 farmers had also risen to P21,290 per hectare in 2009 1,948,000.00 1,842,806.12 2013 from P15,830 per hectare in 2010, brought 2010 2,633,946.34 2,369,403.43 about by the improvement in yields and favorable 2011 1,210,000.00 1,063,985.41 farm gate palay prices17. These increments were 2012 850,000.00 692,220.74 a result of the huge investments the Aquino 2013 368,700.00 271,511.80 2014 1,300,000.00 1,293,340.69 administra on has provided to agriculture which, from 2011 to 2015, has totaled P339 billion. This Source: Na onal Food Authority amount is almost equivalent to the combined budgets of agriculture during the two preceding and cushion increases in the price of rice. The administra ons. ini al 2014 importa on target was 800,000 MT22.

S ll, reducing poverty in the agriculture sector With a P7.1-billion budget for the Na onal Rice remains a huge challenge. Eff orts to strengthen the Program in 2016, the Department of Agriculture sector’s compe veness and deepen its forward seeks to bridge the 20.09 million MT level of palay and backward linkages to the manufacturing produc on as well as ins tute measures that will sector must be intensifi ed in order to create more rapidly improve compe veness of domes c rice job opportuni es in the countryside. To boost the produc on. Part of the funds will be used for government’s interven ons to develop agriculture the High Yielding Technology Adop on Program, and fi sheries and improve rural produc vity and which promotes the use of modern, high-yielding incomes, the proposed 2016 Budget provides and climate resilient rice varie es, such as hybrid P93.4 billion for agriculture18: a 4-percent increase rice seeds, inbred cer fi ed seeds, and green super year-on-year. rice. The DA Regional Field Offi ces, through the local government units (provincial, municipal, Rice Program. Palay produc on had been on the and barangay levels), distribute these high quality upswing, increasing from 15,772,319 metric tons rice seeds to the irrigators’ associa ons and (MT) in 2010 to 18,967,826 MT in 201419, enabling other farmer organiza ons, as well as groups in the government to a ain a 96-percent rice self- iden fi ed project areas. suffi ciency—the highest it has ever achieved— and to place second among Asian countries20, To support the Na onal Rice Program, P518 from ge ng only 81.27 percent in 2010. With million was set aside for the Philippine Rice increased rice produc on, rice importa on Research Ins tute (PRRI) to pursue its rice requirements had decreased from 2,369,403.43 research development program in 2016. Next MT in 2010 to 271,511.80 in 2013. Furthermore, year, the PRRI targets to increase to 51 percent in the same year, the country exported 300 MT the areas planted with high quality seeds. of premium and organic rice to 11 countries such as Canada, China, France, Germany, and Malaysia, The Na onal Irriga on Administra on (NIA), on the among others21. other hand, is provided P5.8 billion to implement both na onal and communal irriga on systems. In 2014, authorized rice importa on increased It was tasked to ensure that the master plan for due to the addi onal importa on of 500,000 MT irriga on projects gives priority to key produc on of rice to support the country’s rice buff er stock areas in major rice producing provinces, and that

17 Farmgate prices of palay rose to P16.93/kg in 2013 from P14.87/kg in 2010. Source: PSA 18 The 2016 DA budget level includes transfers from SPFs. 19 Philippine Sta s cs Authority, & Bureau of Agricultural Sta s cs. CountrySTAT Philippines. 20 Department of Agriculture (2014). DA Annual Report 2013, ci ng the May 2014 issue of the USDA Grain: World Markets and Trade Report 21 Ibid. 22 Offi ce of the Presiden al Assistant for Food Security and Agricultural Moderniza on (2014, July 23). NFA to Import Addi onal 500,000 MT of Rice through Open Bidding. Retrieved from h p://opafsam.gov.ph/nfa-import-addi onal-500000-mt-rice-2014-open-bidding/ 82 Technical Notes on the 2016 Proposed Na onal Budget irriga on projects are undertaken by qualifi ed accoun ng for 14 percent of the country’s irrigator’s associa ons consistent with the agricultural exports in 2013. Earnings from specifi ca ons set by DPWH, and are using coconet agricultural exports rose by 25.41 percent in 2013. bio-engineering solu ons. The government intends to take this even higher by 3.0 percent by 2016. To further strengthen the governance of the rice sector, a subs tute bill on strengthening the Table 11. Breakdown of Produc on Targets Na onal Food Authority (NFA) is being pushed for HVCCs (in metric tons) in Congress to enable the agency to be er focus on its core func ons of buff er stock management High Value 2015 2016 and palay procurement from poor farmers. The Commodity Crops (DA) NFA’s Rice Subsidy Program and importa on are also being studied to help manage and reduce the Banana 9,172,275 9,447,443 Pineapple 2,608,140 2,686,384 23 NFA’s P154.96 billion debt. Mango 865,906 891,883 Rubber 496,548 513,232 Corn Program. Considered as among the country’s Coff ee 84,381 86,668 primary crops, corn serves not only as a staple Cacao 7,787 10,456 food but is also used as an important ingredient Source: Department of Agriculture in animal feeds. Its produc on had increased by 21.86 percent from 6.4 million MT in 2010 to 7.7 Coconut Program. The coconut farmers are among million metric tons in 2014. Improvements in the poorest in the agriculture sector, with about yield, coupled with higher farm gate prices, had 41 percent living below the poverty line24. They raised corn farmers’ income by almost 66 percent. mostly rely on copra for income and earn about Next year, the corn program will be provided P2.2 P20,000 a year25, or a meager P55 a day. To upli billion to procure the required technology for the economic status of the country’s 3.5 million postharvest and farm mechaniza on in order to coconut farmers, the Philippine Coconut Authority a ain high quality produc on. The DA targets a was allocated P1.3 billion to increase coconut produc on of 3.08 million MT of white corn and (copra) yield to 2.61 M MT in 2016 from 2.27 M 6.78 million MT of yellow corn in 2016. MT in 2015. Part of the funds will be used for the Kasaganaan sa Niyugan ay Kaunlaran ng Bayan High Value Crops Development Program. To raise (KAANIB) Coconut Intercropping and KAANIB- farmers’ incomes and create more livelihood Enterprise Development Project, which aims to opportuni es, the High Value Crops Development increase a farmer’s gross income by as much as Program will be given a P2.9-billion funding in 2016. P100,000 from P20,000 per year, and to generate Under this program, farming of high commodity addi onal jobs26. The coconut industry has a high crops will be rehabilitated and rejuvenated to poten al for growth given the increasing global increase yields and income; for instance, the aim demand for alterna ve fuel and edible oil27. is to increase the yield of cacao and coff ee by as much as 100 percent. Moreover, farming of cacao The Aquino administra on issued in March this and coff ee will be complemented by providing year Execu ve Order No. 180, which provided 16,832,478 pieces of plan ng materials and the guidelines for the transfer of coco levy funds establishing 104 units of produc on facili es. and assets to the government and the u liza on of these assets. This endeavor aims to tap the Among the high-value crops, fresh banana is P71-billion coconut levy funds in developing the among the top agricultural export commodi es, coconut industry by improving the industry’s

23 NFA’s outstanding debt as of December 2014. 24 Ranada, P. (2014, November 24). Will Aquino Face the Marching Coconut Farmers. Rappler.com. Retreived from h p://www.rappler.com/ na on/74725-benigno-aquino-coconut-farmers-march-coco-levy 25 Department of Agriculture. (2013). Annual Report: Enabling Communi es, Expanding Opportuni es. 26 Figures provided by the Philippine Coconut Authority 27 Philippine Coconut Authority (2013). 2013 Outlook for the Coconut Industry. Retrieved from h p://www.philexport.ph/c/document_li

83 Technical Notes on the 2016 Proposed Na onal Budget

farm produc vity and developing coconut-based loca on in a priority area where poor farmers enterprises. Its implementa on, however, was are; and to geo-tag them for the approval of the stalled by the temporary restraining order issued loca on list prior to submission to the DPWH. by the Supreme Court, in response to a pe on Ci zens, through civil society organiza ons, are ﬁ led by a farmers’ organiza on28. also being engaged to do par cipatory audit of par cular FMR projects especially in remote Livestock and Poultry Program. The livestock areas. In 2016, P154 million will be provided for and poultry subsectors accounted for 16.10 network planning and monitoring services. To percent and 14.54 percent, respec vely, of improve the quality of FMRs, design standards the total agricultural output in 2014. The 2014 have been upgraded to 6 inches thick from 4 to 5 performance was slightly lower compared to 2013, inches, and its width expanded to 5 meters from at 16.23 percent for livestock and 14.76 percent 3.5 meters. New FMRs must be made of concrete for poultry. In 2016, the livestock and poultry to withstand heavy rains. program will be given P1.2 billion to complement the private sector’s investment ini a ve for the About P22.3 billion was allocated for irriga on industry to produce 2.1 million MT of hogs and facili es, through the NIA, to extend or expand 1.82 million MT of chicken. These targets will help exis ng irriga on systems covering 10,704 ensure aﬀ ordability, accessibility, and availability hectares more, and repair 1,051 km of canal linings of livestock products as well as to boost exports and service roads as well as 1,118 structures. to countries and markets in 2016, such as China, Focus will be given to inves ng in small water South Korea, Singapore, Vietnam, Indonesia, impounding systems and genera ng new service Malaysia, Japan, Cambodia, Bangladesh, the areas as well as restoring non-opera onal ones European Union, and Russia. for adaptability to climate change.

Agriculture Infrastructure and Facili es. A Fisheries Program. The fi sheries sector had total of P35.97 billion29 was allocated for rural recovered from a slump in produc on in 2012 at infrastructure and facili es to enhance produc on -0.25 percent, pos ng a signifi cant 1.24-percent effi ciency, connec vity, and market delivery. The produc on gain in 2013. This recovery was bulk of this amount will be used to rehabilitate, a ributed to the posi ve growth in the produc on restore, and construct 1,285 kilometers (km) of of several commodi es by the diff erent fi sheries farm-to-market roads (FMRs) na onwide so as subsectors, including yellow fi n tuna, skipjack, to spur local trade and employment and improve frigate tuna, eastern li le tuna, roundscad, mobility of goods and people, as well as reduce big-eyed scad, Indian mackerel, squid, blue transporta on cost (see Table 12). With its crab, milkfi sh, lapia, ger prawn, and oyster. mul plier eff ect, the FMRs are indeed a catalyst However, the value of the fi sheries produc on for rural growth. in 2014 decreased by 0.15 percent due to the increasing cost of inputs to opera on and the To maximize the poten al and op mize these series of weather disturbances in the Visayas and investments, the FMRs must be situated in Mindanao regions that interrupted the regular strategic areas and their construc on must be fi shing opera ons of municipal fi shermen31. closely monitored. Since 2014, the DA has been tasked to provide basic informa on on the list of FMRs30 in order to prove their connec vity and

