2016 Volume XVVolume No. 2 XV No. 2
Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders AILEEN S.P.BAVIERA Social Media Use by Frontline Government Agencies: Review and Recommendations CLARISSA C. DAVID Do Investments Respond to Taxation and Incentives? Evidence from the Philippines STELLA A. QUIMBO LORAINE GALLEVO XYLEE JAVIER ROMERO FS. QUIMBO MEG REGAÑON Measuring the Performance of the Philippine Scientific Enterprise System CAESAR A. SALOMA Empowering Filipino Women Seafarers in the Maritime Sector LUCIA P. TANGI Mind the Skills Gap: The Case of the Philippines SENATOR JUAN EDGARDO”SONNY” M. ANGARA Speech Review: Mind the Skills Gap: The Case of the Philippines EMILY CHRISTI A. CABEGIN (PAGE INTENTIONALLY LEFT BLANK) EDITORIAL BOARD
Alfredo E. Pascual, Chair; Emerlinda R. Roman; Emil Q. Javier; Francisco Nemenzo, Jr.; Jose V. Abueva; Edgardo J. Angara; Emmanuel V. Soriano; Edna Estifania A. Co; Gisela P. Concepcion
Issue Editor Edna E.A. Co Associate Editor Lea Marie Diño Copyeditors Ramon Fernan Connie Maraan Layout Artist Shechainah Pacariem Proofreader Kevin Mark Gomez
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Reviewer Affiliation Alyssa Peleo Alampay University of the Philippines Aileen Baviera University of the Philippines Sedfrey Candelaria Ateneo de Manila Law School Eulalio Guieb III University of the Philippines Leticia Ho University of the Philippines Ponciano Intal Economic Research Institute for ASEAN and East Asia-Indonesia Napoleon Juanillo, Jr. Commission on Higher Education Bernard Karganilla University of the Philippines Anthony Leachon University of the Philippines Joseph Anthony Lim Ateneo de Manila University Gilbert Llanto Philippine Institute of Development Studies Eduardo Mendoza University of Munich
Marie Antonette Menez University of the Philippines
Henry Tadap Okole Papua New Guinea and the Solomon Islands National Research Institute Perry Ong University of the Philippines Jeremaiah Opiniano University of Santo Tomas
Visiting Lecturer University of Hawai'i at Manoa-Convenor, Antonio Oposa,Jr. The Road Sharing Movement
William Padolina National Academy of Science and Technology, University of the Philippines Emma Porio Ateneo de Manila University Jon Quah National University of Singapore Ma. Lourdes Rebullida University of the Philippines Alfredo C. Robles, Jr. De La Salle University
Agnes Rola University of the Philippines
Patricia Sto. Tomas Advisory Council - Philippine Civil Service Commission Peter Sy University of the Philippines
Jorge Tigno University of the Philippines
Majah-Leah Ravago University of the Philippines Pia Manalastas De La Salle University Antonio G.M. La Viña Ateneo de Manila University MCM Santamaria, LL.D. University of the Philippines Rolando G. Talampas University of the Philippines Nestor T. Castro University of the Philippines Benjamin M. Vallejo University of the Philippines Charlotte Kendra de Zuñiga Gotangco Ateneo de Manila University Maria Faina Diola University of the Philippines Alicia B. Celestino University of the Philippines David Leonides T. Yap University of the Philippines Public Policy (PAGE INTENTIONALLY LEFT BLANK) Contents
Editor’s Note ix
Edna E.A. Co
Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders 12
Aileen S.P. Baviera
Social Media Use by Frontline Government Agencies: Review and Recommendations 50
Clarissa C. David
Do Investments Respond to Taxation and Incentives? Evidence from the Philippines 73
Stella A. Quimbo Loraine Gallevo Xylee Javier Romero FS. Quimbo Meg Regañon
Measuring the Performance of the Philippine Scientific Enterprise System 122
Caesar A. Saloma
Empowering Filipino Women Seafarers in the Maritime Sector 162
Lucia P. Tangi
Mind the Skills Gap: The Case of the Philippines 199
Senator Juan Edgardo “Sonny” M. Angara
Review: Mind the Skills Gap 208
Emily Christi A. Cabegin
About the Authors 213 (PAGE INTENTIONALLY LEFT BLANK) Editors’ Note
In 2015, five faculty members were awarded the President Edgardo J. Angara (PEJA) Fellowship. The awardees, namely Professors Aileen Baviera, Clarissa David, Stella Quimbo, Caesar Saloma, and Lucia Tangi delivered public lectures on their respective topics upon completing their researches in 2016. Their research reports are featured in this volume of the Public Policy Journal (PPJ). Professor Aileen Baviera’s “Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders” examines the role of the various domestic stakeholders, their views on the controversial maritime dispute between China and the Philippines and how these impact their lives. The study describes the efforts primarily made by the Department of Foreign Affairs in soliciting stakeholders’ feedbacks and recognizes the indicative support of the stakeholders, including Filipino-Chinese nationals torn on the territorial issue and on their loyalties. The study also recognizes the vulnerabilities that persist and bother the Philippine government and the domestic stakeholders such as the need to normalize fishing activities in the West Philippine territories, the need to protect marine resources, the imperative to fast track the modernization of marine capabilities, resources, and equipment. With the onset of a new administration under Duterte, the author raises the question as to whether domestic stakeholders could be a democratic voice and source of strength of a nation whose foreign policy is yet caught in the unfinished business of the maritime dispute. Using three service frontline government agencies as cases, Dr. Clarissa David’s “Social Media Use by Frontline Government Services: Review and Recommendations” examines how social networking, whether internally crafted or outsourced by the agencies, perform to help achieve the agency goals and their own work settings. Social networking as a communication strategy varies in utilization by the three agencies, namely the Department of Education, Department of Health, and the Home Mutual Development Fund. Based on her conclusion, the study recommends some policies, organizational arrangements, and integration of the agency strategies in the overall digital communication strategies. Editors’ Note
Professor Stella Quimbo and her team’s “Do Investments Respond to Taxation and Incentives? Evidence from the Philippines” assesses the responsiveness of industry investments to tax changes and incentives. Using data from industry and firms, the relationships between tax incentives and industry investments are explained. A modified version of the study, which was conducted in time series, validates the research’s earlier cross-section findings. The study suggests a reduction of corporate income tax rates to even off with the industry investment level of some ASEAN countries. Quimbo and her team recognize that a study on corporate taxation is quite limited and under-researched, and should be pursued. Dr. Caesar Saloma’s study on “Measuring the Performance of the Philippine Scientific Enterprise System” presents an interesting set of data from publications and other sources, and uses these data to diagnose the performance indices used by institutions and organizations that are involved in the production of scientific outputs. The author used the Academic Productivity Index, the Scientific Productivity Index, and the PhD Production Efficiency Index in examining the value of metrics that align individual performance and institutional outputs. These outputs are useful measures to determine or decide on faculty tenure and promotion. In a sense, these metrics also facilitate the governance of the academic and scientific work by making performances and decisions transparent, objective, and measurable. Professor Lucia Tangi’s “Empowering Women Seafarers in the Maritime Sector” discusses how female seafarers find themselves in the maritime school and on board sea vessels, and how they face up to various forms of discrimination, bullying by male counterparts, sexual harassment, and loneliness. The narrative is gathered through first-hand accounts among seafarers. The researcher concludes with recommendations that would change the conditions of women sea farers by addressing challenges to welfare, mobilization, awareness raising, and general improvement of their status and lives. The volume includes the speech delivered by Senator Juan Edgardo “Sonny” Angara which was reviewed by a professor from the School of Labor and Industrial Relations (SOLAIR) of the University of the Philippines in Diliman. The speech of Senator Juan Edgardo “Sonny” Angara titled “Mind the Skills Gap: The Case of the Philippines” delivered in a British Council-sponsored policy dialogue on 26 October 2015 is reviewed by Professor Emily Christi A. Cabegin of the School of Labor and Industrial Relations.
x Public Policy Editors’ Note
In his speech, Senator Angara poses an interesting challenge to Philippine education, saying that in the context of the so-called “jobs war”, formal education—and specifically public education—has to be improved by making education accessible, flexible, and seamless, thereby also tempering the “collegiate delusion” where formal higher education seems to be the only way to jobs. A big challenge, he narrates, is the close interface between school and work, implying a better match between job and skills and a harmony between the two sectors of education and job. Education should meet the job requirements. According to Angara, there are different routes to jobs – not only or not necessarily the path of formal higher education. The senator enumerates the various laws and policies adopted to meet the challenges of the education-job equation, and recognizes that although there are clear policies already adopted by the government through legislative measures and executive fiat, all these are a work in progress. Professor Cabegin in her review of the Angara speech brings in another dimension to the jobs and skills discourse, saying the Philippines is not wanting in highly-skilled labor, but rather lacks job opportunities. The articles in this PPJ volume contribute to or provide insights toward policy making by leaders in their respective sectors, namely domestic and foreign policy on the Philippine marine sector, higher education, finance and taxation, communications in frontline service, and women seafarers. A subtle cross-cutting thread among these themes is how policy and practice affect human resources, and vice versa.
Edna E. A. CO Vice President for Public Affairs Executive Director, CIDS University of the Philippines
Volume XV (2016) xi Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders
AILEEN S.P. BAVIERA*
Abstract
Foreign policy decision-making typically involves an interplay between domestic and international actors and interests. Using Philippine policy in the West Philippine Sea as a case, this study looks at who the domestic stakeholders are, the effects of the maritime disputes on them, and their role in foreign policy choices made by the Aquino government. The study examines the defense and maritime law enforcement sector, the fisheries sector and energy industry, as well as those engaged in trade, investments, and tourism cooperation with China. Among certain security sector stakeholders, there were perceptions that the arbitration or legal approach was over-emphasized at possible cost to short-term security goals. Fishing and energy stakeholders also felt there was not much support from government, and that interactions initiated by government were for the purpose of gathering understanding and support for policy, and to institute stop-gap solutions, rather than to address problems that arose as consequences of the disputes or of foreign policy decisions. The study recommends better inter-agency harmonization of its policy priorities, improving central-local governments’ understanding of their respective roles, and introducing more consultative and inclusive
* Email: [email protected]
12 Public Policy Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders
decision-making processes involving non-state stakeholders, in order to improve policy coherence. Apart from defense of sovereignty and territorial integrity, development diplomacy based on domestic stakeholders’ interests and needs should be placed front and center of the next stage of Philippine statecraft on the West Philippine Sea issue, whether through bilateral negotiations with China or regional cooperation or both. Law and diplomacy will remain instruments rather than ends in themselves, and the objectives of our foreign policy will remain security of the state, welfare of the people, peace in the region.1
Keywords: foreign policy decision making, arbitration, domestic stakeholders, security, Philippines-China economic relations
Volume XV (2016) 13 Baviera
Introduction
Foreign policy decision-making typically involves an interplay between domestic and international considerations. Putnam (1988) explained this well in his study of international negotiations as a two-level game, with negotiators trying to reach an agreement with the other party while simultaneously under pressure from domestic stakeholders. In most cases, a negotiator’s hand is determined by the positions of interest groups on the home front, which may even be strongly opposed to each other. This can happen to not only one but both parties conducting negotiations, thus affecting negotiation outcomes. This depiction of negotiations by Putnam has become a frequently used metaphor for a country’s foreign policy decision-making and international interactions, broadly speaking.The ideal foreign policy decision-making process assumes rational choice to be the basis of decisions and, in order to have optimal outcomes, such a process includes consideration not only of the preferences of the decisionmaker but of some notion of “national interest” as well as the positions of major domestic stakeholders. In the Philippines, do domestic stakeholders play an important role in the shaping of foreign policy? Who are the domestic stakeholders in the first place and how are they affected by what goes on between the Philippines and other countries? The territorial and maritime disputes in the South China Sea (SCS) provide us an important case from which to draw insights into these questions. In recent years, the struggle over sovereignty claims in the South China Sea have become quite central to Southeast Asian regional affairs, driven by increasing competition for the ocean’s resources among fast-growing regional states, the rise of China’s capabilities and influence, and geopolitical rivalry between the US and China. While the disputes can be traced back to the 1940s, pressure on the Philippines from China as the most powerful and assertive claimant began in the mid-1990s with the Panganiban Reef (Mischief Reef) incident, and escalated especially since the 2012 Panatag Shoal (Scarborough Shoal; Bajo de Masinloc) standoff. The latter incident occurred under the shadow of the United States’ “pivot to Asia” or “rebalance” policy, which China saw as being directed at it. The Philippines, being a close treaty ally of the US, was perceived by China as being instrumental to this “rebalance” through its recruitment of US support in its determined pushback against China in the South China Sea. From the Philippines’ perspective, on the other hand, its main worries in the South China Sea included the looming prospects of energy supply
14 Public Policy Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders shortages (with its promising Reed Bank fields overlapping disputed areas); overfishing, illegal fishing and environmental damage to surrounding reefs. These were aggravated by China’s encouragement of its local fishers to operate in contested areas, and its own weak external defense capabilities in the face of recent remarkable boosts in China’s maritime power. Thus, among the key concerns of the government of Benigno S. Aquino III had been how to secure the country’s sovereign rights to fisheries and hydrocarbons in its exclusive economic zone (EEZ) as granted under the United Nations Convention on the Law of the Sea (UNCLOS); how to draw international support for its economic and security interests; and how to properly manage the disputes to avoid conflict with China s well as other claimant parties. Under the watch of Aquino and his Secretary of Foreign Affairs Albert del Rosario, this issue animated our diplomacy with the big powers (China and the US), with ASEAN, with the United Nations, and with other countries of the Asia Pacific and beyond. The Philippine positions did not only reflect goals such as access to resources or security against external armed threat; the calls for a rules-based order were also being projected by the Aquino government as expressions of the values and identity of the Filipino people. By the end of Aquino’s tenure, particularly as a consequence of his government’s filing for international arbitration to seek support for its maritime entitlements against China, the Philippines’SCS narrative had become one of Manila’s David fighting Beijing’s Goliath, with David upholding “right” against “might.” To some extent, how other countries aligned themselves with the Philippine position became the standard by which the Aquino government identified friend or foe. Under Aquino, the Philippines called on its traditional military ally the United States to help provide deterrence against Chinese assertiveness and to beef up the capability of its own decrepit defense forces to manage external threats. An Enhanced Defense Cooperation Agreement was signed in April 2014 allowing America access to Philippine military facilities for logistics support, military exercises, and pre-positioning of equipment. The level of U.S. support, however, remained modest and carefully designed so as not to encourage the Philippines to provoke China. U.S. allies—Japan, Australia, and South Korea—also provided assistance in relation to maritime security enhancement and maritime domain awareness. Within ASEAN, Philippine efforts to generate solidarity against China’s encroachments had very little success, as countries that were greatly dependent
Volume XV (2016) 15 Baviera
on China could not be persuaded, while others chose to remain neutral with respect to the territorial disputes or cautious towards Manila’s confrontational approach, despite their own misgivings about China’s push into the SCS. Aquino’s resort to arbitration was vindicated by a decisive legal victory, with the arbitral tribunal declaring China’s expansive nine-dash line claim as being without validity in law or historical fact while upholding the Philippines’ rights in its EEZ. The successor government of President Rodrigo Duterte, which has clearly indicated its desire for good relations with China, now faces the even greater challenge of persuading China to accept this ruling, after China had vowed non-participation in the abritration process since it began in January 2013 and expressed its complete rejection of the arbitration ruling announced on July 12, 2016.
Do Domestic Politics Matter?4
This article does not examine the wisdom or effectivity of the foreign policy approaches that have been taken by the Philippines in its interactions with other countries on the SCS. Instead, it looks at who the domestic stakeholders are, the effects of the international disputes on them, and their role in foreign policy choices made by the Aquino government. Using Putnam’s second level, or sub-state level, of analysis, it seeks to determine how foreign policy decisions reached at high levels are interpreted and implemented by domestic actors, and whether they have produced desired outcomes from the perspective of domestic stakeholders. Among the questions addressed are: Do domestic stakeholders matter in Philippine foreign policy? Are their voices heard by decision makers, and is foreign policy responsive to their needs and concerns? Are they sources of vulnerability, pressures, or support for foreign policy? What are the possible implications of the research findings for the future conduct of Philippine foreign policy? The study maps out the domestic stakeholders–governmental as well as nongovernmental, national as well as local–in order to test the internal coherence of Philippine policy in relation to the maritime disputes. While acknowledging the importance of understanding the international relations dimension of the SCS disputes (Putnam’s first level), this study instead explores the domestic socioeconomic, political, security, environmental, and other concerns of the country that are assumed to be among the drivers of foreign policy choices.
16 Public Policy Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders
The study relies on the following information sources: interviews with key respondents from stakeholder groups; focus group discussions and informal discussions with subject matter experts; news reports; and speeches, reports, field notes, and other documents provided by key informants. Stakeholders were identified based on the extent of their involvement in the recent disputes involving the Panatag Shoal, Kalayaan Islands, and Reed Bank. Rather than focusing on individuals, stakeholders are defined as sectoral groups or organizations with shared interests. The study was undertaken in a somewhat polarized atmosphere where expressing criticism of the Philippine government’s policy toward China was considered by government to be a disloyal and unpatriotic act, in some cases possibly even serving the interests of the “adversary”. Thus, many of the interviews were done on a non-attribution basis, and most of the discussions were held under Chatham House rules. This is the reason why some of the key data and insights that are reflected in the paper have no attribution to sources of information. Simply defined, “domestic stakeholders” in Philippine foreign policy on the West Philippine Sea disputes are sectoral groups (e.g., fisheries sector, oil and gas sector, scientific community) and organizations or institutions (e.g., Philippine Coast Guard, Zambales local government) who have an interest in the maritime disputes and can affect or be affected by foreign policy decisions, behavior, and outcomes pertaining to the disputes. They themselves may or may not directly participate in the foreign policy choices, but their primary role as stakeholder involves being on the receiving end of policy choices made by other decisionmakers. Stakeholders were initially classified into three large groups: governmental, private sector, and civil society, with further subdivisions as illustrated in Figure 2. The next section summarizes the assessments and concerns of selected stakeholders on the West Philippine Sea disputes regarding how foreign policy choices made by the government impact upon them.
Defense and Maritime Law Enforcement Frontliners
The West Philippine Sea disputes arise from the country’s overlapping territorial and maritime jurisdiction claims with those of other countries. Thus, the organs of government tasked to defend those claims, protect sovereignty
Volume XV (2016) 17 Baviera
Figure 1. Foreign policy choices as two-level games and territorial integrity, and assert control and jurisdiction over claimed areas are the frontliners in the implementation of foreign policy decisions. These are the Philippine Navy, the Philippine Coast Guard, Bureau of Fisheries and Aquatic Resources, and the Philippine National Police-Maritime Group.Their mandates extend to the areas identified under PD 1596 (Kalayaan Island Group) and the Philippine EEZ (which includes Panatag Shoal), potentially pitting them against foreign counterparts, including the far more capable Chinese. While they do have their specific mandates, collectively they are tasked to cooperate in dealing with maritime threats and challenges, which may range from illegal entry and illegal fishing to the unauthorized presence of foreign civilian or military vessels. Perhaps most important among the concerns expressed by these stakeholders was that the maritime and territorial disputes have been treated mainly as a legal and diplomatic issue rather than prioritized as a security or law enforcement concern. For instance, the focus of governmental action has been on seeking legal clarity such as through measures for determination of baselines, harmonization of domestic laws with UNCLOS, and filing the arbitration case against China for the recognition of Philippine sovereign rights in its EEZ. On the international front, Philippine diplomacy has emphasized the negotiation of regional cooperation pacts such as the ASEAN- China Declaration of Conduct (DOC) and the proposal for a legally binding ASEAN-China Code of Conduct on the South China Sea. These agreements lay out principles such as “peaceful settlement of disputes” and “self-restraint,”
18 Public Policy Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders Figure 2. Major domestic stakeholders in West Philippine Sea issue Philippine in West stakeholders Figure 2. Major domestic
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but provide little operational guidance to defense and law enforcement units, given the various contingencies they encounter. Although as early as 1994, the government had adopted a comprehensive policy framework called the National Marine Policy (which recognizes defense and maritime law enforcement as important functions), it appears that over the last two decades, the national government has done little to help improve capacities in these areas. The Department of Foreign Affairs had, since the 1990s, been designated to be the core of the development of marine policy because the immediate trigger at the time was the implementation of the UN Convention on the Law of the Sea, with emphasis on the international obligations of coastal states. While it has become clearer over time that the full implementation of UNCLOS requires interventions in development planning, marine resources management, and law enforcement, among others, the institutional arrangements for addressing the said concerns continued to be managed from within a foreign policy framing. Even when the salience of defense and maritime law enforcement concerns grew as the South China Sea disputes escalated over the last six years or so, an almost one-sided emphasis on diplomacy remained, which some stakeholders believe has been at the expense of instituting more pro-active programs for the country’s defense and security. It was only with the establishment of the National Coast Watch System (NCWS) as “the central inter-agency mechanism for a coordinated and coherent approach on maritime issues and maritime security operations” that SCS policy making began to move outside of the DFA ambit, since the establishment of the NCWS led to the abolition of the DFA-led Commission on Maritime and Ocean Affairs. What this translates to is that some representatives of frontline agencies charged with defense and law enforcement, who believe they bear the biggest responsibility and may have the most to lose in failing to execute their mandates, felt that they had been marginalized in the search for solutions. This “diplomacy versus defense/law enforcement” narrative is possibly not new or unique or surprising, as is bound to happen when different agencies’ mandates do not converge. Nonetheless, it can result and has resulted in problems in policy cohesion. The stakeholder concerns from this group generally revolve around the following: • the lack of necessary means (physical assets, technical knowledge or skills, and systems) to undertake their missions more effectively;
20 Public Policy Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders
• perceptions that they are constrained from performing their primary functions for fear of undermining the ongoing diplomatic and legal initiatives, particularly after the Panatag Shoal standoff and filing of the arbitration suit against China; • the inadequacy of policy and immaturity of the maritime governance bureaucracy (e.g., the lack of guidance on policy and strategy; frequent reorganizations of agencies in charge of maritime affairs; slow progress in the development of the National Coast Watch Center after it was established, with turf battles adding to the confusion). In addition, the ongoing transition in the mission of the Armed Forces of the Philippines from its focus on internal security to territorial defense entails a process of sorting out law enforcement, anti-insurgency, and external defense functions, and establishing coordinative arrangements among various institutions. Effective inter-agency cooperation is imperative in the maritime arena, where information sharing for maritime domain awareness is considered vital, and where there are far from adequate resources (e.g., “bottoms” or vessels) to ensure the safety of the entire archipelago, let alone control over zones of maritime jurisdiction such as the EEZ. Applied to the disputed WPS, this confusion in the mission and geographic scope of Philippine military and law enforcement agencies is exacerbated by the transformation of the South China Sea into a so-called “grey zone”—a situation of neither pure peacetime nor actual armed conflict, but of contingencies over territory, sovereignty and maritime economic interests, where, for instance, both China’s People’s Liberation Army-Navy and its newly organized (and reportedly well-armed) Chinese Coast Guard, as well as other paramilitary groups, operate under unclear rules. Navies and Coast Guards the world over have developed protocols as well as rules of engagement in dealing with various situations that may occur when they traverse the oceans—rules that may differ if they are in high seas or within the legal jurisdiction of coastal states, or depending on whether there is a state of hostilities or peace. If the maritime areas are disputed, under what situations should the Philippine Navy be mobilized instead of the Coast Guard, and vice versa, given their separate mandates? The act of sending the Philippine Navy rather than the Coast Guard or BFAR as first responders in apprehending Chinese fishermen on Panatag Shoal—the incident that triggered the 2012 standoff between Manila and Beijing—has been criticized as inappropriate and needlessly provocative. Yet the Philippine Coast Guard, operating in this “grey zone,” could also face uncertainties regarding applicable rules of engagement if it was first on the
Volume XV (2016) 21 Baviera
scene and if it spots Chinese vessels, or if the Chinese Navy intervenes in its law enforcement operations. Meanwhile, the “self-restraint” and “no provocation policy” adopted by the government has ostensibly led to high tolerance for foreign fishing presence (although some law enforcers drew the line at illegal fishing practices), while effectively discouraging Filipinos from proceeding with normal economic activities in its EEZ due to fears of Chinese retaliation. The policy reportedly prevented any physical improvements from being undertaken on Pag-asa or other Philippine-held features that may be misconstrued as provocations. Three foreign policy initiatives were specifically mentioned by stakeholders as having constraining effects on the performance of defense and law enforcement functions: the DOC, because of Paragraph 5, which called for “self-restraint in the conduct of activities that would complicate or escalate disputes”; the filing of the arbitration case, because—rightly or wrongly—of “sub judice” arguments; and the so-called Triple Action Plan of the DFA, which called for a moratorium on specific activities such as construction on occupied features. In the meantime, the defense and law enforcement agencies sometimes receive criticism for not doing their work, including from fisherfolk who were being prevented from fishing in disputed areas because their own government could not guarantee their safety. Some frontliner stakeholders, on condition of anonymity, also cited policy weaknesses arising from the lack of coherent, well-coordinated crisis management mechanisms. This was most evident in the failure of the Aquino government to convene the National Security Council during the Panatag Shoal standoff, ostensibly for domestic political reasons. They also bemoaned the apparent lack of contingency planning or non-conduct of inter-agency war-gaming, especially considering the magnitude and frequency of actual exercises being undertaken by other claimant states. On the other hand, some security stakeholders who were interviewed strongly supported the Aquino government’s emphasis on the acquisition of new equipment, such as multi-role vessels and planes, and its greater efforts to develop and diversify security partnerships, although they considered these as long-term investments in capability building that were uncertain to be sustained. To complement the new vessel acquisitions of the Philippine Navy, the Coast Guard, and BFAR, the government had also begun to use satellite systems for monitoring activities in Philippine-claimed waters.
22 Public Policy Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders
Two respondents said that in order to avoid confusion and accidents occurring in disputed areas, high-level exchanges among defense and law enforcement experts and officials, both bilaterally with China as well as multilaterally, should have been undertaken. These exchanges could have been useful platforms for information gathering as well as confidence building, it was argued. One interviewee said that the volatility of the situation was a reason not to rely solely or even principally on the arbitration case. Instead, defense or naval diplomacy could still play an important role, especially for confidence building, for instance by working together on humanitarian assistance and disaster response (HADR).
Provincial and Municipal Governments
The local constituencies affected by the maritime disputes include the municipality of Kalayaan—consisting of Philippine-claimed features in the Spratlys—in Palawan province, Masinloc in Zambales, Infanta in Pangasinan, and other places whose fishing and coastal communities draw their food and livelihood from Panatag Shoal and Kalayaan Islands. Contrary to some expectations, the Palawan provincial government does not consider itself a major stakeholder in the disputes, despite the fact that Kalayaan Island Group (KIG) in the Spratlys is one of its municipalities. This may be due to a number of factors. Having been established originally as a military outpost and then only declared a municipality in 1978, KIG tends to be seen by provincial executives as beyond their own jurisdiction and exclusively the concern of the national government. Even now, KIG and Pag-asa Island
Figure 3. Dual authority structure
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have a dual governance structure, with the local Navy commander often playing the dominant role even as he sits side-by-side with municipal officials. With this unique and ambiguous authority structure, the role of the provincial government is not too clear. KIG is moreover too remote to consider in the province’s development planning, and it has to compete for attention with southern Palawan, which also remains underdeveloped. Whereas KIG is perceived to have generated economic benefits for the national government (particularly from the Malampaya gas fields) and for the large commercial fishing companies based in the provinces of Batangas, Navotas, Zambales, and Bataan, it has had little economic value for Palawan itself. The Palawan economy does not depend on KIG and thus far does not seem to be affected by the disputes. Palaweños even appear to have far greater interest in the Sulu Sea, including the Tubattaha Reef, than in the West Philippine Sea. Finally, KIG has a very small voting population, and is, therefore, of little interest to local politicians come election season. As tensions escalated over China’s efforts to block the Philippine Navy’s repair and resupply activities on Ayungin (Second Thomas Shoal), KIG Mayor Eugenio Bitoonon became a key information source for foreign media and government analysts, and the “local face” of the conflict. In an interview for this project, he, however, decried how the provincial leaders did not take him seriously, nor did they support the development plans and programs he had for his tiny constituency, which consisted of a little over 300 people residing on Pag-asa Island. His initiative to establish a school for about 28 children living on Pag-asa was supported instead by the national government, and Coast Guard personnel stationed on the island served as volunteer teachers. Asked if he was ever brought into consultations and studies undertaken by the national government about the KIG, Mayor Bitoonon said he was not. He also expressed the view that the arbitration case (prior to resolution) was paralyzing all efforts to improve the facilities on Pag-asa Island. Like their Palawan counterparts, Zambales provincial authorities also appeared to have taken little interest in the Panatag Shoal dispute, despite some of its coastal communities being greatly affected by Chinese control of its rich fishing grounds, and despite the proximity of the disputes to the strategically located Subic Bay. Other than Masinloc town mayor Desiree Edora, most local leaders remained quiet on this issue and deferred to the national government to find solutions to the problem. An additional consideration might have been the heavy involvement of Chinese investments in Zambales mining,
24 Public Policy Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders another major industry, so that anti-Chinese sentiment was neutralized by countervailing economic interests. In another example of poor coordination between national and local authorities, Zambales Governor Hermogenes Ebdane, Jr., a former police chief and also a former national security adviser, commissioned a Canadian surveillance company to set up a coastal monitoring system to detect vessel intrusions in his province, and imposed taxes on foreign ship owners. The latter was declared illegal because this was a function of the Marina and Coast Guard under the national government rather than of local executives. Interestingly, Panatag Shoal had itself been the subject of an internal territorial dispute among the towns of Masinloc, Palauig, and Cabangan. On June 6, 2011 (prior to the 2012 standoff), Masinloc’s claim to Panatag (which is marked in ancient Spanish maps as Bajo de Masinloc) was officially discussed by the provincial government, during which some board members even argued that they preferred to have the WPS international disputes resolved (among the countries) before endorsing any town’s claim to the shoal. Other than this incident and the Chinese occupation in 2012, Panatag seems not to have figured prominently in the consciousness of provincial leaders. The economic impact of the Panatag Shoal situation has been most directly felt by fishing communities not only of Masinloc but also of Subic and Sta. Cruz in Zambales, and Sual, Bolinao and Infanta in Pangasinan. Some fishermen have reportedly experienced direct threats from the Chinese Coast Guard, which rammed their boats or fired at them with water cannons. Fisherfolk families have been displaced from their traditional livelihood, and the BFAR, Coast Guard, and Navy have had to work with Masinloc Mayor Edora to assist in alternative livelihood and new skills training programs. This lack of interest at the provincial level in the direct impact of the disputes on some constituencies is a vulnerability that may result in the public’s disaffection with local leaders. In extreme cases, it may heighten the risk of victims taking matters into their own hands to challenge other claimant states through actions that may escalate tensions and later have foreign policy repercussions. An example would be the aborted plan of former marine captain Nicanor Faeldon to land on the shoal while the Panatag standoff was still taking place, as well as incidents of fishermen throwing fire-bombs (according to Chinese media reports) at a Chinese Coast Guard vessel. Vulnerabilities may also arise when local government executives of frontline provinces take little interest in the broader foreign policy goals of the state.
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After all, local officials have better access to local information, institutions, and resources that they can more quickly mobilize to prevent, address, or intercept situations on the ground even before these come to the attention of national government. Local executives can help compensate for the national government, which has routinely been criticized for its slow reaction time whenever faced with reports of specific incidents. Aside from local Navy and Coast Guard personnel, local governments are another crucial link between the national government (including foreign policy decisionmakers) and direct stakeholders, such as fisherfolk and private fishing companies who in the SCS have had to make sacrifices for the sake of national sovereignty.
Fisherfolk Communities and Fishing Companies
The SCS has been described as overfished or fully fished except for shallow areas near the Philippine coast, but it is likely that a substantial portion of the actual fish catch is unreported. Both commercial Filipino fishing companies as well as artisanal fishers have been active in the KIG and Panatag Shoal. From their reports, we know that the better fishing grounds are far from the main Philippine archipelago, but only big companies from Batangas, Zambales, Bataan, Navotas and Cebu have the capability to travel the distance. Artisanal fishers would opt to harvest sea cucumbers and other high-value items in nearer areas instead. The capture of endangered hawksbill sea turtles (pawikan) by Filipino fishers for sale to Chinese traders may also be a rampant practice. However, one informant from a major commercial fishing company— also on condition of anonymity—said that, contrary to government data, there were still rich fisheries in the SCS. Filipinos, he said, were “dehadong dehado” because not only did other countries take our fishing grounds, they would export their catch to us (e.g., galunggong, which only Filipinos eat because others consider it to be of low value). He said that since China’s island construction activities started in 2013, they observed a sharp drop in their catch (“ang laki nang ibinaba ng volume”). They had also experienced harrassment near Investigator Shoal as early as 2011 from what appeared to be a Chinese navy ship (although the crew said they were Korean), and they know of others with similar experiences that remain unreported. The informant also said that they hope the Philippine government can extend protection. He recalled that during the Marcos administration, government would assist fishing companies by providing subsidies that would encourage them to go
26 Public Policy Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders into farther areas, including the KIG, because of the prevalence of piracy and conflict in waters close to Mindanao at that time. On the other hand, the rich fishing grounds of Panatag continue to be of greater interest than the KIG in terms of living resource potential. In earlier years, Filipino, Chinese, Vietnamese, Taiwanese, and Hong Kong fishers would frequent the area without experiencing territorial tensions or competition. The effects of China seizing control of Panatag Shoal in 2012 have, therefore, been quite evident. One study by the National Coast Watch Center reports that 50 percent of local fishermen in the town of Masinloc had been affected, with many now having to rely on food rations provided by the municipal government. Masinloc Mayor Edora estimates that 2,000 fisherfolk have been affected. An informant from government said during an interview that local fishermen they spoke with blamed the Philippine government for disrupting the harmonious relations that had prevailed earlier among fishers of different nationalities. They also complained that, as the tensions continued to grow, government could offer no protection for those who still ventured out to fish. This was not only due to resource constraints preventing conduct of regular patrols, but also because the Coast Guard, Navy, and other ground operators had allegedly been directed by Malacañang not to cause any new provocations following the Panatag Shoal incident. Since the standoff, Filipino fishermen have been shooed away and doused with water cannons; their vessels have been harrassed and bumped by the Chinese in the area. In one particularly absurd twist of events, the national government at one point declared a fishing exclusion zone around Panatag Shoal (ostensibly for conservation purposes but also because Beijing would seasonally declare its own). Those tasked with law enforcement ended up asking Filipino fishers (over whom they had jurisdiction) to leave, but this paved the way for Chinese and others to fish in what was a Philippine EEZ. An informant from the National Coast Watch Center attributed this to “ground operators not being properly oriented.” But according to this informant, some local fishermen had started to ask: Who is going to fix this? Will diplomacy bring back our fishing grounds? Will the arbitration solve this? The Navy and Coast Guard reportedly encouraged the fishermen to continue fishing in the area, but to avoid risks by venturing no closer than two kilometers from the shoal so as not to be confronted by the Chinese. But many decided to stop fishing altogether. The Northern Luzon Command (which was later
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merged into the Western Command) became involved, not with providing security but with providing livelihood for those most seriously affected. The BFAR promised to set up alternative fishing grounds and encouraged fishers to shift to the use of payao (a fish aggregating device), which the BFAR began to deploy in municipal waters. BFAR urged the LGUs to implement a mangement plan for the management of the payao. Perhaps more than any other stakeholder, the fisheries sector can become a vulnerability and a pressure point in the country’s foreign relations because of the direct impact on the economy, as well as on food security, livelihood, safety, and security of Filipino nationals. The sentiment, particularly of artisanal fishermen, that they are at the mercy of strong nations and that their government is helpless to change the situation stands in sharp contrast to the support that the Chinese government gives its fisherfolk. On the Chinese end, these include the provision of fuel subsidies, financing for new vessels, protection by the Coast Guard when they venture into disputed areas, and even initiatives to organize fishermen into militias equipped with modern communications.
Effects on Energy Players
One of the first salvos fired by China in what was to be an active campaign to assert sovereignty in the SCS was the harrassment of Forum Energy/ Philex activities in Service Contract (SC) 72 of Reed Bank in early 2011. The Department of Energy had started accepting bids for petroleum blocks in Reed Bank, but China’s Nine Dash Line overlapped with the entire Reed Bank and part of the Malampaya gas field. The energy stakeholders in the WPS disputes include the national government, the national oil company (PNOC), private investors (Philex/ Forum Energy), and international oil companies (IOC) that had been granted exploration concessions by Manila in the West Philippine Sea. The Philippines lags behind its neighboring countries in terms of the number of its active petroleum wells, in part because most of the country remains underexplored. Thus, the importance attached by the Philippine government to the energy dimension of the WPS territorial disputes has been evident. Philippine offshore exploration has been concentrated in the West Palawan region, fronting the KIG. The government of Gloria Macapagal-Arroyo had come close to energy cooperation in disputed areas when it agreed to conduct joint seismic surveys with Chinese and Vietnamese national oil companies in
28 Public Policy Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders
2005. In the end, however, the three-year cooperation agreement was allowed to terminate without extension after issues about its constitutionality in Philippine law were raised. At the height of the Panatag standoff in 2012, Philex Petroleum and China National Offshore Oil Corporation (CNOOC) were in talks to explore the possibility of oil development as well as mining cooperation. Philex chair Manny Pangilinan reported that he had clearance from President Aquino to sit down with CNOOC counterparts.The talks fizzled out due to disagreements on whose laws (therefore, whose sovereignty) would be adhered to. But similar consultations would again be reported in October 2013 (after the filing of the arbitration case) between Forum Energy Plc and CNOOC, and hinted at in June 2014. Other incidents involving harrassment by Chinese vessels were reported in the Philippine media. Twice in April 2014 did a Chinese vessel approach the Rubicon Intrepid (FPSO) Ship operating in SC 14C1, and, in August 2015, a Chinese warship with ID No. 571 approached the Maersk Venturer Drill Ship operating in SC55.
Figure 4. Philippine Oil Activity in the WPS
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Chinese efforts to prevent unilateral exploration by the Philippines were not limited to such types of incidents in the ocean. China had previously warned the big energy players to stay away from Reed Bank, or risk losing other, more lucrative China projects. Moreover, oil companies in Manila reported receiving phone calls from “Chinese embassy” officials who told them that the areas they were interested in belonged to China. Even China-based service providers that IOCs wished to hire have said they had to demur when they found out that the projects were in the areas disputed by the two countries, fearful of being penalized by their own government. Unfortunately, IOCs argued, they cannot take sides in territorial disputes, and also cannot operate if ownership is undetermined because they have to be clear as to which government they are reporting to. Their investments— already running into millions or even billions of dollars—are very sensitive to any increase in political tensions and mid-stream changes in the rules. The IOC representatives consulted by the author said they were waiting keenly for the outcome of the arbitration filed by the Philippines. But when pressed for comment on whether a favorable outcome would be taken as a clear signal to go ahead with projects in the Philippine claim areas, they said the implementation of the ruling would be crucial. The Malampaya gas fields are protected by the Philippine government against possible hostile actions; the Navy, Coast Guard, and police have been mobilized for this purpose. However, the government does not have sufficient resources nor a mandate to accord the same treatment to all NOCs and IOC projects. Given considerations of security risks, political pressure,and even questions of economic viability at a time of current low oil prices facing the energy industry, the Philippine government needs to provide more incentives for industry players to invest in upstream operations. While the current government has resisted entering into joint development with other countries due to constitutional constraints and implications for sovereignty, private sector players and legal experts point out that there have been many successful instances of joint development in the world that have proven beneficial to various parties, once their leaders decide that they are ready to make compromises. Inasmuch as private sector commercial linkages and market-based approaches are being utilized for cooperative resource management in some countries, it may also be worth studying if such an approach can contribute to the management of conflicts over resources in the SCS, where sovereignty issues always get in the way. Future studies may explore the potential role of
30 Public Policy Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders private business in the management of maritime disputes, and how a “market approach” to resource competition might be more feasible than a state-centric one.