28 The pe oner, Confedera on of Coconut Farmers Organiza on of the Philippines, argued that the Execu ve Order issued by the government “was rushed” and hence the fund’s u liza on might be prone to misused. 29 The P35.97-billion budget for FMRs is composed of irriga on facili es (P22.3 B), FMRs (P12.9 B), and fi sh landing centers (P756 M). 30 A special provision in the 2016 NEP states that the P7.05 billion appropriated for FMRs shall be released directly to DPWH. The DA shall ensure that the FMRs to be implemented will lead to arterial or secondary roads and key produc on areas, and are geo-tagged. The approved FMR network plan shall be regularly updated to priori ze: (i) provinces that are among the major producers of rice, corn, and high value commercial crops; (ii) areas where the majority of small farmers and agrarian reform benefi ciaries registered under the RSBSA are located; and (iii) provinces or regions where the absolute number of poor farmers and the incidence of poverty are high as iden fi ed in the latest offi cial poverty sta s cs of the PSA-NSCB. 31 Inputs from DA. 84 Technical Notes on the 2016 Proposed Na onal Budget

Table 12. Breakdown of Farm-to-Market Roads for Construc on/Rehabilita on in 2016, DA Par culars 2015 GAA 2016 Amount Km Amount Km FMR Regular Tier 1 6,250,000 625.00 Tier 2 801,167 80.12 Sub-total 6,250,000 625.00 7,051,167 705.12

Davao Integrated Development Project (Upgrading only) - - CHARMP 2 (Rehabilita on only) PAMANA 1,417,000 166.71 Socio-Economic Component of the Normaliza on Process 620,000 62.00 Casecnan Social Measures 50,000 5.00 140,000 11.10 SOCSKSARGEN Integrated Food Security Program 281,040 25.50 489,636 46.25 Philippine Rural Development Project 4,899,390 543.00 5,229,041 522.9 TOTAL 13,51,430 1,427.21 12,909,844 1,285.37 Source: DA, DBM

To make the Fisheries Program a vital contributor of benefi ciaries in 2015. Moreover, P1.8 billion to food security, P4.4 billion was earmarked was earmarked for sugar industry development for its ini a ves in 2016, accoun ng for almost to assist 50 block farms and construct 76.2 km of 67 percent of the total P6.6-billion budget of farm-to-mill roads. the Bureau of Fisheries and Aqua c Resources (BFAR). Of this amount, P756 million will be used to construct 252 community fi sh landing centers Table 14. Seed Buff er Stocking, FY 2016 na onwide. These facili es will help reduce post- Par culars Target Budget harvest losses from 25 percent to 18 percent. White corn 121,333 ha32 P171,776,000 Table 13. Budget and Target for the Fisheries Palay 20,792,203 kg P751,657,000 Program in 2016 TOTAL P923,433,000

Par culars 2015 2016 As a disaster-preparedness measure, the DA will Fisheries Program (BFAR) P4.6 B P4.4 B receive P923 million for Seed Buﬀ er Stocking to Commercial 1.10 M MT 1.11 M MT procure drought and ﬂ ood-tolerant seed varie es. Municipal 1.31 M MT 1.32 M MT Of this amount, P752 million will be used to buy Aquaculture 2.49 M MT 2.49 M MT 20.8 million kilos of rice/palay seeds. Source: DA, DBM

Other assistance to farmers and fi sherfolk. Agrarian Reform. Commi ed to complete Aside from providing the much-needed farm the Comprehensive Agrarian Reform Program infrastructure facili es and technologies to (CARPER) Extension with Reforms, the government increase yields, the government also provides earmarked a total of P3.7 billion for the land insurance protec on to subsistence farmers and tenure services of the Department of Agrarian fi sherfolks included in the Registry System on Reform (DAR). Part of the funds will be used to Basic Sectors in Agriculture (RSBSA). About P1.6 acquire and distribute 105,000 hectares of land. billion was allocated in the 2016 Budget to the In addi on, P252 million was provided for CARP Philippine Crop Insurance Corpora on for services projects being managed by the Department of aimed at insuring and protec ng crops, livestock, Environment and Natural Resources (DENR). These fi sheries, and other non-agricultural assets funds will help reduce the distribu on backlog to against losses to typhoons, fl oods, drought, and 331,419 hectares. Congress is eyeing the passage other agricultural and disaster-related risks. This of a law that will mandate the comple on of the amount will benefi t 694,727 subsistence farmers land acquisi on and distribu on of all public and and fi sherfolks, 23 percent more than the number private agricultural lands under CARP.

32 1 ha = 1 bag (1 bag = 20 kilos) 85 Technical Notes on the 2016 Proposed Na onal Budget

Aside from land distribu on, the DAR will also sectors. In 2013, travel and tourism contributed capacitate agrarian reform benefi ciaries (ARBs) 11.3 percent to the country’s GDP and helped through the Program Benefi ciaries Development, provide 4,295,000 jobs or 11.3 percent of the to enable them to maximize their acquired lands total employment, according to the World Travel and increase their annual income by 10 percent and Tourism Council. The sector also brought in in 2016, improving from the average increase of P81.3 billion worth of investments34. Last year, 9.95 percent in 2010 to 2013. For this eff ort, P2.9 P33.9 billion were invested in the country for 16 billion was allocated to provide support services tourism-related projects, including the Hilton to agrarian reform benefi ciaries, rural women, Hotel in Newport City, the Solaire Resort and the and landowners, among others. Casino Manila, and the Bai Hotel in Cebu, among others. Investments in tourism have more than Toward a boun ful harvest. The agriculture and doubled from P1.7 billion in 2010 to P4.3 billion fi sheries sector is up for a resurgence. With the in 2015. proper interven ons and with the right investments, it can become a key player in giving the rural poor be er opportuni es. Therefore, this sector must Figure 1. Tourism Budget, 2004-2015 be strengthened by boos ng agri-business and (in billion pesos) its forward and backward linkages to industries, manufacturing , and tourism, among others. 6 5 4 3 The Aquino administra on has already ini ated 2 1 the necessary reforms, which must be sustained 0 and therea er heightened to secure the sector’s 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 con nued upward trajectory. Sources: PSA, BESF

Tourism Development Furthermore, the Aquino administra on has leveraged the Program Budge ng approach35 The many pris ne tourist loca ons and friendly to equip the government with ways to be er and hospitable people are just a few of the respond to the tourism sector’s infrastructure reasons why the Philippines has an excellent needs, such as airports, ports, and access roads, poten al for tourism. This prospect awaits—the in key des na ons. This way, the planning and country’s small 4.8 percent share in tourist arrivals implementa on of tourism-related programs and in ASEAN in 201133 can be improved. To do so, the projects of infrastructure agencies, such as the sector must be helped in addressing the causes DoTC and the DPWH, are aligned to the Tourism of its underperformance: poor infrastructure and Master Plan of the DoT. uncoordinated planning and implementa on of infrastructure projects among per nent To make growth in the sector truly inclusive, the government agencies, coupled with security DoT has partnered with the DSWD to pursue the and poli cal issues. These factors hampered One-Step project that integrates the poor with the sector’s poten al to become a key driver of the tourism value chain through the (1) provision growth and job genera on. of physical infrastructure to poor communi es, (2) crea on of job and enterprise opportuni es, The work in the tourism front has actually begun. and (3) engagement of the private sector in the Through the right investments and a strategic implementa on of programs. Under this project, push by the government, the sector has gained the Pantawid Pamilya beneﬁ ciaries are assisted by ground as a robust engine of progress, not training them for tourism-related jobs and linking only in crea ng jobs but also in contribu ng to their microenterprises into the tourism’s value the growth of agriculture, trade, and services chains36.

33 Associa on of Southeast Asian Na ons. (2015). Tourist Arrivals in ASEAN, 2009-2013. Retrieved from h p://goo.gl/ERMbmq 34 World Travel and Tourism Council. (2014). Travel and Tourism: Economic Impact, 2014. Retrieved from h p://bit.ly/1EDPWPf 35 The Program Budge ng Approach was introduced in 2012 during the prepara on of the 2013 Na onal Budget. 36 Department of Tourism. (n.d.). The One-Step Project Briefer. 86 Technical Notes on the 2016 Proposed Na onal Budget

With the government’s strategic approach to program has completed 53 road projects cos ng tourism development, huge investments in P16.7 billion40. This convergence eff ort will be infrastructure, and eff orts to improve peace and strengthened in 2016 with a P24.0-billion budget order, the country’s tourism compe veness rank to cover the construc on or improvement of 1,200 had improved to 74th this year37 from 82nd (out kilometers of access roads leading to declared of 140 economies) and 94th (out of 139 economies) tourist des na ons. The amount is 46 percent in 2013 and 2011, respec vely. Among the areas more than this year’s P16.4 billion alloca on. in which the Philippines was rated high included: government priori za on of the industry (from 46th in 2013 to 28th in 2015); eff ec veness of marke ng to a ract tourists (85th to 29th); number of world heritage sites (25th to 18th); and business costs of crime and violence (103th to 77th)38.

Tourist arrivals have likewise increased for the past years, with Korea accoun ng for the big slice of the tourist market, followed by the United States of America and Japan. The DoT has been Access road leading to white sand beaches of Gumasa, par cipa ng in travel fairs and trade shows Sarangani Province completed in 2015 through the DoT- to a ract more tourists. It has also iden fi ed DPWH Convergence Program. (Photo credit:DPWH) poten al country markets to beef up foreign visitors in the country. These include Indonesia, Furthermore, to support the infl ux of tourists, Viet Nam, Thailand, Russia, and countries in the about P7.0 billion was allocated, under the DoTC Middle East39. To bring in more travelers, more budget, to construct and rehabilitate interna onal routes were opened in 2014, including Manila- and other tourism airports (see page 79 for more Riyadh (Cebu Pacifi c), Singapore-Kalibo (Silk Air), informa on on air transport infrastructure). Kuala Lumpur-Kalibo (Air Asia), Manila-Narita (Cebu Pacifi c), and Manila-Haneda (Philippine By 2017, three interna onal airports are expected Airlines), among others. to be completed, including the Bicol Interna onal Airport, the Puerto Princesa Interna onal Airport, The government will con nue to work the sector to and the Panglao Island Interna onal Airport, meet the target of 10 million interna onal tourist which will cater to interna onal tourists and arrivals and 56.1 million domes c travelers by balikbayans who want direct and easy fl ights 2016, which is es mated to bring some 7.4 million to the Bicol region, Palawan, and Bohol. The employment and generate revenues of P455.0 opening of these interna onal gateways will not billion and P1.86 trillion from interna onal visitor only boost tourism in these areas, but will also receipts and domes c receipts, respec vely. open more opportuni es for trade, employment, Given the tourism sector’s high poten al for job and business for airline operators and cargo crea on, the government will con nue to invest forwarders, among others. in this sector in 2016, par cularly in developing the tourism infrastructure. Moreover, the fi rst airport PPP project, under the Aquino administra on—the Mactan-Cebu Tourism infrastructure development. As part of Interna onal Airport—is underway. This project the Program Budge ng approach, the government entails the construc on of an interna onal launched the DoT-DPWH Convergence Program terminal and the renova on of the exis ng on Enhancing Tourism Access, which strategically terminal to accommodate 8 million passengers iden fi es the needed access roads that should from the current capacity of 4.5 million, according lead to tourism areas. As of 2014, the convergence

37 The Philippines placed 74th out of 141 countries. Source: World Ecpnomic Fourm. (2015). Travel and Tourism Compe veness Report. Retrieved from h p://goo.gl/4Dd4Xj 38 Abellanosa, P. (7 May 2015). Philippines’ Tourism Compe veness Advances to 74th Place. Travel Update Philippines. 39 Department of Tourism. (2014). DoT Annual Report. 40 Ibid. 87 Technical Notes on the 2016 Proposed Na onal Budget