Stakeholders in Trade, Investments and Tourism with China
One important question often asked was whether the tensions arising from the territorial and maritime disputes had a major effect on economic ties between the two countries. Since the approach in this study is to focus on stakeholders and pressure points for foreign policy, it does not attempt a comprehensive assessment of these areas. But the short answers are that (1) there were no observable effects on trade ties at the macro level that were directly attributable to the disputes, but the highly vulnerable banana export sector suffered from measures imposed by China that circumstantially appeared related to the bilateral tensions ; (2) there was definitely a decline in new Chinese investments (that were low to begin with) and opportunity cost may have been high; and (3) there was a temporary, selective, but nonetheless significant decrease in tourist arrivals from China, linked to safety concerns that at least partially arose from the bilateral tensions. The Philippine government and the private sector were united in the goal of preventing economic fallout from the political tensions. Concerns over such a possibility rose when, at the height of the Panatag Shoal standoff, Philippine bananas were denied entry by Chinese customs, citing phytosanitary standards that were reportedly not met. One interpretation held that these were not overt economic sanctions but nevertheless hinted at or signaled the possibility of sanctions in order to try to influence behavior. What surprised the banana growers was that Japan and Korea, both large markets who were receiving imports at the same time as China, did not complain of the issues China was raising on their Philippine banana imports. If the ban had continued, around 150,000 – 200,000 people would have been affected according to industry assessments. As it was, the ban led to wastage, unemployment, and loss of tax revenues to local government, among others. The effect was, however, considered temporary, and according to one scholar, “not debilitating,” but nonetheless, to preserve the China market, government and the banana growers took remedial measures. Even after the 2012 Panatag Shoal standoff, China continued to be the country’s top import source and third largest export market. Among other sectors whose representatives were informally surveyed during a roundtable
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Figure 5. Decline in Banana Exports to China following 2012 Panatag Shoal Incident Source: Pilipino Banana Growers and Exporters Association discussion held in 2014, the electronics and semi-conductors group reported that their export and import percentages remained about the same and that they even observed a windfall from Japanese companies who were leaving China for the Philippines, also due to territorial frictions in the East China Sea. A manufacturer of car batteries and a steel manufacturer reported that their sectors were also not affected. As for investments, the Filipino-Chinese Chamber of Commerce and Industry reported that in 2014, new Chinese FDI reached $41.38 million, up from $6 million in 2013 and $60,000 in 2012. However, total Philippine FDI in China continued to outstrip Chinese FDI in the Philippines, with $3 billion and $1.5 billion, respectively. The Philippine Economic Zone Authority reported having 90 locator enterprises from China as of June 2015. Although China was not among the top ten countries investing in the Philippines through PEZA, from 2010 to April 2015 it still registered PhP4.519 billion in investments. Of the 90, 61 were in manufacturing and 13 in information technology services. The others were in real estate, renting and business activities; hotels and restaurants, and transport, storage and communications.
32 Public Policy Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders
Nonetheless, the disputes were said to have affected decisionmaking by prospective investors. One analyst explained that Chinese state companies “will think thrice” before investing in the Philippines, while Chinese private companies “will clear (it) first” with the Ministry of Commerce of China before deciding to invest. The tensions also made the Philippines a less attractive destination for investments compared to friendlier ASEAN countries. This was borne out by information from the Board of Investments that trade delegations and investment missions from China had nearly ground to a halt compared with activity during the Arroyo administration. However, this was contradictory to a statement by an official of the Philippine Exporters Confederation (PhilExport) that they continued to receive Chinese groups looking for economic partners and projects. It may then be that Chinese missions were merely avoiding official channels and reached out to the private sector instead. Of investments by China, some projects were seen to be potentially sensitive in the context of deteriorating political ties. One was the 40 percent stake by state-owned State Grid of China Corp. in the Philippines’ National Grid Corporation, which it bought in 2009, and from which it has a contract to operate for 25 years. Due to security concerns, the contracts of Chinese engineers were allowed to lapse and their work permits not renewed— an act that was criticized in China. Shortly after the Panatag Shoal standoff, tourism was also temporarily affected, especially in the wake of calls by Philippine nationalists to hold demonstrations against Chinese “bullying.” The Chinese government responded by issuing an advisory against outbound group tours to the Philippines, citing fears for their safety. A second travel advisory was issued in September 2014, this time emanating from the Chinese embassy in Manila, informing their nationals of poor safety conditions in Manila where twelve kidnappings of Chinese nationals had occurred over the previous nine months. However, there was speculation that the 2014 advisory against group tours was in retaliation for the March 2014 submission of a 4,000-page memorial to the Permanent Court of Arbitration. Thus, it may be argued that the travel advisories were somehow related to the disputes and were perhaps, like the earlier ban on banana imports, intended to signal displeasure, and to convey the hint of a threat.
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Figure 6. Chinese visitor arrivals in the Philippines Source: Department of Tourism
Figure 7: Philippine share in ASEAN market for Chinese tourists, 2013 Source: Country Data, 2013.
34 Public Policy Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders
The second advisory led to a significant drop in arrivals, particularly in popular destinations like Boracay and Cebu, with as many as 149 flights and 20,000 room reservations cancelled. Revenue losses were estimated at PhP284 million for airlines and PhP165 million for hotels and resorts. Nonetheless, certain places in the Philippines had become favorite destinations; they continued to attract travelers, particularly individual travelers, dive clubs, and those who booked online rather than through travel agencies. Despite tensions with China and the travel advisory, total tourist arrivals in 2013 and 2014 were much higher compared to 2012. In other words, the economic relations remain stable, with much to be improved, and whatever vulnerabilities may exist for the Philippines are only to some degree related to the disputes. The more serious variables are the oft- cited challenges of poor infrastructure, excessive red tape, lack of predictability of policy, etc. that have held back the economy in years past. On the other hand, going forward and learning lessons from other developing countries that have grown economically more dependent on China than they might have wished, the question we now face is how to strengthen economic ties so as to provide a foundation for greater mutual trust without unduly compromising security and sovereignty goals.
Civil Society
Under the category of civil society are “epistemic communities” or communities of experts that are transnational in nature rather than being purely domestic actors. These groups of experts share a worldview and mode of thinking, and try to translate them into policy intervertions. In the South China Sea disputes, they would iclude marine scientists, environmentalists, scholars of international law and of international relations, security analysts, and the like. Their role was not examined in the study. The role of media in shaping public perceptions and framing an agenda, on the other hand, needs to be acknowledged. For instance, surveys show that only a small percentage among the Filipino public see the disputes as a priority of the country; nonetheless, there is high awareness and interest in the issues, apparently because of extensive media coverage. A special group of civil society stakeholders on this issue would be the Chinese Filipinos. Being “Chinese Filipinos” can mean many things, and they no longer denote a single community; nor would the members even necessarily display the same cultural characteristics. Their attitudes toward the disputes
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may be shaped by citizenship, the individual’s occupation, level of education or awareness, and even positive or negative perceptions of the Philippines and Filipinos, rather than by race or ethnicity.Moreover, it is important to distinguish this group from Chinese nationals (foreigners) who happen to be in the Philippines, many of whom are recent migrants. On the issue of the maritime disputes, Chinese Filipinos are divided, in part, along generational lines, which also reflects the amount of exposure to Chinese education and how far removed they are from traditional Chinese culture. Thus, at the risk of oversimplification, one might argue that members of the older generation may tend to be more pro-China, and the younger ones more pro-Philippines. The dilemmas of their hyphenated identity can be understood from the fact that their history and culture, and in many cases business interests, continue to connect them to China, but their current social context, economic life, political experiences and, for the most part, their aspirations for the future are the same as those of other Filipinos. In general, Chinese Filipinos would avoid discussion of the maritime disputes, whether among themselves or in general society. What was interesting was that during the eruption of hostilities between China and Japan over Diaoyutai, some of the new Chinese migrant organizations issued statements in the Chinese language media in support of China and condemning Japan. The biggest organization, and one of the oldest in the country, the Federation of Filipino-Chinese Chambers of Commerce and Industry Inc. (FFCCCII), did not issue such a statement. As my informant explained, “Most of them (FFCCCII members) are Filipino citizens. They know that siding with China against Japan in Diaoyutai will be tantamount to siding with China against the Philippines in Scarborough Shoal.” Another interesting insight was that, because they could not criticize the Philippines nor sympathize with China, there was a tendency for some to take the stand that the US was at fault for causing tensions between the two. This was an indirect criticism of President Aquino and Foreign Secretary Albert del Rosario, who were seen as having allowed the Philippines to be used for US interests. More in-depth empirical studies of how the disputes have affected this sector are needed, and are in fact being undertaken, in order to avoid subjective conclusions on this sensitive matter that has implications for the country’s social fabric. Looking back at the emotional comments from Filipino netizens on the disputes with China, however, it is sad to note how strongly racism still
36 Public Policy Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders influences the thinking of many, with Chinese Filipinos who had nothing to do with the disputes bearing the brunt of resentment against China.
Summary and Conclusions
By identifying the domestic stakeholders in the Philippines’ maritime disputes in the West Philippine Sea, and examining how they are affected by recent developments, this paper tries to draw implications for future policy and strategy. The paper presents concerns of the defense and maritime law enforcement sector, the fisheries sector and energy industry, local governments, as well as those engaged in trade, investments, and tourism cooperation with China. It also identifies Chinese Filipinos as a social sector somewhat unfairly caught in the crossfire of nationalist sentiments on both sides. There are other stakeholders that were not adequately addressed due to space limitations, but whom we mention here: shipping companies who traverse the SCS; environmental NGOs and the scientific community; mass media in its function of helping shape the national discourse; the community of legal scholars, whether supportive or not of the arbitration or the overall foreign policy approach by Aquino; and so on. Let us now return to the questions asked at the outset: Do domestic stakeholders matter in Philippine foreign policy? Are their voices heard by decision makers and is foreign policy responsive to their needs and concerns? In early 2015, the DFA and Philippine Information Agency launched an information campaign that involved forums, campus tours, and press conferences in Cebu City, Cagayan de Oro City, Subic, Olongapo, Laoag City, Vigan City, Puerto Princesa City, Tuguegarao City, Dumaguete City, Iloilo City, Davao City, Bicol Region, General Santos City, and Zamboanga City. Briefings were also held around schools and government departments in Metro Manila, as well as on television and on radio. In the case of the fishermen, the DFA sent its spokesperson, Mr. Charles Jose, and representatives of other government agencies on a roadshow whose objective was to explain the Aquino government’s position as based on two principles: primacy of the rule of law, and peaceful settlement of disputes. According to news reportage of one meeting, fisherfolk raised concerns about losing access to fishing grounds to both China and Taiwan, to which Jose replied that the government was very much aware and had included these concerns in the arbitration pleadings. Other government officials assured the audience that fishermen would receive help to cope with their concerns. By sending the DFA spokesperson, it was clear that the
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purpose of the meetings was to deliver, top-down, policy statements to gather understanding and support, rather than to seek feedback and address problems that may in part have been unintended outcomes of foreign policy decisions. At best, government was only able to offer stopgap measures because, pending the results of the arbitration case and even after the award was announced, the restoration of fishing grounds could only realistically be achieved through negotiations with the power occupying Panatag Shoal. The same is true for access to oil and gas in the disputed Reed Bank where drilling has been put on hold, also pending the arbitration outcome. Are the stakeholders included in this study sources of vulnerability, pressure, or support for foreign policy? What are the possible implications of the research findings for the future conduct of Philippine foreign policy? The study shows that stakeholders can become strong sources of support under the right conditions. The following is a list of possible advantages that can be utilized to strengthen stakeholder supportfor the country’s efforts to manage the maritime disputes and promote maritime development and security interests: 1. There is greater awareness among the general public of the maritime threats and opportunities we face in the region. 2. Government has demonstrated stronger commitment than in previous years to the development of maritime governance mechanisms and institutions such as the NCWC. 3. The Aquino government’s principled stance, one that emphasizes reliance on a peaceful, rules-based approach, has attracted strong domestic and international support in light of perceived unreasonable behavior by China. 4. There is strong potential for increasing private sector and civil society participation in maritime governance, including—but not limited to— providing technical expertise. 5. Bilateral economic and people-to-people relations with China are proving resilient and can be pillars of cooperation. On the other hand, there are vulnerabilities and pressure points that may present challenges to the nation’s interests if stakeholders’ needs are not addressed effectively and early enough. 1. 1. There is a need to restore or normalize fishing activities in Panatag Shoal and KIG while keeping the area free from threat and confrontation. Arguably, the entire arbitration case, which has entailed considerable
38 Public Policy Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders
political and, presumably, financial cost for the Philippines, was about preserving access to ocean resources in the Philippine EEZ. If this is not achieved, then Panatag may well be built by China into another artificial island, which would again increase the ante in the Philippines’ South China Sea diplomacy and security interests. 2. It is imperative that government fasttrack modernization and capability building efforts for both defense and law enforcement agencies, in the process clarifying their respective roles and cooperation strategies for operations in the EEZ and beyond; 3. With respect to sustainable use of maritime resources, we must address the lack of accurate scientific data on both living and nonliving resources as the basis for development planning, lest by default we surrender our sovereign rights to other countries; 4. There is also a need to harmonize central government-local government positions and understanding of their respective roles, to improve policy coherence and mutual support; 5. Finding creative and pragmatic solutions to the competition for energy resources that will result in absolute gains (win-win), rather than relative gains, will be a great challenge. Now that the arbitration process has concluded and the results are largely in favor of the Philippines, the new administration under President Rodrigo Duterte can pursue maritime dispute settlement confident of the legitimacy of the Philippines’ demand for respect of its sovereign rights. Apart from defense of sovereignty and territorial integrity, development diplomacy based on domestic stakeholders’ interests and needs should be placed front and center of the next stage of Philippine statecraft on the West Philippine Sea issue, whether through bilateral negotiations with China or regional cooperation, or both. Law and diplomacy will remain instruments rather than ends in themselves, and the objectives of our foreign policy will remain the security of the state, the welfare of the people, and peace in the region.
Notes
1. The author is Professor at the Asian Center, University of the Philippines and editor-in-chief of the journal Asian Politics & Policy. Research for this paper was supported by the Pres. Edgardo J. Angara Fellowship Award. The findings were presented at a public lecture co-organized by the UP Center for Integrative and Development Studies and the Asian Center on June 3, 2016 at the GT-Toyota Asian Cultural Center, UP Diliman. 2. Robert Putnam, “Diplomacy and Domestic Politics: The Logic of Two-Level
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Games.” International Organization 42, no. 3 (Summer 1988): 427-460. 3. Some examples: http://www.imoa.ph/david-vs-goliath-south-china-sea- philippines-vs-china/; http://www.nytimes.com/2016/07/16/world/asia/south- china-sea-phillipines-hague.html?_r=0; http://nationalinterest.org/feature/ david-vs-goliath-the-south-china-sea-the-philippines-vs-11534 4. Recent published works by the author that examine the domestic politics-foreign policy nexus that have been published include: “China’s Mediated Influence in the Philippines: Persuasion, Inducement, Coercion and Their Unintended Outcomes” in Evelyn Goh, ed. (2016), Rising China’s Influence in Developing Asia (London: Routledge); “Domestic Interests and Foreign Policy in China and the Philippines: Implications for the South China Sea Dispute,” Philippine Studies: Historical and Ethnographic Viewpoints (PSHEV), March 2014, 62:1; “Filipino Media and Public Opinion on the Philippines-China Disputes in the South China Sea: A Preliminary Analysis” with Sascha Gallardo in Sta. Romana, C. and Ang See, T., eds. (2013), Philippines-China Relations: Sailing beyond Disputed Waters, Special Issue of Chinese Studies Journal, Vol 10; “Towards a Strategic Framework for Management of the West Philippine Sea,” a white paper by the WPS Informal Expert Group, co-authored with Agustin, Baja, Balce, Batongbacal et. al., 2012. 5. A “domestification”of the SCS narrative was strengthened by Aquino’s issuance of Administrative Order No. 2(2012) calling for public agencies to refer to it as the “West Philippine Sea.” “South China Sea” may have been perceived as more remote to the fundamental interests of most Filipinos. 6. The concept of “grey zone” has grown popular in studies of maritime disputes in East Asia and Southeast Asia after it was given prominence in Japan’s New Defense Program Guidelines of 2010. [1] “Gray zone conflict is best understood as activity that is coercive and aggressive in nature, but that is deliberately designed to remain below the threshold of conventional military conflict and open interstate war. Gray zone approaches are mostly the province of revisionist powers—those actors that seek to modify some aspect of the existing international environment—and the goal is to reap gains, whether territorial or otherwise, that are normally associated with victory in war. Yet gray zone approaches are meant to achieve those gains without escalating to overt warfare, without crossing established red-lines, and thus without exposing the practitioner to the penalties and risks that such escalation might bring.” Hal Brands, “Paradoxes of the grey zone”, Feb 5, 2016. Foreign Policy Research Initiative. http://www.fpri. org/article/2016/02/paradoxes-gray-zone// 7. RA 9993, the Coast Guard law of 2009, empowers the PCG to enforce regulations in accordance with all relevant maritime international conventions, treaties or instruments and national laws for the promotion of safety of life and property at sea within the maritime jurisdiction of the Philippines and to conduct port state control implementation. It is also mandated to render aid to persons and vessels in distress and conduct search and rescue in marine accidents within the maritime jurisdiction of the Philippines, including the high seas, in accordance
40 Public Policy Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders
with applicable international conventions. In the performance of this function, the PCG may enlist the services of other government agencies and the merchant marine fleet. The roles of the Navy, on the other hand, include: defending the territory from external aggression; securing Philippine maritime areas from all forms of intrusions and encroachment, piracy, and drug trafficking; assisting other government agencies in protecting marine resources and environment; assisting in the conduct of rescue and relief operations not only during accidents at sea but even during natural calamities on land; and helping fulfill security- related international commitments. 8. It was believed that convening the National Security Council would mean calling on the presence of one of its ex-oficio members, former President Gloria Macapagal-Arroyo, whom President Aquino kept confined under hospital arrest. 9. Roundtable on Regional Fisheries Competition or Cooperation in the South China Sea: Implications for the Philippines, organized by the Asia Pacific Pathways to Progress Foundation, Inc. (APPFI), January 26, 2016, Astoria Plaza. 10. While the Palawan executives were disinterested, the courts in Puerto Princesa were involved in the management of cases filed against poachers, illegal entrants, and the like. Chinese fishermen would be detained in the Puerto Princesa Provincial Jail. 11. Interview with personnel of Naval Forces West, Palawan. 12. Interview with Vice Governor Ramon Lacbain of Zambales, Century Park Hotel , October 28, 2015. There are also similar reports of Pangasinan politicians being involved in black sand mining for the Chinese market.http://newsinfo.inquirer. net/813971/pangasinan-rep-espino-suspended-for-graft-over-black-sand- mining. 13. Allan Macatuno,“Zambales Taps Canadian Firm vs Intrusion in Disputed Seas,” Philippine Daily Inquirer, April 24, 2015,http://newsinfo.inquirer.net/687401/ zambales-taps-canadian-firm-vs-intrusion-in-disputed-seas#ixzz49UgVoX5S. 14. Interview with Coast Guard official. 15. Mortz C. Ortigoza, “Masinloc Mayor Hits China’s Navy Presence in Town,” Northern Watch, May 31, 2015, https://northwatch.wordpress.com/2015/05/31/ masinloc-mayor-hits-chinas-navy-presence-in-town/. The author cited Zambales Vice Governor Ramon Lacbain. 16. Mortz C. Ortigoza, “Masinloc Mayor Hits China’s Navy Presence in Town,” Northern Watch, May 31, 2015, https://northwatch.wordpress.com/2015/05/31/ masinloc-mayor-hits-chinas-navy-presence-in-town/.The author cited Masinloc Mayor Desiree Edora. 17. “Philippines Stops Protest Trip to Scarborough Shoal,” Rappler, May 18, 2012, http://www.rappler.com/nation/5576-ph-stops-protest-trip-to-scarborough- shoal. 18. Ben Blanchard, “China Says Philippines Fishermen Used Fire Bombs in South China Sea,” Reuters, March 22, 2016,http://www.reuters.com/article/
Volume XV (2016) 41 Baviera
us-southchinasea-china-philippines-idUSKCN0WO0W2; “China: Philippine Fishermen Used Fire Bombs in South China Sea,” GMA News Online, March 22, 2016, http://www.gmanetwork.com/news/story/560024/news/nation/china- philippine-fishermen-used-fire-bombs-in-south-china-sea. 19. Interview with Commodore Joel Garcia, Commander, National Capital Region – Central Luzon, Philippine Coast Guard, at the PCG NCR-Central Luzon Office in Binondo, Manila, September 4, 2015. 20. Fishing companies are often careful about reporting catch and location, as the information may be used by competitors. 21. Interview with personnel of Naval Forces West, Palawan. 22. Celeste Anna R. Formoso, “11 Chinese, 5 Filipino Fishers Caught with 300 Pawikan Face Environmental Raps,” Interaksyon, May 8, 2014, http://interaksyon.com/ article/86300/11-chinese-fishermen-intercepted-off-palawan-now-in-puerto- princesa; Aurea Calica, “Chinese Poachers Face Wildlife Raps,” The Philippine Star, May 9, 2014, http://www.philstar.com/headlines/2014/05/09/1321038/ chinese-poachers-face-wildlife-raps. 23. Mortz C. Ortigoza, “Masinloc Mayor Hits China’s Navy Presence in Town,” Northern Watch, May 31, 2015, https://northwatch.wordpress.com/2015/05/31/ masinloc-mayor-hits-chinas-navy-presence-in-town/. 24. “Radyo Inquirer 990AM: ‘Payao’ Deployment near Shoal in Full Swing – BFAR chief,” Philippine Daily Inquirer, May 20, 2012, http://globalnation.inquirer.ne t/37429/%E2%80%98payao%E2%80%99-deployment-near-panatag-shoal-in-full- swing-%E2%80%93-bfar-chief. 25. Singapore-based scholar Zhang Hongzhou writes about the Tanmen militia and the role of fishermen in the South China Sea disputes. See, for example, http:// www.manilalivewire.com/2015/08/china-building-an-armed-maritime-militia- as-its-first-line-of-defense/; http://thediplomat.com/2016/01/south-china-sea- the-story-of-the-tanmen-fishermen/; and https://www.rsis.edu.sg/wp-content/ uploads/2015/06/PR150602_Averting-the-Fishing-Crisis.pdf. 26. Aileen Bavieraand JayBatongbacal,“The West Philippine Sea: The Territorial and Maritime Jurisdiction Disputes from a Philippine Perspective (A Primer) Updated July 15, 2013,” Forging a New Philippine Foreign Policy, http:// philippinesintheworld.org/?q=node/2281. 27. For a more detailed account, see Aileen Baviera, “The Domestic Mediations of China’s Influence in the Philippines”, in Rising China’s Inlfuence in Developing Asia, ed. Evelyn Goh, London: Oxford Univ. Press, 2016. 28. Jim Gomez, Associated Press, “Philex Pertroleum-led Forum, China’s CNOOC Eye Deal in Disputed Sea,” GMA News Online, October 23, 2013, http://www. gmanetwork.com/news/story/332202/money/companies/philex-petroleum-led- forum-china-s-cnooc-eye-deal-in-disputed-sea. 29. Krista Angela M.Montealegre, “Philex Petroleum Unit Revives Talks with CNOOC over Joint Exploration in West PH Sea,” Interaksyon, July 18, 2014,http://
42 Public Policy Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders
interaksyon.com/business/91487/philex-petroleum-unit-revives-talks-with- cnooc-over-joint-exploration-in-west-ph-sea. 30. Presentation of Mr. Rino Abad of the Department of Energy at the Roundtable on Philippine Offshore Oil and Gas industry: Prospects for Competition/ Cooperation with China, Astoria Hotel, http://appfi.ph/publications/ presentations/306-4th-rtd-philippine-offshore-oil-and-gas-industry-prospects- for-competition-cooperation. 31. “Philippines to Offer Offshore Oil Blocks in China Claimed Areas,” Bloomberg, July 31, 2012, http://www.bloomberg.com/news/articles/2012-07-31/philippines- to-offer-offshore-oil-blocks-in-china-claimed-areas. 32. Transcript. Roundtable on Philippine Offshore Oil and Gas industry: Prospects for Competition/ Cooperation with China, January 26, 2016, Astoria Hotel. 33. Ibid. 34. Ibid. 35. Palanca argues that the downturn in Philippine exports to China after 2012 were due to lower demands for Chinese products in the West, considering that Philippine exports to China were part of global value chains. Clemente, on the other hand, noted the big deficits in trade in the years 2013-2015 and said this raised concerns that “they were caused by the maritime tension”. See Tina Clemente, “Understanding the Economic Diplomacy between the Philippines and China,” International Journal of China Studies 7. No. 2 (2016): 217; and Ellen Palanca (presentation at the symposium “In Search of a China Strategy” organized by the Asia Pacific Pathways to Progress Foundation, Inc., UP Diliman, Quezon City, August 17, 2016). 36. Tina Clemente, “Understanding Economic Diplomacy between the Philippines and China.” International Journal of China Studies 7, no. 2(2016): 215–33. 37. Pilipino Banana Growers and Exporters Association, “Philippine Banana Exports to China: Dealing with Sanitary and Phytosanitary Concerns” (presentation at the Roundtable on Philippines-China Trade and Investment Relations organized by the Asia Pacific Pathways to Progress Foundation, Pasig City, Philippines, June 11, 2015). 38. Tina Clemente, “Philippine Economic Vulnerability in Philippines-China Relations”(paper presented at the 10th International Conference on Philippine Studies (ICOPHIL), Silliman University, Dumaguete, July 6-8, 2016). 39. Krista Angela M. Montealegre, “Philex Petroleum Unit Revives Talks with CNOOC over Joint Exploration in West PH Sea,” Interaksyon, July 18, 2014, http://interaksyon.com/business/91487/philex-petroleum-unit-revives-talks- with-cnooc-over-joint-exploration-in-west-ph-sea. 40. David Chua (presentation at the Roundtable on Philippines-China Trade and Investment Relations organized by the Asia Pacific Pathways to Progress Foundation, Inc., Pasig City, Philippines, June 11, 2015). 41. Elmer San Pascual, “Chinese Investments in PEZA Economic Zones”
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(presentation at the Roundtable on Philippines-China Trade and Investment Relations organized by the Asia Pacific Pathways to Progress Foundation, Inc., Pasig City, Philippines, June 11, 2015). 42. Interview with Board of Investments official. 43. Julie M.Aurelio and Niña P.Calleja, “China Issues Travel Ban vs PH after Teener’s Kidnap,” Philippine Daily Inquirer, September 13, 2014, http://globalnation. inquirer.net/111042/china-issues-travel-ban-vs-ph-after-teeners-kidnap. 44. Data from the Department of Tourism. Also see Narzalina Lim, “Philippines- China Relations: Tourism Sector Situationer” (paper presented during the APPPFI-APPI Roundtable on Chinese Tourism in the Philippines, March 10, 2015)http://www.asiapacificprojects.com/research-and-statistics/). 45. Narzalina Lim, “Philippines-China Relations: Tourism Sector Situationer” (paper presented during the APPPFI-APPI Roundtable on Chinese Tourism in the Philippines, March 10, 2015) http://www.asiapacificprojects.com/research- and-statistics/. 46. Only 5% of survey respondents said the territorial dispute was an urgent national concern, according to a Pulse Asia Survey on Urgent National Concerns,March 24, 2015. 47. Interview with informant, a former official of FFCCCII. 48. Ibid. The Philippine Council for Reunification of China and the Federation of Filipino-Chinese Associations were reportedly organized by the Chinese embassy in Manila. 49. “DFA, PIA Conduct West Philippine Sea Information and Advocacy Campaign in Batanes,” Department of Foreign Affairs, December 14, 2015, http://www. dfa.gov.ph/newsroom/dfa-releases/8187-dfa-pia-conduct-west-philippine-sea- information-and-advocacy-campaign-in-batanes
Interviews
(July 27, 2015). Personal interview with Atty. Benjamin Tabios (Assistant Director for Administrative Services) and Ms. Sandra Arcamo (Chief, Fisheries Resources Management Division) at the Bureau of Fisheries and Aquatic Resources Office in Quezon City. (September 4, 2015). Personal interview with Commodore Joel Garcia (Commander National Capital Region – Central Luzon, Philippine Coast Guard) at the Philippine Coast Guard NCR - Central Luzon Office in Binondo, Manila (September 22, 2015). Group discussion with PN1, PN2, PN3, PN4 at the Philippine Navy Headquarters. (September 22, 2015). Personal interview with Mayor Eugenio B. Bito-onon, Jr. (Mayor, Municipality of Kalayaan, Pag-asa Island) at Kabayan Hotel, Pasay City. (October 27, 2015). Personal interview with NCWC1of the National Coast Watch Council – Secretariat and PCG1 (Commanding Officer of the MCS-3004 Vessel, Philippine Coast Guard) in Makati City.
44 Public Policy Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders
(October 28, 2015). Personal interview with Vice Gov. Ramon G. Lacbain (Vice Governor, Province of Zambales) at Century Park Hotel, Manila. (2015) Personal interview with BOI1(Board of Investments)
Proceedings of Roundtable Discussions
Asia Pacific Pathways to Progress Foundation, Inc. and Asia Pacific Projects, Inc. Roundtable Proceedings. “Are we Losing the Chinese Market? Philippine Tourism at a Time of Diplomatic Doldrums.” Roundtable on Chinese Tourism in the Philippines (Makati City: March 10, 2015). Asia Pacific Pathways to Progress Foundation, Inc. and Philippine Exporters Confederation, Inc. Roundtable Proceedings. Roundtable Discussion on China Trade & Investments in the Philippines (Astoria Plaza: June 11, 2015). Asia Pacific Pathways to Progress Foundation, Inc. and UP College of Law Institute for Maritime Affairs and Law of the Sea Roundtable Proceedings. “Regional Fisheries Competition or Cooperation in the South China Sea: Implications for the Philippines” (Astoria Plaza, Pasig City: January 26, 2016). Asia Pacific Pathways to Progress Foundation, Inc., Petroleum Association of the Philippines, and UP Institute Maritime Affairs and Law of the Sea Roundtable Proceedings. “Philippine Offshore Oil and Gas Industry: Prospects for Competition/Cooperation with China” (Astoria Plaza, Pasig City: February 18, 2016).
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Baviera, Aileen and Jay Batongbacal. “The West Philippine Sea: The Territorial and Maritime Jurisdiction Disputes from a Philippine Perspective (A Primer).” Forging a New Philippine Foreign Policy, 2013. http://philippinesintheworld. org/?q=node/2281 Blanchard, Ben. “China Says Philippines Fishermen Used Fire Bombs in South China Sea.” Reuters, March 22, 2016. http://www.reuters.com/article/ us-southchinasea-china-philippines-idUSKCN0WO0W2. Bloomberg. “Philippines to Offer Offshore Oil Blocks in China Claimed Areas.” July 31, 2012. http://www.bloomberg.com/news/articles/2012-07-31/ philippines-to-offer-offshore-oil-blocks-in-china-claimed-areas. Cabacungan, Gil, Redempto Anda, and Tarra Quismundo. “Kalayaan Mayor Urges PH Fishers to Defy China.” Philippine Daily Inquirer, January 11, 2014. Accessed May 13, 2016. http://globalnation.inquirer.net/96275/ kalayaan-mayor-urges-ph-fishers-to-defy-china. Calica, Aurea. “Chinese poachers face wildlife raps.” The Philippine Star, May 9, 2014. Accessed May 16, 2016. http://www.philstar.com/headlines/2014/05/09/1321038/ chinese-poachers-face-wildlife-raps. Cardinoza, Gabriel and Yolanda Sotelo. “Fishers were in Shoal for Shelter.” Philippine Daily Inquirer, February 28, 2014. Accessed May 24, 2016. http://globalnation. inquirer.net/99626/fishers-were-in-shoal-for-shelter. Clemente, Tina. “Philippine Economic Vulnerability in Philippines-China Relations.” Paper presented at the 10th International Conference on Philippine Studies (ICOPHIL), Silliman University, Dumaguete, July 6-8, 2016. ———. “Understanding Economic Diplomacy between the Philippines and China.” International Journal of China Studies 7, no.2 (August 2016): 215–33. Department of Foreign Affairs. “DFA, PIA Conduct West Philippine Sea Information Advocacy Campaign in Batanes.” December 14, 2015. http://www.dfa.gov.ph/ newsroom/dfa-releases/8187-dfa-pia-conduct-west-philippine-sea-information- and-advocacy-campaign-in-batanes. Diola, Camille. “Photos of Dead Turtles in Chinese Ship Anger Filipinos.” The Philippine Star May 21, 2014. Accessed May 25, 2016.http://www.philstar.com/ headlines/2014/05/12/1322282/photos-dead-turtles-chinese-ship-anger-filipinos. Dizon, Nikko. “Chinese Ships Fire Water Cannon at PH Fishers.” Philippine Daily Inquirer, February 25, 2014. Accessed May 25, 2016. http://globalnation.inquirer.net/99374/ chinese-coast-guard-used-water-cannon-vs-filipino-fishermen-bautista. Formoso,Celeste Anna R. “11 Chinese, 5 Filipino Fishers Caught with 300 Pawikan Face Environmental Raps.” Interaksyon, May 8, 2014.http://interaksyon.com/ article/86300/11-chinese-fishermen-intercepted-off-palawan-now-in-puerto- princesa.
Fourteenth Congress of the Republic of the Philippines. Republic Act No. 99931 or An Act Establishing the Philippine Coast Guard as an Armed and Uniformed Service attached to the Department of Transportation and Communications, Thereby
46 Public Policy Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders
Repealing Republic Act No. 5173, as Amended, and for other Purposes (Approved Feb 12, 2010). GMA News Online. “China Philippine Fishermen Used Fire Bombs in South China Sea.” March 22, 2016. http://www.gmanetwork.com/news/story/560024/news/ nation/china-philippine-fishermen-used-fire-bombs-in-south-china-sea. Gomez, Jim (Associated Press). “Philex Pertroleum-led Forum, China’s CNOOC Eye Deal in Disputed Sea.” GMA News Online. October 23, 2013. http://www.gmanetwork.com/news/story/332202/money/companies/ philex-petroleum-led-forum-china-s-cnooc-eye-deal-in-disputed-sea. Inquirer.net. “Radyo Inquirer 990AM: ‘Payao’ Deployment near Shoal in Full Swing – BFAR Chief” Inquirer, May 20, 2012, http://globalnation.inquirer.net/37429/% E2%80%98payao%E2%80%99-deployment-near-panatag-shoal-in-full-swing- %E2%80%93-bfar-chief. ———. “Stay Clear of Disputed Sea, Coast Guard Tells PH Fishermen.” Philippine Daily Inquirer, February 12, 2014. Accessed May 25, 2016. http://www.inquirer. net/west-philippine-sea/articles?nav=118621&chan=9. ———. “Chinese Boats Harvest Giant Clams, Corals.” Philippine Daily Inquirer, March 7, 2014. Accessed May 16, 2016. http://www.inquirer.net/west-philippine-sea/ articles?nav=99921&chan=9. Laude, Jaime. “Chinese Fishing Boat Grounded in Tubbataha.” The Philippine Star, April 10, 2013. Accessed May 20, 2016. http://www.philstar.com/ headlines/2013/04/10/928911/chinese-fishing-boat-grounded-tubbataha. Laude, Jaime. “Phl Fishing Boat Harassed by Chinese Coast Guard.” The Philippine Star, August 19, 2014. Accessed May 26, 2016. http://www.philstar.com/ headlines/2014/08/19/1359190/phl-fishing-boat-harassed-chinese-coast-guard. Lozada, Bong. “PH, US Marines Kick Off Balikatan Exercises in Zambales.” Philippine Daily Inquirer, May 9, 2014. Accessed June 22, 2015. http://globalnation.inquirer. net/103926/ph-us-marines-kick-off-balikatan-exercises-in-zambales. Mangosing, Frances. “Group Slams Palace Plan on Alternative Fishing Grounds.” Philippine Daily Inquirer, May 29, 2013.Accessed June 22, 2015. http://globalnation. inquirer.net/75951/group-slams-palace-plan-on-alternative-fishing-grounds. Macatuno, Allan. “In Zambales Town, China Intrusion into PH Seas is Most Felt.” Philippine Daily Inquirer, June 20, 2014. Accessed May 25, 2016. http://newsinfo. inquirer.net/612633/in-zambales-town-china-intrusion-into-ph-seas-is-most-felt. Macatuno, Allan. “Chinese Ships Ram PH Fishing Boats.” Philippine Daily Inquirer, February 4, 2015. Accessed May 26, 2016. http://newsinfo.inquirer.net/670244/ chinese-ships-ram-ph-fishing-boats. ———. “Chinese Shoo Away Filipino Fishermen’s Boats, Ship Fires Water Cannon at Fishermen.” Philippine Daily Inquirer, April 19, 2015. Accessed May 26, 2016. http:// globalnation.inquirer.net/120904/chinese-shoo-away-filipino-fishermens-boats. ———. “Zambales Taps Canadian Firm vs Intrusion in Disputed Seas.” Philippine Daily Inquirer, April 24, 2015. Accessed May 29, 2016. http://newsinfo.inquirer. net/687401/zambales-taps-canadian-firm-vs-intrusion-in-disputed-seas.
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———. “China Intrusion Won’t Slow PH Fishers.” Philippine Daily Inquirer, May 23, 2015. Accessed April 20, 2015. http://newsinfo.inquirer.net/693052/ china-intrusion-wont-slow-ph-fishers. Macatuno, Allan, Tonette Orejas, and Redempto Anda. “Filipino Fishers Returning to Scarborough Shoal.” Philippine Daily Inquirer, February 8, 2014. Accessed May 24, 2016. http://globalnation.inquirer.net/99692/ filipino-fishers-returning-to-scarborough-shoal. Manila Economic and Cultural Office in Taiwan (MECO) and the Taipei Economic and Cultural Office in the Philippines (TECO). Agreement Concerning the Facilitation of Cooperation on Law Enforcement in Fisheries Matters between the Manila Economic and Cultural Office in Taiwan and the Taipei Economic and Cultural Office in the Philippines (Signed Nov 5, 2015). Montealegre, Krista Angela M. “Philex Petroleum Unit Revives Talks with CNOOC Over Joint Exploration in West PH Sea.” Interaksyon, July 18, 2014 .http://interaksyon. com/business/91487/philex-petroleum-unit-revives-talks-with-cnooc-over-joint- exploration-in-west-ph-sea. Ortigoza,Mortz C. “Masinloc Mayor Hits China’s Navy Presence in Town.” Northern Watch, May 31, 2015. https://northwatch.wordpress.com/2015/05/31/ masinloc-mayor-hits-chinas-navy-presence-in-town/. Pazzibugan, Dona. “32 Chinese Ships in Shoal, Bar Filipino Fishers.” Philippine Daily Inquirer, May 9, 2012. Accessed May 26, 2016. http://globalnation.inquirer. net/36035/32-chinese-ships-in-shoal-bar-filipino-fishers. Philexport, “Proposed Philippine Export Development Plan (PEDP) 2008-2010.” Presentation to Philexport GMM, Manila, July 23, 2008. http://www.philexport. ph/web/guest/export-development-plan-2011-2013. ———. “The Philippine Export Development Plan 2011 – 2013.” Accessed May 25, 2016. http://www.philexport.ph/web/guest/export-development-plan-2011-2013. ———. “The Philippine Export Development Plan 2015-2017: Executive Summary.” Accessed May 25, 2016. http://www.dti.gov.ph/emb/index.php/export-intelligence-2/ phil-export-devt-plan. Philippine Statistics Authority. “Philippine Exports Performance by Country” (2009-2015). Pulse Asia Research Inc. “December 2015 Nationwide Survey on Urgent Personal and National Concerns of Filipinos.” January 11, 2016. ———. “Pulse Asia Research’s September 2014 Nationwide Survey on Urgent National Concerns, National Administration Performance Ratings on Selected Issues, and Possibility of Successfully Combatting Corruption in Government.” October 9, 2016. ——. “Pulse Asia Research’s March 2015 Nationwide Survey on Urgent National Concerns and the Performance Ratings of the National Administration on Selected Issues.” March 24, 2015. Republic of the Philippines. Republic Act No. 9522 or An Act to Amend Certain Provisions of Republic Act No. 3046, as Amended by Republic Act No. 5446, to
48 Public Policy Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders
Define the Archipelagic Baselines of the Philippines, and for other Purposes (Aprroved: March 10, 2009). Accessed May 30, 2016. http://www.gov.ph/2009/03/10/ republic-act-no-9522/). Putnam, Robert. “Diplomacy and Domestic Politics: The Logic of Two-Level Games.” International Organization 42, no. 3(Summer 1988):427-60. Rappler. “Philippines Stops Protest Trip to Scarborough Shoal.” May 18, 2012. http:// www.rappler.com/nation/5576-ph-stops-protest-trip-to-scarborough-shoal. Romero, Alexis. “China Fishing Boats Cordon Off Spratlys.” The Philippine Star, May 8, 2013. Accessed May 26, 2016. http://www.philstar.com/ headlines/2013/05/08/939648/china-fishing-boats-cordon-spratlys. Sabillo, Kristine. “Palace Backs Arrest of 11 Chinese fishers amid Beijing Protest.” Philippine Daily Inquirer, May 8, 2014. Accessed May 25, 2016. http://globalnation. inquirer.net/103863/palace-backs-arrest-of-11-chinese-fishers-amid-beijing- protest. Santos, Matikas. “Filipino Fishers Repeatedly Harassed by China.” Philippine Daily Inquirer, February 25, 2014. Accessed May 21, 2016. http://globalnation.inquirer. net/99443/ph-fishers-repeatedly-harassed-by-china. Ubac, Michael Lim. “Gov’t to Open New Fishing Areas.” Philippine Daily Inquirer, May 29, 2013. Accessed April 22, 2016. http://globalnation.inquirer.net/75931/ govt-to-open-new-fishing-areas/comment-page-1. Yap, D. J. “Filipino Fishers Return to Scarborough Shoal amid Chinese Presence.” Philippine Daily Inquirer, April 30, 2012. Accessed May 26, 2016. http://globalnation.inquirer. net/35265/filipino-fishers-return-to-scarborough-shoal-amid-chinese-presence.
Volume XV (2016) 49 Social Media Use by Frontline Government Agencies: Review and Recommendations
CLARISSA C. DAVID*
Abstract
This paper reports on three case studies conducted to systematically examine how frontline government social services use social media and how their practices might be improved to optimize engagement with the public to serve agency goals, and to investigate the organizational setting around social media management within the agencies. The three cases involve the Department of Education (DepEd), the Department of Health (DOH), and the Home Mutual Development Fund (HMDF). The results indicate that there is a wide variety of approaches to social media, from a closed and outsourced system where materials posted go through layers of high-level approval to open and internal systems with greater autonomy in content development. Social media are now considered necessary parts of communication strategies, but how each agency adopts them tends to differ. Considering that these are official government social media accounts, there is a very high level of engagement with audiences for some of the agencies. The paper then makes recommendations on policies, on organizational arrangements, and on integration into broad overall digital and communication strategies of frontline government agencies.1
Keywords: social media, Facebook, government communication, public communication
* Email: [email protected]
50 Public Policy Social Media Use by Frontline Government Agencies: Review and Recommendations
Communication plays an important role in governance, and its strategic use can service the goals of different kinds of government agencies and offices. In particular, communication between agencies and their clients or constituents is necessary to fulfill various purposes. Offices need to inform and engage their constituents, who in turn need to have a way to bring their concerns to offices. Depending on the function of an agency, the extent of public engagement through communication varies, but every agency in government requires communication activities. Almost all government agencies have communication offices that take charge of both internal and external communication functions. The functions normally include press or media relations, public relations, information dissemination, and corporate or organizational communication. Social media, as it has grown in importance, is now included among these functions. Government agencies used to communicate with their public either directly through social service delivery or in a completely mediated manner through the press. The growth of social media use among Filipinos has provided a new way of communicating with relevant publics, a direct manner that is able to broadcast messages to large, connected, and networked audiences. Through the use of the two most popular social media applications in the country (Facebook and Twitter), government agencies are now able to bring messages to large numbers of people online without having these messages reframed and filtered by media organizations (Shirky 2010). At the same time, the interactive and networked nature of social communication online means that information flows both ways—publics communicate with institutions as well (Murthy 2013). This paper reports on three case studies conducted to systematically examine how frontline government social services use social media and how their practices might be improved to optimize engagement with the public to serve agency goals, and to investigate the organizational setting around social media management within the agencies. The three cases involve the Department of Education (DepEd), the Department of Health (DOH), and the Home Mutual Development Fund (HMDF). The assessment operates within a set of normative assumptions. First, that communicating with the public either directly or indirectly is necessary for good democratic governance, and that more communication is always better. Second, that citizen engagement with state institutions provide enabling environments for effective and efficient government. And finally,
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that open government and open data are positive values that support goals of transparency and accountability. Taken together, these mean that institutions of government should be communicating with the public often, openly, and in an interactive manner.
What is Social Media and What are Its Possibilities for Government?
Social media are platforms for communication. They are channels through which individuals self-organize into communities. The platform allows people in a shared network to interact, share content, and collaborate online. There are different popular platforms, foremost of which are Facebook (FB), Twitter, and Instagram. Examples of more specialized ones are LinkedIn for professional networking, Snapchat for sharing photos, and blogs. Even with a relatively low rate of Internet access (estimated at 43 percent2), the vast majority of Filipinos that do access it are on social media. A large portion of Internet users is on Facebook (latest estimate 94 percent), and a much smaller portion is on Twitter. The Philippines is among the top 15 countries with the highest Facebook penetration rates in the world (Naidu 2013). Market innovations and the spread of smartphones have driven down the cost and broken down barriers to FB use. According to FB, there are 50 million Filipinos on the platform in the country. One of the major mobile phone carriers offers free FB access without data charges, allowing users to browse content on their news feeds multiple times a day. This means that a Filipino with a smartphone can access FB for free but cannot visit an official website or text (via SMS) a government office without charges. As the prices of smartphones continue to decline, there is reason to expect even broader social media use over the long run. Although there are many different social media platforms, this study examines the use of only two of the main ones, Facebook and Twitter. And between the two, Facebook is considered much more important because of its massive reach. Twitter, by way of individual reach, is not big in the country, but it is heavily used by reporters, editors, and bloggers. It provides agencies a good way to get their messages to the rest of traditional media.
Why is Social Media Different?
Social media has a number of features that distinguishes it from other channels of communication. Information posted on social media reaches a
52 Public Policy Social Media Use by Frontline Government Agencies: Review and Recommendations broad audience without the mediation provided by reporters and editors of the traditional media. In this way social media posts provide greater control over the messaging and narrative of all content and communication of an agency. It does many-to-many communication instead of the usual one-to-many. That is, when an organization participates in the social media space, it is participating in a conversation and not in a broadcasting situation where the agency speaks and everybody else listens. Interactive platforms mean that when an agency posts, they get engagement from constituents in the form of comments, likes, and shares. Information flows both ways; the channel allows the agency to receive information from members of the public. Comments by the public on an agency’s FB page are also publicly visible by default, which means that when a citizen posts criticism on the agency page it is visible to everyone. Government communication in the age of networked society is much different compared to communication in the age of one-way information dissemination-type media. Figure 1a shows how communication worked before citizens were online (Shirky 2009). Government is the source of communication, and it sends information out to audiences, either directly to the public or through the press. There was little, if any, feedback mechanism that allowed government to be the recipient of information when it was the public that sought to communicate with agencies. Figure 1b depicts communication flows in a social media setting (Shirky 2009). Government is both the source and the audience. Facebook pages and Twitter accounts broadcast information directly to a larger public, including the press. Unlike traditional media, however, these platforms allow citizens to send messages directly to government agencies (Waters and Williams 2011). It is, therefore, up to the agencies to determine how they are going to treat direct comments and queries through social media sites, officially or unofficially, and with some thought to the implications regarding institutional rules of communicating with beneficiaries. For example, when a citizen stuck in traffic along Commonwealth Avenue on a Sunday morning wants to know what the reason for the traffic is, she can tweet @mmda directly. This message is public and can be seen both by the Metro Manila Development Authority (MMDA) and everybody else on Twitter. The person manning @mmda can respond directly to the query or not, can choose to engage followers or to remain a broadcaster.
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Figure 1. Types of communication flow between government and citizens
Often, the crowdsourcing potential of social media is overlooked by institutions that have a presence on social networking sites. Engaged followers are not only willing to ask questions they need answers to, but are also willing to provide information when asked. For example, the Department of Education once asked tweeters to send them photos of school building damage caused by Typhoon Glenda, and a number of people responded. This is important information that can aid in logistical planning for response. The theoretical framework we adopt in this study is cognizant of the various types of interaction and engagement that are practiced on social media to determine the appropriate policies for government institutions. Communication practitioners operate from a framework of multiple audiences. Audiences are not homogenous sets of populations, but can be subdivided in meaningful groups that should be reached and engaged in a targeted manner. Different audiences will find different kinds of information interesting and useful, and each type of audience requires a different sort of engagement. It is similar to targeting different stakeholders, except that in this case the audiences are not only stakeholders; they include people who have a general interest in the subject and may not be directly affected by the activities of the agency. For government institutions, some of the important sub-audiences are: (1) issue publics, or especially interested members of the citizenry, (2) policy elites, (3) target beneficiaries in the population, (4) the press, (5) the general public, and (6) internal publics. This framework accommodates the varied nature of audiences and their role in agency engagement with citizens. It results in a policy that gives specific and useful guidance on how to design messages that maximize social media’s impact on agency goals.
54 Public Policy Social Media Use by Frontline Government Agencies: Review and Recommendations
This policy research investigates how social media activities are conducted within the organization and in the confines of the institutional constraints that typically accompany government activities. Any policy of social media should be cognizant of the impact of institutional arrangements on the freedom to publish information, the ability of the communication team to directly engage with audiences through social networking sites, and the overall interest in expanding public engagement with the agency. While there are clear benefits for agencies to have a direct line of immediate and fast communication with its publics, there are limitations to its use and there are risks attendant to ease of adoption. Anybody with a computer and a laptop can open and run a social media feed for an institution, but the messages that will be relayed are limited in that these must be short yet self-contained. Messages lose contextual information that may be necessary to make sense of what is shared (Harlow and Johnson 2011). In addition, information via social media expires rapidly; it gets drowned out by millions of other messages that are being posted at the same time. How can attention be gained and sustained? What kinds of information can be officially released through social media? Who are allowed to speak on behalf of the institution and to what extent are these messages binding? Among the people manning social media accounts for government, to what extent are they able to fully address queries posted online? Online presence signals a readiness to respond in a fast manner, so presence in social media carries with it a public expectation of rapid response. Agencies must be prepared to provide this by having the appropriate team in place with sufficient manpower resources.
The Special Potential for Frontline Service Agencies
As with their other communication activities, frontline government agencies can use social media for many functions. They have important public information to disseminate regarding programs and policies. Social media are critical contact points for interfacing with constituent publics and stakeholders (Nitschke, Donges, and Schade 2014). Fostering communication with the general public and with special interest groups creates transparency. When people see news about the activities of an agency, even when the information emanates from the institution itself for public relations purposes, there is greater awareness of the kind of work being done within the agency. The general public usually has a limited understanding of the work of many of the biggest and most important
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agencies of the government, even those that deal directly with service delivery like the DepEd and the DOH. Any information about agencies is better than no information; left to the news media to report on the activities of agencies, very little information will trickle down to the public. Social media allows agencies to broadcast, in a manner of speaking, any kind of message (Allen 1992; Jue, Marr, and Kassotakis2010). This creates a sense of presence for constituents, making them aware that on a daily basis, work is being done in these institutions. As a consequence, a greater understanding of the scope of work of agencies will arm citizens with the necessary knowledge to find what they need when they are in need of services from an agency. For example, the MMDA has a strong social media presence; those on Twitter who are aware of this presence can directly query MMDA about traffic situations in specific streets and areas, and expect a response within a short period of time. By contrast, those who rely on the MMDA for traffic information only through radio reports cannot ask about specific streets and areas. The channel allows the agency to promote its work while at the same time expanding direct delivery of service through social media channels. All of these scenarios would also contribute to greater trust in government institutions assuming that the level of transparency perceived by publics accessing social media channels to converse with government agencies is high. A social media strategy can and should incorporate a goal of greater engagement with the public. Some agencies maintain social media accounts only to send messages out, never to respond directly to comments by citizens. On the other hand, there are agencies that consider social media queries official inquiries that should be responded to with immediacy, as the channel demands a quick turnaround. The approach that an agency takes depends largely on the internal policy (or lack thereof) and the institutional structure surrounding social media management. These will be examined as important factors in assessing the effectiveness of the social media presence. Government agencies also use social media to converse with the press. While traditionally, agencies would have structured communication through press conferences and press releases (Bennett 2004), or unstructured communication through interviews, the social media environment has created a new relationship with reporters and editors that is somewhere in between (Lasorsa, Lewis, and Holton 2012). It provides the space to be pre- planned and yet is not as rigidly presented as a full press conference. The press is an important target audience for government agencies and officials, and reporters and editors are increasingly turning to social media to find sources
56 Public Policy Social Media Use by Frontline Government Agencies: Review and Recommendations of stories and official statements (Poell and Borra 2012). This sort of interaction is new, practices have not been institutionalized, and internal policies would help clarify the role that social media can play in government-press relations. Inter and intra-agency communication can be enabled through social media channels (Franks 2010). This is evident during disasters when organizations like the National Disaster Risk Reduction and Management Council (NDRRMC) cooperate with MMDA in determining damage assessments or status of flooding in the metro, all through communication on Twitter, either directly or through the press’ Twitter accounts. Since the mandates of line agencies involve public-facing service delivery, there should be a direct line of communication between agencies and citizens, allowing as well for a direct line of accountability. They have, or at least should have, closer relationships with citizens, and so most line agencies deal with large external publics or audiences. Many agencies have functioning social media accounts, but the nature of their use varies widely.
Table 1. Audience segments and potential social media functions Channel for queries and feedback, source of information, Client-citizens dissemination of programs, rules, guidelines, forms, etc. Internal audiences/ Dissemination channel, source of information, creating Corporate culture of shared credit for work, building networks of communication practice, place to share best practices General public and CSOs Overall awareness of agency’s work, functions, and mandate Press/News Contact point for comment, official statements and organizations positions, general monitoring for stories Other agencies Coordination and broad awareness of activities
Table 1 illustrates the different ways in which social media can function for agencies in relation to the different audiences they usually deal with. In theory, agencies can take comments and feedback directly from beneficiaries and use social media as a channel for customer response or service delivery. Social media can be used to monitor the news environment so agencies can respond to fast-developing situations. The channels are, in fact, routinely used for disaster situations by different government agencies in a coordinated way. Social media can also be used generally to provide a venue of promotion for the institution’s work and its image. A strong and constant presence gives citizens the impression that the agency is doing its work, is accomplished, and is responsive to the needs of its target publics.
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The present research was conducted to answer the following questions: 1. How do frontline social service agencies use social media? 2. How might the practice of social media engagement with the public and the press improve to serve agency goals? 3. What is the organizational setting around social media management within agencies? 4. What are the ideal organizational arrangements for social media management to enable best use of the platform to assist in achieving agency objectives?
Method
This research into practices of line agencies was conducted through case studies, in-depth and comprehensive investigations of various aspects of different agencies’ social media communication practice. Three cases were selected, each with a different approach to its social media but all of them with a significant presence on Facebook for at least three years. A focus on frontline agencies is applied since these are the ones that must have strong ties with broad constituents and beneficiaries. They often interface with the public and should have existing relationships with large segments of the population. The nature of their work puts them in direct line of sight of important public issues that are the most critical points of contact and can be the most effectively served by social media strategies. The three cases examined are the Department of Education (DepEd), Department of Health (DOH), and the Home Development Mutual Fund (HDMF, more popularly known as Pag- Ibig fund). These agencies are mandated to provide social services on a massive scale and, compared to others, they have immediate and direct contact with their constituents or clients. All three have active Facebook accounts and some have active Twitter accounts, although Twitter activity tends to be seasonal. Each case investigation entailed the following specific information gathering activities: (1) interviews with communication staff, (2) interviews with staff responsible for creating content and posting on social media accounts, (3) observation and analysis of online activities of social media accounts, (4) documentary review of communication policies, (5) analysis of metrics of engagement and reach, and (6) analysis of institutional structures and support for social media use. Fieldwork and observation work was conducted between April and December 2015. Engagement metrics are the numbers of comments,
58 Public Policy Social Media Use by Frontline Government Agencies: Review and Recommendations shares, and likes of each post. In contrast to lower ones, higher values signal that the post is interesting enough to motivate people to engage with the content and spread its reach. All three are social sector agencies and have direct dealings with the public. This section provides a brief background of the features of each agency that have a direct relevance to social media.
Department of Education (DepEd)
The DepEd oversees a massive institution comprised of over 47,000 public schools, over half a million public school teachers, and layers of division, regional, and central offices. In an average year, around 20 million students are enrolled in public schools at both the elementary and high school levels. Its structure is centralized, meaning all schools report directly to and are funded through the central office. As such, DepEd has a direct line of communication to all public school principals, staff, and teachers. DepEd has a large internal public that figures into its social media strategy. Their internal publics include all employees, offices, and sub-national organizations that work directly with the agency in various capacities. Schools are not all wired but many are connected to the Internet and active on social media. Subnational offices and internal interest groups (for example, division-level disaster coordinators) create FB groups and accounts, small communities where functions and interests are shared. These pages are used to organize and announce events, share experiences, post information, and maintain networks. The internal publics are very loosely organized and many are transient, characterized by high levels of activity in the beginning and then tapering off after some time. Still, the groups sometimes have intermittent functions. The external public is very large for DepEd and includes students, parents, and broader communities (e.g., LGUs, NGOs, the private sector). However, the information needs of each set are generally low because their relationship with schools is straightforward and the highly localized presence of schools and division offices means external publics have direct access. There are information needs that are regular and scheduled (e.g., requirements and dates for enrollment, events, graduation), and there are information needs that are unanticipated (e.g., walang pasok advisories for school closures). In addition to the external public to whom service is directly supplied, there are “political” external publics who have a broader interest in the DepEd
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as a government institution. The main mediator of this public is the press, specifically reporters and editors tasked to cover the education beat. There are seasonal news cycles when the DepEd gains much attention—the start of every school year, and, on a more unscheduled basis, when there are developments for large reform measures (e.g., K-12). DepEd has strong relationships with other agencies, such as the DOH, National Disaster Coordinating Council (NDCC), and Department of Social Welfare and Development (DSWD), because it is involved in programs and actions that require access through schools. In many ways it functions as an information hub between these agencies and the public in some cases—for example, for mass vaccination initiatives through schools, large natural hazard events, and national programs.
Pag-Ibig
The service of Pag-Ibig is to provide individual loans toward home ownership. Its audiences are more specific, but the products and information are more complex. It is not a large bureaucratic institution like health and education, but provides housing support on a frontline basis and is the only housing office that deals directly with the public. Pag-Ibig’s internal audience is small and very controlled. It does not have city or municipal-level offices. Since its products are confined to housing loans, it does not have close working relationships with agencies outside of the key housing offices. Its external audience, while smaller and more specialized than that of DOH and DepEd, is highly involved. Since the product and the audience are both specific, information exchange and efficiency of that exchange are critical to effective service delivery. A cursory examination of the Pag-Ibig FB page reveals that people interested in taking out loans ask direct questions about requirements and loan products. This is not the behavior of audiences for the other agencies where the nature of information exchange is more homogenous and less specialized.
Department of Health
The DOH is a devolved agency and does not have direct reporting relationships with the smallest health service units in local areas, the barangay health centers. Since its service delivery functions were transferred to local
60 Public Policy Social Media Use by Frontline Government Agencies: Review and Recommendations government units (LGUs), the DOH central office’s function shifted toward policy-setting, response to epidemics and other health hazards, overall monitoring, and provision of social health insurance, among others. The internal audiences remain large, but the nature of their relationship with these audiences is different compared to the DepEd. While municipal or barangay health workers do not report to the DOH, their actions and programs are directly affected by decisions made by the DOH. Thus, there should be some interest in staying connected, but the imperative is not as strong as their imperative to be directly connected with the LGUs. More important to the DOH are its external audiences. Their press and communication activities are often comprised of health advisories, information about risks of diseases, campaigns about vaccinations, and other health prevention programs. By and large, the communications conveyed by the DOH central office has remained confined to health promotion.
Table 2. Facebook and Twitter follower counts (May 2016) Agency Facebook Followers Twitter Followers Dept. of Education 1,394,562 2,624,619 Dept. of Health 547,248 416,812 HDMF 577,219 3,079
Discussion of Findings
In this section I discuss institutional arrangements, analytical findings, and implications on effectiveness of social media use. All three agencies make active use of Facebook, but their use of Twitter is either intermittent or nonexistent. Thus the main observations presented here pertain largely to FB accounts. The three agencies have full intention to use social media as a key part of their communication operations for public-facing activities. Among the three, Pag-Ibig takes the most innovative approach and active stance in terms of making full use of the features of FB to connect with service clients. DepEd, in part because of its massive size and the size of its direct constituents, is also highly active and responsive online, but the nature of responsiveness is more generic and informational compared to Pag-Ibig which almost crosses over to client-servicing in the channel. DOH is the least active and has the lowest level of responsiveness, and the main reason for this is its institutional arrangement and onerous content approval process.
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Content Style and Strategy
The primary driver of audiences in a social media account is content—its form and substance. If content is not compelling, interesting, attention- grabbing, and optimized for the medium, then audiences are not earned and kept, even if one spends on advertising. Posts can be highly technical and not understandable to a general audience, or too heavy on text and thus not visually attractive. Timing and frequency of posts, when done in a strategic manner, can ensure audience retention and greater reach. DepEd’s FB account posts content that has a high production value, is original, and has relevance to different audiences. The messages contain mostly national-level, as opposed to local-level, relevant information—the same as Pag-Ibig. They are timely and relevant to a season in the academic year. These types of information appeal and are pertinent to a broader audience and are more likely to get shared. Using visual features like infographics and photos, a regular practice by both DepEd and Pag-Ibig, is considered best practice. Reposted news and announcements tend to get lower public engagement, and DOH relied on these for content throughout the months included in this study. For DOH, in particular, many posts are press releases, publicity photos for events, and health advisories. Across these posts, engagement is relatively low, a consequence of the type of content normally shared on the site.
Table 3. Percentage of Facebook posts with type of content by agency Content of post DepEd Pag-Ibig DoH Photo 80.2 85.5 18.6 Reposted News Articles 10.6 8.7 75.5 Reposted Announcements 5.5 4.3 3.6 Highlights Agency Head 8.9 15.9 17.9 Press Release 11.8 -- 3.8 Link to agency website 28.2 100.0 0.9 Link to other websites 15.2 13.0 78.9 Type of information Special programs 25.0 4.3 2.0 Regular services 42.5 27.5 9.9 Local 13.8 -- 14.8 National 62.4 46.4 11.0 Process 18.7 18.8 8.3
62 Public Policy Social Media Use by Frontline Government Agencies: Review and Recommendations
Most impressive for DepEd’s account, and the reason for its continued relevance and large reach, is its active role during times of disaster preparation and response. When there are typhoons, heavy rains, or other forms of local crises, its FB and Twitter accounts actively disseminate information about cancellation of classes, solicit reports from followers to the channels for status reports, and responds directly to questions posted in relation to the event. During these times, audiences closely follow the pages and get used to following and engaging with posts, behavior that carries over to regular days. One of the main issues of the social media strategies of all three agencies is the degree to which the agency website figures into the picture. For the DOH, and to some extent DepEd, there is no clear and regular link between social media posts and the website. FB accounts are not repositories of information as people cannot easily search through it if they are looking for something specific related to the services offered by the agencies. Social media strategies should be a seamless part of a broader online strategy that includes the website and quick adoption to new platforms that might arise. Both the website and the social media strategies should be designed in service of two broad goals: public-facing communication activities and internal institutional efficiencies. There are types of posts that are not popular and should be avoided or used sparingly. These include the practice of DOH at the time of this research of making many posts that feature photos with the head of the agency. Doing this too much runs the risk of the page being seen as a publicity channel, causing audiences to tune out. The popular assumption that human interest angles attract audiences, which holds true for news writing, does not appear to hold true with social media posts. Both DepEd and DOH data indicate that posts with human interest angles get a slightly lower engagement rate.
Responsiveness
If social media is going to be taken seriously by the public as a channel to reach line agencies, the accounts must be responsive in a real way. This means that ordinary citizens should be able to send messages, post comments, reach out in some way, and expect some feedback. Using the channel to respond to queries in a public way, and not only to broadcast information, will result in better service delivery as well as reputation gains from being a government office that is accessible and engages the public. The other side of this, or the
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Figure 2. Engagement rate by post with agency head risk, is that leaving queries unanswered will result in negative views and can erode the agency’s reputation. DepEd’s page is highly active and engages its readers. It posts announcements and informational graphics that invite much interest from clients. Posts with practical information can get flooded easily with questions and comments, so answers are sometimes reposted for questions that are asked frequently. The answers come from the institutional page, and each answer tags the person asking, even if the same answer was posted before for a different person’s query. It is good practice because it shows that the institution is paying attention and taking the query seriously. When the questions regard particular people or cases that should not be discussed publicly, they move the conversation to private messenger where it is more thoroughly addressed or is referred to the relevant office in the institution. In sharp contrast, the DOH page, while active, gets low engagement. The information posted tends to be about personal health, and sometimes promotes events of the agency. There is limited interaction between the institutional account and members of the public posting. Although the account attempts to give responses to comments, they are not answers to the questions but just referrals to a phone number to call. This post is repeated over and over in a public way to different commenters. This behavior does not appear
64 Public Policy Social Media Use by Frontline Government Agencies: Review and Recommendations responsive, and may backfire because the public can see the canned response posted repeatedly. The most highly responsive and ambitious FB page is that of Pag-Ibig. All comments that pose questions are given direct answers and then provided web links to the full information needed. The answers are in Filipino and written in a casual but respectful tone. This level and specificity of engagement means that the FB page is functioning as a transaction window, saving on transaction cost for both the person asking and the agency.
Organizational Arrangements
Social media teams’ strategic advantage is best utilized under conditions of direct access to the agency’s offices and a low degree of control over content postings. Where the social media person or team is lodged matters in their ability to experiment and innovate in the online space. When a competent and experienced social media or communication team is given a freer hand in content strategy, design, and execution, the FB channel tends to have innovative content and be more responsive. This is conditional on the communication team knowing a substantial amount of technical and operational information within the agency. All social media functions for the three cases are lodged within communication offices, but the manner in which this function is dispensed varies greatly across the three agencies. It is influenced directly by the level of prioritization by the agency administration and the manpower capacity of communication offices. The least involved communication office is the DOH. The Health Promotion Office functions as the de-facto communication arm of the agency, although its mandate is confined to health promotion and does not include internal communication. Given its limited manpower capacity for the communication function, the DOH decided early on to subcontract its social media management to a private firm. The firm was charged with maintaining the accounts, posting content, crafting infographics, and overseeing general strategy. Different offices within DOH send the information they wanted posted to the health promotions office, which approves and clears them for posting. In one instance in 2014, a viral video that reflected poorly on the DOH circulated online. It had been posted on the social media account and immediately picked up and spread. The video was of a stage performance of children singing and dancing to a song that was disparaging to young girls
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and boys. The performance was part of a roadshow program of the DOH to promote responsible parenthood. It was widely circulated, picked up by national media, and invited scathing criticism. The subcontractor was caught off guard and did not know how to control the situation. The DOH responded in a belated manner. After this incident, the DOH made it a policy to involve the Office of the Secretary in the approval process of social media posts; the agency’s reaction was to place strict controls on social media. The combination of having strict controls over content and reliance on a subcontractor leads to generally lower potential impact of the DOH social media accounts for many of its possible functions. By sharp contrast, the DepEd and Pag-Ibig sites both are run by communication teams that have a freer hand in all stages of the production and strategy process. Social media is part of the broader communication strategy and team. Therefore, the social media team draws from the overall press relations, public relations, and corporate communication content and talent pool. They have access to graphic artists, multimedia designers, and relationships with other offices of the agencies where content emanates. While DepEd’s communication function is lodged within the Office of the Secretary, there was no policy of the Secretary himself, or even of the next layer of management, of having to approve each post before it goes live. The same is true for Pag-Ibig where the social media team not only enjoys greater leeway to make decisions on postings, but is also likewise empowered to provide individual responses to comments without having to clear them with higher offices.
Recommendations
For most government agencies, Facebook and Twitter have basic functions of disseminating information, announcing events, promoting programs, publicizing the heads of agencies, managing reputation, and communicating crisis, and sometimes acting as communication channels with internal audiences. For the most part, these are one-way communications. Thus the behavior of many agencies with their online presence is such that they are unable to leverage the key interactive features of the platforms toward their objectives. Outside of the usual functions, social media can offer greater service through direct engagement with constituents and beneficiaries—that is, using it not simply as a broadcasting channel, but also as a channel to gather information, to respond to queries, and to provide service.
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Integration into Overall Digital and Communication Strategy
Social media should be fully integrated in the overall communication and digital strategy of an agency. There is enough interest and visibility among high-level government officials for social media that it is often the case that Facebook and Twitter accounts are of more interest among officials than websites. It is a positive development in that top leadership usually places importance on these activities, but the risk is for the accounts to be separated in function from the offices that run overall communication strategy. Social media should work alongside and in the context of all other communication activities ongoing. Maximizing the potential of Facebook accounts means trying to achieve the following: 1. Social media actions should be linked to functioning central websites that house all content. Facebook accounts do not take the place of websites because content in the former is not organized and archived to make it easy to find. As a practice, these two channels should complement each other. FB posts should always contain links to relevant sections of a website, driving traffic to the sites; websites should function as an organized repository of most things posted on social accounts. 2. The staff running social media accounts should be part of the bigger communication office, or at the very least have direct working relationships with external communications, press relations, and corporate communication. 3. Social media staff, as with the communication offices, should have direct working relationships with all technical offices of an agency. This is to ensure a constant stream of accurate and timely information that can be turned into social media content. If the social media team is isolated or separate, the accounts are unlikely to thrive and gain interest.
Social Media Voice is Informal yet Authoritative
Social media is unique from traditional media in that on social media there is a perceived “personality” to an account, the personality of the agency. People who are on the platform are used to a communication style that is different from the typical press release, press statement, or prepared speech from agency officials. The communication style is informal yet authoritative; it is not an institutional voice but a personal one, and is more direct and informative. The closer relationship that is fostered with citizens through social media extends
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to the style of communication. The FB page of an agency is just one among the FB pages of friends, of family, and of colleagues; it is not perceived as different. Audiences respond better to this type of voice and are more interested in what is being said when the tone is less institutional and more personal.
Written Policies and Guides
Most agencies have social media accounts, but most of them do not have written policies and guidelines. Institutionalization of these accounts will be more secure and stable when there are written policies. A written social media policy may include the agency’s preferences and rules on the following: a. Objectives and functions of the social media accounts b. Approval process and rules governing production of content c. Rules for which people and positions in an organization should have editing and administrative roles in the accounts d. Tone, voice, language, style to reflect the agency’s brand e. Policies for public engagement through the site f. Code of conduct and manners of use (e.g., gender sensitivity, respectful behavior) g. Handling crisis situations related to social media posts h. Integration with all other digital channels i. Policies on privacy, confidentiality (tagging) j. Policies on starting new sites, groups, or channels k. Copyright rules l. Flowchart of complaint and query handling in the context of the organization m. Monitoring and evaluation (e.g., regular metrics and target-setting)
The written policies should apply to the entire suite of social media channels, including Twitter, FB, blogs, message boards, image and video sharing sites, and any similar new platforms. It is not recommended that agencies have restrictive rules that extend to personal social media pages. In my own opinion, this infringes on the rights of employees to manage a space that is in their personal, not purely professional, sphere. However, it is appropriate to put restrictions on any depictions of work product, office-related materials, identities of coworkers, and documents or sensitive information, even on personal FB pages and microblogs.
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Resource Investments
The practice of building and maintaining social media accounts and identities has matured over the last few years, to the point where it is a highly technical area of work. Recognizing this and hiring professionals or training staff on social media use and marketing will lead to better performing social media strategies. There is a mistaken popular notion that getting publicity on social media is free—that broad benefits of posts going viral and bringing in droves of followers can be done with no expense. Advertising costs on Facebook are relatively inexpensive compared to traditional media, given the quality of targeting it offers. Pushing ads for a short period to increase the number of followers is a good investment in that it has an extended effect. Even posts without paid boosts will eventually get high visibility if the content quality and strategy are good.
Organizational Set-Up
Outsourcing social media function is not good practice. It is done by some agencies because of the high burden of work necessary to generate content, design and execute a strategy, and maintain a high level of engagement. Outsourced social media means the channel is managed by people who have limited familiarity with the agency’s work, have no direct relationship with operational and technical offices, and are unable to respond to comments and questions on behalf of the agency. In-house social media teams are in the best position to leverage the channel toward achieving the agency’s goals. The team should be part of the bigger communication office—they should be given autonomy on postings and not have to go through too many layers in an approval process. Social media should have dedicated personnel, one or two depending on the number of channels being run. The team should have access to visual artists and multimedia designers so the dedicated personnel for social media can focus on substance, overall strategy, digital curation, content scheduling, moderating, and response. Agencies that want to make their social media accounts responsive to reader comments and queries should have communication offices that have access and cooperative relationships with other offices. If an FB page is to function as a legitimate channel through which complaints can be brought to the agency,
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problems can be alerted, and questions can be asked; then the social media personnel need to know where to get answers and where to send complaints. Without this cooperative relationship with other offices, creating an engaged and responsive page would be difficult.
Closing
Agencies communicate with a variety of audiences to achieve different goals. Communicating through social media can help further agency work toward these goals within the context of often-emplaced communication strategies within the organization. Agencies can choose to invest enough systems and manpower to take full advantage of the benefits of citizen access through social media. It can reduce transaction costs of service desks by dealing with queries online, which in turn can improve the reputation of offices because they not only are more responsive but they are responsive in a very public way. Having constant accessibility online increases public engagement with services, and it holds field personnel to account as a result of citizens and clients having a way to communicate with higher offices. Through more specialized functionalities such as FB groups, for example, internal audiences or personnel can create and maintain closer relationships with communities of practice (e.g., disaster risk reduction officials in different field offices, provincial health officers in a region). In general, well-run social media communication in a government agency can expand community engagement and aid the agency in providing better services and managing its public presence (Bertot, Jaeger, and Grimes 2010). It has the potential to foster public perceptions of responsiveness, efficiency, transparency, and generally positive reputation-building through more direct client servicing and information dissemination. Agencies appear more reachable, accessible, and client-centered. However, a poorly-run social media strategy can result in the opposite; it can result in distrust, disengagement, and greater inefficiency. If response through the channel is slow or non-existent, the public will not take interest. An overly-cautious approach to social media postings and responses will likely backfire. The large reach and high level of social media use of the Philippine public presents the government with opportunities in the online space. Given the nature of the medium as interactive, community-based, and network-building, the potential benefits for line agencies are bigger than in other agencies.
70 Public Policy Social Media Use by Frontline Government Agencies: Review and Recommendations
Realizing the full potential of the various social media channels is possible if an agency is committed to transparency and public engagement as well as to making the necessary investments to build and foster an involved constituency online.
Notes
1. This research was fully supported by the UP President Edgardo J. Angara Fellowship Awards Program. The author is grateful to the reviewers and selection committee for this grant, as well as the research assistance of Karen Varona, Beverly Brul, and Jenna Mae L. Atun. 2. “Philippines Internet Users,” accessed November 1, 2016, http://www. internetlivestats.com/internet-users/philippines/
References
Albert, J.R.A. “Big Data for Measuring Progress and Development: Big Insights or Big Issues?” PIDS Policy Note 2014-04 (April 2014). http://dirp4.pids.gov.ph/ webportal/CDN/PUBLICATIONS/pidspn1404_rev2.pdf. Allen, R.C. Channels of Discourse, Reassembled: Television and Contemporary Criticism. Chapel Hill: University of North Carolina Press, 1992. Bennett, L.W. “Gatekeeping and Press—Government Relations: A Multigated Model of News Construction.” In Handbook of Political Communication Research, edited by Lynda Lee Kaid. Oxford: Routledge, 2004. Bertot, J.C., P.T. Jaeger, and J.M. Grimes. “Using ICTs to Create a Culture of Transparency: E-government and Social Media as Openness and Anti-corruption Tools for Societies.” Government Information Quarterly 27 (3)(2010): 264-71. Cornwall, A. “Introduction: New Democratic Spaces? The Politics and Dynamics of Institutionalized Participation. IDS Bulletin 35(2)(2009). doi: 10.1111/j.1759- 5436.2004.tb00115.x. Delli Carpini, M.X., F.L. Cook, and L.R. Jacobs. “Public Deliberation, Discursive Participation, and Citizen Engagement: A Review of the Empirical Literature.” Annual Review of Political Science 7 (2004): 315-44. Franks, P.C. How Federal Agencies Can Effectively Manage Records Created Using New Social Media Tools. Washington, D.C.: IBM Center for the Business of Government, 2010. http://observgo.uquebec.ca/observgo/fichiers/57504_GRI%201.pdf. Harlow, S. and T.J. Johnson. “The Arab Spring: Overthrowing the Protest Paradigm? How the New York Times, Global Voices and Twitter Covered the Egyptian Revolution.” International Journal of Communication 5 (2011): 1359-74.http://ijoc.org/ index.php/ijoc/article/view/1239.
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Janssen, M., Y. Charalabidis, and A. Zuiderwijk. “Benefits, Adoption Barriers, and Myths of Open Data and Open Government.” Information Systems Management 29(4)(2012):258-68. Jue, A.L., J.A. Marr, and M.E. Kassotakis. Social Media at Work: How Networking Tools Propel Organizational Performance. San Francisco: Jossey-Bass, 2010. Lallana, E. “Review of International Social Media Government Policies.” Unpublished expanded compilation, 2014. Lasorsa, D.L., S.C. Lewis, and A.E. Holton. “Normalizing Twitter: Journalism Practice in an Emerging Communication Space.” Journalism Studies 13(1) (2011): 19-36.doi:1 0.1080/1461670X.2011.571825. Murthy, D. Twitter: Social Communication in the Twitter Age. Cambridge: Polity Publishers, 2013. Naidu, Prasant. “ComScore SouthEast Asia Digital 2013 Report: 62M Web Users, Facebook Leads Followed by Twitter, LinkedIn and Tumblr.” Business2community. com, 2013. http://www.business2community.com/social-media/comscore- southeast-asia-digital-2013-report-62m-web-users-facebook-leads-followed- twitter-linkedin-tumblr-0597676#2u4OKJGwbtJj5iAr.99” Nitschke, P., P. Donges, and H. Schade. “Political Organizations’ Use of Websites and Facebook.” New Media & Society August 7, 2014.doi: 10.1177/1461444814546451. Poell, T. and E. Borra. “Twitter, YouTube, and Flickr as Platforms for Alternative Journalism: The Social Media Account of the 2010 Toronto G20 Protests.” Journalism 13(6) (2012): 695-713. Shirky, C. Cognitive Surplus: New Technology Makes Consumers into Collaborators. New York: Penguin Books, 2010. Waters, R.D. and J.M. Williams. “Squawking, Tweeting, Cooing, and Hooting: Analyzing the Communication Patterns of Government Agencies on Twitter.” Journal of Public Affairs 11(4) (2011): 353-63.
72 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines STELLA A. QUIMBOi XYLEE JAVIER MEG REGAÑON LORAINE GALLEVO ROMERO FS. QUIMBOii
Abstract
In this paper, accelerator models are estimated to assess the responsiveness of industry investments to changes in tax rates and incentives. The cross-sectional analysis uses data from the 2009 and 2010 waves of the Annual Survey of Philippine Business and Industry covering 27,575 and 29,298 firms, respectively, spread over 942 industry subclasses. This data set is supplemented by administrative data on fiscal incentives. The results show that tax rates and incentives can explain inter-industry variations in investment levels. The investment-tax and investment- subsidy relationships are found to be non-linear. Reduced taxes predict higher investments, with larger effects for industry groups that already have previous investments. Increased incentives predict larger investments, with the investment effects varying in size across industries. A modified version of the model, which was estimated using time-series data from 1973 to 2014, validated the study’s cross-section results. The findings lend support to current legislative initiatives to lower corporate income tax rates and rationalize fiscal incentives.
Keywords: corporate income tax, fiscal incentives, investments, subsidies i UP President Edgardo J. Angara Fellow (2015/16); Professor (on leave), UP School of Economics; Commissioner, Philippine Competition Commission (The opinions expressed in this presentation and paper are the author’s own and do not necessarily represent the views of the Philippine Competition Commission.) Corresponding author. Email: [email protected] ii Chair, Committee on Ways and Means, House of Representatives, Philippines
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Introduction
Capital formation and income growth are tightly linked, with predictions of the Solow model consistently borne out by empirical evidence in various study settings. Robinson has found that during the 1950s and 1960s, capital investment was an important source of growth for less developed countries.1 Using cross-country data for the period 1960-1985, Mankiw et al. show that physical and human capital accounted for about 80 percent of cross-country income variations.2 For a sample of 95 developing countries between 1970-1990, Khan and Kumar have found that while both public and private investments contribute positively to growth, private investment had a stronger impact.3 Karras, using averaged annual data from 152 countries, shows that investment rate is significant in positively influencing the growth rate of real gross domestic product per capita.4 Meanwhile, Bond et al., using time series regressions of 94 countries, has found that increased investment-to-GDP ratio predicts higher level and higher growth rates of output per worker.5 Yet, many low-income countries continue to face low levels of gross capital formation (GCF). Thus, an important policy question is whether there are obstacles to investments that could be limiting a country’s economic growth and development potential. Figure 1 shows that the share of gross capital formation in total gross domestic product (GDP) differs widely between middle- and high-income countries versus low-income countries.