Table 15. Alloca on for the Moderniza on of Table 16. Alloca on for Tourism Ports in 2016 Interna onal Gateways and Other Tourism Port Budget Airports Basilisa Municipal Port, Dinagat Island P70 M Airport 2016 Budget Cabra, Lubang Island, Occidental Mindoro P15 M Concepcion Port, Iloilo P10 M Locally Funded Projects Caminawit Development Project, P8 M Laoag Interna onal Airport 13.5 M San Jose, Occidental Mindoro Basco Airport P33.2 M Talisay Port, Batangas P10 M Clark Interna onal Airport New P2,093.1 M TOTAL P113 M Terminal Bldg San Vicente Airport P34.1 M Source : DoTC, 2016 NEP Taytay Aiport P8.8 M Camarines Sur (Naga) Airport P1,002.2 M this year and 10 million in 2016. Tuguegarao Airport P194.6 M Siargao Airport P264.1 M The Tourism Promo ons Board NAIA Redevelopment, Improvement, P25.0 M will be provided P1.64 billion to and Capacity Expansion heighten the promo on of the Calbayog Airport P203.6 M country’s tourist spots. Zamboanga Interna onal Airport P160.1 M Butuan Airport P2.0 M Dipolog Airport P25.4 M The DoT will tap P1.15 billion from Bagabag Airport P11.8 M its P2.7 billion 2016 budget to fund Bicol Interna onal Airport P747.4 M the Branding Campaign Program; Foreign-assisted Projects while P497 million will be used for market and Puerto Princesa Interna onal Airport P68.1 M product development, such as par cipa on in key Development Project New Bohol (Panglao) Interna onal P2,136.3 M travel fairs, conduct of sales mission and product Airport Development Project presenta ons. The DoT intends to promote the TOTAL Php7,023.3 M country not only as a summer des na on but also Sources: DOTC, 2016 Nep as a wedding des na on.

As the country gears up for the ASEAN integra on, the country’s tourism workers have started to undergo skills upgrading through the tourism compe veness project of the DoT in partnership with Asian Development Bank (ADB) and Canada. This year, a total of 23 hotels, resorts, and tourism associa ons were given skills development grants. In 2014, 26 tourism enterprises received the same capacity building grant, benefi ng 5,000 tourism workers. Soon to rise in Bohol: Panglao Interna onal Airport, also known as New Bohol Interna onal Airport. (Photo Credit: DoTC) The Journey Onward. In terms of absorp ve capacity, or the ability of the agency to spend its budget, the DoT has the capability to fully u lize its to the PPP Center. The interna onal terminal is budget as it fares well in its u liza on rate, reported expected to be opera onal by 2018. at 87 percent in 2014. The administra on’s good governance eff orts, which have helped foster the For an archipelagic country like the Philippines, growth of businesses, and the country’s stabilizing ports are a vital infrastructure that promotes the peace and order situa on blend rela vely well to mobility of people, par cularly travelers. Next year, advance the tourism sector. P113 million will be provided for tourism ports. The eff orts in developing this sector, however, must Tourism Promo on. This year is Visit the Philippines be sustained and escalated even beyond 2016 to Year. This campaign, launched in 2014, aims to ensure the country’s compe veness among other a ract 8.2 million foreign tourists in the country Asian na ons. For the sector to thrive as well as spur

88 Technical Notes on the 2016 Proposed Na onal Budget progress in the countryside, where most of the ﬁ ne Thus, the proposed 2016 Budget boosts tourist des na ons are located, the sector must government eﬀ orts to revitalize the manufacturing be linked more deeply with government programs sector by increasing investments in transport in infrastructure, environmental conserva on and infrastructure, bankrolling ini a ves to improve protec on, agriculture, trade and industry, and the business climate, nurturing micro-, small- peace and order. and medium-scale enterprises (MSMEs), and suppor ng the development of the country’s Manufacturing Resurgence greatest resource—its people.

The Philippines was among the fi rst na ons in Adequate infrastructure support. Suffi cient Asia to push for industrializa on. In the 1950s, infrastructure, such as an effi cient transport it was faring well compared with its neighboring system in land, sea, and air, helps in making doing countries in the region in terms of real capita business easier. As such, the government has GDP levels and growth rates41. The country’s increased its transport infrastructure investments growth, however, was characterized by a boom- to P245.8 billion in 2016, higher than the P220.7 and-bust cycle as various external events, such billion allocated budget in 2015 (See page 76 for as oil price shocks, worldwide recession, the more discussions on transport infrastructure). Asian fi nancial crisis, and structural weaknesses adversely aff ected the country’s economy. Improving the business climate. The Aquino From a 9.94-percent growth rate in the 1950s, administra on’s eff orts in improving the business the manufacturing sector’s growth declined to climate have paid off as its ranking in the 2015 1.06 percent in 1981 to 1990 and perked up to Interna onal Finance Corpora on (IFC) Ease of 4.2 percent in 2001 to 200642. The country’s Doing Business Report climbed to No. 95 out of burdensome bureaucra c procedures, restric ve 189 economies, from No. 108 in 2014. Out of policies, inadequate logis cs infrastructure, and the 10 indicators used to gauge the ranking, the insuffi cient skilled workers have weighed down Philippines improved in fi ve: Resolving Insolvency the sector’s progress. (from No. 100 to No. 50), Ge ng Electricity (from No. 33 to No. 16), Paying Taxes (from No. 131 to When the Aquino administra on took over in No. 127), Star ng a Business (from 170 to 161), 2010, it sought to shi the economy from a and Registering Property (from No. 121 to No. consump on-driven to an investment-driven 108)43. By 2016, the target is to make it to the top growth by pushing for the revitaliza on of third of the global rankings in the World Economic the manufacturing sector. Given the sector’s Forum-Global Compe veness Index. capability to ignite innova on and investments, and provide backward linkage with the agriculture To promote governance, the government sector—a main source of livelihood for the rural simplifi ed business procedures. For instance, poor—the revival of the sector has been one of it introduced online fi ling and payment system the government’s top priori es in pushing its for easy tax compliance, and streamlined the agenda for inclusive and sustained growth. applica on for occupancy clearances. Moreover, as part of its eff orts to improve the ease of Currently, the manufacturing sector is gaining doing business in the country, the government is ground as it con nues to fuel the economy and pursuing the Na onwide Streamlining of Business create employment. In 2013, it contributed 22.8 Permits and Licensing Systems (BPLS) Program at percent to the economy, from 21 percent in both the na onal and local levels. The program 2009; and employed 3.1 million people or 1.2 adopts a unifi ed form and reduces the steps, percent higher than the previous year. It was number of days, and the signatories for new also considered as the largest and fastest growing applica ons and business renewals. industry in the country in 2013. Clearly, these gains must be sustained and even intensifi ed.

41 Canlas, D., Chan & M.R. (2008). Notes on Philippine economic growth and its sources. The Philippine Review of Economics, XLV (1). 42 Na onal Sta s cs Coordina on Board. (n.d.). Na onal Accounts of the Philippines. 43 Philippines Climbs 13, Notches in Doing Business Report (2015). Retrieved on August 22, 2015 from www.compe ve.org.ph/node/2013 89 Technical Notes on the 2016 Proposed Na onal Budget

The following are some of the standards The Comprehensive Automo ve Resurgence contained in the BPLS, as s pulated in the Joint Strategy (CARS) Program is one of the outputs of Memorandum Circular No. 01, series of 2010 the completed roadmap. The CARS provides tax (Guidelines in Implemen ng the Standards in incen ves and other non-fi scal support, such as Processing Business Permits and Licenses in all streamlining of registra on processes. Such moves Ci es and Municipali es)44: are intended to encourage car manufacturers to set up shops in the country, and make the Philippines • Processing me - Processing of new business a regional automo ve manufacturing hub. The permits shall not be more than 10 days, but the opera ng requirements of the Implementa on LGUs are enjoined to strive for 5 days or less; and and Monitoring Offi ce of the CARS program was processing of business renewals, not be more earmarked P10.8 million in 201647. than 5 days. However, the LGUs are enjoined to strive for 1 day or less. Enhancing support for the MSMEs. Aside from providing a conducive business environment • Signatories - Permits shall not have more by reforming policies and procedures, the than fi ve (5) signatories; in the case of the LGUs, government, through the Department of Trade and permits should require only two (2) signatories Industry (DTI), also assists MSMEs to make them (Mayor and Treasurer or the BPLO). compe ve and bolster their resilience in mes of crisis. Over the years, their numbers had grown As of July 2015, 1,447 out of 1,516 LGUs have by 66 percent, from 492,510 in 1995 to 816,759 completed their business process reengineering. in 2011. Correspondingly, the number of those The remaining 69 LGUs are expected to become employed in these enterprises had also increased compliant with the BPLS standards by yearend. from 2.7 million in 1995 to 3.9 million in 201148.

In addi on, the full implementa on of the The 2016 Budget will provide P932 million to the e-commerce law should ensure the fast and DTI to promote and develop MSMEs in the regions eﬃ cient delivery of government services, the through counselling, training on entrepreneurship, ra onaliza on of economic zone development and product and merchandise development, to consider regional dispersal of agencies, and among others. Some P201 million will be used the use of local or indigenous resources, among to establish 68 Negosyo Centers na onwide that others45. will assist 6,800 MSMEs. These targets will add to the 100 Negosyo Centers planned this year. Building compe veness of industries. The government, through the Department of Trade and Industry’s Board of Investments, launched the Industry Roadmap Project in 2012 to build strategic partnerships with industry stakeholders in cra ing sectoral roadmaps. These roadmaps, which will serve as building blocks of the Manufacturing Industry Roadmap and the Comprehensive Na onal Industrial Strategy, will help enhance global compe veness of Philippine industries. As of June 2015, 29 industry roadmaps have been completed, while 18 more are expected to be completed within the year46. Negosyo Center in Davao City opens its door to small businesses on July 9, 2015. (Photo from DTI)

44 Philippine Development Forum (n.d.). BPLS Briefer. 45 Na onal Economic and Development Authority. (2014). Philippine Development Plan: 2011-2016 Midterm Update. 46 Source: DTI-BOI 47 Per Execu ve Order No. 182, s. 2015, “[T]he total fi scal support for the CARS Program will be given beginning 2016, and shall not exceed Twenty- Seven Billion Pesos (P27 Billion), with each enrolled Model qualifi ed to a fi scal support in an amount not exceeding Nine Billion Pesos (P9 Billion).” 48 Mendoza, R., & Melchor, M. (2014, November 11). SMEs in the Philippines: Going Beyond Survival. Rappler.com. Retrieved from h p://www.rappler. com/thought-leaers/74674-smes-philippines-asian-ins tute -management/ 90 Technical Notes on the 2016 Proposed Na onal Budget

Table 17. List of Industry/Sectoral Roadmaps (As of June 2015) Roadmaps being implemented/for implementa on 11. Copper and 19. Petrochemicals 1. Manufacturing copper products 20. Plas cs 2. Automa ve 12. Electronics 21. Metalcas ng 3. Automo ve parts 13. Furniture 22. Tool and die 4. Electric vehicles 14. Paper 23. IT-BPM 5. Aerospace 15. Rubber products 24. Re rement 6. Motorcycle 16. Biodiesel 25. Shipbuilding 7. Cement 17. Natural health 26. IC design 8. Ceramic les products 27. Health care services 9. Mass housing 18. Chemicals 28. Prin ng 10. Iron and steel 29. Book publishing

Roadmaps to be completed in 2015 1. Coco coir 9. Tex les 16. Processed shrimps/ prawns 2. Bamboo 10. Christmas décor 17. Seaweeds/carrageenan 3. Jewelry 11. Gi s & housewares 18. Services 4. Crea ve industries 12. Processed ﬁ shery 5. Mineral processing products 6. Footwear 13. Processed meat 7. Chocolate confec onaries 14. Condiments/mixes 8. Garments 15. Processed fruits

Source: DTI-BOI

These Negosyo Centers serve as one-stop shops of priority industries, the TSWP also provides in processing the requirements to establish a opportuni es for the unemployed poor ci zens business. Some centers, especially the advanced as it priori zes poor residents without formal or and specialized types, provide assistance on voca onal training and living in areas with high product development, trade promo on, and poverty incidence49. fi nancing facilita on. The TESDA also pursues the Special Training for To further enhance the MSMEs’ compe veness, Employment Program (STEP), “a community- the DOST will sustain its Small Enterprise based specialty training program that will Technology Upgrading Program (SETUP) to provide address the specifi c skills needs of the technical assistance, training, and equipment communi es and promote employment through to fi rms. Set aside in the 2016 Budget is P780 million for this program, P118 million more than Table 18. Programs on Training for Work this year’s budget of P662 million, to assist 2,150 fi rms and help generate an es mated 17,431 jobs. Par culars 2015 2016 Training for Work Scholarship P2 B P2.2 B Program (TWSP) Human Resource Development. To ensure that the No. of TWSP Enrollees 210,526 231,895 right skills match the requirements of the market, No. TWSP Graduates 189,473 208,705 the Technical Educa on and Skills Development Special Training for Employment P441 M P337 M Services (TESDA) will con nue to accelerate its Program (STEP) No. of benefi ciaries 32,321 24,687 Training for Work Scholarship Program (TWSP). Private Educa on Student P200 M P200 M Armed with a P2.2 billion budget in 2016, the Financial Assistance (PESFA) TWSP aims to take in 231,895 students, 21,369 No. of benefi ciaries 21,053 21,053 more than the targeted enrolees in 2015. Aside JobStart Philippines - P107 M from addressing the skills gaps and requirements No. of benefi ciaries - 3,200

49 Technical Educa on and Skills Development Authority. (n.d.) Scholarship and Student Assistance Programs. Retrieved from h p://bit. ly/1JjI0E6 91 Technical Notes on the 2016 Proposed Na onal Budget

entrepreneurial, self-employment, and service- future; and the promo on of investments in the oriented ac vi es50.” Unlike other TESDA training energy sector. As part of boos ng investments in programs, the STEP provides starter kits and daily the sector, the private sector capital is tapped. allowance of P60 per day to its scholars during the training course. The technical-voca onal courses Under the Aquino administra on, the fi rst off ered are aligned with the following priority commercially-fi nanced solar power plant was sectors or industries: agriculture and fi sheries; established in San Carlos City, Negros Occidental. automo ve and land transporta on; hea ng, Upon comple on of the project, the San Carlos ven la on, air-condi oning, and refrigera on; Solar Energy (SACASOL) is “expected to supply construc on; visual arts; electronics; furniture and 35-million kilowa hour of energy to the Visayas fi xtures; and garments; health, social, and other grid and cover mainly the power needs of Negros community development services; and metals Occidental, Negros Oriental, Cebu and Iloilo52.” and engineering. In 2016, the STEP will be given P337 million that will benefi t 24,687 enrolees. Another commercially-fi nanced energy project that will help ensure a steady power supply is the Moreover, P107 million was earmarked for Pagbilao III Power Plant Project due for comple on JobStart Philippines to help increase youth in 2017. These projects are not only expected to employability and job search outcomes. The provide addi onal power supply but also provide program provides the youth access to technical jobs. The la er’s construc on is es mated to and life skills training, work place experiences, employ 2,000 workers53. and mentoring. To pursue the Philippine Energy Plan 2012-2030, The government will con nue to provide the DoE was allocated P102.5 million next year to scholarships and fi nancial assistance to poor promote energy development and conserva on. students, amoun ng to P7.7 billion that will benefi t Part of the amount will be used to promote 284,637 of them51 who want to pursue ter ary explora on, development and produc on of educa on. Part of the amount will be used for the indigenous energy resources as well as promote Student Financial Assistance Programs, such as the electric power industry. the Tulong Dunong Program, the Iskolar ng Bayan, and the Study Now, Pay Later Plan Program of the In addi on, to support the rural electrifi ca on Commission on Higher Educa on. program, the Na onal Electrifi ca on Administra on was allocated P2.8 billion in 2016 Improve power security and facili es. for the Si o Electrifi ca on Program to provide Uninterrup ble power supply and aff ordable electricity to the remaining 3,150 si os, and electricity cost are cri cal concerns among thus meet the 32,441 target si os under the businesses, par cularly those in the manufacturing Social Contract. From 2011 to 2015, the Aquino and tourism sectors. administra on has earmarked P25.0 billion for rural electrifi ca on, almost thrice the total investments In 2012, the Department of Energy (DoE) launched provided by the past three administra ons. a roadmap for the energy sector, dubbed the Moreover, the DoE will be funded P169 million for Philippine Energy Plan 2012-2030, to lay down its Household Electrifi ca on Program in Off -Grid future demands and capacity addi on plans and Areas that will energize 5,400 households. The ensure energy security. Among the policy thrusts program taps renewable energy technology, such iden fi ed in the plan include the expansion of as photovoltaic solar home systems. energy access; the promo on of low-carbon

50 TESDA. (n.d.) TESDA Special Training for Employment Program. Retrieved from h p://tesdatrainingcourses.com/tesda-special-training-employment-program-step.html 51 These fi gures make up the sum of benefi ciaries for the following scholarship and fi nancial assistance programs for College: Student Financial Assistance Programs, Expanded Students’ Grants-in Aid Program for Poverty Allevia on, Tulong Dunong, and DOST Scholarship Program. 52 Tan, K. (2014, May 15). PNoy Turns on First Large-Scale Bronzeoak Solar Power Plant Financed by Thomas Lloyd. Retreived from h p://bit. ly/1WG2gtx 53 Offi cial Gaze e. (2014, September 11). Speech of President Aquino at the Launch of Pagbilao III Power Plant Project. Retrieved from h p:// www.gov.ph/2014/09/11/speech-of-president-aquino-at-the-launch-of-pagbilao-iii-power-plant-project/

92 Technical Notes on the 2016 Proposed Na onal Budget

Table 19. Rural Electriﬁ ca on Program

Par cular 2015 2016 Si o Electriﬁ ca on Program (NEA) Budget P1.5 B P2.8 B Target: No. of si os energized 2,308 3,150

Household Electriﬁ ca on Program in Oﬀ -Grid Areas (DoE) Budget P153 M P169 M Target: No. of households 5,400 5,400 energized

Globally compe ve manufacturing. The government is currently building the capacity of industries to maintain, if not strengthen, their compe veness. In the medium term, the goal is to shi to high value added ac vi es and invest in upstream industries as well as link and integrate industries to further their strength.54

Con nuous improvements in the manufacturing sector’s produc vity is vital to the country’s goal of inclusive growth. The government will con nue to strengthen this sector, par cularly the food manufacturing and other agro-industrial endeavors that employ more unskilled workers in the countryside, in order to boost the produc on and the export of products and raise the income of agricultural workers.

54 DTI

93 Technical Notes on the 2016 Proposed Na onal Budget

D. Climate Change Adapta on and Disaster Risk Reduc on and Management

When the country’s social and economic Build Back Be er. Six of the 30 provinces iden fi ed infrastructure are capable of mi ga ng the in the Budget Priori es Framework among the worsening eff ects of natural and man-made poorest and most predisposed to calami es are calami es, industries recover rapidly and vulnerable in Regions 6 and 8, where Super Typhoon Yolanda families get back on their feet immediately. had cut a swath of death and destruc on in 2013. To help these aff ected areas and other disaster- Intense rainfalls, rising seas, and longer dry spells hit provinces regain their ground, the Na onal are but a few signs of the new normal weather Economic Development Authority designed the condi ons in the Philippines. Even as the country Reconstruc on Assistance on Yolanda (RAY), a ranked fi h overall in the 2015 Global Climate Risk strategic recovery framework that es mated the 1 Index , a closer look at the data would reveal that fi nancial, logis cal, and other developmental needs it placed fi rst among the countries most aff ected to fast-track the recovery of Yolanda-aff ected areas. by extreme weather condi ons. The country did not only experience the most number of typhoons As of June 30, 2015, the government has released and other calami es in a span of 19 years, but also P88.96 billion to rehabilitate regions most aff ected braced the most destruc ve storm in recent global by Yolanda (see table). It is noteworthy that while history: Super Typhoon Yolanda, which le at least most releases made in 2013 had been sourced 6,293 dead, 4.1 million persons displaced, and from savings, releases between 2014 and 2015 2 P39.82 billion lost in agriculture and infrastructure. have been mostly made against the regular agency budgets and the special purpose funds for disasters The Aquino administra on recognizes the link in the GAA, as well as from the supplemental between inclusive growth and disaster mi ga on; appropria ons approved by Congress. therefore, it strives to strengthen the adap ve capacity of ins tu ons and communi es to prevent Consistent with the priority areas under the people from sliding back to poverty. The Na onal NCCAP, fund releases for recovery eff orts a er Climate Change Ac on Plan (NCCAP; see sidebar) is Yolanda have so far facilitated the provision of the government’s framework for an inclusive and food security support, social protec on packages, cross-sec onal approach on mi ga ng the impact housing support, sustainable micro-enterprise, of natural and man-made disasters. and the preserva on of ecosystems, among other forms of recovery assistance to the aff ected areas (see Sidebar on page 95).