Figure 1. Gross Capital Formation as percent of GDP, 1960-2014 Source: Philippine Statistics Authority and World Bank
74 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines
The Philippines is arguably an interesting case. By World Bank standards, it is classified as a lower middle-income country. As a group, the GCF of lower middle-income countries is relatively high. It was in the 28-30 percent range over the last five years and highly comparable to upper middle-income countries. The latter have been the best performers in terms of GCF since the 1970s. The Philippines’ GCF levels, however, were below even those of low- income countries, at least in the last decade. Yet, from the 1960s to the early 1980s, GCF levels of the Philippines were among the highest, even higher than those of upper middle- income countries. Scholars of Philippine economic history have pointed out a number of possible explanations for these recent low levels of GCF. Using data from the 2005 Investment Climate Survey, a joint study by ADB and World Bank found that small and medium enterprises have limited access to credit, or no access at all to overdraft or credit line facilities.6 A 2007 study by ADB has also stated that “low levels of investment in and the poor conditions of infrastructures in the Philippines have increased the cost of doing business in the country and had a significant adverse effect on the competitiveness and attractiveness of the Philippines as an investment destination.”7 The study further recognized the following factors that may affect the “appropriability” of returns to investments in the Philippines: periodic macroeconomic instabilities, poor governance, high tax rates, inefficiencies and lack of transparency in the tax administration, cumbersome business procedure, and overregulation. Recent surveys on the cost of doing business also suggest that tax policies could explain low GCF levels. According to the Global Competitiveness Report 2015-2016, taxes—particularly complex tax regulations and high tax rates—are cited by firms as among the top reasons for the high cost of doing business and an important barrier to investments.8 Against the backdrop of the Association of Southeast Asian Nations (ASEAN) Economic Community, a more current policy concern is whether the tax rates faced by Philippine firms reduce competitiveness levels and ultimately reduce the attractiveness of foreign direct investments (FDI). Figure 2 shows that the Philippines has the lowest average net FDI inflows (as a share of GDP) among ASEAN member-countries from 2009 to 2013. The average corporate income tax rate among ASEAN member countries is 23 percent. Singapore has the lowest tax rate (17 percent of net taxable income), while the Philippines has the highest rate (30 percent). The country with which the Philippines can be most closely compared, Indonesia, imposes a 25 percent corporate income tax rate. Vietnam and Cambodia, whose foreign
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Figure 2. Average Net FDI Inflows and Corporate Tax Rates‡ of ASEAN Countries, 2009-2013 Sources of basic data: ADB Key Indicators for Asia and the Pacific 2015, Philippine laws, and various sources (see references) direct investment rates are among the highest in the region, have lower rates (22 percent and 20 percent, respectively). Figures 2 and 3 show how, among the Philippines and other ASEAN member-states, corporate income tax rates are inversely related to GCF (p<0.047). While within the ASEAN region the Philippines imposes the highest corporate income tax rate, it curiously registers one of the lowest tax efforts at only 13.6 percent of GDP in 2014. Figure 4 suggests that the Philippines can potentially lower its tax rate to Cambodia’s 20 percent and achieve a similar tax effort. Having the highest corporate income tax rate within the ASEAN region poses a concern due to the adverse impact it has on the locational decisions of firms, particularly footloose industries. Considering the country’s low level of infrastructure9, providing favorable tax treatments has been the go- to tool to attract investments. The 2015 ASEAN integration was an important consideration when Vietnam, Thailand, Indonesia, Brunei Darussalam, and
‡ ASEAN countries generally impose corporate income tax rates on a similar tax base except for (1) Singapore, which allows the first SGD152,000 to be tax-exempt, and (2) the Philippines, which applies a different tax treatment on passive income (i.e., 20 percent tax on interest, royalties, and dividends). The effective corporate tax rates presented above were calculated for firms with an average net taxable income of PhP44.5 million, with 10 percent coming from passive income. The comparison shows that only Singapore and the Philippines have effective corporate taxes lower than their nominal corporate tax rates.
76 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines
Figure 3. Corporate Tax Rates and Gross Capital Formation: Philippines (1946- 2014), Indonesia (1984-2014), Thailand (1990-2014), and Vietnam (1986-2014) Legend: Yellow – Philippines; Green – Vietnam; Red – Thailand; Blue – Indonesia Sources: Philippine Statistics Authority, World Bank, Philippine laws, and various sources (see references)
Figure 4. Tax Effort vs Corporate Tax Rates, ASEAN Notes: Tax effort data for Vietnam includes local government taxes. Tax effort data for Singapore was for 2013. Sources of basic data: ADB Key Indicators for Asia and the Pacific 2015, Philippine laws, and various sources (see references)
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Malaysia decided to lower their corporate income tax rates beginning in 2010. Thailand undertook the most drastic cut, from 30 percent in 2011 to 23 percent in 2013. This paper seeks to determine whether tax rates faced by firms can explain low levels of capital formation. Accelerator models of investments using data are estimated from two waves of a nationwide survey of firms to examine the relationship between potential tax payments faced by firms and their investments in new tangible assets, and other measures of firm investment, particularly new entrants in industries and research and development expenditures. Variations in tax payments are exploited across industry subclasses and are empirically tested for whether these can explain variations in investments aggregated at the industry subclass level.
Corporation Taxation in the Philippines
Philippine firms are subject to national and local taxes; some enjoy benefits in the form of fiscal incentives. National taxes are imposed and collected by the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC). The current governing tax laws are Republic Act (RA) No. 8424, or the “Tax Reform Act of 1997,” and all its amendments (e.g., RA 9337, RA 9504) along with the implementing rules and regulations issued by the BIR.
National Taxes
National taxes in the Philippines include: 1. Corporate Income Tax Corporate income tax (CIT) is 30 percent of net taxable income, defined as revenues minus total expenses, or net income. A minimum corporate income tax (MCIT) rate is imposed on firms with zero or negative taxable income, which is computed as 2 percent of annual gross income. The firm is subject to pay either the MCIT or the CIT, whichever is higher.i Corporate income taxes are collected in advance through the creditable/expanded withholding tax, which is equal or at least approximate to the CIT due from the recipient of the income and creditable against the income tax due from the corporation.
i MCIT is imposed on the fourth taxable year of business operations. Any excess of the MCIT over the regular CIT (RCIT) shall be carried forward and credited against the RCIT for the 3 immediately succeeding taxable years. The MCIT is the mechanism that allows government to collect tax revenues in advance.
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Some industries are exempted from paying the CIT. In general, CIT exemptions can either protect or promote certain sectors. The Tax Code (RA 8424), for example, exempts labor, agricultural, or horticultural organizations and non- stock, non-profit mutual savings banks.ii CIT exemption is also offered to promote industries included in the Investment Priority Plan (IPP) of the Philippines. In recent years (2014-2016), the IPP included preferred activities in the four broad sectors of manufacturing, agribusiness and fishery, services, and infrastructure and logistics, and in four specific activities which include energy, housing, hospitals, and public-private partnership projects. 2. Final Tax Final taxes refer to the full and final payment of income taxes on selected types of income, such as interest income, dividends, rents, royalties, premiums, annuities, emoluments, and capital gains. Final taxes are withheld at source and are not creditable against the income tax due of the payee. The final tax rates differ depending on type of income. Dividends received from domestic corporations are tax-exempt. Interest income from any peso bank deposit, and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements, are levied a 20 percent tax. Meanwhile, interest income received from a depository bank under the Foreign Currency Denominated system is taxed at 7.5 percent. Passive income sources such as premiums, annuities, and emoluments are subject to a 20 percent tax. A capital gains tax (CGT) of 6 percent is a final tax imposed on capital gains presumed to have been realized from the sale, exchange, or other disposition of real property located in the Philippines and classified as capital assets. A 5 percent CGT is also imposed on the net capital gains from the sale of shares of stock in a domestic corporation not traded in the stock exchange. For those sales of shares of stock through the exchange, the applicable CGT rate is one half of one percent of the selling price. ii Other CIT exempt sectors are: beneficiary associations operating for the benefit of the members, such as fraternal organizations; cemeteries that are company-owned and operated exclusively for the benefit of its members; non-stock corporations organized and operated exclusively for religious, charitable, scientific, athletic, or cultural purpose, or for the rehabilitation of veterans; business leagues, chambers of commerce, or boards of trade not organized for profit; civic leagues or organizations operated exclusively for the promotion of social welfare; non-stock, non-profit educational institutions; government educational institutions; organizations of local character with income from the fees of members for the sole purpose of meeting expenses; and farmers, fruit growers, or similar associations organized for marketing the products of their members.
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3. Value-Added Tax Value-added tax (VAT) is a consumption tax imposed on any sale, barter, exchange, lease of goods or properties, rendering of services, and importation of goods done in the course of trade or business. It is an indirect tax, which may be shifted or passed on to the buyer, transferee, or lessee of goods, properties, or services. A corporation is subject to a 12 percent VAT if its gross sales or receipts exceed PhP1,919,500. Entities with gross sales less than PhP1,919,500 are subject to a 3 percent tax. A zero-rated VAT (0 percent) is imposed on export sales, foreign currency denominated sales, and sales to persons or entities whose exemptions are defined under special laws or international agreements. Input taxes attributed to zero-rated sales are creditable against output VAT. Certain transactions are considered as VAT-exempt sales, such as the sale of agricultural or marine products in their original state; the sale or importation of fertilizers, seeds, seedlings and fingerlings; educational services rendered by private educational institutions; sales by agricultural cooperatives; sales, importation, printing, and publication of books and any newspaper, magazine, review, or bulletin that appears at regular intervals; services subject to percentage tax; services of banks; services rendered by regional or area headquarters established in the Philippines by multinational corporations that act as supervisory, communications, and coordinating centers for their affiliates; transactions that are exempt under international agreements to which the Philippines is a signatory, or under special laws; transport of passengers by international carriers; and other sales and services enumerated under the Tax Code. Input taxes attributed to exempt sales are not creditable against output VAT. 4. Excise Taxes Excise taxes are imposed on the production, sale, or consumption of tobacco, alcohol, petroleum products, mineral products, and motor vehicles that are manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition. Types of excise taxes include: (i) specific tax, and (ii) ad valorem tax. Specific tax is based on weight or volume capacity or any other physical unit of measurement. Ad valorem is based on the selling price or other specified value of the goods or articles. 5. Customs Duties Customs duties are levied on goods imported to the Philippines. The applicable duty rate or the most-favored nation (MFN) rate depends on the
80 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines appropriate classification of the goods under the Tariff and Customs Code of the Philippines, and generally ranges from 0 to 30 percent. Preferential rates under the Common Effective Preferential Tariff of the ASEAN Free Trade Agreement are generally lower than MFN rates. 6. Other National Taxes Other taxes include: fringe benefits tax (FBT), documentary stamps tax, and percentage tax. Fringe benefits granted to supervisory and managerial employees are subject to a 32 percent tax on the gross value of the fringe benefit.iii The documentary stamp tax (DST) is a transaction tax on selected transactions involving documents, such as loan agreements; lease agreements; original issues of shares of stocks, bonds, mortgage, insurance policies and papers; sales and transfers of the obligation, right, or property. The DST rates range from 0.15 to 12.5 percent depending on the document issued. A percentage tax is imposed on corporations not subjected to VAT. The rates imposed are based on gross receipts, and differ per industry. Table 1 shows total collections by the BIR from firms for the period 2009 to 2014. CIT is the largest source of internal revenue taxes with a share of 34 to 37 percent in total collections. Personal income taxes account for 18 to 21 percent of total internal revenue collections. Philippine firms are also subject to local taxes. The current governing law for local taxes is RA 7160, or the Local Government Code of 1991. The Local Government Code of 1991 intends to provide autonomy to local governments through decentralization. Local government units impose local business taxes that are generally based on the gross sales or gross receipts of the prior year. This is usually collected when the firm renews its business permit at the start of the year. The local business tax rate varies depending on the rate imposed by the local government on the business, but generally does not exceed 3 percent. In addition, a real property tax of 1 to 2 percent is imposed on the assessed value of real properties, such as land, building, machinery, and other improvements owned or utilized by a corporation. Transfer taxes are also imposed on the sale, donation, barter, or on any other mode of transfer of real property. iii The FBT helps restore equity and fairness between the managerial and rank and file employees since some benefits received by managerial employees are non-cash benefits (housing, vehicles, club memberships) and not included in their taxable income.
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Table 1. Internal Revenue Collections (in million pesos), 2009-2014 2009 2010 2011 2012 2013 2014 I. Taxes on 435,372 489,300 571,897 642,501 718,361 784,756 Net Income and Profit (58%) (59%) (62%) (61%) (59%) (59%) A. Company, 254,372 280,044 337,443 370,125 424,497 455,099 corporate, enterprise (34%) (34%) (37%) (35%) (35%) (34%) 136,692 167,110 193,525 222,724 246,580 283,589 B. Individual (18%) (20%) (21%) (21%) (20%) (21%) 44,308 42,145 40,930 49,652 47,284 46,069 C. Others (6%) (5%) (4%) (5%) (4%) (3%) II. Excise 60,548 67,203 67,993 72,346 118,856 135,315 Taxes (8%) (8%) (7%) (7%) (10%) (10%) III. Value 168,294 173,284 183,082 229,594 250,149 278,793 Added (22%) (21%) (20%) (22%) (21%) (21%) IV. Other 42,838 44,510 47,012 52,571 60,807 56,489 Percentage Taxes (6%) (5%) (5%) (5%) (5%) (4%) V. Other 43,236 48,327 54,162 60,904 68,488 79,408 Taxes (6%) (6%) (6%) (6%) (6%) (6%) TOTAL 750,288 822,624 924,146 1,057,916 1,216,661 1,334,762 Source: Bureau of Internal Revenue, 2009-2014
Table 2 shows an estimate of taxes collected from firms, whether by the national or local governments. Total tax collections from firms are about 9.5 to 10.4 percent of GDP.iv This range is comparable to lower middle-income countries. An IMF study indicates that in 2009, CIT revenues averaged about 2.5 percent for lower middle-income countries.10
Fiscal Incentives
As mentioned above, certain types of firms enjoy subsidies in the form of tax holidays or reduced tax rates. These have been provided specifically to encourage foreign direct investments. There are at least six lawsv that provide iv Table 2 shows that 30 to 35 percent of all taxes paid by firms is in the form of corporate taxes. v The following laws provide fiscal incentives: The Omnibus Investments Code of 1987 (EO 226); Bases Conversion and Development Act of 1992 (RA 7227), amended
82 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines
Table 2. Estimated Tax Collections from Firms (in billion pesos), 2009-2014 2009 2010 2011 2012 2013 2014 Corporate Income Tax 254 280 337 370 424 455 Final Witholding TaxA 44 42 41 50 47 46 Value Added Tax 168 173 183 230 250 279 Excise Tax 61 67 68 72 119 135 Fees, Charges, & Royalties from Mining FirmsB 0.40 0.80 1.18 1.65 1.52 3.14 Custom DutiesC 220 259 265 290 305 369 Local TaxesD 32 34 40 49 49 no data TOTAL 781 856 936 1,062 1,197 1,288 % of GDP 9.7% 9.5% 9.6% 10.1% 10.4% 10.2% Sources: Philippine Statistics Authority, Bureau of Internal Revenue, Mines and Geosciences Bureau, and Bureau of Local Government Finance, 2009-2014. A Based on BIR collection from bank deposits and tax on government securities. This is possibly overstated because reported data are inclusive of bank deposits of non-corporate accounts. B Collected by the Mines and Geosciences Bureau of the Department of Environment and Natural Resources C Data from Department of Finance, DOF Statistical Bulletin D “Tax on Business” in the LGU’s Statement of Receipts and Expenditures. Real property taxes are excluded here. income tax holidays for four to six years for selected industries, 5 percent preferential gross income tax rate, and tax and duty exemption on imported capital equipment. As a result of these fiscal incentives, economic zones have sprouted in various parts of the Philippines seeking tax havens for businesses. For instance, PEZA economic zone entities alone have grown from 211 in 2010 to 326 as of May 2015, with information technology (IT) parks and centers driving the increase.11 In 2013, the total incentives amounted to PhP146.8 billion, which is equivalent to 1.3 percent of GDP.12
Tax Reforms in the Philippines
The question of whether corporate income taxes should be lowered can be assessed in the historical context of reforms in the Philippines, where tax by RA 9400 in 2006 (including Clark Development Corporation, Poro Point Management Corporation, and Subic Bay Metropolitan Authority); the Special Economic Zone of 1995 (RA 7916), amended by RA 8748 in 1999; the Cagayan Special Economic Zone Act of 1995 (RA 7922); the Freeport Area of Bataan Act of 2009 (RA 9728); and the Regional or Area Headquarters, Regional Operating Headquarters and Regional Warehouses Act (RA 8756).
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reform has been a major policy concern since the 1983-84 economic crisis.13 Over the past three decades, the Philippines adopted two tax-reform programs and various legislation that reformed tax policies. 1. 1986 Tax Reform Program With the change in government in 1986, several new tax measures became effective. The unique political situation under the revolutionary government of Corazon Aquino may have contributed to the speed with which new tax measures were implemented. In addition, there was an existing package of tax measures prepared by a group of economics professors from the University of the Philippines.14 The 1986 reform program included the following tax measures: • The corporate dual rate system of 25 and 35 percent shifted to a single rate of 35 percent. • The VAT system replaced the previous sales tax system. Under the previous system, goods were levied different rates of sales taxes, and a turnover tax of 1.5 percent of gross selling price was levied on each subsequent sale of the goods. This was replaced by the current VAT system, wherein a uniform tax rate is imposed based on the destination of the goods. The VAT rate imposed then was 10 percent, but allowed for exempt and zero-rated statuses. • Export taxes were abolished. Previously, the export tax was levied on the gross value of taxable exports ranging from 2 to 20 percent. • Import taxes were decreased. Prior to 1986, an ad valorem tax of 50 percent and an additional duty of 3 percent were imposed on all imports. The additional duty was phased out by 1986. • The final tax on inter-corporate dividends and final tax on dividends were removed. The 1986 tax reform program was successful in simplifying the tax system and raising revenues. Revenue effort increased from 10.9 percent in 1985, and peaked at 17.5 percent in 1997.15 2. 1997 Comprehensive Tax Reform Program From 1992 to 1997 there were only 10 laws that were passed to raise revenues, while 24 laws granted incentives and higher tax exemptions.16 Compelled by this, another comprehensive tax-reform program (CTRP) was implemented in 1997. At that time, a tax-reform program was required by the International Monetary Fund. The Philippine government had to adopt policy measures to
84 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines strengthen the financial system, which included a comprehensive tax reform program.17 The 1997 reform included the following tax measures: • The CIT rate was gradually reduced from 35 to 32 percent. • The rationalization of fiscal incentives, which was the most important aspect of the reform package, was bypassed by legislation. • The MCIT was imposed on corporations on the fourth year after they commenced their business operations. • A fringe benefits tax was imposed on benefits granted to supervisory and managerial services. • A tax on dividends was restored gradually over a period of three years. A final tax was imposed on cash or property dividends actually or constructively received. Intercompany dividends remained exempt. • The VAT base was amended to expand the coverage of the term “simple processes” by including “broiling” and “roasting.” It restored the VAT-exempt status of cooperatives, and added VAT exemptions on importation of meat, sale or importation of coal and natural gas, educational services, sales of house and lot, and printing and publication of books and newspapers. • Taxes on the downstream oil industry and on sin products (tobacco and alcohol) were changed from ad valorem to specific taxes. • No taxes were imposed on liquefied petroleum gas. The approved CTRP did not adopt all the proposed measures. Observers suggested that the timing of the proposed reform was less than ideal. The presidential elections in 1998 seem to have dictated caution in passing unpopular revenue- generating laws. The rationalization of fiscal incentives was a popular call among scholars,18 but was not approved. The 1997 CRTP resulted in a major decrease in revenue effort: from 17.5 percent in 1997, this dropped to 13.8 percent in 2004.19 After the 1997 tax reform program, the Philippines only had piecemeal tax reforms. In 2005, RA 9337 was passed, resulting in an increase in the VAT rate from 10 to 12 percent, and the CIT rate increased from 32 to 35 percent. Beginning in 2009, the CIT was lowered to 30 percent. 3. Recent Tax Reform Measures More recent tax reform measures include increasing the basic personal exemption for individuals, excluding minimum wage earners from income tax
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(both RA 9504), increasing the cap of the exemption of thirteenth month pay and other benefits from PhP30,000 to PhP82,000 (RA 10653), and increasing excise taxes of alcohol and tobacco products (RA 10351). Yet despite these numerous reform measures, scholars as well as industry observers and practitioners have pointed out deficiencies and irrationalities in the tax system. For example, some have raised the concern that the current package of fiscal incentives is redundant—that is, firms would have invested anyway, even in the absence of fiscal incentives.20 In this sense, some of these fiscal incentives can be considered wasteful. More importantly, as Lim pointed out (and as borne out by Figure 2), despite these generous tax incentives, FDI did not come into the country on as massive a scale as it did into its ASEAN neighbors.21 Recently, the Tax Incentive Management Act (TIMTA), or RA No. 10708, was passed. Under TIMTA, registered business entities must file a complete annual tax incentives report with their investment promotion agencies. The reports will be submitted to the BIR, the BOC, and the Department of Finance (DOF). The DOF is in charge of maintaining a single database of these incentives. It will submit to the Department of Budget and Management (DBM) the actual amount, estimate claims, current year’s programmed amount, and the following year’s projected amount of tax incentives. While the monitoring will be an additional administrative burden on the part of the firms, this will enable the government to gather information crucial in analyzing the tax reforms necessary for fiscal incentives. Philippine legislators have sought the restructuring of the corporate tax system. The move is seen to enhance the country’s competitiveness, stimulate investments, improve employment, and even encourage the movement of informal businesses into the formal sector. At least seven measuresvi have been filed at both the Senate and the House of Representatives during the sixteenth Congress to lower the present 30 percent corporate income tax rate to at least 25 percent.
Methods
Basic Model
A flexible accelerator model is employed, which assumes the following: (i) the firm is a profit maximizer, (ii) output is concave in capital stock, and vi Senate Bill (SB) 2163 (Angara), SB 2974 (Recto), House Bill (HB) 4099 (Gunigundo), HB 4829 (Quimbo), HB 4925 (Noel), HB 4941 (Yap), and HB 4996 (Aggabao).
86 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines
(iii) the firm is a price taker. Firms’ investments at time t are proportional to desired capital stock, which is a function of expected output levels Q t*. Traditionally, firms are also assumed to expect future output to be a linear function of current output levels. These assumptions imply the following basic reduced form:
It= I (∆Qt, It-1) The "flexibility" of this version of the accelerator model allows for effects on investments of profits, uncertainty, and other variables.22 Profitability (π) matters for investments, particularly in the presence of credit constraints where firms use current profits to finance spending on capital.23 The investment climate, which ultimately affects the access price of capital, will also matter.24 This includes tax policies (π) that determine the amount of resources available for investments.25 Two-year panel data on firms is used to estimate the following model of investment:
It= I (∆Q t , It-1, πt , τt , Xt) where X refers to other firm characteristics that affect investments. In order to test the validity of the assumption on expectations of future output, Q t and Q t-1, instead of ∆Q , are used as regressors. It can be shown that if indeed the expected future output is solely based on current output, the difference in the estimated coefficients of Q t and Q t-1 should not be statistically significant. It can be further shown that if, instead, expected output level is a weighted average of current and previous output levels,
Q t* = w Q t + (1-w) Q t-1 where 0 It= I (Q t , Q t-1 , It-1, πt, τ t, Xt) To validate the results of the cross-section analysis, further multivariate analysis was performed utilizing time series data for the Philippines from 1973 to 2014. A modified version of the model above is estimated to incorporate the presence of lags. Junankar has shown that decision, delivery, and administrative lags are important in explaining changes in investments over time.26 vii Proof available upon request. Volume XV (2016) 87 Quimbo et al. Cross-section Analysis The main data source for the analysis is the Annual Survey of Philippine Business and Industry (ASPBI)viii, a nationwide survey of formally registered firms in the economy, including corporations and partnerships, cooperatives and foundations, and single proprietorships. The data from ASPBI includes a detailed breakdown of the sources of revenues, types of expenses, Philippine Standard Industrial Classification (PSIC) Code, and the amount of subsidies received by the firms. The sampling frame of the 2010 ASPBI consists of 150,000 establishments, which is about 89 percent of all firms in the formal sector. The 2010 Census of Establishments showed that there were about 778,000 establishments in operation in the country in 2010, of which 610,000 establishments (78 percent) were classified as “informal” establishments. These were all excluded from the analysis as they are, presumably, not subject to taxation. Thus, the 2010 ASPBI covered only the following economic units: (i) all establishments with total employment of 10 and over, (ii) all establishments with total employment of less than 10, and (iii) all establishments classified as single proprietorship or single establishments regardless of total employment. The same 2010 sampling frame was used for the 2009 round. The 2010 ASPBI sample consists of 29,298 firms (about 20 percent of the total number of firms in the sampling frame). About 73 percent of the entire sample belongs to the services sector. The distribution by industry is shown in Annex Table 1. In this paper, the regression analyses presented are those done at the industry subclass level, using five-digit PSIC codes.ix Variations in potential tax payments across industry subclasses are thus exploited and examined as viii An alternative data source is the website of the Securities and Exchange Commission (SEC), from which financial statements of companies can be downloaded. However, this is limited to registered corporations and does not include single proprietorships. Moreover, the information available through the SEC lacks details on subsidies, hours worked in production, and capacity utilization, all of which are needed for the computation of total potential tax burden. ix Use of the firm-level ASPBI data is tightly regulated given the Commonwealth Act No. 591 provision that “Data furnished the Bureau of Census and Statistics (BCS) by an individual, corporation, partnership, institution or business enterprise shall not be used as evidence in any court or in any public office either as evidence against the individual, corporation, association, partnership, institution or business enterprise from whom such data emanates; nor shall such data or information be divulged to any person except authorized employees of the BCS acting in the performance of their duties; nor shall such data be published except in the form of summaries or statistical tables in which no reference to an individual, corporation, association, partnership, institution or business enterprise shall appear.” 88 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines to whether these predict changes in investment levels, holding other industry subclass characteristics constant. Consequently, variables utilized in the regression models are industry subclass sums or averages. Time Series Analysis For the supplementary time series analysis, the sources of data are the database of the Philippine Statistics Authority, the World Bank, and the Bangko Sentral ng Pilipinas. The dataset constructed covers the period 1973 to 2014, for which complete data for all the required variables were available. The dependent variable for the model is a measure of investment: the Philippines’ annual gross capital formation (GCF) in constant 2000 prices. The main independent variable, on the other hand, is the country’s historical corporate income tax rates. From 1941 to 1985, the Philippines employed a dual corporate income tax rate system; the lower tax rate is used in the regressions when applicable. Moreover, the tax rates were lagged, since changes in tax rates presumably take time to affect investment decisions. Other independent variables include the lagged annual gross domestic product in constant 2000 prices, lagged GCF, and lagged bank average lending rates. Using the Augmented Dickey-Fuller (ADF) test, the variables were found to be non-stationary,x or I(1). Hence, there was a need to use the first difference of the variables to mitigate spurious regression results.27 Estimating Potential Major Tax Payments and Subsidies The central variable of interest is potential tax payments by businesses. The available data allow the measurement of four major types of taxes: corporate income taxes, value-added taxes, final withholding taxes, and excise taxes. It was noted that these are distinct from actual tax payments, which are the de facto amounts paid to or collected by government. The information needed to compute potential tax payments were obtained from the ASPBI’s Section 12 (Compensation), Section 14 (Total Revenues) and Section 16 (Total Costs Incurred). The revenues that are subject to corporate income taxation include: revenues from main activity, real estate sales, insurance premiums, industrial services and non-industrial done for x A stationary time series is one whose statistical properties such as mean, variance, or autocorrelation structure do not change over time. Volume XV (2016) 89 Quimbo et al. others, commissions and fees earned, delivery charges separately invoiced to customers, service charges, franchise income, and other income. VAT payable is computed as the difference between output and input VAT. Sales are subject to 12 percent VAT and costs are subject to 12 percent input VAT. In this study, the computation takes into account sales from exports and applied zero-rated VAT. To identify VAT exempt transactions, the industry code was applied. For PEZA-listed firms, the number of years that these had been PEZA-registered for proper application of zero-rated VAT was taken into account. Final withholding tax payable is computed based on the following declared revenue items: interest income, dividend income, royalty income, and foreign exchange gains. One limitation is that certain revenue items that are subject to final withholding tax are lumped together as “other revenues” in the ASPBI. Hence, the following items could not be included in the computation of taxes: capital gains taxes on the sales of shares, and taxes on passive income such as premiums, emoluments, and annuities. It is also assumed that all interest income is subject to a 20 percent tax rate, in lieu of information on foreign currency denominated accounts (which are subject to a 7.5 percent tax rate). Excise taxes are defined as actual BIR collections from selected industries for which excise taxes apply, i.e., alcohol products, tobacco products, petroleum products, miscellaneous products, and tobacco inspection fees. Excise taxes for mining and mineral products are computed based on the ASPBI data on value of products sold and materials and supplies bought by the firm. Due to data limitations, custom duties are excluded. In estimating potential tax payments, tax exemptions for industrial sectors as provided by Republic Act (RA) 8424 (Tax Reform Act of 1997) Sections 30 (Exemptions from Tax on Corporations) and 109 (Exempt Transactions from the value-added tax) were noted. A separate variable for subsidies was generated in the form of tax exemptions and income tax holidays due to investment promotion policies. These were also deducted from the estimated potential tax payments. For purposes of accounting for total tax exemptions and holidays, ASPBI data was supplemented with data on fiscal incentives obtained from the Board of Investments (BOI), Philippine Economic Zone Authority (PEZA), Cagayan Economic Zone Authority (CEZA), and Authority of the Freeport Area of Bataan (AFAB). In 2013, these investment promotion agencies (IPAs) accounted for PhP135.7 billion of investment tax expenditures.xi For purposes of the regression analyses, however, only PEZA xi The tax incentives provided by the following IPAs are not yet included in the analysis: Clark Development Corporation, Poro Point 90 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines incentives were included. The level of detail provided by the PEZA master list allowed merging with the ASPBI data at the subclass level (five-digit PSIC).xii It was further noted that PEZA incentives vary over time: In the first five years, firms enjoy a full income tax holiday, but without VAT exemption. Beyond five years, firms are given VAT and FWT exemption, and face a 5 percent tax rate on gross income. For each of the firms registered in the PEZA roster, taxes payable were estimated and the relevant subsidies were applied, depending on the age of the firm. The tax variable, tax rate, is defined as the sum of the major business taxes— corporate income tax, VAT, final withholding tax, and excise tax—that are payable or due as a proportion of total revenues. The subsidy variable (PEZA incentives) is expressed in peso amounts.xiii Measuring capital formation For the dependent variable, we use four alternative measures of capital formation were used. The first is capital expenditures, defined as all tangible fixed assets acquired and for use of the establishment and expected to have a productive life of more than one year, and intangible fixed assets. Tangible fixed assets include: new tangible fixed assets, major alterations and improvements on tangible fixed assets; land and used tangible fixed assets; and tangible fixed assets produced on own account. Intangible assets include: intangible non- produced assets (e.g., patents, trademarks), computer software and databases, mineral exploration (for mining establishments only), entertainment, literary and artistic originals, and others. This is similar to the OECD definition of gross fixed capital formation, which is classified as the acquisition—less disposals—of tangible and intangible fixed assets, plus major improvements to, and transfer costs on, land and other non-produced assets.28 The second Management Corporation, and Subic Bay Metropolitan Authority. xii The study recognizes that PEZA companies may not be accurately classified according to their appropriate PSIC codes. Consider the scenario that Company 1 has two lines of businesses: Line A and Line B. Line A is subjected to regular CIT (30 percent) while Line B has PEZA incentives. Company A files one tax return for both lines of businesses. Line A figures are under regular corporate tax rate, and Line B figures are under the special rate (0 percent because of PEZA). The company files its tax return under the default PSIC code (Line A), and the code of the Line B business is not reflected in the tax return. For example, the main business is food manufacturing, but the company has a business line that packages the food it processes and has obtained an incentive for that (packaging used to be a prioritized business activity). Some companies, however, use separate small subsidiaries that are different entities to handle their Line B. There is no “approach” or “monitoring entity” that distinguishes this. xiii The detailed estimation methodology is available upon request. Volume XV (2016) 91 Quimbo et al. measure is value of new tangible assets, as defined above. The third measure is research and development expenditures as reported by firms. A fourth measure is number of new firms within an industry subclass, defined as the additional number of establishments from 2009 to2010. Other regressors To proxy for expected scale of business activity, the change in total revenues— defined as cash received by the firms, including receivables, for products sold and for services rendered from 2009 to 2010—was used. The lagged values of capital formation, as the accelerator model implies, indicates the timing of investments, or whether or not planned capital stocks are achieved within one year. Profit rate is defined as the difference between total revenues and total expenditures, as a proportion of total revenues. Complementarities between capital and labor were assumed, and thus total employment (in logarithms)—defined as the number of persons who worked for the establishment—was also include as a regressor. In the 2010 ASPBI sample, the average number of workers in each firm was 101. Concentration ratios (defined as the market share of the top four firms to the total revenue generated by each subclass) were also included. In his seminal work, Schumpeter argued that monopolies, rather than competitive markets, offer the “stable platform” and incentives in the form of monopoly profits that promote innovation.29 This argument has long been the subject of debate and empirical tests, but still no clear-cut evidence has emerged for or against the Schumpeterian view.30 Average age of the establishment accounts for the investment preferences that change over time. Dummy variables were also added in the analysis to indicate the industry type of subclass: agriculture, forestry and fishing; mining and quarrying; manufacturing (main); electricity, gas, steam and air conditioning supply; wholesale and retail trade; repair of motor vehicles and motorcycles; information and communication; other manufacturing industries (water supply, sewage, waste management and remediation activities; and construction); and other service industries (transportation and storage; accommodation and food service activities; financial and insurance activities; real estate activities; profession, scientific, and technical activities; administrative and support 92 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines services; private education; human health and social work activities; arts, entertainment and recreation; and other service activities). The latter industry type is used as the default industry category. Analyzing potential revenue implications An important consideration in proposing any change in tax rates is the potential effect on total revenue collections by the BIR. A simple exercise was conducted using available data and parameters. It begins by computing the direct negative impact on BIR revenues (i.e., the revenue loss due to a reduction in the corporate income tax rate at the current income levels) was first computed. A possible indirect but positive impact on BIR revenues, which could arise via the investment channel, was further projected. Using the regression coefficients of the tax variable, the increase in investments resulting from a reduction in tax rates was projected. Assuming a collection efficiency of 67 percent, the increase needed in corporate income per peso investment for the CIT collections to be revenue- neutral was computed. By comparing the direct loss with the indirect gain from a reduction in CIT, further insights were gained into whether or not proposed cuts in CIT are judicious. Results Cross-Section Analysis Table 3 shows a breakdown of the estimate of potential major tax payments of firms in 2010. Total potential major tax payments amounted to PhP856 billion, about 7 percent of total revenues amounted to PhP9.978 trillion,xiv or 35 percent of total taxable income. xiv It was noted, however, that due to missing and suppressed data from the 2010 ASPBI for certain subclasses, the numbers here are possibly underestimated. Volume XV (2016) 93 Quimbo et al. Table 3. Potential Major Tax Payments of Firms, Exemptions and Incentives, 2010 Estimated Potential Tax Payments (in billion pesos) Corporate income tax* 469 Final withholding tax* 145 VAT* 170 Excise tax and royalties** 72 Total potential tax payments 856 Estimated total tax exemptions**** 0.17 Estimated total tax incentives***** 159 Total potential tax payments, net of tax exemptions and incentives 697 % of total revenues* 7.0% % of taxable income 35% *Author’s calculations using raw data from 2010 ASPBI **Author’s calculations using raw data raw from 2010 ASPBI plus DENR-MGB collections from mining firms and BIR revenues from alcohol products, tobacco products, petroleum products, miscellaneous products, and tobacco inspection fees. ***Actual values from Department of Finance, DOF Statistical Bulletin ****Author’s calculations using raw data from 2010 ASPBI. This is the estimated tax payable of firms that are exempt from paying corporate income taxes. *****Actual values were used for BOI-listed firms and AFAB-listed firms (with available data). Author’s calculations for firms listed in PEZA, CEZA, and AFAB (for firms without available data on tax incentives). Comparing the potential amount of corporate income tax payable with the actual collections of corporate income taxes by the BIR gives a rough measure of collection efficiency. Estimates in this study suggest that in 2010, only 67 percent of potential major tax payments were actually collected as corporate taxes. The reasons for this gap range from administrative difficulties in tax collection (including corrupt practices), to outright tax evasion, to tax avoidance. To the extent that some of the corporate tax payables can be avoided through legal means requiring the help of professionals who earn income from this activity, part of the gap in corporate tax payments are collected alternatively as personal income taxes paid by professionals. Table 4 presents estimates of potential tax payments by major economic sector. Potential tax rates, defined as potential tax payments, as a share of total revenues, range from a low of 2.4 percent for the agriculture, forestry and fishing sector to a high of 7.2 percent for the services sector. 