Table 1. Top 5 Countries most aﬀ ected by climate change, 1994 to 2013 CRI Country CRI Death Toll Death per 100,00 Total losses Losses per Number of Events 1994-2013 Score inhabitants in million unit GDP (total 1994-2013) (1993-2012) US$ PPP in %

1 (1) Honduras 10.33 309.70 4.60 813.56 3.30 69 2 (2) Myanmar 14.00 7,137.40 14.80 1,256.20 0.87 41 3 (3) Hai 16.17 307.80 3.41 261.41 1.86 61 4 (4) Nicaragua 16.67 160.15 2.98 301.75 1.71 49 5 (7) Philippines 19.50 933.85 1.13 2,786.28 0.74 328 Source: 2015 Global Climate Risk Index

1 GermanWatch. (2015). Global Climate Risk Index. Retrieved from h ps://germanwatch.org/en/download/10333.pdf 2 Na onal Disaster Risk Reduc on and Management Council. (2014). Situa on Report No. 108 Eﬀ ects of Typhoon “Yolanda” (HAIYAN). Retrieved from h p://www.ndrrmc.gov.ph/a achments/ar cle/1329/Eﬀ ects_of_Typhoon_YOLANDA_(HAIYAN)_SitRep_No_108_03APR2014.pdf 94 Technical Notes on the 2016 Proposed Na onal Budget

Developing a Climate-Responsive Budget Proposed Budget. This amount is expected to further increase once the government Created by the Climate Change Commission completes the tagging of climate expenditures in 2011, the Na onal Climate Change Ac on based on the 2016 Enacted Budget. Plan (NCCAP) outlines the policy roadmap for climate change adapta on and mi ga on un l Figure 1. Climate Change Budget, 2022. Among the impera ves that the plan 2009 to 2016 iden fi ed was to develop a climate-responsive 140,000 128,585 129,300 Budget: one that does not only address the 5% 4.3%* 120,000 need to stabilize natural ecosystems, but also AAllocallocati oonn (in(in millionmillion pesos) pesos) 100,000 ensures the government’s mely response to 80,000 70,535 the needs of aff ected ci zens and enterprises. 3.1% 60,000 35,272 36,668 With technical and fi nancial support from 40,000 25,369 16,792 17,495 1.9% 1.8% the private sector and the interna onal 20,000 1.6% 1.1% 1.2% community, this Budget strives to meet the 0 global standard Climate Change Expenditures 2009 2010 2011 2012 2013 2014 2015 2016 3 *Figures for 2009 to 2015 are based on GAA level, while the equivalent to at least 2 percent of GDP . 2016 level is ini ally tagged under the Na onal Expenditure Toward this end, the government, with support Plan. The 2016 climate budget may increase upon the from the World Bank, has introduced the comple on of the tagging exercise, which will coincide with climate change expenditures tagging (CCET) the passage of GAA. scheme4, where projects of the agencies aimed at building disaster resiliency, including Figure 2. Climate Change Expenditures targets and proposed budgets, are classifi ed in 2015 under the eight strategic priority areas of the (in thousand pesos) NCCAP, and are accounted for, monitored, and reported clearly. A er introducing the CCET in the 2015 budge ng process, the government further refi ned the guidelines to be used in 2016 by harmonizing its implementa on with the Unifi ed Accounts Code Structure, among others5.

The government has shown the poli cal will to address the worsening impact of climate change. A study by the World Bank in 2013 found that the share of climate expenditures in the Budget increased from 1.1 percent in Source: World Bank 20096 to 1.8 percent in 2013 or P36.69 billion7. With the implementa on of CCET, climate expenditures in the 2015 Budget amounted to 5 As can be gleaned from the 2016 Proposed percent of total or P128.8 billion (see diagrams). Budget, the agencies have ensured that part of Ini ally iden ﬁ ed climate expenditures already their expenditures correspond to the priori es amounts to P129.3 billion under the 2016 set by the NCCAP (see table 2 on page 96).

3 Climate Change Commission (n.d.).”Climate of Change”. Retrieved from h p://climate.gov.ph/images/presenta ons/greenera on/ Greenera on_Summit_Sec_presenta on.pdf 4 World Bank. (2014). Philippines: Promo ng Transparency in Mobilizing Funds for Climate Ac on. Retrieved from h p://www.worldbank.org/ en/news/press-release/2014/10/24/philippines-promo ng-transparency-in-mobilizing-funds-for-climate-ac on 5 Department of Budget and Management. (2015). Joint DBM-CCC Memorandum Circular 2015-01: Revised Guidelines for Climate Change Expenditure Tagging (CCET) Amending JMC No. 2013-01. Retrieved from h p://bit.ly/1HXlcsR 6 World Bank. (2013). Ge ng a Grip on Climate Change in the Philippines: Extended Technical Report. 7 The ﬁ gures were computed through CPEIR methodology using the classiﬁ ca ons under the NCCAP. 95 Technical Notes on the 2016 Proposed Na onal Budget

Table 2. Examples of 2016 Programs Falling Under the Priority Areas of NCCAP Areas Budget

Food security Repair and Rehabilita on of irriga on and farm-to-market roads, and technical assistance to corn, rice, and high value crops programs (DA) P2.6 billion Coping with Climate Change Program (PhilRice) P3.04 million Insurance for rice and other major crops (Philippine Crop Insurance Corpora on) P1.6 billion Water Suﬃ ciency Policy formula on on and regula on of water resources (Na onal Water Resource Board) P59.5 million Delinea on of 17 and opera onaliza on of 19 Water Quality Management Areas (DENR-EMB) P44 million Ecosystem and Environmental Stability Toxic Substances and Solid Waste Management (DENR-EMB) P147.6 million Resource Management in coastal and inland ﬁ sheries (BFAR) P382.7 million Human Security Disaster Risk Reduc on and Management (DRRM) and Rescue Equipment (DILG ini a ve under BuB) P622.49 million Weather, Climate, and Flood Forecas ng (PAGASA) P992.4 million Volcano, earthquake and tsunami warning and monitoring (PHIVOLCS) P258.51 million Housing for informal se ler families living in danger areas (NHA, SHFC) NHA: P4.3 billion; SHFC: 909 million Geohazard Mapping and Assessment (DENR-NAMRIA, DENR-Mines and Geosciences Bureau) P347.34 million Climate-smart industries Farming using alterna ve energy (PhilRICE, Na onal Tobacco Administra on) PHILRICE: P4.4 million; NTA: P90 million Green Growth (DTI ini a ve under BuB): encourages entrepreneurs to integrate prac ces in sustainable development into their businesses P6.6 million Sustainable Energy Renewable Energy Management (DOE) P23.89 million Promo on of alterna ve and renewable energy sources (DOE) P52.36 million Knowledge and Capacity Development Crea on of a Meteorological Studies curriculum in State Colleges and Universi es (CHED): to be piloted in four schools in 2016 P29.4 million Research on climate-resilient post-harvest farming mechanisms (Philippine Center for Postharvest Development and Mechaniza on) P106.2 million Monitoring and Detec on of Ecosystems Changes for Enhancing Resilience and Adapta on in the Philippines (DOST): includes the produc on of instruc onal materials to guide policymaking on disaster risk reduc on P150 million

Table 3. Releases and Fund Sources for Yolanda-Related Projects8

Fund Source (in thousand Pesos) 2013 GAA 2014 GAA 2015 GAA Total****

Na onal Risk Reduc on and Management Fund (formerly Calamity Fund)* 1,068,510 12,898,249 201,362 14,168,121 Rehabilita on and Reconstruc on Program (RRP)* 6,326,528 3,181,232 9,508,373 Regular Budget (including savings & realignments within agencies) 4,385,176 2,880,605 751,933 8,017,714 Quick Response Fund 161,604 161,604 Savings 19,576,940 4,265,880 23,842,820 Automa c Appropria ons *** 2,155,595 100,154 2,255,749 Unprogrammed Fund 1,705,720 1,788,392 11,180,520 14,674,632 Supplemental Appropria ons (under RA 10634 and 10652)** 6,247,571 10,084,458 16,332,029 TOTAL 26,736,346 36,724,424 25,500,272 88,961,042

*includes Con nuing Appropria ons from the prior ﬁ scal year’s appropria ons **RA 10634 was enacted on Dec. 26, 2013 and RA 10652, on Dec. 23, 2014 ***Automa c Appropria ons, lodged under the Special Accounts in the General Fund, came from foreign grants (Japan, Germany, and the Asian Development Bank), the Higher Educa on Development Fund, and local aid (JCB Corpora on) **** Numbers may not add up due to rounding.

8 Some releases, par cularly the RRP alloca ons, and the 2014 calamity fund and supplemental alloca ons, include provision for calami es other than Yolanda. 96 Technical Notes on the 2016 Proposed Na onal Budget

Table 4. Highlights of Projects funded by Yolanda releases, 2013-2015

Agency Examples of Project Amount

DA Bancas and fi shing materials; irriga on and aquaculture assistance 2.77 B DepEd Classroom repair, library hubs 5.72 B DENR Na onal Greening Program 576.6 M DOF/BTr Credit Support Fund (loans and assistance to vic ms) 2.00 B DOH Construc on of Eastern Visayas Regional Medical Center; preven on of communicable diseases 1.95 B DILG Rehabilita on of municipal halls, police sta ons, public markets, fi re sta ons 4.48 B DOLE Emergency Employment Program, Livelihood Assistance 1.01 B DSWD Food distribu on, livelihood assistance and Cash-for-Work program 30.71B DPWH Repair and maintenance of roads and fl ood control structures 4.63B DOTC Repair and rehabilita on of Tacloban Airport and seaports 2.31 B NHA Housing of Yolanda vic ms 22.74 B PCA Coconut tree disposal and u liza on 2.87 B

Source: DBM, Releases for Typhoon Yolanda as of June 30, 2015

To sustain and boost the government’s ini a ves under the Build Back Be er scheme, the proposed Figure 3. Calamity/NDRRM Funds, 2010-2016 2016 Budget supports not only the ongoing P38.9B transforma on of communi es that had been 40,000,000,000 devastated by calami es but also the se ng up 35,000,000,000 30,000,000,000 of disaster-proof and climate-smart mechanisms: 25,000,000,000 20,000,000,000 Na onal Disaster Risk Reduc on and P14B 15,000,000,000 P13B Management Fund (NDRRMF). Formerly known 10,000,000,000 P7.5B P7.5B 9 P5B as the Calamity Fund , the NDRRMF is available to 5,000,000,000 P2B the agencies and the LGUs for personnel training, 0 procurement of emergency equipment, and other 2010 2011 2012 2013 2014 2015 2016 GAA GAA GAA GAA GAA GAA NEP ac vi es related to mi ga ng and preparing for disasters. It also supports the relief, recovery, and reconstruc on of communi es destroyed by calami es during the year the budget is being People’s Survival Fund (PSF). The alloca on for implemented as well as those that occurred two the NDRRMF includes P1 billion for the PSF, a years before the current budget year. special resiliency-building fund for the LGUs and community organiza ons. As mandated From inheri ng a P2-billion Calamity Fund under by Republic Act 10174, this fund, which should the 2010 Budget, the Aquino administra on has be at least P1 billion annually, off ers long-term progressively increased the NDRRMF in the last fi nance streams to carry out projects that are fi ve years (see diagram). The proposed total hinged on the Na onal Framework Strategy in alloca on in 2016 stands at P38.9 billion. Climate Change (2010-2022)10, the precursor to the NCCAP. First included in the 2015 Budget, the Apart from provisions for rehabilita on, relief, fund can be accessed by the LGUs that submi ed and other calamity-related services, the NDRRMF their respec ve Local Climate Change Ac on Plans will also include budgetary alloca ons for the and met the following requirements as set by the People’s Survival Fund in 2016; and the Yolanda PSF Board11: Comprehensive Rehabilita on and Recovery Plan (Yolanda CRRP), which used to be funded from diff erent sources (see succeeding por ons).