94 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines Table 5 shows the descriptive statistics for the regression sample. There are about 683 industry subclasses††††† covered in the various analyses. In 2010, total expenditures on capital (all types) and new tangible assets accounted for about 3 and 4 percent of total revenues, respectively. Research and development expenditures accounted for a much smaller share of total revenues (less than 1 percent). From 2009 to 2010, the average number of firms in an industry subclass dropped by about 9. Table 4. Potential Major Tax Payments, by industry, in billion pesos and % of total revenues Total Estimated Number of Revenues Tax Burden (B)/(A) Firms (A) (B) Agriculture, Forestry and Fishing 1,516 82 2 2.4% Industry 18,763 4,672 256* 5.5% Services 127,835 5,224 374 7.2% *includes royalties and excise taxes for mining. Source of basic data: 2010 ASPBI Potential major tax payments were about 6 percent of total revenues. On the average, PEZA incentives per industry subclass amounted to over PhP231 million (about 3.9 percent of total revenues for industry subclasses with at least one PEZA beneficiary). Huge variability was found in industry profitability in 2010 with a range of -146 to 99 percent. About 11 percent of all industry subclasses in the regression sample declared negative profits. The average total employment per industry subclass was about 5,700 workers, while the mean age of firms is 16 years. The average market share of the top four firms per subclass in terms of revenues is around 75 percent, with a standard deviation of 24 percent. Tables 6 to 9 report the regression results. In general the flexible accelerator specification (Models E and F) has a better fit of the data. All models show that investments are positively correlated with current and previous output levels. That is, industry subclasses with higher current revenues have higher investments in the current year. Similarly, lower revenues in the previous period predict higher investments in the current year. Joint tests of significance on the coefficients of Q t and Q t-1 as previously discussed suggest a rejection Volume XV (2016) 95 Quimbo et al. 251 S.D. 0.059 0.732 8.841 0.241 0.207 0.086 0.494 0.055 0.415 0.170 0.143 15,711 2,648,199 3,017,002 50,200,000 72,200,000 Model 4 (9) 669 Mean 0.056 0.092 5,574 0.744 0.045 0.007 0.422 0.003 0.221 0.030 0.021 (New Entrants) 16.403 519,709 236,034 14,700,000 23,800,000 S.D. 0.059 0.726 8.770 0.242 0.215 0.093 0.494 0.054 0.412 0.173 0.142 53,312 70,531 15,924 2,986,060 49,800,000 71,500,000 Model 3 683 Mean 9,405 9,575 0.056 0.090 5,608 0.747 0.048 0.009 0.420 0.003 0.217 0.031 0.020 (R&D Expenses) 16.361 231,223 14,500,000 23,300,000 S.D. 0.059 0.726 8.770 0.242 0.215 0.093 0.494 0.054 0.412 0.173 0.142 15,924 2,744,944 1,733,407 2,986,060 49,800,000 71,500,000 Model 2 683 Mean 0.056 0.090 5,608 0.747 0.048 0.009 0.420 0.003 0.217 0.031 0.020 16.361 386,581 334,788 231,223 (New Tangible Assets) (New Tangible 14,500,000 23,300,000 S.D. 0.059 0.726 8.770 0.242 0.215 0.093 0.494 0.054 0.412 0.173 0.142 15,924 3,010,027 2,621,913 2,986,060 49,800,000 71,500,000 Model 1 683 Mean 0.056 0.090 5,608 0.747 0.048 0.009 0.420 0.003 0.217 0.031 0.020 (Total Capital (Total Expenditures) 16.361 534,285 509,056 231,223 14,500,000 23,300,000 Table 5. Descriptive Statistics 5. Descriptive Table Investments in 2010, thousand pesos Number of new firms in 2010, thousand pesos Revenues in 2009, thousand pesos Revenues Investments in 2009, thousand pesos Rate Tax incentives, in thousand pesos PEZA rate Profit employment Total age of firm Average 4) Concentration ratio (Top Agriculture, Forestry and Fishing Mining and Quarrying Manufacturing Air Gas, Steam and Electricity, Conditioning Supply of Repair Trade; Wholesale and Retail and Motorcycles Motor Vehicles Information and Communication Other manufacturing industries Number of observations The reduction in the number of observations from 942 to 669-683 regression sample is due primarily merging PSIC codes for 2009 * ASPBI reports. and 2010 missing or suppressed values in the published excise taxes (for mining industry only), and royalties VAT, tax payments include corporate income tax, final withholding **Potential industry only), net of exemptions due to statutory laws. 96 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines of the assumption that expectations on future output levels are based solely on current output.xv Moreover, lagged investments are significant determinants of current investments. The positive coefficients indicate that industry groups with larger investments in the previous year also have larger investments in the current year. This seems to suggest a kind of persistence in investment behavior. Tax rates and PEZA incentives appear to influence investments in a non- linear way (refer to Models E and F).xvi Increases in tax rates (subsidies) predict lower (higher) investments. The magnitude of the effect depends on having previous (presumably ongoing) investments. This pattern was found to be true for all investment measures, with the exception of new entrants. The effect of tax rates could be substantial, at least for total capital expenditures or new tangible assets. For every percentage point increase in tax rates, the reduction in the capital expenditures and value of new tangible assets in industries is estimated at 6.1 and 7.09 percent, respectively. Smaller tax effects are found on research and development expenditures (Model E, 1.9 percent). On the other hand, from the model of new entrants, tax rates do not appear to impact on the decision to start a business (thereby increasing the number of firms in an industry). From Model E, industry groups with larger PEZA incentives, on the average, have larger investment expenditures. A PhP1,000 increase in PEZA incentives is associated with a PhP434 to PhP865 increase in investments. Model F, however, seems to suggest that there is scope for rationalizing incentives or choosing to grant incentives to the sectors that are putting these resources in productive use. Significant and positive coefficients of the PEZA variable interacted with industry dummy variable, for example, provide empirical basis for supporting the manufacturing, and information and communication sectors by way of fiscal incentives. Further research can be conducted to validate these findings, possibly with new data made available through TIMTA. Increased fiscal incentives were also found to predict a rise in the number of firms in the following industry subclasses: (i) wholesale and retail trade; (ii) information and communication; and (iii) water supply, sewage, waste management, and construction. This is noteworthy considering that on average there was a decline in the number of firms from 2009 to 2010 across all industries. xv Details available upon request. xvi Regressions using an alternative definition of tax rates (net of VAT) yielded similar results. Details available upon request. Volume XV (2016) 97 Quimbo et al. Age, meanwhile, is positively correlated with the level of R&D expenditures of firms. While some studies present contrasting evidence31, the positive influence of age is consistent with the liability of newness concept.32 Rafiq, Salim, and Smyth conclude that newer or younger firms have yet to have the experience and the time to build ties with creditors, customers, as well as research institutions to further facilitate R&D spending.33 Kane, Ubilava, and Xu provide evidence that older firms do spend more on R&D than younger firms.34 Total employment (in logarithms) and profit rates are not significant determinants of investments in all models. Using Model D for new tangible assets, it was found that increased market concentration predicts larger firm investments. This is in line with the predictions of Schumpeter. Adding industry dummy variables, however, seems to dampen this correlation. As suggested earlier, consensus on this link is elusive.xvii Further research is needed to robustly identify the competition-innovation nexus, at least in the Philippine context. Time Series Analysis The results of the time series regressions are consistent with the results of the cross-section analysis previously discussed. Higher corporate income tax rates negatively impact on investments at the 5 percent significance level. In particular, the full model indicates that a one percentage point increase in statutory corporate tax rates from the previous year predicts a PhP22 billion decrease in the country’s GCF. This is roughly 0.6 percent of average GDP and 3 percent of average GCF from 1973-2014. To further highlight the significance of the predicted decrease, the average annual rise in GCF is PhP29 billion for the same time period. Figure 5 shows the model’s predicted 2014 GCF if changes were introduced in the corporate tax rate starting in 2013. If the rate remained at 30 percent, the model predicts a PhP1.51 trillion GCF, which is similar to the actual GCF in 2014. Regression tables are presented in Annex 3 and 4. xvii Cohen’s review (2010) of the empirical research points to a positive relationship between market concentration and investments, particularly in the form of R&D, providing confirmation to the predictions of Schumpeter (1942). Some studies show that market concentration predicts reduced investments (Ruiz-Porras and Lopez-Mateo 2010; Aiello and Castiglione 2013). Other empirical studies reveal an inverted U relationship between market concentration and investments. Akdogu and MacKay (2008) attribute this to the strategic role of investments for firms in mid-concentration industries by way of posturing to prevent new entrants, to induce rivals to give up market share, or to cause them to exit the industry. 98 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines 0.670 0.170 -0.380 -1.330 6.080* -1.020 -0.820 -0.380 -0.540 -0.260 4.740* -1.460 -2.450* -4.240* -2.250* -8.020* t-stat 15.620* Model 1F 0.332 0.000 1,464 0.057 931,123 (71,856) -1.337 -0.327 -0.015 Coef (129,301) (242,486) (197,167) (226,289) (2,430) 2,775,343 (44,312) (2,602,555) 0.030 1.650 4.490* -0.450 4.170* -1.290 4.670* 2.090* -0.330 -0.290 2.680* -1.370 9.810* -4.550* -3.740* -4.400* -5.130* t-stat Model 1E 414 0.886 0.000 0.045 0.357 -1.866 -0.014 Coef (130,894) (133,964) (342,298) (3,464) 2,398,375 2,535,564 180,296 977,349 (2,205,962) (8,763,787) 1.940 -0.420 5.060* -0.020 2.750* -0.730 8.650* 4.640* -3.700* -4.750* -4.400* t-stat Model 1D (269) 0.976 0.000 0.035 0.401 -1.874 -0.011 Coef (662,681) (7,636) 1,123,170 240,409 0.070 -0.230 1.970* 9.510* 4.500* -3.630* -4.250* t-stat Model 1C 953 0.081 0.039 0.388 -1.849 -0.011 Coef (362,099) 0.100 -0.780 5.370* -4.720* t-stat 11.380* Model1B 0.183 1,515 0.044 -0.012 Coef (1,206,089) -5.270* t-stat 13.760* Model 1A 0.049 -0.013 Coef Information and Communication Wholesale and Retail Trade; Repair Repair Trade; Wholesale and Retail and Motorcycles of Motor Vehicles Tax Rate Tax rate* lagged Tax investments incentives, in PEZA thousand pesos incentives* PEZA lagged investments rate Profit Log (Total employment) age of firm Average Concentration ratio 4) (Top Agriculture, Forestry and Fishing Mining and Quarrying Manufacturing Air Gas, Steam and Electricity, Conditioning Supply Table 6. OLS Estimates of Capital Expenditures Table Capital Total Expenditures in 2010, in thousand pesos (Y) in 2010, Revenues in thousand pesos in 2009, Revenues in thousand pesos Investments in 2009, thousand pesos Volume XV (2016) 99 Quimbo et al. 0.320 0.040 1.090 0.785 (6.1%) 1.970* -0.830 -6.490* t-stat 28.430* (32,833) Model 1F 0.657 0.017 -3.111 17.687 22.380 Coef (340,733) 679,938 0.439 0.865 (1.8%) -1.690 -1.020 (9,498) t-stat Model 1E Coef (653,438) (1,685,759) 0.952 0.396 (1.8%) -2.350 (9,538) t-stat Model 1D Coef (2,316,644) 0.810 0.368 0.081 (1.8%) (9,412) t-stat Model 1C 0.649 -0.008 -3.119 -0.008 22.373 Coef 106,211 0 0.000 0.183 1.570 0.351 t-stat Model1B Coef 205,339 1.250 0.326 t-stat Model 1A Coef 114,481 Other manufacturing industries Electricity, Gas, Steam and Air Conditioning Supply Gas, Steam and Electricity, and Motorcycles of Motor Vehicles Repair Trade; Wholesale and Retail Information and Communication Electricity, Gas, Steam and Air Conditioning Supply*PEZA Air Conditioning Supply*PEZA Gas, Steam and Electricity, incentives and Motorcycles*PEZA of Motor Vehicles Repair Trade; Wholesale and Retail incentives incentives Information and Communication* PEZA incentives Other manufacturing industries*PEZA Constant R-squared marginal effect of tax rates, in thousand pesos Total As % of average (Y) incentive, in thousand pesos marginal effect of PEZA Total in thousand pesos per industry, Marginal effect of PEZA Manufacturing Manufacturing* PEZA incentives Manufacturing* PEZA Table 6. OLS Estimates of Capital Expenditures Table Capital Total Expenditures in 2010, in thousand pesos (Y) Other manufacturing industries 100 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines -2.560* 0.410 0.210 -0.090 -1.010 5.820* -0.170 -0.840 -0.700 -0.250 -0.100 3.240* -1.000 -2.960* -2.570* -7.520* t-stat 13.900* Model2F 0.351 0.000 1,713 0.047 551,832 (28,550) (89,026) (28,011) -1.374 -0.782 -0.013 Coef (174,705) (147,629) (4,350) 1,813,237 (43,337) (2,600,742) -1.170 0.040 1.700 4.940* -0.050 3.970* 2.350* 2.120* -0.560 1.910* -0.100 -0.890 8.930* -4.080* -3.570* -2.060* -5.200* t-stat Model2E 593 0.441 0.000 0.040 0.390 (15,422) -2.701 -0.014 Coef (216,949) (5,728) 2,567,123 1,104,777 1,577,713 178,199 (43,343) (1,955,448) (7,612,768) -0.500 0.000 2.390* 2.820* -0.910 2.290* 7.970* 4.090* -3.320* -2.050* -4.570* t-stat 6 Model2D 0.457 0.000 0.032 0.406 -2.540 -0.011 Coef (772,529) (9,292) 1,288,824 238,375 -0.540 1.830 0.070 9.070* 4.090* -3.190* -4.750* t-stat Model2C 902 0.077 0.035 0.399 -2.441 -0.012 Coef (810,864) -1.150 0.100 5.730* -4.940* t-stat 10.000* Model2B 0.187 1,384 0.037 -0.012 Coef (1,702,922) -5.480* t-stat 12.290* Model2A 0.042 -0.013 Coef Information and Communication Wholesale and Retail Trade; Repair Repair Trade; Wholesale and Retail and Motorcycles of Motor Vehicles Tax Rate Tax rate* lagged Tax investments incentives, in PEZA thousand pesos incentives* PEZA lagged investments rate Profit Log (Total employment) age of firm Average Concentration ratio 4) (Top Agriculture, Forestry and Fishing Mining and Quarrying Manufacturing Air Gas, Steam and Electricity, Conditioning Supply Table 7. OLS Estimates of New Tangible Assets Tangible 7. OLS Estimates of New Table Expenditures in Assets New Tangible in 2010 thousand pesos (Y) in 2010, Revenues in thousand pesos in 2009, Revenues in thousand pesos Investments in 2009, thousand pesos Volume XV (2016) 101 Quimbo et al. -7.9% 0.350 1.450 0.970 0.765 2.630* -1.570 -4.820* t-stat 30.710* (30,606) Model2F 0.848 0.613 -2.131 18.081 22.943 Coef (623,679) 577,934 -2.3% 0.356 0.434 -1.890 -0.950 (9,042) t-stat Model2E Coef (604,255) (1,839,098) -2.2% 0.450 0.313 -2.530 (8,502) t-stat Model2D Coef (2,407,625) -2.1% 0.810 0.302 0.000 (8,172) t-stat Model2C 0.066 -0.782 -2.913 -0.782 22.161 Coef 102,216 0.0% 0.000 0.187 1.500 0.287 t-stat Model2B Coef 187,463 0.820 0.254 t-stat Model2A 72,325 Coef Other manufacturing industries Electricity, Gas, Steam and Air Conditioning Supply Gas, Steam and Electricity, and Motorcycles of Motor Vehicles Repair Trade; Wholesale and Retail Information and Communication Electricity, Gas, Steam and Air Conditioning Supply*PEZA Air Conditioning Supply*PEZA Gas, Steam and Electricity, incentives and Motorcycles*PEZA of Motor Vehicles Repair Trade; Wholesale and Retail incentives incentives Information and Communication* PEZA incentives Other manufacturing industries*PEZA Constant R-squared marginal effect of tax rates, in thousand pesos Total As % of average (Y) incentive, in thousand pesos marginal effect of PEZA Total in thousand pesos per industry, Marginal effect of PEZA Manufacturing Manufacturing* PEZA incentives Manufacturing* PEZA Table 7. OLS Estimates of New Tangible Assets Tangible 7. OLS Estimates of New Table Expenditures in Assets New Tangible in 2010 thousand pesos (Y) Other manufacturing industries 102 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines 0.150 0.170 0.580 0.800 2.270 1.490 5.310 -0.170 -0.250 -0.910 -1.310 -5.250 -0.100 -0.610 -0.730 -0.770 -3.070 15.190 t-stat Model 3F 972 332 (18) (709) 1,362 1,302 0.684 0.000 -0.901 -0.009 13,913 12,183 Coef (7,892) (3,836) (9,593) (2,653) 0.00004 (0.0001) 0.100 0.080 1.250 0.590 1.590 2.650 2.000 3.200 -0.260 -2.500 -1.960 -5.150 -0.150 -0.720 -0.740 -0.780 -1.150 16.530 t-stat Model 3E 854 616 390 (29) 0.000 0.000 1,894 0.729 -1.886 29,766 16,263 Coef (1,076) (4,548) (9,753) (2,695) 0.00002 (0.00004) (68,330) 1.810 0.760 1.840 2.680 2.030 2.440 -2.360 -5.240 -0.050 -0.620 17.160 t-stat Model 3D 384 (10) 0.000 0.000 2,126 0.745 -2.237 38,315 15,508 Coef 0.00013 (0.00002) 1.180 2.540 0.100 2.400 -0.790 -1.020 23.450 t-stat 19 Model 3C 1.711 0.000 0.548 24,724 Coef 0.00013 -0.00004 3.450 0.140 6.350 -0.240 -2.140 t-stat 42 Model 3B 0.002 0.0005 Coef (7,584) (0.0001) 7.950 -2.520 t-stat Model 3A 0.0006 Coef (0.0001) Other manufacturing industries Information and Communication Wholesale and Retail Trade; Repair Repair Trade; Wholesale and Retail and Motorcycles of Motor Vehicles Tax Rate Tax rate* lagged Tax investments incentives, in PEZA thousand pesos incentives* PEZA lagged investments rate Profit Log (Total employment) age of firm Average Concentration ratio 4) (Top Agriculture, Forestry and Fishing Mining and Quarrying Manufacturing Air Gas, Steam and Electricity, Conditioning Supply Table 8. OLS Estimates of R&D Expenditures Table R&D Expenditures in 2010, in thousand pesos (Y) in 2010, Revenues in thousand pesos in 2009, Revenues in thousand pesos Investments in 2009, thousand pesos Volume XV (2016) 103 Quimbo et al. 0 0% 1.310 0.200 0.440 0.659 -2.430 -0.810 -1.420 t-stat Model 3F 0.009 0.241 0.004 -0.025 -0.014 Coef (19,787) (181) -1.9% 0.652 -2.190 t-stat Model 3E Coef (30,085) (214) -2.3% 0.652 -2.540 t-stat Model 3D Coef (32,941) 164 1.7% 0.650 0.632 t-stat Model 3C 1,129 Coef -0.0001 -0.0250 -0.0001 -0.0001 -0.0001 0.0% 0.000 1.800 0.164 t-stat Model 3B 4,724 Coef 2.080 0.154 t-stat Model 3A 3,788 Coef Other manufacturing industries Electricity, Gas, Steam and Air Conditioning Supply Gas, Steam and Electricity, and Motorcycles of Motor Vehicles Repair Trade; Wholesale and Retail Information and Communication Total marginal effect of PEZA incentive marginal effect of PEZA Total in thousand pesos per industry, Marginal effect of PEZA Manufacturing Electricity, Gas, Steam and Air Conditioning Supply*PEZA Air Conditioning Supply*PEZA Gas, Steam and Electricity, incentives and Motorcycles*PEZA of Motor Vehicles Repair Trade; Wholesale and Retail incentives incentives Information and Communication* PEZA incentives Other manufacturing industries*PEZA Constant R-squared marginal effect of tax rates Total Table 8. OLS Estimates of R&D Expenditures Table R&D Expenditures in 2010, in thousand pesos (Y) incentives Manufacturing* PEZA 104 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines 0.330 0.980 0.130 1.740 2.600 0.050 0.210 0.600 0.490 1.160 2.180 -2.420 -0.270 -1.090 -0.710 -1.720 t-stat 21 33 33 32 56 33 Model4F (52) (11) (48) Coef 0.0000995 0.0001506 0.0761888 0.2495710 0.0000015 -0.0000241 -0.0000006 0.210 0.740 0.430 0.410 0.810 1.290 0.610 0.050 0.210 1.850 -0.650 -1.920 -0.360 -0.920 -0.650 -1.490 t-stat 13 25 23 48 23 (9) Model4E (70) (44) (141) Coef 0.0000725 0.0000129 0.0714343 0.2489097 0.0000010 -0.0000185 -0.0000005 1.290 0.800 0.050 0.190 1.630 -0.820 -0.830 -0.520 -1.240 -1.900 t-stat (8) Model4D (33) (140) Coef 0.0000703 0.0000166 0.0683519 0.2138228 0.0000007 -0.0000178 -0.0000003 1.430 1.160 0.020 1.710 -0.760 -1.350 -2.170 t-stat Model4C (129) Coef 0.0000768 0.0000050 0.0257540 0.0000007 -0.0000197 -0.0000004 0.040 0.000 0.990 -0.590 -1.060 t-stat Model4B (98) Coef 0.0000001 0.0012243 0.0000004 -0.0000003 0.980 -1.020 t-stat Model4A Coef 0.0000004 -0.0000003 Information and Communication Wholesale and Retail Trade; Repair Repair Trade; Wholesale and Retail and Motorcycles of Motor Vehicles Tax Rate Tax rate* lagged Tax investments incentives, in PEZA thousand pesos incentives* PEZA lagged investments rate Profit Log (Total employment) age of firm Average Concentration ratio 4) (Top Agriculture, Forestry and Fishing Mining and Quarrying Manufacturing Air Gas, Steam and Electricity, Conditioning Supply Table 9. OLS Estimates of New Industry Entrants Table in 2010, Revenues in thousand pesos in 2009, Revenues in thousand pesos Investments in 2009, thousand pesos New Industry Entrants (Y) Volume XV (2016) 105 Quimbo et al. 0 0 0.050 0.690 0.880 -2.670 -2.790 -1.300 -1.950 t-stat 79 65 Model4F 0.028 Coef 0.0005165 -0.0001613 -0.0002423 -0.0001855 -0.0001568 0 0 0.640 0.660 t-stat 73 48 Model4E 0.014 Coef 0 0 0.740 t-stat 79 Model4D 0.012 Coef 0 0.130 t-stat 0.00000014 2 Model4C 0.010 Coef 0.00015 0.00015 0.00015 -0.00001 -0.00009 0 -0.190 t-stat (3) Model4B 0.002 Coef -0.800 t-stat (8) Model4A 0.154 Coef Other manufacturing industries Electricity, Gas, Steam and Air Conditioning Supply Gas, Steam and Electricity, and Motorcycles of Motor Vehicles Repair Trade; Wholesale and Retail Information and Communication Electricity, Gas, Steam and Air Conditioning Supply*PEZA Air Conditioning Supply*PEZA Gas, Steam and Electricity, incentives and Motorcycles*PEZA of Motor Vehicles Repair Trade; Wholesale and Retail incentives incentives Information and Communication* PEZA incentives Other manufacturing industries*PEZA Constant R-squared marginal effect of tax rates Total incentive marginal effect of PEZA Total in thousand pesos per industry, Marginal effect of PEZA Manufacturing Manufacturing* PEZA incentives Manufacturing* PEZA Table 9. OLS Estimates of New Industry Entrants Table Other manufacturing industries New Industry Entrants (Y) 106 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines Figure 5. Predicted GCF vis-à-vis Different Corporate Tax Rates, 2014 Source: Author’s calculations Source of basic data: Philippine Statistics Authority, Bangko Sentral ng Pilipinas, various sources (see references) Possible revenue implications Table 10 shows an illustrative computation of the revenue effects of the lowering of CIT to 25 percent. It is estimated that for the proposed 25 percent CIT to be revenue-neutral, the net income of firms must increase by 2.1 pesos for every peso increase in investments. While there is a direct reduction of revenues resulting from the 5 percentage point reduction in CIT, the predicted increase in CIT payable through the investment pathway is potentially sufficient to outweigh the direct revenue loss. This study underscores the fact that these estimates are not inclusive of the revenue effects resulting from tax-induced increases in foreign direct investments that may arise, particularly with the ASEAN economic integration. Volume XV (2016) 107 Quimbo et al. Table 10. Estimated Revenue Changes with CIT Reduced to 25 Percent In billion pesos At current revenues, total tax potential payments of firms* 631 BIR revenue loss due to CIT reduction to 25 percent ** 54.0 Increased investments of firms due to reduced taxes*** 153 Increased net income from additional investments**** 322 BIR revenue from additional net income (at 67% collection efficiency)***** 54.0 Estimated revenue gain 0 *Author’s calculations using reported revenues from 2010 ASPBI **Reducing the CIT rate by 5 percentage points will lower current CIT collections by 16.7 percent (25%/30%) ***Regression results (Model 2F) show that a percentage point reduction in tax rates will lead to PhP30.6 billion increase in investments. *****Applied 25 percent rate on additional net income and assumed 67 percent CIT collection efficiency rate by BIR. Conclusion The results show that, in the Philippines, tax rates and incentives matter in investment decisions. Taxes and incentives can explain inter-industry variations in investment levels. The study concludes that the investment- tax and investment-subsidy relationships are non-linear: increased taxes or reduced incentives predict lower investments only for industry groups that already have previous investments. Reduced taxes predict higher investments, with larger effects for industry groups that already have previous investments. Increased incentives predict larger investments, with the investment effects varying in size across industries. Incentives, but not taxes, can also explain changes in industry size. Potential investors in particular industries could consider available incentives as crucial in making investment decisions. Nonetheless, the results suggest that reducing corporate income tax rates to, say, 25 percent—as some stakeholders have suggested—could bring Philippine investment levels closer to ASEAN member nations with high and growing investments, such as Indonesia, Vietnam, and Thailand. Moreover, 108 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines the findings support current calls for the rationalization of fiscal incentives or the granting of such to industries or sectors that are able to best utilize them. While this paper has attempted to contribute to the current debate on tax reforms in the Philippines, it emphasizes that the area of corporate taxation and subsidies is still largely under-researched. One important obstacle is the lack of data or the limited public access of available data. The government should consider intensifying efforts in collecting and analyzing firm and industry level data so that debates on taxation can be evidence-based. Notes 1. Sherman Robinson, “Sources of Growth in Less Developed Countries: A Cross- Section Study,” The Quarterly Journal of Economics 85, no. 3 (1971):408. 2. N. Gregory Mankiw, David Romer, and David N. Weil, “A Contribution to the Empirics of Economic Growth,” The Quarterly Journal of Economics 107, no. 2 (1992):408. 3. Mohsin S. Khan and Manmohan S. Kumar, “Public and Private Investment and the Growth Process in Developing Countries,” Oxford Bulletin of Economics and Statistics 59, no. 1 (1997):84. 4. Georgios Karras, “Land and Population Growth in the Solow Growth Model: Some Empirical Evidence,” Economics Letters 109 (2010):67. 5. Steve Bond, Asli Leblebicioglu, and Fabio Schiantarelli, “Capital Accumulation and Growth: A New Look at the Empirical Evidence,” Journal of Applied Econometrics 25, no. 7 (2010):1073. 6. Asian Development Bank and World Bank, Improving the Investment Climate in the Philippines (Manila: Asian Development Bank and World Bank, 2005),46 7. Asian Development Bank, Philippines: Critical Development Constraints (Manila: Asian Development Bank Country Diagnostic Studies, 2007), 25. 8. World Economic Forum, The Global Competitiveness Report 2015-2016 (Geneva: World Economic Forum, 2015), 296. 9. Ibid. 10. International Monetary Fund, “Revenue Mobilization in Developing Countries” (Policy paper, International Monetary Fund, 2011), 34. 11. 1. “Operating Economic Zones,” Philippine Economic Zone Authority, last modified May 31, 2015, http://www.peza.gov.ph/index.php/economic- zones/ list-of-economic-zones/operating-economic-zones. 12. Department of Budget and Management, Budget of Expenditures and Sources of Financing 2016 - Table K.1 Investment Tax Expenditures by Investment Promotion Agency 2013-2016, http://www.dbm.gov.ph/wp- content/uploads/BESF/BESF2016/ K1.pdf. Volume XV (2016) 109 Quimbo et al. 13. Vito Tanzi and Parthasarathi Shome, “Taxation and Development in East Asian Countries,” in The Political Economy of Tax Reform, ed. Takatoshi Ito and Anne O. Krueger (Chicago and London: The University of Chicago Press, 1992), 31-65. 14. Florian Alburo et al., Economic Recovery and Long-Run Growth: Agenda for Reforms (Manila: Philippine Institute for Development Studies, 1986), 71-82. 15. Department of Budget and Management, Fiscal Statistics Handbook 1984-1993 – Table I.B.2 National Government Revenue Collections as a Percentage of GDP, 16. Benjamin E. Diokno, “Reforming the Philippine Tax System: Lessons from Two Tax Reform Programs” (Discussion paper, University of the Philippines School of Economics, 2005), 15. 17. International Monetary Fund, “IMF Approves Extension and Augmentation of EFF for the Philippines,” Press Releases, July 18, 1997, http://www.imf.org/ external/np/sec/pr/1997/pr9733.htm. 18. Diokno, “Philippine Tax System,”19. 19. Department of Budget and Management, Fiscal Statistics Handbook 2004-2013 – Table I.B.2 National Government Revenue Collections as a Percentage of GDP. 20. Renato Reside, “Towards Rational Fiscal Incentives (Good Investments or Wasted Gifts?)” (Discussion paper, University of the Philippines School of Economics, 2006), Executive Summary. 21. Joseph Y. Lim, “Comment on Tanzi and Shome 1992 Paper,” in The Political Economy of Tax Reform, ed. Takatoshi Ito and Anne O. Krueger (Chicago and London: The University of Chicago Press, 1992),63. 22. Edgar E. Twine, Barnabas Kiiza, and Bernard Bashaasha, “The Flexible Accelerator Model of Investment: An Application to Ugandan Tea Processing Firms,” African Journal of Agricultural and Resource Economics 10, no. 1 (2015):2. 23. Steven M. Fazzari, R. Glenn Hubbard, and Bruce C. Petersen, “Financing Constraints and Corporate Investment,” Brookings Paper on Economics Activity 1 (1988):163-165. 24. Asian Development Bank, Philippines: Critical Development Constraints,2. 25. Fazzari, Hubbard, and Petersen, “Financing Constraints,” 148. 26. Pramod N. Junankar, Investment: Theories and Evidence (London: Macmillan, 1972), 32-33. 27. Jeffrey M. Wooldridge, Introductory Econometrics: A Modern Approach 2nd edition (Australia: Thomson/South-Western, 2003), 363. 28. “Glossary of Statistical Terms – Gross Fixed Capital Formation,” Organisation for Economic Cooperation and Development, last modified November 2, 2001, https://stats.oecd.org/glossary/detail.asp?ID=1171. 29. Joseph A. Schumpeter, Capitalism, Socialism and Democracy (New York: Harper and Brothers Publishers, 1942). 30. Richard Gilbert, “Looking for Mr. Schumpeter: Where are We in the Competition- Innovation Debate?,” in Innovation Policy and the Economy, ed. Adam B. Jaffe, Josh Lerner, and Scott Stern (Massachusetts, MIT Press, 2006), 204-206. 110 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines 31. Claudio Loderer and UrsWaelchli, “Firm Age and Performance” (Paper, University Library of Munich Germany, 2010), 26; Laarni T. Bulan and Zhipeng Yan, “Firm Maturity and the Pecking Order Theory” (Paper, Brandeis University and New Jersey Institute of Technology, 2010), 7. 32. Arthur L. Stinchcombe, “Social Structure and Organizations,” in Handbook of Organizations, ed. James G. March (Chicago: Rand McNally and Company, 1965), 148. 33. Shuddhasattwa Rafiq, Ruhul Salim and Russell Smyth, “The Moderating Role of Firm Age in the Relationship between R&D Expenditure and Financial Performance: Evidence from Chinese and US Mining Firms” (Discussion paper, Monash Business School, 2015), 6-7. 34. Maud R. Kane, David Ubilava, and Pei Xu, “Effects of Firm-Specific Factors on R&D Expenditures of Agribusiness Companies” (Working Paper, Purdue University, 2007), 7. Bibliography Aiello, Francesco and Concetta Castiglione. “Firm Size, Market Concentration and R&D: An Empirical Analysis of the Italian Manufacturing Firms.” Working paper, University of Calabria, 2013. Akdogu, Evrim and Peter MacKay. “Investment and Competition.” The Journal of Financial and Quantitative Analysis 43, no. 2 (2008): 299-330. Alburo, Florian, Emmanuel S. De Dios, Felipe M. Medalla, Mario B. Lamberte, Ponciano S. Intal Jr., Romeo Bautista, Mahar Mangahas, Dante B. Canlas, Manuel F. Montes, Edita A. Tan, Rosalinda Tidalgo, Mario C. Feranil, Gabriel U. Iglesias, Raul V. Fabella, Ernesto M. Pernia, and Benjamin E. Diokno. Economic Recovery and Long-Run Growth: Agenda for Reforms. Manila: Philippine Institute for Development Studies, 1986. Asian Development Bank. Philippines: Critical Development Constraints. Manila: Asian Development Bank Country Diagnostic Studies, 2007. Asian Development Bank. Key Indicators for Asia and the Pacific 2015.Manila: Asian Development Bank, 2015. Asian Development Bank and World Bank. Improving the Investment Climate in the Philippines. Manila: Asian Development Bank and World Bank, 2005. Bangko Sentral ng Pilipinas. “Economic and Financial Statistics – Selected Domestic Interest Rates.” http://www.bsp.gov.ph/statistics/efs_fsa1.asp. Blaine, Jonathan and Theeradaje Tansuwanrat. “Thailand Cuts Corporate Income Tax in Preparation for AEC Competition.” The Nation, February 3, 2012. http:// www.nationmultimedia.com/opinion/Thailand-cuts-corporate-income-tax-in- preparation--30175039.html. Bond, Steve, Asli Leblebicioglu, and Fabio Schiantarelli. “Capital Accumulation and Growth: A New Look at the Empirical Evidence.” Journal of Applied Econometrics 25, no. 7 (2010): 1073-1099. Volume XV (2016) 111 Quimbo et al. Bulan, Laarni T. and Zhipeng Yan. “Firm Maturity and the Pecking Order Theory.” Paper, Brandeis University and New Jersey Institute of Technology, 2010. Bureau of Internal Revenue. BIR Annual Reports. Manila, 2009-2014. Bureau of Local Government Finance. Statement of Receipts and Expenditures. Manila, 2009-2013. Cohen, Wesley. “Fifty Years of Empirical Studies of Innovative Activity and Performance.” In Handbook of the Economics of Innovation Volume I, edited by Bronwyn H. Hall and Nathan Rosenberg, 129-213. Oxford, UK: Elsevier, 2010. Department of Budget and Management. Budget of Expenditures and Sources of Financing 2016 - Table K.1 Investment Tax Expenditures by Investment Promotion Agency 2013-2016. http://www.dbm.gov.ph/wp- content/uploads/BESF/BESF2016/K1.pdf. Department of Budget and Management. Fiscal Statistics Handbook 1984-1993 – Table I.B.2 National Government Revenue Collections as a Percentage of GDP. Department of Budget and Management. Fiscal Statistics Handbook 1994-2003 – Table I.B.2 National Government Revenue Collections as a Percentage of GDP. Department of Budget and Management. Fiscal Statistics Handbook 2004-2013 – Table I.B.2 National Government Revenue Collections as a Percentage of GDP, Department of Finance. “DOF Statistical Bulletin – Table 24. Bureau of Customs Collections 1999-2014.” http://www.dof.gov.ph/index.php/data/ statistics-bulletin/. Diokno, Benjamin. “Reforming the Philippine Tax System: Lessons from Two Tax Reform Programs.” Discussion paper, University of the Philippines School of Economics, 2005. Executive Order No. 37: Further Amending Certain Provisions of the National Internal Revenue Code, as amended. Republic of the Philippines, 1986. Executive Order No. 226: Omnibus Investments Code of 1987. Republic of the Philippines, 1987. Fazzari, Steven M., R. Glenn Hubbard, and Bruce C. Petersen. “Financing Constraints and Corporate Investment.” Brookings Paper on Economics Activity 1 (1988): 141-206. Gilbert, Richard. “Looking for Mr. Schumpeter: Where are We in the Competition- Innovation Debate?” In Innovation Policy and the Economy, edited by Adam B. Jaffe, Josh Lerner, and Scott Stern, 159-215. Massachusetts, MIT Press, 2006. Heij, Gitte. “Who Pulled the Strings? A Comparative Study of Indonesian and Vietnamese Tax Reform.” PhD diss., University of Groningen Netherlands, 2007. International Monetary Fund. “IMF Approves Extension and Augmentation of EFF for the Philippines.” Press Releases, July 18, 1997. http://www.imf.org/external/np/ sec/pr/1997/pr9733.htm. International Monetary Fund. “Revenue Mobilization in Developing Countries.” Policy paper, International Monetary Fund, 2011. Junankar, Pramod. Investment: Theories and Evidence. London: Macmillan, 1972. Kane, Maud R., David Ubilava, and Pei Xu. “Effects of Firm-Specific Factors on R&D 112 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines Expenditures of Agribusiness Companies.” Working Paper, Purdue University, 2007. Karras, Georgios. “Land and Population Growth in the Solow Growth Model: Some Empirical Evidence.” Economics Letters 109 (2010): 67-68. Khan, Mohsin S. and Manmohan S. Kumar. “Public and Private Investment and the Growth Process in Developing Countries.” Oxford Bulletin of Economics and Statistics 59, no. 1 (1997):69-88. Lim, Joseph. “Comment on Tanzi and Shome 1992 Paper.” In The Political Economy of Tax Reform, edited by Takatoshi Ito and Anne O. Krueger, 62-65. Chicago and London: The University of Chicago Press, 1992. Loderer, Claudio and Urs Waelchli. “Firm Age and Performance.” Paper, University Library of Munich Germany, 2010. Mankiw, N. Gregory, David Romer, and David N. Weil. “A Contribution to the Empirics of Economic Growth.” The Quarterly Journal of Economics 107, no. 2 (1992): 407-437. Mines and Geosciences Bureau. “Mining Industry Statistics 1997-2013.” Last modified February 20, 2015. http://mgb.gov.ph/attachments/article/162/ HistoricalMineralIndustrySt atistics.pdf. Mines and Geosciences Bureau. “Mining Industry Statistics 2011-2015.” Last modified June 16, 2016. http://mgb.gov.ph/attachments/article/162/MIS(2015)%20(1)%20(1). pdf. Nguyen, Huu Cung. “Corporate Income Tax Burden and its Determinants: Evidence from Vietnam.” Advances in Management and Applied Economics 5, no. 3 (2015): 103-120. Organisation for Economic Cooperation and Development. “Glossary of Statistical Terms – Gross Fixed Capital Formation.” Last modified November 2, 2001. https:// stats.oecd.org/glossary/detail.asp?ID=1171. Philippine Congress. Senate Bill No. 2163 filed by Senator Sonny Angara: An Act Reducing the Corporate Income Tax Rate, Amending Sections 27 and 28 of the National Internal Revenue Code of 1997, as amended, and for other purposes. Republic of the Philippines, 2014. Philippine Congress. House Bill No. 4099 filed by Representative Magtanggol Gunigundo: An Act Amending Sections 24 and 27 of Republic Act 8424, as amended, otherwise known as the National Internal Revenue Code of 1997. Republic of the Philippines, 2014. Philippine Congress. House Bill No. 4829 filed by Representative Romero “Miro” Quimbo: An Act Restructuring the Income Taxes Imposed on Individuals and Corporations, Amending for the Purpose Sections 22; 24; 27(A) and (E)(1); 28(A)(1),(2) and (B)(1); and 34 all under the National Internal Revenue Code of 1997, as amended. Republic of the Philippines, 2014. Philippine Congress. House Bill No. 4941 filed by Representative Arthur Yap: An Act Reducing the Rates of Income Tax Imposed on Corporations in the Philippines, Amending for the Purpose Republic Act 8424, otherwise known as the National Internal Revenue Code of 1997, as amended, and for other purposes. Republic of the Philippines, 2014. Volume XV (2016) 113 Quimbo et al. Philippines Congress. House Bill No. 4925 filed by Representative Victoria Noel: An Act Amending Sections 24 and 27 of Republic Act 8424, as amended, otherwise known as the National Internal Revenue Code of 1997. Republic of the Philippines, 2014. Philippine Congress. House Bill No. 4996 filed by Representative Giorgidi Aggabao: An Act Reducing the Corporate Income Tax Rate, Amending Sections 27 and 28 of the National Internal Revenue Code of 1997, as amended, and for other purposes. Republic of the Philippines, 2014. Philippine Congress. Senate Bill No. 2974 filed by Senator Ralph Recto: An Act Instituting Income Tax Reform for Individual and Corporate Taxpayers, Amending for this Purpose Sections 24(A)(2), 27(A) and 35(A) of the National Internal Revenue Code of 1997, as amended, and for other purposes. Republic of the Philippines, 2015. Philippine Economic Zone Authority. “Operating Economic Zones.” Last modified May 31, 2015. http://www.peza.gov.ph/index.php/economic-zones/ list- of-economic-zones/operating-economic-zones. Philippine Statistics Authority. “National Accounts – Revised/Rebased Annual National Accounts Linked Series 1946-2010.” Last modified April 12, 2012.http:// psa.gov.ph/nap-press-release/data-charts. Philippine Statistics Authority. 2009 Annual Survey of Philippine Business and Industry. Fifteen Volumes. Manila, 2012. Philippine Statistics Authority. 2010 Annual Survey of Philippine Business and Industry. Eighteen Volumes. Manila, 2013. Presidential Decree No. 1158-A: Amending Certain Sections of the National Internal Revenue Code of 1939 for Incorporation in the Consolidation and Codification of All Existing Revenue Laws under Presidential Decree No.1158. Republic of the Philippines, 1977. Pricewaterhouse Coopers. Worldwide Tax Summaries: Corporate Taxes 2015/16. http:// www.pwc.com/gx/en/services/tax/corporate-tax/worldwide-tax- summaries/ downloads.html. Putra, Eureka. “A Study of the Indonesian’s Income Tax Reforms and the Development of Income Tax Revenues.” Journal of East Asian Studies 12, no. 3 (2014): 55-68. Rafiq, Shuddhasattwa, Ruhul Salim, and Russell Smyth. “The Moderating Role of Firm Age in the Relationship between R&D Expenditure and Financial Performance: Evidence from Chinese and US Mining Firms.” Discussion paper, Monash Business School, 2015. Revenue Regulations No. 2.Republic of the Philippines, 1941. Republic Act No. 1855: An Act to Place Life Insurance Companies on a New Income Tax Basis by Amending Sections 24 and 32 of Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code, as amended.Republic of the Philippines, 1957. Republic Act No. 2343: An Act to Amend Certain Sections of Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code, as amended, and for other purposes. Republic of the Philippines, 1959. Republic Act No. 5431: An Act Amending Sections 24, 26, 29, 32, 49, 53, 54 and 84(b) of the National Internal Revenue Code, as amended. Republic of the Philippines, 1968. 114 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines Republic Act No. 7160: An Act Providing for a Local Government Code of 1991. Republic of the Philippines, 1991. Republic Act No. 7227: Bases Conversion and Development Act of 1992. Republic of the Philippines, 1992. Republic Act No. 7916: The Special Economic Zone Act of 1995. Republic of the Philippines, 1995. Republic Act No. 7922: Cagayan Special Economic Zone Act of 1995. Republic of the Philippines, 1995. Republic Act No. 8424: The Tax Reform Act of 1997. Republic of the Philippines, 1997. Republic Act No. 8756: Regional or Area Headquarters, Regional Operating Headquarters and Regional Warehouses Act. Republic of the Philippines, 1999. Republic Act No. 8748: An Act Amending Republic Act No. 7916, otherwise known as The Special Economic Zone Act of 1995. Republic of the Philippines, 1999. Republic Act No. 9224: An Act Rationalizing the Excise Tax on Automobiles, amending for the purpose the National Internal Revenue Code of 1997, and for other purposes. Republic of the Philippines, 2003. Republic Act No. 9337: An Act Amending Sections 27, 28, 34, 106, 107, 108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237 and 288 of the National Internal Revenue Code of 1997, as amended, and for other purposes. Republic of the Philippines, 2005. Republic Act No. 9400: An Act Amending Republic Act No. 7227, as amended, otherwise known as the Bases Conversion and Development Act of 1992, and for other purposes. Republic of the Philippines, 2007. Republic Act No. 9504: An Act Amending Section 22, 24, 34, 35, 51, and 79 of Republic Act No. 8424, as amended otherwise known as the National Internal Revenue of 1997. Republic of the Philippines, 2008. Republic Act No. 9728: Freeport Area of Bataan (FAB) Act of 2009. Republic of the Philippines, 2009. Republic Act No. 10351: The Sin Tax Reform Act of 2012. Republic of the Philippines, 2012. Republic Act No. 10653: An Act Adjusting The 13th Month Pay And Other Benefits Ceiling Excluded From The Computation Of Gross Income For Purposes Of Income Taxation, Amending For The Purpose Section 32(B), Chapter Vi Of The National Internal Revenue Code Of 1997, As Amended. Republic of the Philippines, 2015. Republic Act No. 10708: An Act Enhancing Transparency in the Management and Accounting of Tax Incentives Administered by Investment Promotion Agencies. Republic of the Philippines, 2015. Reside, Renato. “Towards Rational Fiscal Incentives (Good Investments or Wasted Gifts?).” Discussion paper, University of the Philippines School of Economics, 2006. Robinson, Sherman. “Sources of Growth in Less Developed Countries: A Cross-Section Study.” The Quarterly Journal of Economics 85, no. 3 (1971): 391-408. Volume XV (2016) 115 Quimbo et al. Ruiz-Porras, Antonio and Celina Lopez-Mateo. “Market Concentration Measures and Investment Decisions in Mexican Manufacturing Firms.” Accounting and Taxation 2, no. 1 (2010): 59-69. Schumpeter, Joseph. Capitalism, Socialism and Democracy. New York: Harper and Brothers Publishers, 1942. Stinchcombe, Arthur. “Social Structure and Organizations.” In Handbook of Organizations, edited by James G. March, 142-193. Chicago: Rand McNally and Company, 1965. Tanzi, Vito and Parthasarathi Shome. “Taxation and Development in East Asian Countries.” In The Political Economy of Tax Reform, edited by Takatoshi Ito and Anne O. Krueger, 31-65. Chicago and London: The University of Chicago Press, 1992. Twine, Edgar E., Barnabas Kiiza, and Bernard Bashaasha. “The Flexible Accelerator Model of Investment: An Application to Ugandan Tea Processing Firms.” African Journal of Agricultural and Resource Economics 10, no. 1 (2015): 1-15. Wooldridge, Jeffrey. Introductory Econometrics: A Modern Approach 2nd edition.Australia, Thomson/South-Western, 2003. World Bank.