9 Renamed through R.A. 10121 (Philippine Disaster Risk Reduc on Act of 2010) 10 Climate Change Commission. (n.d.) Na onal Framework Strategy on Climate Change 2010-2022. Retrieved from h p://bit.ly/1DWCKKu 11 Climate Change Commission. (2015). PSF board approves selec on criteria of LGUs to tap PhP 1B survival Fund. Retrieved from h p://bit. ly/1BVCLdI

97 Technical Notes on the 2016 Proposed Na onal Budget

1. Proximity to one of the 18 major river basins, Quick Response Funds. In addi on to the NDRRMF, which cover more than 40 provinces in all 16 the Aquino administra on since the 2012 Budget regions12; has allocated Quick Response Funds under the 2. High poverty incidence; budgets of specifi c agencies as standby funding 3. Exposure to climate/disaster risks; for relief, rehabilita on, and reconstruc on 4. Proximity to key biodiversity areas; and eff orts to quickly normalize communi es stricken 5. Conferment of Seal of Good Governance by the by epidemics, poli cal uprising, and other crises DILG. that may arise from disasters13. The government proposed a total of P5.67 billion in Quick Response Yolanda Comprehensive Rehabilita on and Funds in 2016 (see Table 7 on page 99). Reconstruc on Program (RRP). In addi on to the NDRRMF, the government fi rst introduced the RRP Flood Control Infrastructure. Part of government in the 2014 Budget to fi nance medium- and long- spending for post-disaster reconstruc on involves term rebuilding eff orts in areas aff ected by the inves ng in fl ood control structures and facili es Zamboanga siege, the 7.2-magnitude earthquake to reduce the extent of casual es and damage to in Bohol, and typhoons such as Pablo and Sendong. property due to inunda on. In 2014 and 2015, a total of P21 billion have been authorized by Congress for the RRP. The DPWH proposed a budget of P60.644 billion to fund 1,090 fl ood control and maintenance Under the 2016 NDRRM Fund, the government works in cri cal areas across the country. In 2016, proposes a budget of P18.9 billion for the Yolanda the agency aims to build fl ood control projects CRRP, a full-scale master plan for building back covering 20 percent of communi es14 lying along be er the infrastructure, livelihood support, the 18 major river basins, as well as other loca ons rese lement, and social services . vulnerable to inunda on.

Table 5. 2016 Yolanda CRRP Budget By Agency The major river basins include Marikina River, Cagayan de Oro River, Iligan River, Agno River, Agency Budget (in Million Pesos) Pampanga River, Bicol River, Cagayan River, Agusan DA 5,584 River, Panay River, Magaswang Tubig River, Jalaur DENR 420 River, Ilog-Hilabangan River, Agus River, Davao DOF 48 River, Mindanao River, Tagum-Libuganon River, DOH 439 Tagaloan River, and Buayan-Malungun River. DOLE 1,148 DOT 1,148 DTI 803 In addi on, the Metropolitan Manila Development DOTC 1,000 Authority proposes to spend about P282.4 million CHED 541 to reduce fl ooded areas through the dredging of HLURB 29 open waterways, and desil ng and declogging of NCIP 62 PCA 7,676 drainage laterals. Another P221.4 million will fund Total 18,896 the building of 66 fl ood control structures and Note: Numbers may not add up due to rounding facili es. Table 6. Flood control and drainage projects In addi on, the government allocated P25.6 constructed and maintained billion under the budget of the NHA in 2016, as well as P992 million under the Local Water Agency 2011 2012 2013 2014 2015 2016 U li es Administra on and P660 million under Target Target the Na onal Electrifi ca on Administra on, to DPWH 623 1,876 469 458 1,176 1,090 construct and rehabilitate housing units, and MMDA 52 49 72 84 82 66 install water and power lines, for the vic ms of Super Typhoon Yolanda. Source: DPWH, MMDA, OP

12 Department of the Interior and Local Government. (n.d.). List of LGUs covered by 18 Major River Basins with Geo-Hazard Maps. Retrieved from h p://bit.ly/1MrckC2 13As mandated by R.A. 10121. 14 Department of Public Works and Highways. (2014). Accomplishment Report. 98 Technical Notes on the 2016 Proposed Na onal Budget

Table 7. Alloca ons for Quick Response Funds, 2011 to 2016 (in thousand Pesos)15

Agency 2011 2012 2013 2014 2015 2016 Proposed

DND-OSEC 325,500 352,500 352,500 352,500 352,500 - DND-OCD 530,000 530,000 530,000 530,000 530,000 530,000 DSWD 662,500 662,500 662,500 662,500 1,325,000 1,325,000 DepEd - 550,000 550,000 654,766 1,000,000 1,000,000 DA (including NIA) - - 1,000,000 500,000 1,000,000 1,000,000 DOH - - - 500,000 500,000 510,000 DOTC - - - 1,000,000 1,000,000 - DPWH - 550,000 600,000 650,000 1,000,000 1,300,000 TOTAL 1,518,000 2,645,000 3,695,000 4,849,766 6,707,500 5,665,000

Moreover, P1.6 billion of the alloca ons for surpassed its 2013 targets: installed 21 percent Bo om-up Budge ng was earmarked for fl ood more Automated Rain Gauges and 10 percent more control projects. Water Level Monitoring Systems. The PAGASA proposes a P34.47-million budget in 2016 for the Mapping and Monitoring Environmental Hazards. repair and upkeep of 1,295 forecas ng systems17 The government’s proac ve stance in addressing installed along major river basins. Another P13.2 disasters is best underscored by the investments million will be used to install, repair, and maintain in state-of-the-art mapping and early warning the Telemeter Flood Forecas ng and Warning systems. Systems. Likewise, the PAGASA proposes to spend P57.6 million to fi x other forecas ng and warning Project NOAH. With a budget of P200 million in systems that were destroyed by typhoons and 2015, the Philippines’ Earth Observa on Micro- fl oods. Satellite, codenamed DIWATA, the fi rst local micro- satellite, will be launched into space in 2016. Designed to provide up to 3,600 images daily, the Table 8. Forecas ng Capabili es Under satellite can provide a range of informa on helpful Project NOAH in weather forecas ng, survey of agricultural land and fi sheries, territorial defense, and even Equipment Target Actual preserva on of heritage sites. Automated Rain Gauges 600 726 In 2011, the groundbreaking Na onwide Water Level Monitoring Systems 400 441 Automa c Weather System 78 86 Opera onal Assessment of Hazards or Project Sources: DOST-PAGASA, OP NOAH was launched: communi es straddling the country’s major river basins for the fi rst me received alerts when typhoons and torren al Geohazard Mapping. To assist communi es most monsoon rains would strike16. Forecasts of suscep ble to earthquakes, landslides, and similar accurate weather and fl ood were made possible geohazards, the Mines and Geosciences Bureau by an integrated warning system comprised of (MGB) will con nue its geological assessment automated rain gauges and water level monitoring and mapping. Supported by a total budget of sta ons. These tools today collect up-to-the- P1.02 billion in 2016, the MGB will con nue to minute data from the fl ood-prone areas. produce and update maps to help offi cials and communi es, especially those in disaster-prone Part of the P1.24-billion budget being proposed zones, to draw up their con ngency plans. by the PAGASA will sustain the NOAH and boost its forecas ng capabili es. In 2014, the NOAH

15 QRFs for 2011 used to be lodged under the Calamity Fund (i.e. as part of the P2 billion). Beginning 2012, these have been tucked under the budgets of key agencies. 16 Na onwide Opera onal Assessment of Hazards (NOAH). (n.d.). Retrieved from h p://blog.noah.dost.gov.ph/about/ 17 Of the 1,295 forecas ng systems, 1,235 were built as of 2014 and another 60 built in 2015. 99 Technical Notes on the 2016 Proposed Na onal Budget

Since 2012, Web users have been able to access Launched in 2011, the NGP seeks to reverse this 700 quadrant maps covering the whole country trend by enhancing the country’s forest stock to through the Geological Database Informa on 1.5 billion trees in 1.5 million hectares of land in System website18. Large-scale and coastal 2016. Through the help of the LGUs, the DENR has geohazard maps likewise off er a color-coded reforested 1,005,013 hectares across the country, mapping of high-risk spots in a given area. 12 percent higher than the target 900,000 hectares from 2011 to 201419. About 603 million seedlings with an 87-percent survival rate have Table 9. Status of large-scale and coastal been planted as of 2014. geohazard mapping, 2010-2014 Year Towns covered by Towns covered by Coastal Geohazard Large-scale The DENR proposes a P10.2-billion budget for Mapping Mapping (1:10,000) NGP to meet and even exceed its targets before 2016. To verify the agency’s accomplishments and 2010 92 51 progress, the DENR requires its regional offi ces to 2011 137 174 submit geo-tagged photos of the plan ng sites. 2012 156 230 2013 123 548 Geo-tagging, or the use of cameras or other 2014 122 218 devices equipped with global posi oning system, allows for real- me monitoring of the NGP areas, Source: DENR-MGB not only by the DENR offi cials but also by the ci zens by logging on to h p://ngp.denr.gov.ph/ Ecosystems Management. Mi ga on is a cost- index.php/example-pages/photo-albums/geo- eff ec ve measure to build the country’s resilience tagged-photos-actual-accomplishment. against major disasters. Besides applying state- of-the-art technology to forecast calami es Solid Waste and Water Quality Management. and thereby reducing the possible loss of lives In most urban areas, garbage-fi lled waterways and livelihood, the government also invests in contribute to fl ooding especially during the rainy processes that restore the environment to its season and pose serious health risks to nearby characteris c state of preven ng the ill eff ects of residents. Likewise, improper solid waste disposal unhealthy air, extreme heat, fl ooding, and similar deteriorates ecosystems over me and poses risks dangers. to human health.

Na onal Greening Program (NGP). A plenteous The DENR-Environmental Management Bureau cover of trees buff ers the impact of air pollutants. was allocated P91.9 million to con nue its While the Philippines’ forest cover could have na onwide eff orts for eff ec ve ecological solid shielded the country from the recent calami es, the waste management, including technical assistance last century saw the alarming decline of forested to the LGUs in closing down their disposal facili es areas, from 90 percent of the total land area in and establishing Material Recovery Facili es to 1900 to merely 20 percent in 2010, according to encourage the recycling of non-biodegradable the 2010 Global Forest Resources Assessment by waste. To facilitate safe waste disposal in Metro UN Food and Agriculture Organiza on. Manila and the surrounding provinces, the MMDA

Table 10. Status of the Na onal Greening Program

2011 2012 2013 2014 2015

Budget (in thousand Pesos) 1,311,143 2,280,000 5,800,000 7,704,280 7,000,000 Hectares greened 128,558 221,763 333,160 334,302 16,258 Seedlings planted 89,624,121 125,596,730 182,548,662 205,414,639 11,737,096

*As of First Quarter 2015 Source: DENR-NGP

18 DENR-Mines and Geosciences Bureau. Geological Database Informa on System. Retrieved from h p://gdis.denr.gov.ph/mgbviewer/ 19 Department of Environment and Natural Resources. (2015). DENR Statement on the 2013 COA Report on the NGP and Cadastral Survey Project. Retrieved from h p://bit.ly/1eta94e/ 100 Technical Notes on the 2016 Proposed Na onal Budget proposes a fund of P993.5 million to maintain its disposal facili es in Quezon City, Navotas, and San Mateo in Rizal.

The EMB’s P197.47-million proposed budget for clean water regula on will support its ongoing water quality management program with the LGUs. This program will allow the cleanup of debris as well as unclog rivers, inlet canals, and other waterways.

A Climate-Resilient Philippines. Climate change has come at the expense of the safety and security of the people, par cularly the poor and marginalized who have the least access to resources that can help them to quickly recover from disasters. It has also weakened the capacity of the government to deliver services when and where most needed. The Philippines, noted by the World Bank20 in its 2013 review of the country’s ac on plan on climate change, is in “great need for increased ins tu onal capacity on climate change.” The review also emphasized that the country’s ac on plan for climate change should secure the solid commitment of the LGUs, par cularly the disaster-prone ones21, if only to make the government’s disaster response more eﬃ cient and eﬀ ec ve.

Good governance is fundamental to building a climate-ready government: one that ensures that every family has food on the table, people get safe and clean water from the tap or the nearest well, and even the smallest farmers and entrepreneurs can regain their ground quickly right a er disasters strike. Build Back Be er, therefore, is not merely about increasing investments in rehabilita on and reconstruc on: It is also about pursuing policies and strategies that enable communi es to live be er lives immediately a er being devastated by calami es.

20 World Bank. (2013). Ge ng a Grip on Climate Change in the Philippines. Retrieved from h p://bit.ly/1MxbN00. 21 See Map of Focus Geographical Areas.

101 Technical Notes on the 2016 Proposed Na onal Budget

E. Just and Las ng Peace and the Rule of Law

Where there is peace and the rule of law, there Congress is expected to pass the BBL before is progress and prosperity. To recover from the the 2016 elec ons. Once passed, the law will previous decade that was marred by social conﬂ ict, provide the blueprint for peace and progress in instability, and injus ce that hampered the Mindanao. In prepara on for its passage, the country’s progress, the Aquino administra on took government has been pursuing the establishment signiﬁ cant steps in forging just and las ng peace, of good governance in the Autonomous Region successfully concluding peace nego a ons with in Muslim Mindanao (ARMM). Demonstra ng its key rebel groups, most notably the Moro Islamic commitment to ensure the delivery of essen al Libera on Front (MILF). The government has social and economic services in the future likewise modernized the police and the military so Bangsamoro region, the Aquino administra on has that they become more capable of addressing new hiked the budget of ARMM from P10.4 billion in threats to public order and na onal security. 2010 to P25.23 billion in 2015 (see diagram).

As the government con nues to invest in Figure 1: ARMM Budget, 2010 to 2016 strengthening law enforcement, territorial defense, and the delivery of jus ce, it pays equal 35 a en on to the use of proac ve, diploma c, and inclusive means to address social conﬂ ict, 30 29.41 crime, global terrorism, and other roadblocks to 25 25.23 achieving just and las ng peace. As in the previous years, the Proposed Budget for 2016 underscores 20 20.52 the Aquino government’s commitment to foster a 15 climate of just and las ng peace and translate this 14.05 commitment into ac on. 11.85 12.46 10 10.4

Las ng Peace in the Bangsamoro. A er 17 years of 5 nego a ons, the government and the MILF peace 0 panels signed the Comprehensive Agreement on 2010 2011 2012 2013 2014 2015 2016 the Bangsamoro on March 27, 2014. Together with AMOUNT (in billion pesos) NEP the expected passage of Bangsamoro Basic Law (BBL) awaits a greater prosperity through las ng In 2016, a further 17-percent increase in the budget peace in a region, which has been among the for ARMM is being proposed, or an equivalent of poorest and least developed in the country. P29.4 billion. This budget will fund investments in

Table 1. Major milestones in the Bangsamoro Peace Process, 2010-2015

Date Event

1996 Peace talks between government and the Moro Islamic Libera on Front begin Feb-99 Both par es sign the joint GRP-MILF Acknowledgement and Agreement to Reaffi rm the Pursuit of Peace 6-May-02 GPH and MILF form an Ad Hoc Joint Ac on Group to fi ght crimes in MILF areas 27-Jul-08 The Memorandum of Agreement on Ancestral Domain is ini aled; in October, however, the Supreme Court declares it uncons tu onal 24-Apr-12 GPH and MILF sign a document containing the common standpoints between both par es Dec. 17, 2012 Pres. Aquino signs EO 120, crea ng the Bangsamoro Transi onal Council Feb. 25-27, 2013 Both par es sign the Annex on Transi onal Agreements and Modali es, detailing the blueprint for the crea on of the Bangsamoro Mar. 27, 2014 GPH and MILF sign the Comprehensive Agreement on the Bangsamoro Sept. 10, 2014 Pres. Aquino turns over the fi nal dra of Bangsamoro Basic Law to Congress

Source: Offi ce of the Presiden al Adviser on the Peace Process (OPAPP) 102 Technical Notes on the 2016 Proposed Na onal Budget educa on, health, social protec on, and public Even with the closure of the Sajahatra Bangsamoro, infrastructure across the autonomous region (see the na onal government will con nue to deliver table 2). social and economic services in the ARMM and the future Bangsamoro region to achieve greater Table 2. Highlights of the Proposed ARMM prosperity. Thus, the 2016 Budget will invest a Budget for 2016 total of P25.14 billion under the budgets of key Program/Project Amount na onal government agencies. Of this amount, (in thousand Pesos) P10 billion lodged under the Department of Public Works and Highways will facilitate the building of Health and Hospital Services P1,200,176 roads and other infrastructure. Educa on, Skills Training, Research and Development P8,976,919 Livelihood Assistance, Capacity Building and Social Welfare and Table 4. Other Na onal Government Protec on Services P849,100 Investments in ARMM Roads, bridges and government Amount infrastructure P10,735,384 Agency Project/s (in million Trade, Industry and Investment Pesos) Development P127,947 Environmental Protec on and DepEd Basic Educa onal Facili es P2,991 Human Rese lement P281,686 DOH Drugs and medicines P80.52 PAMANA Alloca on P3,543,291 TESDA Training for Work Scholarships P49.62 DA AgriPinoy program, farm-to- Moreover, the government and the MILF jointly market roads P620.64 implemented the Sajahatra Bangsamoro Program BFAR Fisheries livelihood program P100.12 in February 2012 with the end-in-view of upli ing DAR Land distribu on P222.11 lives of the people in the former MILF base DSWD Condi onal Cash Transfers and other social protec on programs P6,887 areas. Since then un l 2015, the government DPWH Na onal roads P10,000 has invested a total of P126.68 billion to deliver DILG Salintubig program P220.42 healthcare packages, scholarships, livelihood, and NIA Irriga on P186.63 other programs. In an cipa on of the passage of NEA Electrifi ca on of 139 si os P125.1 BBL, the Offi ce of the Presiden al Adviser on the NHA Rese lement program P70.0 PhilHealth Na onal Household Targe ng System P3,200 Peace Process (OPAPP) will close the program in OPAPP Normaliza on Program P383 2016 to give way to the socioeconomic services under the Bangsamoro autonomous region. The OPAPP proposed a budget of P383 million to Table 3. Accomplishments under the Sajaha- convert former confl ict zones into communi es tra Bangsamoro Program for displaced families and transi oning troops. Health & Social Protec on Part of the budget for the so-called Normaliza on 11,000 new benefi ciaries enrolled in Philhealth process will allow for the decommissioning and 16,194 children enrolled in Madrasahs enrolled under transi on of at least 70 percent of the Bangsamoro Supplemental Feeding Program (DSWD) Educa on: Islamic Armed Forces (BIAF), and the delivery of Standard Madrasah Curriculum implemented for social and economic support to the transi oning Bangsamoro children (DepEd) fi ghters as they return to civilian life. 639 Bangsamoro students of state colleges and universi es received scholarship grants of P10,000 per year for four Inves ng in Peace and Development. While the years, plus allowance (CHED) 1,030 students availed of technical and voca onal courses nego a ons with the MILF have achieved major (TESDA) milestones in the last three years, the struggle Livelihood: to achieve just and las ng peace con nues to Close to 11,000 individuals provided with jobs through the unfold. The OPAPP handles four other peace cash-for-work program (DSWD) and development tracks, aiming for judicious 10 Communi es provided with crop and vegetable seedlings, farming implements, and agricultural support (DA) se lement with the groups that wage armed struggle. Source: OPAPP 2014 Accomplishment Report

103 Technical Notes on the 2016 Proposed Na onal Budget

Table 5: Status of Other Peace Tables and Prospects for 2016

Group Status (as of mid 2015) 2016 Targets

Communist Party of the Talks were put on hold in view of the precondi ons set by While peace talks might resume Philippines-New People’s the NDF. While there are ongoing eﬀ orts to move the peace before 2016, the Government also Army nego a ons forward, PAMANA ini a ves are gaining ground engages the CPP-NPA-NDF to come in communi es, allowing locals to pursue an alterna ve track up with a broad-based consensus toward peace building. against the use of armed struggle.

Moro Na onal Libera on Sa sfactory comple on of the Front In 2011, the Government and MNLF agreed to develop GPH-MNLF Final Peace Agreement a “workable partnership” to pursue social reforms in the ARMM. This led both par es to form an oversight commi ee to implement PAMANA ini a ves in MNLF communi es. Of late, 225 children or rela ves of MNLF members received social protec on and educa on packages. To date, GPH s ll engages the MNLF to gain their support for BBL. Cordillera Bodong Sustain mechanisms for transforma- Administra on-Cordillera Par es have yet to reach consensus on closure agreement; on a er Closure Agreement has People’s Libera on Army Meanwhile, the following provisions under the GPH-CBA-CP- been reached. LA Memorandum of Agreement were fulﬁ lled as of 2014: 1. Disposi on of 342 ﬁ rearms 2. Integra on of 168 former CPLA members into the AFP; 555, into DENR as forest guards; and 868, as leaders of livelihood ini a ves 3. Comple on of community development projects worth Php220.4 million Rebolusyonaryong Sustain the mechanism for trans- Par dong Manggagawa Par es will soon arrive at a closure agreement. Meanwhile, forma on a er having the Closure ng Pilipinas-Revolu onary Tabara Paduano Group transforms into a socioeconomic MOA with Tabara Paduano Group Proletarian Army-Alex group (Kapa ran para sa Progresong Panlipunan). signed and fully implemented. Bongcayao Brigade Source: OPAPP

However, peace is not merely the absence of A crucial challenge to the program’s aggression, but also the existence of equal and implementa on is the limited absorp ve capacity inclusive opportuni es for every individual. of the regional line agencies and the LGUs to carry Parallel to the ongoing peace nego a ons with key out the development programs in the PAMANA rebel groups, the government seeks to tackle the areas. Thus, part of the P767.9-million proposed root cause of confl ict in these areas—poverty. The agency budget of the OPAPP in 2016 will help the government, therefore, implemented the Payapa agencies and the LGUs in planning and execu ng at Masaganang Pamayanan (PAMANA) Program projects be er. in 2012. In 2016, P12.8 billion is being proposed to fund community infrastructure, farm-to-market Defending Na onal Sovereignty. Outside the roads, reforesta on, electrifi ca on, and support country, par cularly along the West Philippine Sea, for indigenous people and other development tensions have been brewing in the last few years eff orts in the following closure areas: because of the increasingly aggressive foreign incursions in the country’s territory. However, the Communist Party of the Philippines-New government is aware that such disputes cannot People’s Army be addressed with blind force that could cause Moro Na onal Libera on Front unrest at the expense of peace and prosperity Cordillera Bodong Administra on-Cordillera between the Philippines and nearby countries. People’s Libera on Army Rebolusyonaryong Par dong Manggagawa ng The government con nues to use peaceful and Pilipinas-Revolu onary Proletarian Army-Alex lawful means to se le territorial disputes. On May Bongcayao Brigade 23, 2014, the country proved that the diploma c 104 Technical Notes on the 2016 Proposed Na onal Budget

Table 6. PAMANA Alloca ons, 2014-2016 (in thousand Pesos)