“Data – Gross Capital Formation (% of GDP).”Last modified June 14, 2016. http://data.worldbank.org/indicator/NE.GDI.TOTL.ZS. World Economic Forum. The Global Competitiveness Report 2015-2016. Geneva: World Economic Forum, 2015. Yui, Yuji. “FDI and Corporate Income Tax Reform in Vietnam.” Working paper, Seijo University, n.d. Annexes Annex Table 1. Distribution of Sample Firms, by Industry, 2010 ASPBI Sampled as a 2009 ASPBI Sampled Total percentage of Establishments Establishments Total ALL INDUSTRIES 29,298 148,266 19.76% AGRICULTURE 811 1,536 52.80% Agriculture, Forestry and Fishing 811 1,536 52.80% INDUSTRY 7,049 18,836 37.42% Mining and Quarrying 162 110 147.27% Manufacturing 7,049 18,836 37.42% Electricity, Gas, Steam and Air-conditioning Supply 251 231 108.66% Water Supply, Sewage, Waste Management and 238 762 31.23% Remediation Activities 116 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines Annex Table 1. Distribution of Sample Firms, by Industry, 2010 ASPBI Construction 624 1,464 42.62% SERVICES 21,438 127,894 16.76% Wholesale and Retail Trade; Repair of Motor Vehicles, Motorcycles, and Personal and 8,159 57,908 14.09% Household Goods Transportation and Storage 922 2,891 31.89% Accommodation and Food Service Activities 1,904 14,937 12.75% Information and Communication 2,082 1,736 119.93% Financial and Insurance Activities 1,427 14,213 10.04% Real Estate Activities 444 2,873 15.45% Professional, Scientific and Technical Activities 977 6,251 15.63% Administrative and Support Service Activities 1,597 6,272 25.46% Education 1,835 9,949 18.44% Human Health and Social Work Activities 835 4,451 18.76% Arts, Entertainment and Recreation 384 1,861 20.63% Other Service Activities 872 4,552 19.16% Volume XV (2016) 117 Quimbo et al. Annex Table 2. Distribution of Sample Firms, by Industry, 2009 ASPBI Sampled as a 2009 ASPBI Sampled Total percentage of Establishments Establishments Total ALL INDUSTRIES 27,575 150,196 18% AGRICULTURE 1,268 1,567 80.92% Agriculture, Hunting and Forestry 898 1,280 70% Fishing 370 287 129% INDUSTRY 7,454 20,368 36.60% Mining and Quarrying 171 100 171% Manufacturing 5,894 17,904 33% Electricity, Gas and Water Supply 473 908 52% Construction 916 1,456 63% SERVICES 18,853 128,261 14.70 Wholesale and Retail Trade; Repair of Motor Vehicles, Motorcycles, and Personal and 6,100 59,398 10% Household Goods Hotels and Restaurants 3,066 14,998 20% Transportation, Storage and Communications 1,816 4,181 43% Financial Intermediation 1,281 14,078 9% Real Estate, Renting and Business Activities 3,238 15,118 21% Education 1,346 9,908 14% Health and Social Work 631 4,480 14% Other Community, Social and Personal Service 1,375 6,100 23% Activities 118 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines Annex Table 3. Time Series Regressions (1973-2014): Descriptive Statistics Variable Definition Mean SD PH Gross domestic product GDP (in constant 2000 prices, in 3,394,411.00 1,483,776.00 million PHP) log(GDP) Natural logarithm of PH GDP 14.95 0.41 Δlog(GDPt) First difference of log (GDP) 0.04 0.03 Δlog(GDP ) Lagged first difference of log 0.04 0.03 t-1 (GDP) Δlog(GDP ) Twice lagged first difference 0.04 0.03 t-2 of log (GDP) PH Gross domestic capital GCF formation (in constant 2000 742,716.70 282,374.30 prices, in million PHP) GCFt-1 First lag of GCF 723,912.00 257,886.40 ΔGCFt First difference of GCF 29,084.44 110,937.40 ΔGCFt-1 Lagged first difference of GCF 29,388.18 112,333.40 PH Corporate income tax Tax Rates rates 30.76 4.26 ΔTax Rates First difference of PH 0.12 1.85 t corporate income tax rates ΔTax Rates Lagged first difference of PH 0.13 1.87 t-1 corporate income tax rates PH Average bank lending rates Interest Rates (BSP) 13.74 5.50 ΔInterest Rates First difference of PH average -0.16 3.01 t bank lending rates ΔInterest Rates Lagged first difference of PH -0.16 3.05 t-1 average bank lending rates Volume XV (2016) 119 Quimbo et al. 39 Yes Yes Yes 1381249 9.65e-12 4463.374 0.046234 1365.662 0.510577 0.400062 Model 5 -0.161066 (Robust) 1622360*** -2078215**** -22059.21*** 39 1381249* 4463.374 0.046234 1365.662 0.510577 Model 5 -0.161066 -22059.21*** 1622360**** -2078215*** 39 Yes Yes Yes 5.55e-12 1568509* 3033.409 0.502275 0.408951 Model 4 -0.197644 -9645.922 (Robust) 1521127*** -1914191**** -21913.89*** 39 3033.409 0.502275 Model 4 1568509** -0.197644 -9645.922 1521127*** -21913.89*** -1914191*** 39 Yes Yes Yes 1.12e-12 1059979* 2933.140 0.477948 0.398849 Model 3 -4047.081 (Robust) 1643188*** -21985.94*** -1831640*** 39 1059979* 2933.140 0.477948 Model 3 -4047.081 -21985.94*** 1643188**** -1831640*** 40 Yes Yes Yes 0.388402 0.337435 -9.09e-12 Model 2 -13513.39 -5949.173 -37233.08 (Robust) 1772670**** 40 0.388402 Model 2 -5949.173 -37233.08 -13513.39* 1772670**** 41 No Yes Yes 6.92e-12 0.300519 4888.803 927.1375 0.352980 Model 1 -45697.22 (Robust) 1994011**** 41 4888.803 927.1375 0.352980 Model 1 -45697.22 1994011**** * ) ) t t-1 t ) t t-1 t-2 t t-1 t-1 t-1 Annex Table 4. Time Series Regression Results (1973-2014): Dependent Variable is Annual Change in PH GCF is Variable Series Regression Results (1973-2014): Dependent Time 4. Table Annex Δlog(GDP Δlog(GDP Δlog(GDP ΔGCF Rates ΔTax ΔInterest Rates Rates ΔTax ΔInterest Rates Rates ΔTax ΔGCF Constant R squared Adjusted R squared No of observations Diagnostics Residual Zero Mean? Normally Distributed? Serially Uncorrelated? Homoskedastic? **** 1% significance level *** 5% significance level ** 10% significance level * 15% significance level For the residual diagnostics, is set at 5%. 120 Public Policy Do Investments Respond to Taxation and Incentives? Evidence from the Philippines As briefly discussed above, time series regressions were also pursued to validate the results of the cross section regressions using the ASPBI dataset. For the time series analysis, macro variables for the Philippines from 1973 to 2014 were used. Annex Table 3 presents the descriptive statistics of the variables. There were five regression models as shown in Annex Table 4. The models were also subject to residual diagnostics tests (Jarque-Bera statistic for normal distribution of residuals, White’s Test for Heteroskedasticity, and the Breusch- Godfrey Serial Correlation LM). Robust OLS regressions were also done. In Models 3 to 5, wherein the change in investment due to changes in output is allowed to take place over time, corporate income tax rates are found to be significant at the 5 percent level. In particular, a 1 percentage point increase in statutory corporate tax rates from the previous period predicts about a PhP22 billion decrease in the GCF. This is roughly 0.6 percent of average GDP and 3 percent of average GCF from 1973 to 2014. Moreover, the average annual rise in GCF is PhP29 billion for the same time period. Despite the negative coefficient in the second lagged first difference of GDP, the long-run effect of output on investment is still positive. Based on Junankar (1972), this is the sum of the coefficients of Δlog(GDPt), Δlog(GDPt-1) and Δlog(GDPt-2). Assuming equal weights for the lag distribution, the long-run effect of output on investment is estimated to be PhP925 billion per 1 percent increase in GDP. The lagged change in GCF is found to be negative but insignificant. According to Twine, Kiiza, and Bashaasha (2015), “Investment in the previous period can have either a positive or negative effect on current investment, depending on its magnitude, returns and the cost of adjusting the stock of capital.” In addition, the lagged change in interest rates is insignificant in the models. This might indicate the lack of access or lack of importance placed by PH firms (most are MSMEs) on formal capital markets. The interaction between the corporate income tax rate and lagged investments is also insignificant. Lastly, a co-integrating relationship was found between constant GCF and constant GDP. Future research is advised to explore the Vector Error Correction Model (VECM) specification. Volume XV (2016) 121 Measuring the Performance of the Philippine Scientific Enterprise System CAESAR A. SALOMA* Abstract This study demonstrates three metrics for measuring the performance of the Philippine scientific enterprise system. The system consists primarily of institutions, agencies, and organizations in the country that are directly involved in the generation of new scientific knowledge and in the training of future Filipino scientists and researchers in science, technology, engineering, and mathematics (STEM). The national budget in 2014 was 1.59 times larger than that in 2009 consistent with the steady growth of the gross domestic product during said period. Consequently, the budgets for the state universities and colleges (SUCs) and the Department of Science and Technology (DOST) also grew by 61.53 percent and 115.11 percent, respectively. The DOST is a major source of research and development (R&D) grants and scholarships for STEM students, while the country’s higher education institutions (HEIs) form the backbone of the enterprise system. Peer-reviewed technical publications and PhD graduates are considered to be tangible outputs of an institution that is engaged in scientific R&D activities. The performance indices are: Academic Productivity Index (API), Science Productivity Index (SPI), and the PhD Production Efficiency Index (PPEI). The API score of an HEI is given by the ratio of the (geometric) product * Email: [email protected] 122 Public Policy Measuring the Performance of the Philippine Scientific Enterprise System of the number of SCOPUS publications and PhD graduates produced in a given year, and that of its corresponding budget allocation and number of faculty members. The SPI score is computed as the ratio of the product of the number of SCOPUS publications and PhD graduates, and that of the number of faculty members and their time to do research. A PhD program gets a high PPEI score if it graduates many PhD students within the shortest possible completion time. An institution gets a zero API or SPI score if it does not produce a PhD graduate even if its faculty members are publishing. Two or more units perform uniformly well when their corresponding index scores are comparatively high. The geometric product places equal importance to the institutional output (PhD graduates) and the individual accomplishment (peer-reviewed publications). Because the possible outputs are calibrated to the inputs, an index score would track the response (absorption capacity) of an institution or program to temporal variations in resources invested in it. The use of scientific measures that align institutional output with individual performance is recommended in faculty and staff promotion and in the selection of administrators, as well as in assessing the possible impact and long-term consequences of programs and administrative policies. Prudent application of data-driven analytics promotes transparency, predictability, fairness, and meritocracy in the scientific enterprise system. It motivates stakeholders to work together for a common purpose that is larger than the sum of their own individual aspirations. Keywords: Philippine scientific enterprise system, higher education institutions, Department of Science and Technology, measures of scientific output and productivity Volume XV (2016) 123 Saloma Introduction The gross domestic product (GDP) of the Philippines grew steadily at an average rate of 8.9 ± 2.54 percent per annum from 2005 to 2015, and it enabled the Philippine government to finance the cost of implementing its socio-economic programs as well as expanding their coverage. From 2006 to 2016, the yearly national expenditure program (NEP) that is submitted by the Department of Budget and Management for scrutiny by the Philippine Congress has been equivalent to 19.3 ± 1.32 percent of the GDP in the previous fiscal year.1 The version of the NEP that is jointly passed by the House of Representatives and the Senate becomes the General Appropriations Act when signed into law by the Philippine president. The Act contains the specifics of the national budget for a given fiscal year. A growing Philippine economy implies more revenues for the government and the availability of more resources at the disposal of the executives, administrators, and managers in the Philippine bureaucracy. Here the impact of additional investments on the performance of the Philippine scientific enterprise system is measured. The system consists primarily of institutions, agencies, and organizations in the country that are directly involved in the generation of new scientific knowledge and in the training of future Filipino scientists and researchers in science, technology, engineering, and mathematics (STEM). The national budget in 2015 was 1.59 times larger than that in 2009, resulting in an increase in the budget allocations for the 112 state universities and colleges (SUCs) and the Department of Science and Technology (DOST) by 61.53 percent and 115.11 percent, respectively. The DOST is a major source of research and development (R&D) grants and scholarships for STEM students, while the degree-granting higher education institutions (HEIs) form the backbone of the enterprise system. Peer-reviewed scientific publications and PhD graduates are considered tangible outputs of a scientific institution that is engaged in scientific R&D activities. The DOST organized the Engineering Research and Development for Technology (ERDT) and the Accelerated Science & Technology Human Resource Development (ASTHRD) programs in 2007 and 2009, respectively, for the purpose of increasing the number of PhD and MS graduates.3 The University of the Philippines System (UP) is one of four SUCs in the nine HEIs that qualified to participate in the said programs. 124 Public Policy Measuring the Performance of the Philippine Scientific Enterprise System More than 99.5 percent of the 1,935 HEIs accredited by the Commission on Higher Education (CHED) are incapable of offering tenable PhD degree programs in STEM due to a lack of qualified faculty members. According to CHED, only 12.54 percent of all HEI faculty members had PhD degrees during academic year (AY) 2014-15, which is just 3.3 percent more than the number in AY 2003-04.2 A PhD degree is a research degree that is granted to a student who has been able to contribute an original, novel, and significant piece of scientific knowledge. Only PhD faculty members are qualified to mentor and supervise PhD students. A distinctive requirement for the awarding of a PhD degree is the publication of the dissertation results in a refereed journal, with the concerned PhD student serving as the first or corresponding author. The number of peer-reviewed SCOPUS-indexed publications from the Philippines is growing at an average rate of 136 ± 66.43 papers per year from 2009 (with 1,196) to 2015 (2,014), with UP accounting for 35.57 percent of the total number (11,676).4 It should be pointed out that UP has been receiving 27.36 + 1.32 percent of the annual SUC budget allocation in the last eleven years, ending 2016. From 2009 to 2014, the number of SCOPUS publications rose by 68.4 percent, while the combined allocation for SUCs and DOST increased by 110 percent, with the UP budget increasing by 91.7 percent. Evidently, UP plays a defining role in the functioning of the Philippine scientific enterprise system. A proper performance analysis shall consider the output relative to the input that is given into an institution. The use of the following indices is demonstrated to determine the comparative performance of HEIs and doctoral programs: (1) Academic Productivity Index (API), (2) Science Productivity Index (SPI), and (3) PhD Production Efficiency Index (PPEI). The API score of an HEI is given by the ratio of the (geometric) product of the number of SCOPUS publications and PhD graduates that it produces in a given year, and that of its corresponding budget allocation and assigned number of faculty items. On the other hand, the SPI score is computed as the ratio of the product of the number of SCOPUS publications and PhD graduates, and that of the assigned faculty items and faculty research workload. A PhD program gets a high PPEI score if it graduates many PhD students within a short average completion time. An institution with no PhD graduate gets a zero API or SPI score even if its faculty members are publishing scientific papers. Moreover, two or more units perform comparatively well when their corresponding index scores are both high and close to each other. Volume XV (2016) 125 Saloma The indices employ the geometric product to align the institutional output (PhD graduates) with individual accomplishment (peer-reviewed publications) instead of treating them separately as a sum. When calculated over a sufficient period of time, an index would track the response of an institution to changes in the resources that are invested in it. The use of indices that couple institutional output with individual performance, in faculty and staff promotion and in the appointment of school officials and administrators, is recommended. They are also highly suitable for determining the long-term impact and effectiveness of programs and administrative policies. The prudent application of analytics promotes greater transparency, predictability, fairness and meritocracy in the scientific enterprise system particularly in the SUCs. It motivates the various stakeholders to work together for a common purpose that is larger than the sum of their own individual aspirations. The presentation for this paper proceeds as follows: In Section II, the Philippine scientific enterprise system is characterized in terms of its ability to generate new scientific knowledge and to train the next generation of Filipino scientists and researchers. The said capability is calibrated with respect to the resources that are invested in the enterprise. Section III defines the API, SPI, and PPEI formulas and applies them to rate the performance of the three largest constituent universities of UP, constituent units of the College of Science, UP Diliman, and the doctoral programs of UP Diliman. The presentation ends with a set of recommendations for improving the performance of the HEIs in the country. Basic Information about the Philippine Scientific Enterprise System Publications Per Capita and GDP Per Capita The Philippines is one of the six major ASEAN economies, together with Singapore, Malaysia, Thailand, Indonesia, and Vietnam. Its population is the second largest behind that of Indonesia among the ten ASEAN member- states, and the Philippine GDP per capita (in current US dollars) is the sixth largest since 2009.5 In terms of SCOPUS-indexed publications, the Philippines produced the smallest number among the six major ASEAN economies.6 Figure 1 plots the publication per capita versus the GDP per capita of the ten ASEAN countries for 2015. Publication per capita is obtained by dividing 126 Public Policy Measuring the Performance of the Philippine Scientific Enterprise System the number of SCOPUS publications with the country population. Singapore produces the highest publication per capita (2.954109 x 10-3) and GDP per capita (USD52,888.7), while Myanmar (2.39534 x 10-6) and Cambodia (USD1,158.7) have the lowest publication per capita and GDP per capita, respectively. The Philippines is ranked eighth in publication per capita (1.85602 x 10-5) and sixth in GDP per capita (USD2,899.4). The GDP per capita and the publications per capita are strongly correlated with each other for countries with a GDP per capita of more than USD5,800 (Singapore, Malaysia, and Thailand). For the said countries, increasing national prosperity is accompanied by an improving scientific productivity of the population. On the other hand, no such correlation is observed for the remaining five countries that are characterized by a GDP per capita of less than USD5,000 (Indonesia, Philippines, Vietnam, Lao PDR, Myanmar and Cambodia). The lack of correlation implies that differences in GDP per capita are not accompanied by proportional changes in the publication per capita. The case of Brunei Darussalam is an outlier in Figure 1. It has the smallest population (423,188) but the second highest GDP per capita (USD36,607) among ASEAN countries. A similar case was previously found for Luxembourg (569,700 population), with its high GDP per capita but low publication citation intensity count in a 2004 study involving 31 countries.7 The plot behavior in Figure 1 for 2015 is also displayed in corresponding plots for 2009 and 2015. In the ASEAN region at least, the symbiotic relation between the capability of a country to generate new scientific knowledge and national prosperity is not detected below a GDP per capita threshold. The Philippine Higher Education System Figure 2 plots the number of CHED-accredited HEIs in the country.2 From AY 2003-04 to AY 2014-15, the number increased by 25.65 percent, with private schools accounting for 24.51 percent of the growth. Meanwhile, the Philippine population increased by 21.66 percent in the aforementioned period. Classified as public HEIs are the SUCs that are operated using yearly allocations from the national budget and the local universities and colleges (LUCs) that rely on financial support from local government units. Figure 2 shows a 1.14 percent increase in the number of public HEIs since 2003, due primarily to the establishment of additional LUCs. Volume XV (2016) 127 Saloma Figure 1. Plot of normalized publications per capita (y-axis) versus normalized GDP per capita of ten ASEAN countries for 2015. Singapore produced the highest publication per capita (2.954109 x 10-3) and GDP per capita (USD52,888.7) while Myanmar (2.39534 x 10-6) and Cambodia (USD 1,158.7) had the lowest publication per capita and GDP per capita, respectively. The ten ASEAN member states in the order of population size are: Indonesia, Philippines, Vietnam, Thailand, Myanmar, Malaysia, Cambodia, Lao PDR, Singapore and Brunei Darussalam. Figure 2. Number of HEIs from AY 2003-04 to AY 2014-15. Of the 1,935 HEIs operating in AY 2014-15, more than 88 percent were private and 213 were publicly-funded, including 112 SUCs. 128 Public Policy Measuring the Performance of the Philippine Scientific Enterprise System Figure 3 presents the percentage distribution of HEI faculty members according to their highest educational attainment. In AY 2003-04, more than 60 percent of the faculty members only had baccalaureate degrees and were not qualified to teach graduate degree programs. By AY 2014-15, that number was reduced to 47 percent, with those having master’s degrees increasing to 41 percent from 30 percent in AY 2003-04. The corresponding number of faculty members with PhD degrees increased by only 3.3 percent, from 9.24 percent in AY 2003-04. More than 99 percent of HEIs today are incapable of offering tenable PhD degree programs in STEM due to the lack of qualified faculty members. Figure 4 plots the year-to-year percentage change of undergraduate enrolment from AY 2004-05 to AY 2014-15. In 2003 there were a total of 2.42 million undergraduates, with 34.25 percent enrolled in public HEIs. By 2014 the number increased to 3.81 million, with 44.25 percent studying in public institutions. Undergraduate enrolment in CHED priority disciplines was 1.527 million, representing 63.1 percent of the total enrolment in 2003. In 2014, it increased Figure 3. Percentage distribution of faculty members according to their highest educational attainment. Number of faculty members with PhDs increased only by 3.3 percent from AY 2003-04 to AY 2014-15. Volume XV (2016) 129 Saloma to 2.232 million—that is equivalent to 58.6 percent of the total enrollment, representing a 4.5 percent decrease over 12 years. The CHED priority disciplines are: Sciences (18.6 percent of total enrolment in 2014); Maritime, Medicine and Health, Engineering and Technology (20.8 percent); Agriculture-related and Veterinary Medicine, Teacher Education, Information Technology-related, and Mathematics (1.8 percent); and Architectural and Town Planning. Figure 5 plots the year-to-year percentage change in graduate school enrolment from AY 2004-05 to AY 2014-15. During AY 2003-04, there were 0.3882 million graduate students, with 36.5 percent of them studying in public HEIs. By AY 2014-15, the number increased to 0.647 million, with 46.2 percent of them in public institutions. Public institutions are absorbing a higher percentage of graduate students in AY 2014-15 than they were ten years previously. Graduate school enrolment in the priority disciplines was 0.231 million, representing 59.44 percent of total enrolment in 2003. It became 0.371 million, or 57.2 percent, of total enrolment in 2014. The graduate enrolment in CHED priority disciplines in 2014 was: Sciences (1.9 percent of total enrolment); Maritime, Medicine and Health, Engineering and Technology (17.7 percent), Agriculture-related and Veterinary Medicine, Teacher Education, Information Technology-related, and Mathematics (0.77 percent), and Architectural and Town Planning. Figure 4. Year-to-year percentage change of undergraduate enrolment from AY 2004-05 to AY 2014-15. 130 Public Policy Measuring the Performance of the Philippine Scientific Enterprise System Figure 5. Year-to-year percentage change in graduate school enrolment. Enrolment in all fields increased by 67.12 percent, with enrollment in STEM growing at a slower rate of 38.53 percent from AY 2003-04 to AY 2014-15. Budgetary Allocations for the DOST and SUCs Figure 6 presents the annual budget allocations of the DOST and SUCs from 2006 to 2016. The 2016 DOST budget is 115.11 percent more than it was in 2006, while the allocation for the 112 SUCs in 2016 is 61.53 percent higher. On average, UP receives 27.36 ± 1.32 percent of the annual SUC budget. In 2006, the UP budget was 1.93 times larger than that of DOST (PhP2.781B), but it is only 0.63 times that of DOST (PhP18.137B) in 2016. In terms of total student enrolment, the largest SUC in the country is the Polytechnic University of the Philippines (with 79,762), followed by UP (72,339) and the Mindanao State University System (62,501) in AY 2013-14. Only 14.4 percent of the 47,145 regular faculty members in the SUCs had PhD degrees, with UP (3,165) having the highest ratio of 28.72 percent. A strong correlation (correlation coefficient: 0.988) is observed between graduate school enrolment EG (in units of 100,000) and GDP (in trillions of PhP) from 2003 to 2015: EG = 3.29GDP – 7.99. The corresponding undergraduate enrolment EUG correlates with GDP according to (coefficient: 0.974): EUG = 0.54GDP – 7.57. The GDP grew steadily at an average rate of 8.9 ± 2.54 percent per annum from 2005 to 2015, and it has allowed more Filipinos to pursue graduate studies at a rate that is faster than the corresponding increase in undergraduate enrolment with GDP. Volume XV (2016) 131 Saloma Overall graduate enrolment in all fields increased by 67.12 percent, with enrollment in STEM growing at a slower rate of 38.53 percent from AY 2003-04 to AY 2014-15. Because the number of PhD faculty increased by only 3.3 percent, a majority of these graduate students would encounter considerable difficulty in getting a PhD degree due to the lack of qualified mentors. The DOST first established the ERDT and the ASTHRD programs in 2007 and 2009, respectively, in order to increase the number of PhD and MS graduates in STEM by coordinating the services of qualified PhD faculty and improving access to existing R&D facilities across the country. The Science Education Institute of the DOST evaluated the capabilities of the various HEIs and found that only nine were able to offer a tenable PhD degree program in STEM and qualify to participate in either program.8,9 UP is one of three SUCs that qualified to participate in both programs. Together, the nine ASTHRDP institutions are known as the National Science Consortium. As of summer 2015, only 19.75 percent (47) and 9.61 percent (22) of the ERDT and ASTHRD PhD scholars, respectively, were able to graduate, with 62.32 percent (43) receiving their technical training from UP. UP Diliman (with 32) and UP Los Baños (9) produced the most number of PhD graduates in the ERDT and ASTHRD programs, respectively. Figure 6. Yearly budget allocations of DOST and the SUCs. The 2016 DOST budget is 115.11 percent more than it was in 2006, while that of SUCs is 61.53 percent higher. On average, UP receives 27.36 ± 1.32 percent of the annual SUC budget. The 2006 UP budget was 1.93 times larger than that of DOST (PhP2.781B). In 2016 the entire SUC budget is only 0.63 times that of DOST (PhP18.137B). 132 Public Policy Measuring the Performance of the Philippine Scientific Enterprise System Generation of New Scientific Knowledge The ability of an institution or organization to generate new scientific knowledge that improves the accuracy of the understanding of natural phenomena is usually measured in terms of the number of peer-reviewed publications produced. Simply put, a commonly accepted indicator of a successful research endeavor is the publication of its research results in a refereed journal that is widely read by the scientific community. Figure 7 presents the number of SCOPUS-indexed publications that have been produced by the Philippines, UP and UP Diliman respectively, from 2009 to 2015. The number of publications from the Philippines increased steadily at a rate of 136 ± 66.43 per year, unlike that of UP, which tapered off after 2012. UP accounts for 35.57 percent of the total number, with UP Diliman contributing 51.77 percent of all UP publications. The number of UP publications peaked in 2012 at 648, decreasing to 618 in 2015. The number of Philippine publications in 2015 was 68.4 percent higher than in 2009. On the other hand, the combined DOST-SUC budget in 2015 was 110 percent more than it was in 2009. The UP budget increased by 91.7 percent in the aforementioned years. Figure 7. Number of SCOPUS-indexed publications from the country, from UP, and from UP Diliman. Counted as publications are articles, reviews and conference papers published by a journal in the three previous years (selected year documents are excluded). Volume XV (2016) 133 Saloma Figure 8 shows the number of SCOPUS-indexed publications that were produced by the different constituent universities (CUs) of UP from 2009 to 2015. UP Diliman accounted for 51.77 percent of the total number produced by UP, followed by UP Manila (23.43 percent) and UP Los Baños (14.74 percent). The remaining CUs contributed 10.06 percent of the total. In April 2011, UP Diliman (43.6 percent), UP Manila (16.4 percent), and UP Los Baños (24 percent) together employed 84 percent of all regular UP faculty members. Figure 9 compares the number of SCOPUS-indexed publications from UP Diliman and the College of Science that accounted for 58.93 percent of all UP Diliman publications from 2009 to 2015. The publication number for UP Diliman peaked in 2012 at 334, while that for the College of Science was highest in 2013 at 210. In January 2013 the College of Science employed 20.6 percent of all regular UP Diliman faculty, followed by the College of Engineering (15 percent), College of Arts and Letters (12.7 percent) and the College of Social Science and Philosophy (11.2 percent). As of November 2012, the abovementioned colleges together with the School of Economics employed a total of 444 regular PhD faculty members, and 36.94 percent of them were aged 56 years old and above. More than 31 percent (31.23 percent) of the 1,503 regular faculty members in UP Diliman are PhD (or equivalent) degree holders. Figure 10 compares the number of SCOPUS-indexed publications from the ten constituent units of the College of Science, namely: Institute of Biology (IB), Institute of Chemistry (IC), National Institute of Geological Sciences (NIGS), Institute of Environmental Science and Meteorology (IESM), Marine Science Institute (MSI), Institute of Mathematics (IM), National Institute of Molecular Biology and Biotechnology (NIMBB), National Institute of Physics (NIP), Materials Science and Engineering Program (MSEP), and the Natural Science Research Institute (NSRI). All units offer graduate degree programs, except the NSRI. The MSI and the NIP are consistent top producers of SCOPUS publications. Their production, however, does not show steady growth from 2009 to 2015. 134 Public Policy Measuring the Performance of the Philippine Scientific Enterprise System Figure 8. Number of SCOPUS-indexed publications from UP. Its constituent universities are UP Diliman (UPD), UP Manila (UPM), UP Los Baños (UPLB), UP Visayas (UPV), UP Mindanao (UP Min), UP Baguio (UPB), and UP Open University (UPOU). Figure 9. Number of SCOPUS-indexed publications from UP Diliman and the College of Science. The College of Science employed 20.6 percent of all regular UP Diliman faculty in January 2013. Volume XV (2016) 135 Saloma Figure 10. Number of SCOPUS-indexed publications from the College of Science. Its constituent units are: Institute of Biology (IB), Institute of Chemistry (IC), National Institute of Geological Sciences (NIGS), Institute of Environmental Science and Meteorology (IESM), Marine Science Institute (MSI), Institute of Mathematics (IM), National Institute of Molecular Biology and Biotechnology (NIMBB), National Institute of Physics (NIP), Materials Science and Engineering Program (MSEP), and the Natural Science Research Institute (NSRI). Production of PhD Graduates in UP Diliman, UP Los Baños, and UP Manila Figure 11 shows the number of PhD graduates that was produced by the three main CUs of UP from AY 1999-2000 to AY 2013-14.10 Every year, UP Diliman produced an average of 68.47 ± 10.51 PhD graduates, followed by UP Los Baños (53.80 ± 9.32), and UP Manila (1.73 ± 1.62). Annual PhD production strongly fluctuated (greater than 10 percent variation from year to year) and did not show an increasing trend for UP Diliman and UP Los Baños. In April 2011, UP Diliman (43.6 percent), UP Los Baños (24 percent) and UP Manila (16.4 percent) employed 84 percent of all regular UP faculty members. 136 Public Policy Measuring the Performance of the Philippine Scientific Enterprise System Figure 11. Number of PhD graduates produced by the three main CUs of UP from AY 1999-2000 to AY 2013-14. Every year UP Diliman produced an average of 68.47 ± 10.51 PhD graduates, followed by UP Los Baños (53.80 ± 9.32), and UP Manila (1.73 ± 1.62). Figure 12 tabulates the average number of PhD graduates that is produced annually by the various colleges of UP Diliman from AY 1990-91 to AY 2014- 15.10 The top five producers of PhD graduates were: College of Education (16.36), College of Science (12.56), College of Social Science and Philosophy (7.68), College of Arts and Letters (5.76), and College of Engineering (4.32). UP Diliman produced an average of 64.12 ± 16.20 PhD graduates per year over the said 25-year period. Figure 13 plots the number of PhD graduates that was produced annually by College of Engineering (4.32 ± 5.05) and the College of Science (12.56 ± 3.87) of UP Diliman (64.12 ± 16.2) from AY 19-1991 to AY 2014-15.10 The number of PhD graduates per year did not increase steadily for either UP Diliman or the College of Science. The number of PhD graduates from the College of Engineering has been growing since AY 2007-08, which is likely due to the implementation of the ERDT program. In December 2015, 30.9 percent (154) and 14.66 percent (73) of all PhD faculty members of UP Diliman were affiliated with the College of Science and the College of Engineering, respectively. Volume XV (2016) 137 Saloma Figure 12. Average number of PhD graduates produced yearly by the various colleges of UP Diliman from AY 1990-91 to AY 2014-15. Figure 13. No. of PhD graduates produced annually by College of Engineering (4.32 ± 5.05) and the College of Science (12.56 ± 3.87) of UP Diliman (64.12 ± 16.2) from AY 1990-91 to AY 2014-15. 138 Public Policy Measuring the Performance of the Philippine Scientific Enterprise System Figure 14 plots the average number of PhD graduates that is produced by the Institute of Biology, National Institute of Physics, Institute of Mathematics, and the Marine Science Institute. From AY 1983-84 to AY 2014-15, the College of Science produced an average of 13 ± 4.1 PhD graduates per year. The said 32-year average annual PhD production rate is broken down in the following manner: Institute of Biology (2.94, or 22.58 percent), National Institute of Physics (2.68, or 20.60 percent), Institute of Environmental Science and Meteorology (2.48, or 19.11 percent), Institute of Mathematics (2.45, or 18.86 percent), Institute of Chemistry (0.94, or 7.2 percent), Marine Science Institute (0.84, or 6.45 percent), National Institute of Molecular Biology and Biotechnology (0.52, or 3.97 percent), National Institute of Geological Sciences (0.10, or 0.74 percent) and Materials Science and Engineering Program (0.06, or 0.5 percent). The National Institute of Physics consistently increased its PhD production rate from an average of 0.83 PhD graduates per year in the five-year period covering 1984 to 1990 to 5.8 in 2011 to 2015. On the other hand, the Institute of Biology was the top producer in the 1980s and 1990s, but its production rate dropped by more than 60 percent going into the period 2011 to 2015. The Marine Science Institute steadily increased its production rate during the 15 years from 2001 to 2015. The overall production rate of the College of Science fluctuated, since the production rates of its constituent units are not in synchrony with each other. Figure 14. Average number of PhD graduates produced per year by the College of Science Institute of Biology, National Institute of Physics, Institute of Mathematics, and the Marine Science Institute. Volume XV (2016) 139 Saloma Figure 15 plots the number of SCOPUS-indexed publications versus the corresponding number of PhD graduates that were produced for a given year (2009 to 2015) by the College of Science and UP Diliman. The correlation between peer-reviewed publication and PhD graduate production is stronger in UP Diliman (correlation coefficient: 0.84) than in the College of Science (0.62). The number of SCOPUS publications reached a plateau and became unmatched with PhD graduate production for the College. The National Institute of Geological Sciences has been able to publish consistently on a yearly basis, but failed to produce even one PhD graduate from 2009 to 2015. Figure 15. Number of SCOPUS-indexed publications versus number of PhD graduates produced for a given year (2009 - 2015) produced by the College of Science (top) and UP Diliman (bottom). 140 Public Policy Measuring the Performance of the Philippine Scientific Enterprise System Duration of PhD Study in UP Diliman The performance of 835 doctoral graduates from 59 degree programs at UP Diliman between AY 2003-04 and AY 2014-15 is examined in this section. The graduates spent an average of 7.88 ± 1.57 years to complete their academic requirements. Figure 16 presents a histogram of the number of PhD graduates and the corresponding duration of their PhD study. A student with the prerequisite master’s degree who is then admitted into the PhD program is required to complete 24 units of academic courses plus four additional units of seminar and colloquium courses. He or she is required to pass the PhD candidacy examination and successfully defend his or her dissertation work. A full-time PhD student with a pre-requisite MS degree could graduate within three years after admission. On the other hand, a PhD student that is admitted straight after completing his pre-requisite BS degree could finish within five years. The following is the average number of years needed by PhD students to graduate, calculated per college (the second number is the actual number of PhD graduates per college): College of Social Work and Community Development (4.542 years; 8 PhD graduates), College of Engineering (5.51; 85), College of Science (6.924; 167), Virata School of Business (7.278; 18), College of Mass Communication (7.4; 40), College of Public Administration and Governance (7.717; 46), College of Arts and Letters (7.833; 60), School of Statistics (8.067; 5), College of Education (8.307; 177), College of Social Science and Philosophy (8.625; 96), College of Home Economics (8.768; 23), Tri-College (9.258; 75), School of Economics (9.487; 13), and School of Urban and Regional Planning (10.65; 22). Table A-1 in the Appendix lists the completion times (in years) of the 835 PhD graduates according to their degree programs. The Computer Science program produced two graduates who completed their requirements in the shortest duration of 3.3 ± 0.94 years, while the longest is 11.8 ± 0.69 years for three Food Science graduates. The top five producers of PhD graduates are: Philippine Studies (75), Physics (52), Public Administration (46), Communication (40), and Educational Administration (38). No correlation (correlation coefficient: -0.068) is apparent between the number of PhD graduates produced by a college (among the 14 colleges considered) and the corresponding average completion time. For the constituent units of the College of Science, however, the number of PhD graduates correlates fairly well (coefficient: -0.669) with completion times: NIP Volume XV (2016) 141 Saloma (52 graduates and 3.942 years), IM (34 graduates and 7 years), IB (22 graduates and 7.47 years), MSI (17 graduates and 9.235 years), IESM – Environmental Science (16 graduates and 10.5 years), IC (9 graduates and 8.96 years), NIMBB (9 graduates and 9 years), IESM – Meteorology (6 graduates and 9.222 years) and NIGS (0). Constituent units (e.g., NIP and IM) that graduate students more quickly also produce the most number of PhD graduates. Figure 16. Number of PhD graduates (vertical axis) and their corresponding duration (in years) of study. Histogram involves a total of 835 doctoral graduates from 59 degree programs of UP Diliman between AY 2003-04 and AY 2014-15. Metrics for Measuring the Performance of a Higher Education Institution A more accurate measurement of the performance of an academic institution or program is to measure its outputs (in terms of PhD graduates and peer- reviewed publications) relative to the resources put into that unit. Among the possible inputs that may be applied are budget allocation, number of faculty, and faculty workload for research. For evaluating a PhD program, the possible input is the duration of PhD study. 142 Public Policy Measuring the Performance of the Philippine Scientific Enterprise System Academic Productivity Index The Academic Productivity Index (API) compares the relative performance of an institution among its peers in a cohort. The annual API score of an institution is computed as: API = (P x G)1/2/(F x B)1/2 (1) where P is the normalized number of publications per year (0 ≤ P ≤ 1), G is the normalized number of PhD graduates per year (0 ≤ G ≤ 1), F the normalized number of faculty items per year (0 ≤ F ≤ 1) and B is the normalized budget allocation per year (0 ≤ B ≤ 1). The API considers the SCOPUS publications and PhD graduates produced per year as outputs and the corresponding budget and number of faculty items as inputs. When comparing a group of N institutions, the Gn value for the nth institution is computed as: Gn = (gn – gmin) / (gmax – gmin), where gn is the number of PhD graduates that it produces and gmin and gmax are the minimum and maximum PhD production values found in the group. Hence, Gn = 1 when gn = gmax. The corresponding values for Pn, Fn, and Bn are computed in a similar manner. In the general case where J (> 2) input variables {Ij} are considered, 1/J the geometric numerator product in Equation (1) becomes: (I1 x I2 x … x IJ) . Similar formulation applies to the output variables that form the geometric product in the denominator. A desirable case when comparing the performance of institutions is for them to yield comparably high API scores. In computing for the API, the output (numerator) of an institution is interpreted as a geometric product of the P and G values instead of being a sum to impose the equal importance of producing PhD graduates and generating new scientific knowledge. The API formula in Equation (1) aligns institutional production (PhD graduates) with individual faculty accomplishment (authorship of publication). An institution that does not produce a PhD graduate gets a zero API score even if its faculty members are able to publish. On the other hand, the input (denominator) is given by the geometric product of the F and B values to indicate the equal role of financial support (for capital outlay, maintenance, operation and other expenses, salaries, etc.) and human resource allocation. A high API score that is obtained with the least possible input value describes desirable performance. At this point, the API is employed to rate the performance of the three biggest CUs of UP: UP Diliman, UP Los Baños, and UP Manila. Figure 8 presents the annual SCOPUS-indexed publication output of the three CUs while Figure Volume XV (2016) 143 Saloma 11 shows the number of PhD graduates that they produce each year. In April 2011, UP Diliman (43.6 percent), UP Los Baños (24 percent) and UP Manila (16.4 percent) employed 84 percent of all regular UP faculty members (3,430). Figure A-1 (Appendix) presents the yearly UP budget (2008 – 2015) and the corresponding budget allocations for the different CU.11 Figure 17 plots the yearly API scores of UP Diliman, UP Los Baños, and UP Manila from 2009 to 2015. The average API score of UP Diliman (0.99 ± 0.182) is 2.69 times larger than that of UP Los Baños (0.37 ± 0.115), and 8.59 times that of UP Manila (0.12 ± 0.118). The API score (1.222) of UP Diliman was highest in 2012. The significant differences in the API scores indicate a disparate degree of performance among the three CUs. The API scores do not reflect the sustained increases in the UP budget during the indicated period. Interestingly, the API scores were highest during the year that the UP budget was at its lowest (2012). Figure 17. Yearly API scores of UP Diliman, UP Los Baños, and UP Manila. Average API scores are: UP Diliman (0.99 ± 0.182), UP Los Baños (0.37 ± 0.115), and UP Manila (0.12 ± 0.118). 144 Public Policy Measuring the Performance of the Philippine Scientific Enterprise System Scientific Productivity Index Another metric that can be used to rate the relative performance of academic institutions when the pertinent budget information is difficult to ascertain— which is the case for colleges and institutes that share common expenses— is the Scientific Productivity Index (SPI). The SPI score is calculated as follows: SPI = (P x G)1/2/(F x R)1/2 (2) where R is the normalized research load granted to a faculty (0 ≤ L ≤ 1). In UP, for example, the regular faculty workload is 12 units per semester, comprising his or her teaching, research, and administrative load assignment. The SPI is employed to rate the constituent units of the College of Science. Figure 10 presents the number of SCOPUS-indexed publications produced by the units, while Figures 13 and 14 show the corresponding PhD production rates. Table A-2 (Appendix) presents the regular faculty complement of the constituent units.12 The PhD faculty members of the College are each granted a research load credit of three units (out of a total workload of twelve per semester), except for those at MSI who are given six, which means less time for teaching and more for research. Figure 18 plots the yearly SPI scores (2008 – 2015) of the constituent units. It reveals that no unit is able to produce an annual SPI score that is increasing steadily through time. The SPI score of NIP was highest (2.323) in 2014 while MSI scored highest (1.543) in 2013. The following are the average SPI scores: NIP (1.491), MSI (1.028), IM (0.529), IB (0.786), IESM (0.325), IC (0.204), NIMBB (0.152), and NIGS (0). The MSEP is excluded because it does not have its own faculty items, while NIGS did not produce a single PhD graduate within the period considered. The SPI scores are widely distributed, indicating varying degrees of performance—the SPI score of NIP is 9.8 times larger than that of the NIMBB. Figure 19 plots the average SPI score against the percentage of PhD degree holders, tenured faculty, and faculty with local PhD degree on the faculty roster of a constituent unit. About fifty percent (49.7 percent) of the regular faculty members (310) of the College of Science have the required PhD degrees, while 27.4 percent (85) of them have permanent (tenured) appointments. Moreover, 36 percent (56) of the PhD faculty members obtained their degrees from UP. The Institute of Mathematics (regular faculty: 83), Institute of Chemistry (71), National Institute of Physics (53), and the Institute of Biology (32) have large Volume XV (2016) 145 Saloma faculty rosters that include instructors who are still pursuing their graduate degrees. These institutes offer service courses to undergraduate students from other colleges in UP Diliman. Figure 19 shows that the API scores do not correlate with the relative number of PhD faculty members and percentage of tenured faculty. More than 85 percent of the faculty of MSI (100 percent), IESM (100 percent), and the NIMBB (85.7 percent) have PhD degrees, but their SPI scores are all lower than that of NIP with only 39.6 percent. A certain level of correlation exists between API score and the percentage of PhD faculty who obtained their degrees from UP. The NIP has the highest percentage (81 percentage) and API score (1.491), Figure 18. SPI scores (2008 – 2015) of the constituent units of the College of Science. 