Project Agency 2014 2015 2016 Proposed

Community-driven Infrastructure and Support to LGUs DILG 1,547,000 3,143,000 1,793,000 Agricultural Development (e.g., FMRs) DA 1,735,000 1,744,000 568,800 Community Support DSWD 922,000 760,000 427,500 Community-driven Development ARMM 2,660,000 655,000 3,543,000 Road Construc on DPWH 519,000 6,339,000 Reforesta on DENR 200,000 84,180 Electrifi ca on and Line Enhancement NEA 57,000 100,000 Support to Indigenous Peoples NCIP 57,000 62,000 Health Insurance Premiums PHIC 15,000 48,000 53,570 Study Grants CHED 4,000 9,000 14,500 Solar Electrifi ca on DOE 19,000 3,000 Agrarian Reform DAR 196,000 Irriga on NIA 3,000 TOTAL 7,215,000 7,250,000 12,842,000 resolu on of confl icts is feasible by resolving Armed Forces of the Philippines (AFP) will con nue a 20-year dispute with Indonesia regarding to protect the integrity of the country’s territory the overlapping boundaries of their respec ve while normalizing confl ict-aff ected provinces and Exclusive Economic Zones (EEZs). delivering rapid disaster response. Table 7. AFP Budget, 2014-2016 In the same manner, the government has fi led a (in billion Pesos) Memorial with Permanent Court of Arbitra on in The Hague, Netherlands: to resolve territorial Unit 2014 2015 2016 NEP Actual Adjusted disputes with China, in line with the United Na ons Conven on on the Law of the Sea, to assert its Army 43.92 41.48 47.30 mari me rights through an open, friendly, and Navy 14.53 13.46 16.24 rules-based se lement1. The Aquino government Air Force 13.51 14.71 15.37 con nues to engage mul lateral fora, such as the AFP-GHQ 51.67 26.28 32.95 Associa on of Southeast Asian Na ons, where Note: Inclusive of RLIP it presented the proposed Triple Ac on Plan Part of the agency’s 2016 budget is the P25-billion that consists of immediate, intermediate, and allotment under the Revised AFP Moderniza on fi nal approaches to resolving territorial disputes, Program (AFPMP), which was extended to including the Code of Conduct in the South China another 15 years through Republic Act 10349 Sea. that was signed on Dec. 11, 2012. Under this act, the government must set aside P75 billion2 for Toward this end, the Department of Foreign Aff airs the program’s fi rst fi ve years of the extension. (DFA) and the Department of Na onal Defense Moreover, the act mandates that the funds (DND) con nue to work hand-in-hand in arriving will be sourced out from allotments under the at las ng solu ons to the ongoing territorial General Appropria ons Act; and proceeds from disputes through diplomacy and according to the the sale, lease, or joint development of military rule of law. Part of the DFA’s P5.2 billion proposed reserva ons, such as the Fort Bonifacio. budget for foreign policy planning and formula on will enable the agency to con nue in this track. Since 2014, the government has released P9.4 billion for the ongoing moderniza on of the AFP. Modernizing Territorial Defense. As the major As one of the highlights of his 2015 State of the armed confl icts are ended, the government can Na on Address, President Aquino announced the further shi toward territorial defense. With a acquisi on of brand new assets for the agency. proposed budget of P116.06 billion in 2016, the

1 Department of Foreign Aﬀ airs. (2014). Accomplishment Report. 2 Republic Act No. 7898. “Establishing the Revised AFP Moderniza on Program and for Other Purposes.” 105 Technical Notes on the 2016 Proposed Na onal Budget

The ini al batch of FA-50 lead-in fi ghter jets from Strengthening Public Safety and Law South Korea will arrive in December. Between now Enforcement. Confl ict and lawlessness undermine and 2017, the government expects the arrival of the pursuit of inclusive development. Mandated the 10 remaining units. Eight Bell combat u lity to fi ght crimes and maintain a safe and favorable helicopters assembled in Canada, also new and climate for doing business and improving human fi rst-rate, will not only cover more areas than development, the Philippine Na onal Police (PNP) before for combat and ground surveillance, but will receive P88.29 billion in 2016, P17.4 billion also facilitate quick response, such as airli ing more than its 2015 budget, in order to further relief goods, when calami es strike. improve its capability to quickly respond to and solve crimes. Table 8. AFP Moderniza on: Releases under the old and revised programs In 2014, the PNP’s effi ciency in solving crimes increased by 14 percent than the previous year. To Phase Releases keep its momentum, the police force is targe ng a (in bllion Pesos) 5-percent increase in crime solu on effi ciency by end-2015, and another 5 percent in 2016. Old Program-RA 7898 (1995-2010) 63.39 Revised Program-RA 10349 (2012-present)* 19.10 Part of the 2016 budget of the PNP will go to *The fi rst release under the revised moderniza on program was the procurement of informa on technology, made in 2014 patrol vehicles, and other tools and equipment First implemented in 1995 through RA 7898, the to improve law enforcement. Ensuring a 1:1 AFP Moderniza on Program provided the Armed police-to-pistol ra o is a major improvement Forces an opportunity to acquire state-of-the- achieved under the moderniza on eff ort. Another art systems and materiel and to confront threats ongoing endeavor is the Electronic Crime Incident within and outside of the country’s borders. Repor ng System, which has made repor ng President Aquino approved the much-needed crime incidents more streamlined and systema c. extension of AFPMP to respond to the shi ing The system facilitates the speedy and reliable dynamics of human and territorial security. transmission of crime informa on from the precinct to the provincial or regional offi ce, and In 2014, 45 out of 75 provinces were declared free up to the Na onal Headquarters, enabling faster of insurgency, based on the 2014 SONA Technical response and inves ga on. Report. Part of the DILG budget (P124.8 million) will provide reintegra on assistance to former rebels Toward the Swi Delivery of Jus ce. Jus ce, in the remaining provinces formerly embroiled in like health and educa on, is a basic public good decades of confl ict in their normaliza on process. that everyone must receive regardless of age, The role of management of public order in these gender, or social standing. However, heavy case areas will then be turned over to the LGUs. backlogs and delayed dispensa on of cases have characterized the Philippine jus ce system. Every Likewise, in Mindanao, numerous normaliza on year between 2006 and 2009, the country’s trial mechanisms have been put in place following courts needed to resolve an average of 1,055,068 the turnover of the dra BBL to the Senate and cases. With this volume, every judge would have 3. Congress. These systems include the establishment to handle an average of 644 cases yearly Such of joint commi ees in Normaliza on and Peace numbers tell the stark imbalance between the and Security, an Independent Decommissioning volume of caseload and the number of courts Body, and an Independent Commission on Policing. across the country, as well as the delay this Also, a Transi onal Jus ce and Reconcilia on imbalance had caused in the speedy and equitable Commission has been established to address the delivery of jus ce. grievances of the Bangsamoro people, historical injus ces, and human rights viola ons.

3 Philippine Sta s cs Authority-Na onal Sta s cal Coordina on Board. (2013). “The Philippine Criminal Jus ce System: Do we have enough judges to act on ﬁ led cases?” Accessed at h p://www.nscb.gov.ph/beyondthenumbers/2013/06132013_jrga_courts.asp 106 Technical Notes on the 2016 Proposed Na onal Budget

Aware of this challenge, the government This year, the Judiciary is expected to roll out an increased the budget for the Judiciary over me. electronic case mechanism that will gather, store, In 2016, a budget of P26.68 billion was earmarked and upload court documents fi led within the lower for the Judiciary: 27 percent higher than its 2015 courts for easy access and reduced li ga on cost. budget (P21.046 billion) and twice the amount of The system will also feature a case manual system its budget in 2010 (P13.34 billion). that will allow the court branches to issue orders and resolu ons shortly a er every hearing. This Figure 2. Budget of the Judiciary and other informa on technology enhancements (in bllion pesos) for the courts were allo ed P890.36 million in 2015. 30 26.68 25 Likewise included in the Judiciary’s budget in 2016 is P1.2 billion for the Supreme Court to pay the 21.05 20 land acquired from the Bases Conversion and 19.34 17.77 Development Authority and fi nally enable its 15 15.71 14.31 transfer to the Fort Bonifacio Global City complex. 13.34 10 The government has also commi ed to provide the Supreme Court a total of P3.29 billion over 5 four years for the construc on of its new building4, of which P113 million was set aside in the 2016 0 2010 2011 2012 2013 2014 2015 2016 Budget to support the detailed architectural AMOUNT adjusted NEP and engineering design and other project management needs. In addi on, P210 million, This investment should enable the swi lodged under the Jus ce System Infrastructure dispensa on and resolu on of cases as well as Program of the Department of Jus ce (DOJ), will ensure the independence of courts—through the be used to construct new halls of jus ce, including construc on and maintenance of jus ce halls; the Cagayan de Oro Hall of Jus ce that was gu ed the use of technology to streamline case fi ling by fi re in February 2015. and resolu on; and the hiring of personnel to decongest the courts from backlogs, ensure their In 2016, the DOJ aims to increase the rate of independence, and improve their disposi on successful prosecu ons to at least 75 percent, rates. In par cular, P2.35 billion will cover all and to conduct the preliminary inves ga on on the opera ng expenditures of lower courts and at least 47 percent of criminal complaints in 120 reduce their dependence on subsidies from the days or less. The DOJ budget for law enforcement LGUs. A budget of P239 million was earmarked to will allow the agency to reach these goals, at employ 635 court deconges on offi cers (CDO) to P3.25 billion. conduct case inventories, prepare case briefs, and The Witness Protec on Program will likewise be provide other knowledge management assistance strengthened: with a budget of P236.4 million, to branches and sta ons that have an average the DOJ aims to accommodate addi onal state caseload of 500.

Table 9. Witness Protec on Program: Amount vis-à-vis witnesses covered 2010 2011 2012 2013 2014 2015 2016

Financial support (in Million Pesos) 139.1 151.1 174.7 184.6 195.7 190.7 236.4 Witnesses covered 455 514 556 580 630* 680* 720*

* Based on targets

4 Through the issuance of a Mul -Year Obliga onal Authority (MYOA) covering 2016 to 2019 requirements for the new SC complex. A MYOA is a document issued by the DBM to authorize government agencies to enter into mul -year contracts for the full cost of a project. It requires an agency to include in its proposal the amount programmed for every year of the project. 107 Technical Notes on the 2016 Proposed Na onal Budget

witnesses to contribute in delivering fast and favorable resolu on of high-proﬁ le cases, such as the Maguindanao Massacre (see table on page 107). Likewise, about P1.73 billion of the total 2.1-billion budget for Public A orney’s Oﬃ ce will facilitate the delivery of free legal assistance to indigent vic ms and accused.

Forging Just and Las ng Peace. President Aquino’s ﬁ nal Proposed Budget builds on previous eﬀ orts to ensure that peace and the rule of law reign—a necessary pla orm for progress to prevail in all communi es across the archipelago. Good governance provides the solid founda on in forging just and las ng peace. It ensures that each peso for the moderniza on of the military, the police, and the judiciary is spent on quality equipment and facili es that enable soldiers, policemen, and judges to perform their sworn du es. It fosters open, transparent, and lawful dialogue in each peace table or diploma c forum. It guarantees the prompt and high-impact delivery of services to war-torn communi es. Las ng peace and development, therefore, requires that good governance be sustained beyond 2016.

108