146 Public Policy Measuring the Performance of the Philippine Scientific Enterprise System Figure 19. Average API score versus the percentage of PhD degree holders (top), tenured faculty (middle), and faculty with local PhD degree (bottom) on the faculty roster of the Institute of Biology (IB), Institute of Chemistry (IC), National Institute of Geological Sciences (NIGS), Institute of Environmental Science and Meteorology (IESM), Marine Science Institute (MSI), Institute of Mathematics (IM), National Institute of Molecular Biology and Biotechnology (NIMBB), and the National Institute of Physics (NIP). The Natural Science Research Institute (NSRI) and the Science and Society Program are non-degree granting units, while the Materials Science and Engineering Program (MSEP) has no assigned faculty items. The dotted lines indicate the values for the entire College of Science. Volume XV (2016) 147 Saloma while NIMBB and NIGS with all foreign-trained PhD faculties have the lowest API scores among the constituent units. PhD Production Efficiency Index The PhD Production Efficiency Index (PPEI) is a possible metric for evaluating a doctoral degree program: N PhD min (N PhD − N PhD min ) + N PhD max N PhD max − N PhD min PPEI = (3) N − N 1+ year(ave) year(ave) min − N year(ave) max N year(ave) min where: NPhDmin and NPhDmax are the minimum and maximum number of PhD graduates produced in the group of programs to be evaluated, NPhD the number of PhD graduates for a particular program, Nyear(ave) the average duration needed to complete a program, and Nyear(ave)min and Nyear(ave)max are minimum and maximum average durations, respectively. A doctoral degree program achieves a high PPEI score if it produces many PhD graduates in the shortest possible time. Programs that do not produce at least one graduate get a score of PPEI = 0. The following doctoral programs obtained the highest PPEI scores: Physics (0.656), Philippine Studies (0.594), Environmental Engineering (0.432), Public Administration (0.409), and Communication (0.364). The lowest non-zero PPEI score is 0.007. Figure 20 plots the average SPI scores against the number of regular faculty members, the percentage of PhD faculty, and the percentage of tenured faculty with local PhDs in the College of Science (CS), College of Social Science and Philosophy (CSSP), and the College of Engineering (CoE). Tables A-3 and A-4 (Appendix) present the pertinent information for regular faculty rosters of the constituent units of the CSSP [13] and the CoE.14 In terms of PPEI per faculty, which is obtained by dividing the PPEI with the number of regular faculty items assigned to an institute or department offering the doctoral program, the following scores were obtained for the CS units: NIP (0.012), IESM (0.011), MSI (0.006), IB (0.006), NIMBB (0.005), IM (0.004), IC (0.001), and NIGS (0). The following are the PPEI per faculty scores that were calculated for the CoE units: Chemical Engineering Department 148 Public Policy Measuring the Performance of the Philippine Scientific Enterprise System (0.006), Electrical and Electronics Engineering Institute (0.002), Institute of Civil Engineering (0.002) and Computer Science Department (0.001). The following are corresponding PPEI per faculty scores for the CSSP departments: Psychology (0.011), Anthropology (0.0085), History (0.0083), Linguistics (0.0033), Sociology (0.0032), Political Science (0.0020) and Philosophy (0.0003). Doctoral programs (e.g., Material Science and Engineering, Energy Engineering, and Environmental Engineering) that are jointly administered by multiple institutes and departments are not rated. The following PPEI per faculty scores are calculated when the comparison is limited only to the three colleges that offer PhD programs in STEM: College of Science (0.00335), College of Engineering (0.00185) and College of Social Science and Philosophy (0.00209). It is observed that the PPEI scores are not correlated with the number of tenured faculty. Having a high percentage of tenured faculty members does not guarantee a high PPEI score. The same can be said of the correlation between PPEI score and percentage of PhD faculty. The PPEI score of NIP is 0.656, while the percentage of faculty with tenure and PhD is 26 percent and 40 percent, respectively. It is 0.135 for MSI, where the percentage of faculty with tenure and PhD is 67 percent and 100 percent, respectively. The PPEI score of the Psychology Department is 0.263, while the percentage of faculty with tenure and PhD is 87.5 percent and 41.7 percent, respectively. Discussion The study has found that differences in the GDP per capita of Indonesia, Philippines, Vietnam, Cambodia, Myanmar, and Lao PDR do not translate to proportional variations in their corresponding publication per capita. The GDP per capita needs to reach a threshold (around USD5000) before it starts correlating with publication per capita, which is the case for Singapore, Malaysia, and Thailand. The Philippines needs a faster GDP growth and a slower rate of population increase in order to surpass the GDP threshold. Instead of funding so-called big-ticket research programs to keep up with its more prosperous ASEAN neighbors, the Philippines should focus its attention on areas that directly improve the general quality of life of Filipinos. Meaningful success in this regard means the palpable presence of a responsive, competent, and honest government; a national-scale infrastructure network that promotes the efficient and reliable transport of people, goods, services, and information; a widely-accessible education system that builds up the human capital value of Volume XV (2016) 149 Saloma Figure 20. Average SPI scores versus number of regular faculty members (top), percentage of PhD faculty (middle), and percentage of tenured faculty with local PhD degree (bottom) in the College of Science (CS), College of Social Science and Philosophy (CSSP), and the College of Engineering (CoE). 150 Public Policy Measuring the Performance of the Philippine Scientific Enterprise System students; an affordable and comprehensive health care service; and the earnest implementation of initiatives that effectively arrest and reverse the rising income inequality in Philippine society. Big science projects that consume billions of pesos would likely underperform or fail because their success is strongly dependent on an established culture of operational excellence and on the sustained participation of thousands of Filipino scientists and researchers – elements that simply do not fully exist in the country today. The national budget is equivalent to 19.27 ± 1.32 percent of the GDP in the previous year (2006 – 2016). The 2014 budget allocations for SUCs and the DOST were higher by 61.5 percent and 115.1 percent with respect to their corresponding values in 2009. The 2015 GDP per capita is 57.8 percent higher than it was in 2009, while graduate enrollment rose by 34.8 percent from AY 2009-10 to AY 2014-15, with the corresponding enrollment in STEM growing by 36.4 percent. The increases in the SUC and DOST budgets are critical since graduate enrollment in the public HEIs grew from 36.5 percent in AY 2003-04 to 46.2 percent in AY 2014-15. Because the corresponding number of HEI faculty members with PhDs increased by only 3.3 percent, the increase in graduate enrollment is unlikely to result in more PhD graduates, given that most of PhD faculty members are also incapable of producing one PhD graduate per year. UP is allotted 27.36 ± 1.32 percent of the total yearly budget for the operations of the 112 SUCs in the country. In 2006 and 2016, respectively, the DOST budget was 0.52 and 1.58 times that of UP. The ASTHRDP program produced an average of 7.3 PhD graduates per year (2010 – 2012), while the ERDT yielded 6.7 PhD graduates (2008 – 2015). Completion rate among DOST-funded PhD scholars is below 30 percent. It is worth mentioning that 56.7 percent of the PhD faculty members participating in the ASTHRDP were 51 years old or older in October 2010. The compulsory retirement age in public and private HEIs is 65 and 60 years old, respectively. A rapidly aging PhD faculty is compounding the lack of qualified PhD faculty members to handle PhD degree programs in STEM. The API scores of UP Diliman (0.99 ± 0.182), UP Los Baños (0.37 ± 0.115), and UP Manila (0.12 ± 0.118) differ widely from each other, indicating disparate levels of performance. Moreover, their API scores are also not increasing with time—the API score of UP Diliman peaked in 2012 at 1.222. In the 25-year period ending AY 2014-15, UP Diliman produced an average of 64.12 PhD graduates per year, with the College of Education (CoEd), College of Science (CS), College of Social Sciences and Philosophy (CSSP), and the Volume XV (2016) 151 Saloma College of Engineering (CoE) contributing 16.36, 12.56, 7.68, and 4.32 graduates, respectively. In the 12-year period ending SY 2014-15, UP Diliman graduates (sample size: 835) took an average of 7.88 ± 1.57 years to complete doctoral degrees, with those from the CoE, CS, CoEd, and CSSP needing 5.51, 6.92, 8.31, and 8.62 years, respectively. The number of PhD graduates per college did not correlate with the average completion time. For CS units, however, the number of PhD graduates correlates (coefficient: -0.669) with the completion times: Institutes that train PhD students more efficiently also produce the most number of graduates. On average, PhD students in NIP finish within 3.942 years after admission, the fastest among doctoral programs in UP Diliman. The NIP also yields the highest SPI score of 1.491, followed by MSI with 1.028. For CS (with 310 regular faculty items), CoE (224), and CSSP (174), size matters in terms of PPEI scores: CS (1.038), CoE (0.509), and CSSP (0.322). At the institute or department level, however, faculty size does not correlate with the corresponding PPEI score. For example, the Institute of Mathematics (83) and IC (71) are the two largest CS units in terms of faculty number but rank only second (0.320) and sixth (0.076), respectively, among eight CS units. On the other hand, the PPEI score of CoE benefits from the strong contribution of its interdisciplinary Environmental Engineering (0.432) program. Among nine CSSP units, the highest score (0.263) is garnered by the Department of Psychology (24), which only has the fourth largest faculty size. Among 59 doctoral programs in UP Diliman with at least one graduate, the following are the best performing in terms of PPEI scores: Physics (0.656), Philippine Studies (0.594), Environmental Engineering (0.432), Public Administration (0.409), and Communication (0.364). The lowest non-zero PPEI score is 0.007. For CS (1.038), CSSP (0.322), and CoE (0.509), PPEI scores are not linked with the percentage of tenured faculty in the college. The CSSP (with 70.7 percent) has the highest percentage of permanent faculty members, but its PPEI is the lowest among the three. The same could be observed between PPEI score and the percentage of faculty with PhDs, CSSP with 42.5 percent yields a lower PPEI score than Engineering with 32 percent. At this point, a reasonable production target is for a PhD faculty to produce (at least) one PhD graduate every three years. For CS, with its 154 PhD faculty members, this should mean the yearly graduation of about 50 PhD students, which is about four times the current rate of 13 ± 4.1 (1984 – 2015). For the CSSP 152 Public Policy Measuring the Performance of the Philippine Scientific Enterprise System with its 44 PhD faculty members, it means a yearly production increase to about 25 PhD graduates from its current average of 7.68 (1990 – 2015). For CoE with its 78 PhD faculty members, it implies a yearly production increase to about 25 PhD graduates from its current average of 4.32 (1990 – 2015). Recommendations This paper’s analysis of the Philippine scientific enterprise system has led to the following set of recommendations15: 1. For the country’s political leaders, decision makers, and socioeconomic managers to become fully aware that the symbiotic closed-loop (feedback) relationship between scientific productivity (publications per capita) and national prosperity (GDP per capita) that holds in the three most prosperous ASEAN economies (Singapore, Malaysia, and Thailand) and in other developed countries is not observed in the other six ASEAN countries, where the GDP per capita is below a certain threshold. 2. For the DOST to provide full PhD scholarships to qualified students in the social sciences and economics, while sustaining its current support to those taking PhD degree programs in STEM. The Philippines is confronted with complex challenges (e.g., climate change, income inequality, inefficient distribution of people, public services, goods, and information) that are best addressed by the interdisciplinary collaboration of experts. A significant percentage of the increases in the year-to-year DOST budget is best spent on human capital generation in the form of student scholarships from high school to STEM PhD students to postdoctoral fellows. 3. For the DOST to offer postdoctoral fellowship awards to qualified PhD graduates from Philippine universities, thereby enabling them to carry out postdoctoral research work in leading foreign research laboratories in the United States, Europe, Japan, South Korea, etc. The said fellowship program shall not require applicants to have current employment affiliation with public institutions and government agencies. The only return-service-obligation is for the fellows to return and work in the country for at least three years for every year spent abroad. The postdoctoral fellowship awards will attract additional young Filipino talents to pursue PhD studies and help build the scientific infrastructure of the country. 4. For the DOST and UP to formulate jointly a separate procurement system governing the use of public funds in scientific R&D activities. It would feature a separate Implementing Rules and Regulations of Republic Act Volume XV (2016) 153 Saloma 9184 – The Government Procurement Reform Act, which was first signed into law in January 2003. The aforementioned procurement system shall include a depreciation formula for research facilities, equipment, devices, and components. It shall allow the direct importation of equipment and technical services from internationally-recognized and established manufacturers and service providers free of tax and custom duties. In addition, imported products that are for R&D use shall be brought directly to the research laboratory without initial storage in the Bureau of Customs. The concerned foreign manufacturers will not be required to have local distributors and representatives. The permission applies only to publicly-funded R&D projects that are performed in an ERDT and ASTHRDP member institution. The procurement system shall also feature a clear-cut procedure for regularly adjusting the price ceiling for shopping and small-value procurement that considers possible variations in inflation rate, consumer price index, and foreign exchange rate. A responsive procurement system is essential in the proper operations and maintenance of research laboratories and even university campuses. 5. For the public HEIs—especially UP, being the national university— to develop and apply performance measures that align institutional output (PhD graduate production) with the individual accomplishments (publications, citations, patents, etc.) of faculty and staff. Data-driven analytical tools (e.g., API, SPI, PPEI) shall be used to accurately track the ability of an HEI or academic program to respond optimally to increases in the amount of resources that is given to it. The coupling of institutional output with individual productivity will ensure sustained institutional growth by attracting young talent to join the organization and work together toward a shared institutional goal. NIGS is a case in point—it has produced only three PhD graduates since AY 1984-85 (32 years) and none since 2000, even though its faculty members have been able to publish an average of 15 SCOPUS-indexed papers a year since 2009. 6. For UP and the other SUCs to employ analytics in recognizing and promoting faculty members and staff. Scientific measures of excellence are crucial in building an enabling and nurturing ecosystem that is founded on transparency, predictability, fairness, and meritocracy. Their use will motivate the faculty, staff, and administrators to work together for a common purpose. 7. To rely extensively on analytics in choosing officials and administrators of SUCs. A candidate who underperforms as a department head is unlikely to become a successful CEO of a more complex organization like a college 154 Public Policy Measuring the Performance of the Philippine Scientific Enterprise System or a university. Performance metrics that distinguish the output from the input variables would minimize, if not eliminate, the trivialization of excellence and the perpetuation of mediocrity in the academe. UP, being a recipient of almost a third of the entire SUC budget, should serve as a role model of effective governance and a veritable source of best practices in the country. 8. For public HEIs to invest seriously in building a culture of excellence in campus operations, which includes the availability of a reliable data gathering and management system. An HEI that cannot maintain a clean, safe, and secure campus is likely incapable of operating research laboratories and programs that produce cutting-edge scientific results. 9. For UP to allocate a sufficient regular budget for the maintenance and operation of the National Science Complex in UP Diliman, and to complete the construction of the Engineering Complex in UP Diliman that was started in 2007. 10. To decouple salary grade increase from academic (and administrative) rank promotion in UP and the other SUCs. Decoupling would allow the prompt promotion of an individual faculty or staff who has been duly recognized for his or her work without waiting for a DBM allocation. Such a policy would also allow salary grade increases to faculty members with the academic rank of Professor 12, as well as to deserving administrative personnel who are already occupying the highest salary grade level in their assigned administrative item (sagad). Acknowledgement This policy research was made possible by a UP President Edgardo J. Angara fellowship award. The author acknowledges the support of Senator Edgardo J. Angara, Office of the UP President, UPPEJA Fellowship Selection Committee, Office of the UP Diliman Chancellor, National Institute of Physics, UP Center for Integrative and Development Studies, Office of the University Registrar, and the OVCA Human Resource and Development Office. He is also grateful for the technical assistance generously provided by Dr. Evangeline Amor, Maureen Anne Araneta, Marie Antoinette Villaflor (CS Library), CS Dean Jose Maria Balmaceda, CoE Dean Aura Matias, CSSP Dean Aguiling-Dalisay, and UPVPF Jose Florendo. Notes 1. Department of Budget and Management, accessed February 10, 2016. http:// www.dbm.gov.ph/. Volume XV (2016) 155 Saloma 2. “CHED Higher Education Indicators (Table 1),” Office of the President Commission on Higher Education, accessed May 16, 2016. http://www.ched.gov. ph/. 3. Saloma, C., “Science and Technology and the PGMA Presidency and Administration.” In The Macapagal-Arroyo Presidency and Administration (2001- 2010), ed. by J. Abueva, O. Alfonso, E. Alampay, M. F. Diola, M. O. Domingo, and E. Nicolas. Quezon City: National College of Public Administration and Governance, University of the Philippines, 2014. 4. Scopus. https://www.scopus.com/. 5. “World DataBank,” The World Bank, accessed July 9, 2016. http://databank. worldbank.org/data/home.aspx. 6. Scimago Journal & Country Rank. Accessed July 9, 2016. http://www.scimagojr. com/. 7. King, D. “The Scientific Impact of Nations.” Nature 430(2004): 311-16. 8. ASRHRDP participating institutions: University of the Philippines, Central Luzon State University, Mindanao State University-Iligan Institute of Technology, Visayas State University, Ateneo de Manila University, De La Salle University and the University of Santo Tomas. 9. ERDT participating institutions: University of the Philippines, Central Luzon State University, Mindanao State University-Iligan Institute of Technology, Ateneo de Manila University, De La Salle University, Mapua Institute of Technology and the University of San Carlos. 10. Sources: UP Diliman (Office of the University Registrar), UP Los Baños (Yearly Commencement Programs) and UP Manila (Graduate Office). 11. Source: Office of the UP Vice-President for Finance. 12. Sources: Office of the College of Science Dean, UP Diliman Human Resource Development Office. 13. Source: Office of the Dean, College of Social Science and Philosophy, UP Diliman. 14. Source: Office of the Dean, College of Engineering, UP Diliman. 15. Additional details are available at http://cids.up.edu.ph/can-ph-improve- science-enterprise/. Annex Table A-1. Completion times (in years) of 835 PhD graduates by doctoral degree program (No. of programs: 59); Period: First semester, AY 2003-04 – Midyear 2015. Average Doctoral Program Duration No. of (Years) Graduates Food Science 11.8 3 Urban and Regional Planning 10.7 22 Sociology 10.5 7 156 Public Policy Measuring the Performance of the Philippine Scientific Enterprise System Table A-1. Completion times (in years) of 835 PhD graduates by doctoral degree program (No. of programs: 59); Period: First semester, AY 2003-04 – Midyear 2015. Average Doctoral Program Duration No. of (Years) Graduates Environmental Science 10.5 16 Creative Writing 10.3 1 Political Science 10.3 8 Education (Anthropology and Sociology of Education) 10.0 9 Education (Reading Education) 10.0 17 Education (Research and Evaluation) 9.9 15 English Studies: Language 9.7 2 Linguistics 9.6 5 Economics 9.5 13 Energy Engineering 9.4 4 Philippine Studies 9.3 75 Anthropology 9.2 15 Marine Science 9.2 17 Meteorology 9.2 6 Molecular Biology and Biotechnology 9.0 9 English Studies: Anglo-American Literature; Creative Writing; Language 9.0 19 Home Economics 8.5 19 Education (Educational Administration) 8.5 38 Education (Special Education) 8.5 15 Education (Social Studies Education) 8.4 4 Education (Physics Education) 8.3 2 Chemistry 8.3 9 Psychology 8.3 31 Education (Curriculum Studies) 8.1 7 Statistics 8.1 5 English Studies: Creative Writing 8.0 1 Education (Educational Psychology) 7.9 23 Public Administration 7.7 46 Chemical Engineering 7.7 19 History 7.7 29 Volume XV (2016) 157 Saloma Table A-1. Completion times (in years) of 835 PhD graduates by doctoral degree program (No. of programs: 59); Period: First semester, AY 2003-04 – Midyear 2015. Average Doctoral Program Duration No. of (Years) Graduates Biology 7.5 22 Communication 7.4 40 Filipino: Istruktura ng Wikang Filipino; Malikhaing Pagsulat, Pagpaplano sa Wikang Filipino, Pagsasalin, 7.4 25 Panitikan) Education (Language Education) 7.4 14 Education (Mathematics Education) 7.3 15 Business Administration 7.3 18 Mathematics 7.0 34 Materials Science and Engineering 7.0 8 Comparative Literature: Comparative Literary Theory; Literary Translation; Philippine Literature in English; Popular and Folk Literatures; Regional and National 6.9 8 Literatures Education (Biology Education) 6.8 4 Education (Chemistry Education) 6.7 1 Material Science Engineering 6.5 2 Hispanic Literature: Spanish American Literature; Spanish Filipino Literature; Spanish Peninsular 6.5 2 Literature Education (Educational History and Philosophy) 6.1 6 Education (Guidance) 6.0 7 Philosophy 5.7 1 Filipino: Panitikan 5.3 1 Civil Engineering 4.9 8 Nutrition 4.7 1 Social Development 4.5 8 Electrical and Electronics Engineering 4.4 8 Filipino: Pagsasalin 4.3 1 Environmental Engineering 4.1 35 Physics 3.9 52 Chemical Engineering 3.3 1 Computer Science 3.3 2 158 Public Policy Measuring the Performance of the Philippine Scientific Enterprise System Figure A-1. Annual UP budget and corresponding allocations to constituent units (2008 – 2015). In 2008 the percentage allocations were: UP Diliman (39.22 percent), UP Los Baños (16.51 percent), UP Manila (6.71 percent), Office of the UP President (2.99 percent), and other CUs (37.55 percent). In 2015 the percentage allocations were: UP Diliman (20.14 percent), UP Los Baños (13.32 percent), UP Manila (7.3 percent), Office of the UP President (6.54 percent), and other CUs (59.24 percent). Table A-2. Regular faculty distribution in the constituent units of the College of Science, UP Diliman CS Unit (as of Regular With PhD deg December 2015) faculty PhD faculty from UP With tenure MSI 21 21 5 (24%) 14 NIP 53 21 17 (81%) 14 IM 83 32 17 (53%) 16 NIGS 27 12 0 8 IB 32 18 6 (33%) 9 IC 71 29 9 (31%) 18 IESM 9 9 2 (22%) 3 NIMBB 14 12 0 3 NSRI (3) 0 TOTAL 310 154 (49.7%) 56 (36%) 85 (27.4%) Volume XV (2016) 159 Saloma Table A-2. Regular faculty distribution in the constituent units of the College of Science, UP Diliman Note: The constituent units consist of: Institute of Biology (IB), Institute of Chemistry (IC), National Institute of Geological Sciences (NIGS), Institute of Environmental Science and Meteorology (IESM), Marine Science Institute (MSI), Institute of Mathematics (IM), National Institute of Molecular Biology and Biotechnology (NIMBB), National Institute of Physics (NIP), and the Natural Science Research Institute (NSRI). The NSRI and the Science and Society Program are non-degree granting, while the Materials Science and Engineering Program (MSEP) has no assigned faculty items. Table A-3. Regular faculty distribution of the constituent departments of the College of Social Sciences and Philosophy, UP Diliman CSSP Department Regular (December 2015) faculty PhD faculty Tenured Faculty Anthropology 14 7 8 Geography 9 5 5 History 31 13 20 Linguistics 12 4 7 Philosophy 30 10 25 Political Science 30 12 22 Psychology 24 10 21 Sociology 16 7 9 Population Institute 8 6 6 TOTAL 174 74 (42.5%) 123 (70.7%) Table A-4. Regular faculty distribution in departments of the College of Engineering, UP Diliman Engineering Unit Regular Tenured (December 2015) faculty PhD faculty faculty Electrical & Electronics Eng'g Institute 47 18 16 Institute of Civil Engineering 48 19 24 Department of Chemical Engineering 29 11 11 Department of Computer Science 32 8 17 Department of Geodetic Engineering 18 4 6 Department of Industrial Engineering & Operations Research 22 6 10 Department of Mechanical Engineering 19 4 8 Department of Mining, Metallurgical & Materials Engineering 29 8 9 160 Public Policy Measuring the Performance of the Philippine Scientific Enterprise System Table A-4. Regular faculty distribution in departments of the College of Engineering, UP Diliman Energy Engineering Program Environmental Engineering Program 101 Total 244 78 (32%) (41.4%) Volume XV (2016) 161 Empowering Filipino Women Seafarers in the Maritime Sector LUCIA P. TANGI* Abstract Filipinos account for a quarter of the world’s 1.6 million seafarers. However, Filipino women account for only around two percent of more than 400,000 seafarers deployed annually. Around 90 percent of these women seafarers are in the services and domestic sectors, doing jobs that are related to their reproductive duties. Because of this, Filipino women seafarers are among the lowest paid in the seafaring industry, and are also among the most vulnerable to redundancy. Following the enactment in the 1990s of the Women in Development and Nation Building Act, maritime schools started opening up to women who wanted to become sea officers. Although more women have been attracted to seafaring in the past decade, the number of women sea officers has remained microscopic, compared to the thousands of male sea officers deployed every year. Based on focus group discussions and key informant interviews with almost a hundred stakeholders, this study finds that women sea officers often face discrimination as soon as they start applying for shipboard internship and employment. They have to battle loneliness, sexual harassment, and bullying by their male colleagues on board. This study finds that patriarchal beliefs and control in the seafaring industry have discouraged women sea officers from pursuing careers at sea. This is * Email: [email protected] 162 Public Policy Empowering Filipino Women Seafarers in the Maritime Sector aggravated by the race among ship owners to reduce costs, at the expense of seafarers. Using the women’s empowerment framework developed by Sara Longwe and the human rights-based approach as guides, this policy research paper proposes a package of measures to empower women by addressing issues on welfare, access, conscientization, mobilization, and control in the maritime industry. Keywords: Women seafarers, women empowerment, gender and seafaring, Filipino seafarers Volume XV (2016) 163 Tangi Background of the Problem Achieving gender equality and empowerment of women and girls is one of the crucial targets enshrined in the United Nations Development Program (UNDP) Sustainable Development Goals. According to the UNDP, the elimination of all forms of discrimination against women and girls is not only a basic human right, but is also a crucial factor in accelerating development. This means that the fight for the elimination of other indicators, such as poverty, hunger, corruption, malnutrition, corruption, poor health, and illiteracy, are all meaningless if women and girls do not benefit from it. While the world may have achieved strides in many aspects and sectors in terms of gender equality, the maritime sector appears to have been left behind. Previous studies done by the International Labor Organization (ILO) and the International Maritime Organization (IMO) show that women account for only two percent of the world’s seafarers. The majority of these women are in the hotels and services departments of passenger vessels or cruise ships. Their integration into the industry has been driven more by the demand for women’s jobs on board passenger vessels rather than to improve the gender gap in the industry. It is still rare to find women officers and ratings (skilled personnel) on foreign vessels, and most of the women who control the helms of these vessels come from developed countries. In the past two decades, both ILO and IMO have been working together to improve women‘s integration in this male-dominated industry. Such moves include information campaigns on seafaring and providing more scholarships in maritime schools for women. However, these efforts by international agencies and non-governmental organizations have not been enough to drastically increase women’s participation in the seafaring sector. The few women sea officers who dared to break the glass ceiling were often met with discrimination, sexual harassment, and bullying by their male colleagues. The World Maritime University (WMU) and the IMO launched a project in 2016 to develop “A Global Strategy for Women Seafarers” in the hope of encouraging more women to join the seafaring industry. Women have been encouraged to fill the shortfall in sea officers. Such a call comes as the Baltic and International Maritime Council (BIMCO) and the International Chamber of Shipping (ICS) released their Manpower Report for 2015. The report said the shortage of sea officers for 2015 was 16,500. The situation is expected to worsen in the coming decade with a projected shortfall of 92,000 in 2020 and 147,000 in 2025 (International Chamber of Shipping 2016a). 164 Public Policy Empowering Filipino Women Seafarers in the Maritime Sector The Philippines is one of the top suppliers of the world’s 1.6 million seafarers. However, women account for only two to three percent of sea-based workers deployed every year. Ninety percent of these women seafarers are in the hotel and services sector, while less than 10 percent are officers and ratings (Tangi 2012). Some of these women on board cruise liners received a basic salary of US$50 and relied heavily on tips from passengers and commissions to boost their incomes. Like many women seafarers in various parts of the world, Filipino women seafarers were also met with discrimination, sexual harassment, and bullying by their male colleagues (Tangi 2012). This policy research comes at a time when the world is facing a shortage of sea officers to serve on merchant vessels. Filipino women, who have been mostly relegated to low status jobs as cabin girls, massage therapists, and waitresses, deserve to reach the helm. Filipino women can become captains and chief engineers with the introduction of a package of measures to empower them. There is a big opportunity for Filipino women to fill the shortage in the supply of sea officers. The more Filipino women sea officers are deployed, the higher the remittances their families will receive, and the bigger contribution they make to the economy. This policy research also comes at a time when the new president, Rodrigo Roa Duterte, announced in his first State of the Nation Address (SONA) the full implementation of the Magna Carta of Women, or Republic Act 9710. The Magna Carta calls for the elimination of all forms of discrimination against women and ensures their empowerment. The call for empowering Filipino women seafarers in the maritime sector is a fulfillment of the spirit of the Magna Carta of Women, which states: The State shall undertake temporary special measures to accelerate the participation and equitable representation of women in all spheres of society particularly in the decision-making and policy-making processes in government and private entities to fully realize their role as agents and beneficiaries of development. (Office of the President Philippine Commission on Women 2010, 54) Scope and Severity of the Problem The gender gap, or the problem of low participation of women in the maritime sector, should be addressed by the Philippine government and the private sector to conform with the UNDP’s Sustainable Development Goal on gender equality. Filipinos are often considered among the world’s favorite Volume XV (2016) 165 Tangi seafarers and account for about a quarter of the 1.6 million global supply of seafarers. A shortage in sea officers is also projected in the coming years, and women should be given the chance to fill in that shortage. Filipino women should be given access to this opportunity. More Filipino women should be educated and trained to become officers and skilled personnel. Problem Statement The problem addressed in this policy research is how to empower Filipino women seafarers to achieve gender equality in a male-dominated and hierarchical industry. Addressing the gender gap will also entail addressing the patriarchal control and patriarchal values prevalent in the industry. Goals and Objectives The policy proposal hopes to meet the following objectives: 1. To determine the extent of the gender gap and the reasons behind its persistence in the seafaring industry 2. To review various efforts made by international and local agencies and organizations in integrating women in the maritime industry 3. To identify the challenges and obstacles to women’s participation and empowerment in the seafaring industry 4. To introduce measures to empower women and promote gender equality in the maritime sector Measures of Effectiveness The effectiveness of the program can be measured with the increase in the number of women enrolled in maritime schools and the deployment of sea officers. Such development will eventually lead to an increase in the number of women officers and skilled personnel on board and also improve the working environment on board. Potential Solutions Any attempt to increase the number of women officers and skilled personnel in the maritime industry should also address the roots of gender gap and discrimination, including eliminating patriarchal values and patriarchal control in the industry. 166 Public Policy Empowering Filipino Women Seafarers in the Maritime Sector Framework Empowerment Framework and Human Rights-Based Approach Filipino women have gone a long way in terms of fighting for their rights as women and in the elimination of various forms of discrimination and marginalization. However, patriarchy continues to dominate different aspects of Philippine society. Maria Mies (1986) has said that patriarchy literally means “the rule of fathers”. Male dominance today also includes the rule of husbands, of male bosses, of ruling men in most societal institutions, in politics and economics (Mies 1986, 37). The seafaring industry continues to be controlled and dominated by men. Most of the bosses and owners of shipping companies, crewing agencies, training centers, and even maritime schools are men. Around 97 percent of the seafarers deployed to work onboard international vessels are men, while women account for only three percent. Patriarchal beliefs – that seafaring is a man’s turf – also persist in the industry. Sara Longwe’s Empowerment Framework (2002) is used in this policy research to achieve the goal, which is to empowering Filipino women seafarers. She says that there are five levels of empowerment, namely welfare, access, conscientization, mobilization, and control. Welfare is defined by Longwe as the improvement of nutritional status, shelter, or income. Access is defined as improved access to resources and trainings. Conscientization refers to the understanding of women’s subordination and oppression. Mobilization refers to collective action and ability to connect or link up with other women. Control, which is the highest level of empowerment, means that women take control over decision-making and resources. To ensure that the rights of women seafarers are promoted and protected in the empowerment process, the human rights-based approach (HRBA) is also applied in this policy research. The United Nations High Commissioner for Human Rights defines HRBA as: A conceptual framework for the process of human development that is normatively based on international human rights standards and operationally directed to promoting and protecting human rights. It seeks to analyze inequalities which lie at the heart of development problems and redress discriminatory practices and unjust distribution of power that impede development progress. (United Nations Office of the High Commissioner for Human Rights 2006, 15) Volume XV (2016) 167 Tangi The Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW), adopted in 1979, is considered to be the bill of rights of women. The Philippines has ratified CEDAW and is obliged to implement and reflect it in its domestic laws. Article 1 of the Convention defines discrimination against women as: Any distinction, exclusion or restriction made on the basis of sex which has the effect or purpose of impairing or nullifying the recognition, enjoyment or exercise by women, irrespective of their marital status, on a basis of equality of men and women, of human rights and fundamental freedoms in the political, economic, social, cultural, civil or any other field. The human rights-based approach supports the inclusion of women in the maritime sector. This means that gender discrimination, stereotyping, and harassment of women must be eliminated. Women must be given equal opportunity to apply for the positions available on board and be treated equally. The duty bearer and the right holder are identified in the human rights-based approach. Duty bearers are those responsible for the realization and protection of human rights. In the maritime sector, the Philippine government and other government agencies involved in the maritime industry and the deployment of seafarers are the duty bearers. Rights holders are people who are affected by or claim human rights. In this study, the women seafarers and women cadet or maritime students are the rights holders. Table 1. Empowerment in the Seafaring Industry Levels of Empowerment Indicators in the Seafaring Industry Women seafarers receive the same salary as their male Welfare counterparts Women are given access to maritime schools, Access scholarships or sponsorships, and trainings for promotion Women seafarers understand that they are Conscientization discriminated against; become members of trade unions; form women seafarers’ association Women stage mass actions, organize fora/conferences, Mobilization and link up with other women seafarers Women are at the helm, there are more women chief Control engineers, heads of crewing agencies, and shipping companies 168 Public Policy Empowering Filipino Women Seafarers in the Maritime Sector Methodology The data gathering was conducted from August 2015 to May 2016. Almost 100 stakeholders were either interviewed or invited to participate in focus group discussions. A review of existing literature and documents related to women seafarers was also conducted. Stakeholders 1. Women seafarers. A total of 24 women seafarers were interviewed face- to-face, online via Skype or Facebook, or through an online questionnaire. Most of the women were on board international vessels during the time of the interview. The interviewees were referred by maritime schools, trade unions, crewing agencies, and Women in Maritime Philippines. The interviewees were between 18 to 49 years old. Eighteen of them were single while four were married and with children. One was a solo parent and another one was a widow. 2. Female maritime students. A total of 48 female maritime students were invited to participate in focus group discussions. Their schools were chosen based on the number of women sea officers they have produced. The female maritime students were from the Maritime Academy of Asia and the Pacific (5), Philippine Merchant Marine Academy (33), Asian Institute of Maritime Studies (6), and Lyceum of the Philippines University-Batangas (4). The participants were selected with the assistance of school administrators. 3. Male maritime students. Separate focus group discussions were conducted for male maritime students in MAAP (3) and PMMA (10) to find out how they felt about the entry of women in the seafaring industry. The male students revealed their attitudes toward female students in the academy. 4. Maritime schools. Top maritime schools that have been producing women seafarers were targeted for the interviews. The following maritime schools were included in this research: • Maritime Academy of Asia and the Pacific (MAAP), located in Mariveles, Bataan, was established in 1998. It is owned and operated by the Association of Marine Officers and Seamen‘s Union of the Philippines (AMOSUP) and was considered the top maritime school in 2015. Dean Renante Garcia and Engineer Basco, faculty and alumnus, respectively, were the key informants. Volume XV (2016) 169 Tangi • Philippine Merchant Marine Academy (PMMA) is a state-owned maritime academy. It was first established as Escuela Nautica de Manila under the Spanish Royal Decree in 1820. In 1899, the academy was renamed the Nautical School of the Philippine Islands, and still later renamed as the Philippine Nautical School under the US Navy. It was formally renamed PMMA in 1963 pursuant to Republic Act 3680. Commandant Bernabe N. Funelas and Engineer Ronald Magsino, assistant superintendents for Academics and for Training and Research, respectively, were interviewed for this study. • Lyceum of the Philippines University–Batangas City was established in 1966 by Dr. Sotero H. Laurel, son of former Philippine President Jose P. Laurel. The university started offering marine transport in 1975 in response to the government’s export policy on seafarers. The marine department is now officially called Lyceum International Maritime Academy and has a separate campus. Dean Arnulfo Orence was interviewed in Batangas City for this research. • Asian Institute of Marine Studies (AIMS) is a merchant marine college in Pasay City. It was established in February 1993. It offers courses in marine engineering, marine transport, and naval architecture. Capt. Lauro S. Torrechilla, Dean of the Maritime College, was the key informant from AIMS. 5. Maritime Industry Authority (MARINA). It is the government agency in charge of formulating policies and in implementing international standards related to seafarers. 6. Commission on Higher Education 7. Philippine Overseas and Employment Administration 8. Seafarers’ unions. They directly recruit and organize seafarers. Engineer Nelson Ramirez, president of the United Filipino Seafarers (UFS) and members of the Associated Marine Officers and Seamen‘s Union of the Philippines (AMOSUP) served as key informants. 9. Crewing agencies and shipping companies. They recruit seafarers for shipboard employment. In legal terms, they are the representative of shipping companies in the Philippines. Among key informants were Philippine Association of Manning Agencies & Shipmanagers, Inc. (PAMAS) President Captain Oscar Orbeta President, Conference on Maritime Manning Agencies (COMMA) President Capt. Rodolfo D. Estampador and Magsaysay Maritime Corporation Chief Executive Officer Alex Querol. 170 Public Policy Empowering Filipino Women Seafarers in the Maritime Sector 10. Training centers. There are around 74 maritime schools registered with CHED. They are the main targets for these policy changes. Captain Arsenio C. Padilla, Jr., president of Philippine Association of Maritime Training Center, Inc. (PAMTCI) was interviewed for this research. Table 2. Empowerment in the Seafaring Industry Number of women Types of Jobs/Position interviewed Captain 3 Chief Engineer 2 Second Engineer 1 Third Engineer 3 Fourth Engineer 1 3rd Officer 1 Project Administrator 2 Deck Cadet 5 Engine Cadet 4 Mess Girl 1 Brazilian Supervisor 1 TOTAL 24 Results and Discussion Gender Gap in the Maritime Sector Gender gap is defined as “the observable gap between women and men on some important socio-economic indicator (e.g., ownership of property, access to land, enrolment at school) which is seen to be unjust, and therefore presents clear empirical evidence of the existence of a gender issue” (Longwe 2002, 5). Gender gap is highly evident in maritime schools and in the seafaring profession. The gender gap in maritime schools can be attributed to the delay in the opening up of schools to female students. A number of maritime schools accepted male students before and after World War II. Limiting enrollees to males for decades, and for almost two centuries in the case of one government school, reinforced the belief that maritime courses were only for male students. Volume XV (2016) 171 Tangi It has only been in the past three decades that women have been welcomed to these male-dominated institutions. Lyceum of the Philippines-Batangas City is probably the first maritime school to have a female student. The university welcomed its lone female student in 1985. LPU Dean for Maritime Education C/M Arnulfo Orence, however, underscored that the female student only enrolled in some subjects in maritime transport in preparation for a job with the Maritime Industry Authority (MARINA). LPU did not have a female maritime student for almost a decade after its first female student completed the required subjects. It was only in the mid-1990s that LPU started having female students in maritime courses. Although LPU is one of the private maritime institutions that has produced world-class seafarers, the number of its women enrollees continues to be low compared to male students. The Philippine Merchant Marine Academy (PMMA) was the first government maritime school to accept women cadets in 1993, almost 173 years after it was founded. The opening up was brought about by the enactment of RA 7192, also known as the Women in Development and Nation Building Act, which was passed in 1992. The law mandates the integration of women in various industries and in the military to make them full and equal partners of men in development and nation building. The first batch of enrollees was composed of four women, and graduated from the academy in 1997. Aside from serving merchant and passenger vessels, many PMMA women graduates also joined the Philippine Coast Guard and the Philippine Navy. PMMA produced its first woman captain and first woman chief engineer in 2015. The Maritime Academy of Asia and the Pacific (MAAP) welcomed midship women or female students as soon as it started operations in 1998. From 2003 to 2015, a total of 84 women completed their degrees in maritime transport, marine engineering, and marine transport engineering. The number of female graduates does not even represent 10 percent of the total graduates. MAAP has so far produced two women captains and the country’s first woman chief engineer. AIMS was established in 1993, but it was only in the late 1990s that the school experienced the entry of female students. It has also become one of the major suppliers of women seafarers. AIMS students interviewed for this research were hoping that the school could also produce a woman captain in order to boost the profile of the school. Although figures were not available, female students accounted for less than 10 percent of the student population. 172 Public Policy Empowering Filipino Women Seafarers in the Maritime Sector Statistics from the Commission on Higher Education (CHED) show that maritime-related courses have been quite popular for the past decades because of the surge in deployment of sea- based workers since the 1970s. There was a slight surge in the number of female enrollees after the opening up policy. For academic year 1998/99, the number of female enrollees in maritime schools reached 3,736, or almost six percent of the total enrolment. However, since 1999, there has been a decline in women enrollees. Table 4 shows that from 1999 to 2004, the total number of maritime students (excluding 2002 figures) was 378,277. The number of male enrollees was 371,669, or 98.26 percent, while female students accounted for 6,608, or 1.74 percent, of the total enrollees in maritime. The ratio of males to females was 98.26 to 1.74. The low enrolment rate of women during the period may be attributed to the lack of information campaigns by maritime schools and government agencies announcing that both male and female are eligible to take up maritime courses. Female graduates of maritime schools also had difficulty looking for jobs and often ended up doing office work in shipping companies and other industries. Table 3. Female Graduates of MAAP (2003-2015) Year BS MT BS MarE BS MTE TOTAL 2003 2 2 N/A 4 2004 4 1 N/A 5 2005 2 3 N/A 5 2006 2 2 N/A 4 2007 2 0 N/A 2 2008 2 2 N/A 4 2009 1 1 0 2 2010 3 1 4 8 2011 3 4 2 9 2012 3 3 2 8 2013 5 9 N/A 14 2014 2 9 N/A 11 4 4 N/A 8 2015 35 41 8 84 Source: Maritime Academy of Asia and the Pacific Volume XV (2016) 173 Tangi Table 4. Male and Female Enrollees in Maritime Schools (AY 1998-2004) PERCENTAGE ACADEMIC TOTAL MALE FEMALE OF FEMALE VS YEAR TOTAL 1998/99 62,687 58,951 3,736 5.9% 1999/00 73,747 72,316 1,431 1.94% 2000/01 68,966 67,634 1,332 1.93% 2001/02 82,471 80,943 1,528 1.85% 2002/03 No data 2003/04 79,843 78,531 1,312 1.64% 2004/05 73,250 72,245 1,005 1.37% Source: Commission on Higher Education The number of women graduates of maritime schools was quite low in the late 1990s and early 2000s. Statistics show that the number of female graduates was slightly higher in school year 1997/98 at 4.9 percent (549) and in school year 1998/99 at 9.29 percent (936), but the momentum was not sustained in the succeeding years. During the period 1999 to 2003 (excluding 2001 when no data were available), female graduates did not even reach one percent, except for school year 2000/01. The low number of female graduates compared to the number of enrollees shows that many female students decided not to pursue their maritime courses. It is possible that female students felt uncomfortable with the dominance of males in schools. The low prospects of finding jobs after college may also have discouraged female students from completing their maritime courses or degrees. Likewise, the high cost of education and other expenses in private maritime schools may have contributed to the low graduation rate of female students. The Magna Carta of Women was signed in to law on August 14, 2009 by then President Gloria Macapagal-Arroyo. The landmark law seeks to eliminate all forms of discrimination against women and encourages the full participation of women in development. The so-called bill of rights of women, however, failed to encourage women to enter male-dominated maritime schools. Table 6 shows that the number of women enrolled in BS Marine Transport from 2010 to 2014 remained low, between 1.68 per cent and 2.76 percent of total enrolment. There were fewer women enrolled in BS Marine Engineering, which did not even reach one percent of the total enrolment from 2010 to 2014. The number of graduates in the two major courses also remained less than one percent most of the time, and reached its peak of 1.7 percent for BS Marine 174 Public Policy Empowering Filipino Women Seafarers in the Maritime Sector Engineering in 2012. Although the Magna Carta of Women gave hope to the empowerment of Filipino women in various sectors, it hardly empowered women in the maritime sector. This shows the need for specific legislation that addresses the gender gap in the maritime sector. Table 5. Graduates of Maritime Schools (AY 1997-2003) ACADEMIC YEAR BACCALAUREATE MALE FEMALE 1997/98 10,663 549 (4.9%) 1998/99 9,143 936(9.3%) 1999/00 9,695 47(0.48%) 2000/01 10,685 158(1.46%) 2001/02 No data available 2002/03 10,669 77(0.72%) 2003/04 10,084 78(0.77%) Source: Commission on Higher Education Table 6. Enrolment in Marine Transport and Marine Engineering 2010-14 Year BS Marine Transport BS Marine Engineering Male Female TOTAL Male Female TOTAL 1,352 348 2010 78,767 (1.68% of 80,119 52,813 (0.65% of 53,161 total) total) 1,314 384 2011 80,395 (1.8% ) 82,043 58,228 (0.66%) 58,612 1,945 499 2012 74,136 (2.56%) 76,056 62,034 (0.79%) 62,533 2,183 522 2013 79,611 (2.67% ) 81,794 55,562 (0.93%) 56,084 1,865 434 2014 65,730 (2.76%) 67,595 49,424 (0.87%) 49,858 Note: Enrolment figures for first semester only. Volume XV (2016) 175 Tangi Table 7. Graduates of BS Marine Transport and BS Marine Engineering (2010- 2014) Year BS Marine Transport Graduates BS Marine Engineering Graduates Male Female TOTAL Male Female TOTAL 2010 4,601 41 (0.88%) 4,642 2,392 11 (0.46%) 2,403 2011 4,366 28 (0.64%) 4,394 2.970 15 (0.50%) 2,985 2012 3,961 25 (0.63%) 3,986 2,692 47 (1.7%) 2,739 2013 4,178 46 (1.09%) 4,224 2,990 32 (1.06%) 3,022 2014 3,790 43 (1.12%) 3,833 2,874 19 (0.66%) 2,893 On the professional side, the gender gap is also very wide. The number of Filipino seafarers deployed annually has been growing steadily since the 1970s. From only 23,000 deployed in 1972, the number of sea-based workers deployed in 2014 has reached more than 400,000. According to the BIMCO/ISF Manpower Report 2015, the Philippines continues to be one of the top three suppliers of seafarers, together with China and Russia. However, Filipino women seafarers have not benefitted much from this global phenomenon. Statistics from the POEA show that women only account for between two to three percent of the total sea-based workers deployed from 2006 to 2014. Clearly, male seafarers dominate the seafaring industry and account for around 97 percent. The gender gap in the seafaring industry is more apparent among officers and ratings. Most of the women officers and ratings are on board oil tankers, chemical tankers, cargo vessels, and dry vessels. The number of women in these two subgroups can be considered microscopic. One needs a microscope to find these women officers and ratings in a sea of men. For instance, in 2006 there were only 25 women officers, or 0.05 percent, of the 52,757 sea officers deployed, while there were only 329 women, or 0.24 percent, out of the 136,250 ratings deployed. It was only in 2011 that the number of women officers reached 1,005, or more than one percent, while female ratings reached almost one percent. Industry sources attributed the sudden surge to women on shipboard training during the period that was classified as either officers 176 Public Policy Empowering Filipino Women Seafarers in the Maritime Sector Table 8. Number of Women Seafarers vs Total Seafarers Deployed (2006-2014) Total Seafarers Women Seafarers Percentage of YEAR Deployed Deployed Women Seafarers 2006 230,586 6,436 2.79% 2007 266,553 5,546 2.08% 2008 261,614 6,019 2.30% 2009 330,424 8,114 2.46% 2010 347,150 9,002 2.59% 2011 369,104 12,171 3.30% 2012 366,865 9,186 2.50% 2013 367,166 10,171 2.77% 2014 401,826 12,345 3.07% Sources: POEA , Tangi (2012) Table 9. Number of Women Sea officers, Ratings vs Total Officers, Ratings Deployed (2006-2014) Total number Number of Number of YEAR of Filipino Sea Women Sea Total number of Women Ratings Officers Deployed officers Deployed Ratings Deployed Deployed 2006 52,757 25 (0.05%) 136,250 329 (0.24%) 2007 51,353 44 (0.08%) 139.740 300 (0.21%) 2008 57,773 65 (0.11%) 98,720 394 (0.40%) 2009 78,893 90 (0.11%) 92,027 501 (0.54%) 2010 81,761 84(0.10%) 124,765 497 (0.40%) 2011 90,506 1,005 (1.11%) 140,681 1,394(0.99%) 2012 84,836 111(0.13%) 136,505 77(0.05%) 2013 86,636 118 (0.14%) 139,211 72(0.05%) 2014 93,686 170(0.18%) 154,402 89(0.06%) Sources: Philippine Overseas Employment Administration 2016; Tangi 2012 Volume XV (2016) 177 Tangi 100,000 90,000 80,000 70,000 60,000 women 50,000 Total 40,000 30,000 20,000 10,000 2012 2013 2014 Chart 2. Number of Women Sea officers vs Total Sea Officers Deployed 2011-2014 or ratings. In 2012 the number of women officers and ratings returned to their previous levels of less than one percent. There is also a gender gap in the hotel and services department of passenger vessels or cruise liners, but not as wide as with officers and ratings. A previous study by the author (Tangi 2012) shows that more than 90 percent of Filipino women seafarers work on board passenger vessels. Most of them work as waitresses, massage therapists, kitchen helpers, cabin girls, and utility personnel. The latest figures from the Philippine Overseas Employment Administration (POEA) show that women account for between 14 to 16 percent of non-marine personnel on passenger vessels deployed from 2011 to 2014. Although more than 90 percent of women seafarers are found in this category, men still dominate the passenger vessels. Filipino women are valued on passenger vessels because of their caring attitude toward children and senior passengers as well as for their smiling dispositions. It should be noted that there are also women officers and ratings who manage to work on passenger vessels, but they are quite rare. 178 Public Policy Empowering Filipino Women Seafarers in the Maritime Sector Table 10. Women Seafarers on Passenger Cruise (2011-2014) Women non- marine Year Non-marine Seafarers Seafarers on Percentage of women on Passenger Vessels Passenger Vessels 2011 59,262 8,441 14.24% 2012 58,966 8,530 14.46% 2013 60,565 9,523 15.72% 2014 70,640 11,465 16.23% The gender gap in the seafaring industry is brought about by various factors. Based on interviews with stakeholders, patriarchal control and patriarchal beliefs are the main reasons behind the gender gap. Patriarchal control is defined by Longwe (2002, 5) as “the system of male monopoly or domination of decision making positions, at all levels of governance, which is used to maintain male dominance and gender discrimination (for the continued privilege of males).” Most of the shipping companies, shipping organizations, crewing, and ship management companies are still controlled by men. One of the most common patriarchal beliefs is the notion that men are superior while women are considered “the weaker sex.” In the maritime sector, the notion that seafaring is man’s turf is also a patriarchal belief. Patriarchal control and beliefs affect women seafarers in various ways in the maritime sector. They are evident in terms of gender discrimination, sexual harassment, bullying, company policies on women, and maritime school policies on women. Each of these terms will be discussed extensively in this study. Gender Discrimination Gender discrimination is generally defined as the different treatment given to women compared to men. This different treatment given to women and girls deprives them or denies them opportunities, resources, and control over policies. Gender discrimination in the maritime sector stems from the notion that seafaring is a man’s turf. Most seafarers and shipping companies believe that work on board requires heavy lifting and technical expertise. The dirty jobs in the engine department are considered unglamorous and therefore not fit for women. Thus women who dare enter the industry or maritime schools are often challenged, and their capabilities are often underestimated by male colleagues and male students. Some start to experience discrimination in maritime schools. Volume XV (2016) 179 Tangi We think that discrimination of women is part of human nature. Since the day we wrote down our application forms prior to entering this institution, we had been told that we are about to enter a man’s world. We just think that we are the ones who must adjust to these changes. (PMMA women cadets focus group discussion, September 28, 2015) Female cadets usually experience discrimination during their first two years in maritime school. PMMA female cadets said that upper class men usually underestimate their abilities. Gender discrimination is high. For instance, some seniors underestimate the capability of female cadets in doing certain tasks (such as push-ups and jogging several kilometers). But some of us cadets just keep quiet in order to avoid conflict. We just try our best in fulfilling the tasks. (PMMA women cadets focus group discussion, September 28, 2015) Maritime school officials claim that they do not discriminate against women. They also emphasize that they do not give special treatment to women. In PMMA and MAAP, all cadets, both male and female, have to wake up at 4:30 AM so they can do their morning jog around the campus. The physical and academic training is the same for both male and female. Engineer Joel Magsino, a faculty member at MAAP, said that sometimes female cadets finish their jogging routine even faster than some male cadets. Female cadets are excused from the daily jogging during their period. But Engineer Magsino said that since he started teaching at MAAP, he has not come across a female cadet who asked to be excused from the routine of jogging during her menstrual period. Maritime school faculty members observe that female cadets or students tend to excel in academics while males tend to excel in physical and technical trainings. Female students also tend to be more focused in their lessons and in their studies in general. Since maritime schools are male-dominated, it is often expected for males to be on top of the class. On the other hand, if female students excel, they receive derogatory remarks from male students, as in the case of licensed Captain Jasmin Labarda when she was still at MAAP. A concerned colleague once told me that when I was number one during the very first two semesters in MAAP, some boys were not happy about it and even questioned why a female was allowed to be on top. It makes me wonder now if a female did not excel, they would have said the same thing: “Why let a female enter here.” “That’s how 180 Public Policy Empowering Filipino Women Seafarers in the Maritime Sector females are.” That’s basically the life of being the lesser gender; you’re damned if you do well, damned if you don’t. (Licensed Captain Jasmin Labarda on-line interview, January 2016) Female cadets of PMMA and MAAP have to cut their hair crew-cut style as soon as they are accepted in the institution. For some female cadets, the ritual of hair cutting can also be tormenting as it symbolizes saying goodbye to long hair and being feminine. Most of the female cadets also look at the hair cut ritual as a preparation for their being an officer. However, when they go to malls and public places, PMMA and MAAP students complain of the way they are treated by some people. I remember one time when I was about to enter a comfort room in a gasoline station, the staff really stopped me from entering the ladies room. She said arrogantly, “Pambabae yan (That’s for women).” But I politely responded, “Miss, babae po ako (Miss, I am a woman).” The staff eventually allowed me to use the ladies room after she realized that I was really a woman. (PMMA female cadet, focus group discussion, September 28, 2015). The first time I went to a mall after entering the academy, I wanted to try a shirt but the sales girl stopped me. She said “Sir, sa ladies lang po dyan (Sir, that’s only for ladies).” But I said, “Lady po ako, hindi sir (I am a lady, not a ‘sir’).” Such incidents are really annoying, but I just look at it as part of the challenges of being a future officer. (MAAP female cadet, focus group discussion, September 21, 2015). MAAP, which is operated by AMOSUP, relies on sponsorship to finance the education of cadets. However, MAAP Dean of Academics Renante Garcia said that the academy often has difficulty finding sponsors for female cadets. Shipping companies prefer to sponsor male cadets, according to him. When female cadets do not have sponsors, this means added cost for the operation of the academy. If shipping companies will continue with their preference for male cadets in their sponsorship, Dean Garcia said MAAP might reduce its intake of female cadets. Maritime students are required to undergo one year of shipboard training before they earn their degree. The shipboard training is supposed to be the culmination of their maritime education and the application of the theories that they learned in class. Meeting this requirement, however, has become a major challenge for female maritime students. Volume XV (2016) 181 Tangi Last month there were a number of shipping companies that visited our school. We applied for shipboard training. But all the companies were not accepting women trainees. We will try to apply to as many companies, hoping that one of them will finally accept women trainees. (Female students of Lyceum of the Philippines-Batangas focus group discussion, March 2016) The country’s first female licensed chief engineer, Nina Sue Da Silva, did not have a sponsor when she was a cadet at MAAP. Although that in itself was quite frustrating, she never realized that applying for shipboard employment was more challenging. She applied to 124 companies after she graduated from MAAP in 2003. She was rejected simply because she was a woman, and many shipping companies do not accept female sea officers. She was finally accepted by the 125th company she filed her application with. Although she was accepted as an engine cadet in a Japanese shipping company, she considered it a breakthrough because Japanese companies hardly accept women on board. Licensed Captain Beverly Pawid, a graduate of PMMA in 2004, shared the same experience in job hunting. I thought it would be easier for me to find a job because I am a graduate of a premier maritime school. I applied to many companies and I did not give up because I really wanted to help my family. Oftentimes, the crewing agents outrightly reject your application because of your gender. (Captain Pawid interview, March 2016) Women seafarers also experience discrimination from their own male colleagues and friends. Gender discrimination stems from the erroneous notion that women are pambahay, or only good for the home. Licensed Captain Ma. Kristina Javellana, an MAAP 2005 graduate, also did not have a sponsor while she was studying and, therefore, had difficulty finding shipboard training. When she was finally accepted as deck cadet on board a chemical tanker, she received unpleasant remarks from male seafarers. “Baka naman pagsayawin ka lang doon, sabi nila sa akin (They‘ll probably just make you dance, they told me).” Captain Javellana, however, ignored such discriminatory remarks and pursued her seafaring career, usually serving on chemical tankers, and became a licensed captain in 2015. It is quite rare to find women marine engineers because the engine department is often considered a dirty job and exclusive to males. Thus, some male engine officers who do not want women in their department usually 182 Public Policy Empowering Filipino Women Seafarers in the Maritime Sector relegate women marine engineers to paper work or work inside the control room. Especially some of the Indians and Ukrainians, they think women are only good for house chores and taking care of babies. You will get offended at first, of course, but in the long run, I learned how to defend myself and to speak out; then they slowed down and did not discriminate [against] me anymore. They will always try to discriminate in many forms, sometimes by not saying any words. They will give you [an] easy task, paper work to be exact, and if you will not speak out and tell them what your objections are, they will continue to treat you that way. (Engineeer Luzviminida Ornopia online interview, February 2016) Sexual Harassment Sexual harassment is generally defined as “unwanted sexual attention that is explicitly or implicitly made a condition for favorable decisions affecting one’s employment or school standing, or that which creates an intimidating, hostile or offensive environment in the school or the workplace” (Office of the President Philippine Commission on Women n.d., 2). It can be manifested through verbal and physical conduct. The Anti-Sexual Harassment Law of 1995, or RA 7877, states that any person who directs or induces to commit any act of sexual harassment is also liable under the law. The penalty imposed under the law includes imprisonment from one to six months and a maximum fine of PhP20,000. In a male-dominated industry, sexual harassment is an issue that women have to brace themselves for. Around 60 percent of the 24 professional women seafarers interviewed said that they had experienced various forms of sexual harassment. Some of the experiences were verbal and others were physical in nature. With the enactment of RA 7877, maritime schools are now more active in preventing sexual harassment on campus. A female graduate of MAAP said in an interview that she was a victim of sexual harassment twice on campus. The first incident happened when the female cadet was on her second year in the academy, and she learned from one of her male friends that some seniors had been peeping in the shower room of female cadets. The female cadets checked the shower area and indeed found holes in the ceiling. The female cadets reported the incident to academy officials, and all their upperclassmen were punished. Volume XV (2016) 183 Tangi The second incident of sexual harassment happened when the female cadet was in her senior year. She was focusing on a group activity in class when one of her male groupmates suddenly rubbed his private part on her. The female cadet was shocked and confronted the male cadet. She reported the incident to school authorities and the male cadet was punished. On board international vessels, Filipino women sea officers are often the only female on board. This condition or set-up makes them vulnerable to sexual harassment, especially during their junior years. Chief Engineer Da Silva, for instance, was a third engineer when she received an indecent proposal from a Danish chief mate. Akala nya nagpapabayad ako. Dati kasi may kasama kaming Pinay din na nagpapabayad. Akala ng Danish na yon na lahat ng Pinay ganon. (He thought that I was offering sex for cash. We had a Filipina steward who used to peddle sexual services on board. This Danish thought that all Filipino women are the same.) (Chief Engineer Da Silva online interview, January 2016) Based on the ship’s operational procedures, a crew member must report any untoward incident or grievance directly to the immediate supervisor. But since the perpetrator of the sexual harassment was of higher rank than the direct supervisor, Da Silva reported that incident to the captain. The Danish chief officer was eventually punished by the company. An Indian second engineer also preyed on Da Silva while she was a third engineer and was up for promotion as second engineer. The Indian second engineer used to give her light workload inside the control room and was nice to her. However, the Indian engineer’s attitude changed when Da Silva rejected his invitation to his cabin. One day the Indian engineer invited me to watch television in his cabin. I turned down the invitation and warned him that he would get nowhere with me. After the incident, he started giving me heavy workload and often reprimanded me for no valid reason. He also wrote bad marks on the evaluation form. (Engineer Da Silva online interview, January 2016). Engineer Da Silva reported the incident to her immediate supervisor, the chief engineer, and the company disregarded the negative evaluation of her performance. She was eventually promoted to second engineer. 184 Public Policy Empowering Filipino Women Seafarers in the Maritime Sector Most of the women sea officers dress up like one of the boys and sometimes even act like one of the boys just to ward off potential predators. But Marine Engineer Monique Arrojado, a MAAP graduate, was surprised one day when the Danish captain of the cargo vessel to which she was deployed called her alone inside his office. The Danish captain confessed, “There is something in you. I really like you.” Arrojado was offended because the captain was already married. She politely replied to the Danish captain, “Sir, I came on board to work and not to look for a boyfriend.” I really don‘t know why he (the captain) liked me when on board I just wear my bandana, no makeup, and I try not show any part of my body. He continued to invite me to his office after the incident but I always tell him that I am busy. (Engineer Arrojado interview, January 2016) Captain Beverly Pawid said that she always brings extra locks and items that she can use for self-defense whenever she works on board. When I was younger, one of my male colleagues told me that someone tried to open my cabin while I was asleep. On ship, there are only two people who have access to my cabin key—the chief mate and the captain. So I always try to be extra careful and alert. (Captain Pawid interview, March 2016). Whenever on board, Captain Pawid also puts away all her personal belongings, including slippers and underwear. “Maybe because of loneliness and boredom while on board, some seafarers develop sexual fetishism for the personal belongings of women on board” (Captain Pawid interview, March 2016). Other forms of sexual harassment experienced by women seafarers include dirty jokes during conversations, discussion of sexual adventures, and watching pornographic movies or videos while women seafarers are in the area. Based on the interviews, women sea officers become vulnerable to sexual harassment during their junior years and when they are the only woman on board. As women officers climb the ladder and become recognized in their profession, male seafarers tend to respect them; thus they become less vulnerable to sexual harassment. The sexist and macho attitude of male seafarers is the main reason behind the sexual harassment. This is reinforced by the working environment wherein seafarers are away from their loved ones for months. Volume XV (2016) 185 Tangi Bullying of Women Seafarers Bullying is defined as “a form of harassment that includes hostile or vindictive behavior that can cause the recipient to feel threatened or intimidated” (International Chamber of Shipping and International Transport Workers Federation 2016, 5). Bullying is also a problem of both male and female seafarers on board, especially among ratings and junior officers. However, women are more vulnerable to bullying because of the notion of some male seafarers that women are “the weaker sex” and therefore have no place in the profession. Bullying also occurs when some male seafarer feel threatened when they see junior women officers who are working hard. On board international vessels, a mess man is usually assigned to serve the food, do the laundry, and clean the mess of officers. The job is usually reserved for male seafarers, but one woman seafarer from Bustos, Bulacan who dared to assume this position ended up being bullied by the ship captain. There is one incident during my tenure that our captain threw the used towel and bed sheet on my feet instead of giving them to me by hand or by calling me. He also used to throw garbage like cartons in front of the door that blocked the entrance to the mess room. I guess on our part we can call this (bullying) or he thought we are like a slave to him. (Messperson from Bustos Bulacan online interview, May 2016) Chief Engineer Da Silva recalled that she was also bullied by a Russian chief engineer who never worked with women on board. She had an argument with the Russian chief engineer over a task. The Russian chief engineer suddenly lifted her and was about to punch her. But Da Silva threatened, “Hit me and I will make sure that this will be the end of your career.” The Russian chief engineer calmed down and did not hurt or bully Da Silva ever again. Bullying also occurs because of racial discrimination. Some male seafarers from developed countries look down on Filipino women. A female project administrator who graduated from De La Salle University-Manila said some nationalities look down on Filipino women as “idiots and illiterates.” There was a chief engineer before that told me frankly that I wrote the minutes of the meeting like a 10-year-old child. My other boss told me I was the dumbest of the dumbest. (Project administrator from Parañaque City online interview, May 2016) 186 Public Policy Empowering Filipino Women Seafarers in the Maritime Sector It is apparent that women junior officers and ratings become vulnerable to bullying if they work with male seafarers who never had any experience in working with women on board. Their attitude towards women reflects that of the societies they come from and greatly affects their treatment of women seafarers, regardless of their rank. Shipping Companies/Crewing Agencies Policy on Women Another major reason for the gender gap in the seafaring industry is the attitude of shipping companies and crewing agencies toward women. Based on the latest report released by POEA, there are around 407 crewing agencies that are licensed to recruit seafarers who want to work on board international vessels. However, at present there are only a few crewing agencies that accept women seafarers. Most of these agencies recruit women seafarers to work on passenger vessels or cruise ships. Women officers complain that crewing agents reject their applications outright without even going over their documents or without checking their credentials. But crewing agents say that shipping companies are the ones that accept or reject applications. “We just send them [shipping companies] the documents,” said Captain Rodolfo Estampador, president of the Conference on Maritime Manning Agencies (COMMA). Crewing agents say that shipping companies are more willing to accept women to work on board passenger cruise because of the nature of Filipino women.” Our women are known to be very caring and always smiling at passengers. These are qualities that are much needed on cruise ships,” a crewing agent said. However, many shipping companies are still reluctant to accept women on merchant vessels because they are perceived to be “causing trouble on board.” (USF President Engineer Nelson Ramirez interview, March 2016). Based on the interviews, it appears that shipping companies do not really question the credentials or the productivity of women seafarers. The International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (STCW) is already in place. It sets the minimum standards and qualifications for both male and female seafarers. It appears that shipping companies are more concerned about issues of sexual harassment, extra marital affairs, and pregnancy while women are on board. It should be noted that Filipino women are generally not covered by maternity benefits, which are enjoyed by women seafarers from other nationalities like Britain, Australia, Denmark, and Sweden. Volume XV (2016) 187 Tangi Filipino seafarers, both male and female, are hired on a contractual basis by shipping companies or their principals. This means that all the salary and benefits of Filipino seafarers also end with the expiration of their contract. Contractualization is not beneficial to women sea officers because they are not entitled to maternity benefits. Many women officers also need to abandon their seafaring career as soon as they start having children, instead of having options to work in other departments while they are raising them. The president of the Women in Maritime Philippines, Carla Limcaoco, said that the great challenge is to change the perception of shipping companies about women. Women in Maritime Philippines (WIMAPHIL), a nationwide organization of women in the maritime industry, was planning to forge an agreement with shipping companies registered in the Philippines to accept more women seafarers (Seafarer Times 2013). Crewing agencies also have a big role to play in convincing shipping companies to hire more Filipino women sea officers and ratings. A crewing manager interviewed said that she had successfully convinced a Japanese shipping company to accept Filipino women cadets, although it is known in the industry that Japanese companies do not accept women seafarers. The crewing manager said that encouraging former women sea officers to set up crewing agencies may be helpful in changing the attitude of shipping companies towards women officers. Table 11. Agencies that Recruit for Passenger Cruise CTI Group Manila Holland American Lines - UPL Dolphin Ship Management, Inc. Magsaysay Maritime Great Southern Maritime Services Corporation Century Maritime Agencies, Inc. Jebsens Maritime, Inc. Eagle Star Crew Management Corporation Allied International Manpower Services Singa Ship Management Phils. Inc. Splash Phils. Inc. Shipping Agency Career Phils. Shipmanagement, Inc. CF Sharp Crew Management V Ship Philippines PTC Royal Caribbean Source: Philippine Association of Manning Agencies and Ship Managers, Inc. (PAMAS) 188 Public Policy Empowering Filipino Women Seafarers in the Maritime Sector Maritime Schools and Training Institutions Maritime schools and training institutions also contribute to the widening of the gender gap in the seafaring sector. In the latest report of the Commission on Higher Education, there are only 23 maritime institutions with accredited Merchant Marine (Deck) Programs and Marine Engineering Programs. Only three of these schools—PMMA, Palompon Institute of Technology, and Zamboanga State Colleges of Marine Sciences and Technology—are state universities. The majority of the CHED-accredited maritime institutions are privately owned. Many female students are unable to pursue their maritime courses because of the prohibitive cost of education. For instance, in Lyceum of the Philippines-Batangas City, the tuition is more than PhP40,000 per semester, while in AIMS in Pasay City, the tuition is more than PhP50,000. The high tuition also reflects the huge amount that maritime schools need to invest in order to provide education and training that meet international standards. Aside from tuition, students also need to dig into their pockets for their uniforms, books, food, and transportation. MAAP, which is a privately- run institution, provides free tuition, but female students have to undergo rigid training. Only a few women survive the training there. With the decline in sponsorship for female cadets, there may be fewer chances for women to be accepted in MAAP. In state universities like PMMA, female students need to undergo rigid physical training. Female graduates of PMMA said many women pass the written examination, but most of them do not survive the rigid physical training. The macho style of discipline also discourages many women cadets from pursuing their maritime education. As soon as we said goodbye to our mama and papa, we were immediately instructed to go to gym. I was shocked at the way we were treated. The officers started screaming at us and I didn’t understand why. At first I really felt like quitting. But on the other hand I also had a dream. (Chief Engineer Kiat-Ong, interview, March 2016) Officials of PMMA said that the training and discipline imposed on cadets are part of their preparation for their life on board. The administration has also been taking steps to address the special needs of women cadets. For instance, a separate dormitory for women cadets has been built. Women cadets are also excused from routine jogging in the morning during their menstrual period. Volume XV (2016) 189 Tangi Social Cost of Seafaring for Women Aside from enduring the effects of patriarchal control and beliefs, Filipino women seafarers also bear the social cost of their profession. Since they are always away from home from four to six months, women seafarers confess that their relationship with their family members was also affected. They feel that their parents and siblings do not know them very well and sometimes feel alienated. Since they also have very limited time on shore or in the Philippines, some women seafarers say that they do not have many friends. The breakdown of relationships and separation is also a problem that women seafarers face. Single women interviewed said that they have difficulty sustaining their relationships because of their shipboard employment. For married women seafarers, convincing their husband or partner to understand their profession is always a challenge. A number of marriages have failed because of this issue. In many instances, women seafarers have to give up their careers to look after their family and to maintain a harmonious marriage. Women seafarers who are married or committed to non-seafarers mentioned about the identity shift that they go through when on board and when on shore. On board, they are officers, and their male colleagues follow their orders. But when they return home, they have to remove their officer mentality and become humble servants of their husband or partner. This sad reality shows that the empowerment of women seafarers must start at home. This means that even if the country produces many women captains and chief engineers, it would be meaningless if they end up as victims of domestic violence and patriarchal control at home. Life onboard can be lonely, especially if you are the only woman on board. Women seafarers battle homesickness by joining their male colleagues in their drinking sessions. A number of women officers said they started smoking when they worked on board in order to relieve stress and also to battle loneliness. Sometimes they also need to be “one of the boys.” Such a dangerous lifestyle that women seafarers have to adopt is detrimental to their health and may lead to serious ailments. This research also found that women seafarers may be more prone to occupational ailments than men. For instance, women engineers sometimes develop skin allergies when they are exposed to certain chemicals in the engine department. This may be due to the sensitive skin of women. One of the women officers also said that she suffered from short-term memory loss and suspected that it was caused by fumes emitted by chemicals used in cleaning vessels. The 190 Public Policy Empowering Filipino Women Seafarers in the Maritime Sector woman officer said that she could not even remember her name when she was filling up an application form. She even forgot where she kept her money. Although she did not seek medication, her memory eventually improved after drinking supplements for more than a year. Existing literature links short term memory loss to drugs, alcohol, trauma, and even stress. Further studies must be made to find out the link between memory loss and chemicals used in vessels. Integrating Women in Seafaring Various efforts have been made in the international and local arena in order to address the gender gap in the maritime sector. The International Maritime Organization (IMO) introduced in 1988 the Women in Development (WID) Program to integrate women into the male-dominated maritime industry. Part of the strategy was to increase the enrolment of women in maritime schools. There have been slight increases in enrolment in maritime schools in many parts of the world, especially in Europe. For instance, at the World Maritime University, women accounted for eight percent of enrollees, many of whom were in high-level maritime trainings (Belcher et al. 2008). The WID program eventually resulted in higher participation of women in the maritime industry in Europe. In Sweden, women accounted for 23 percent of their country‘s seafarers from 1997-2001. In Denmark women accounted for 15 percent, and in Norway it was 10 percent (Belcher et al.2008). The International Labour Organization (ILO) also launched in the past decade a research and education campaign on the plight of women seafarers. One of the major contributions of the ILO is the release of a book in 2003 on the global employment policies and practices on women seafarers. In April 2013, the IMO made another milestone by introducing the Busan Declaration at the IMO Regional Conference on the Development of a Global Strategy for Women Seafarers in Busan, Korea. The declaration recognizes the contribution of women seafarers to the maritime industry and also the challenges that they face at work. IMO advocated the promotion of policies to support women’s access to maritime education and merchant marine professions (International Maritime Organization 2013). In the Philippines, the effect of WID has been very minimal. More than two decades after IMO’s WID program, the number of women in maritime schools in the Philippines continues to be very negligible. Those who manage to enter maritime schools also have less chance of graduating compared to males. As Volume XV (2016) 191 Tangi a result, the number of Filipino women seafarers has remained between two to three percent. Among those who manage to enter the trade, less than one percent are professionals and skilled workers. On July 7, 2007, a milestone was achieved with the establishment of Women in Maritime Philippines, an organization of women in the maritime sector, with the help of IMO officials. WIMAPHIL is now a national organization with members from various parts of the country. In June 2013, WIMAPHIL launched the “She to Sea” campaign to raise awareness on the importance of employing women seafarers. “The program aims to raise awareness on the importance of employing female seafarers in an industry that is in need of qualified shipboard officers” (Seafarer Times 2013). The campaign made by international and local groups has been quite useful in providing information on women seafarers. However, such campaigns and strategies have not been sustained and were rather seasonal in nature. The call for women’s integration in the maritime sector has produced a greater number of women in the hotels and services departments of ships. It is probably high time to abandon the call for integration and instead push for women empowerment in the maritime sector. Summary and Policy Recommendations The gender gap in the seafaring industry is indeed one that is most serious. While the percentage of women has surpassed men in some sectors, women seafarers have remained at between two to three percent in the past decade, the majority of whom are in non-marine or hotels and services departments of cruise ships. The number of women officers deployed on board international vessels has remained at a microscopic level at less than one percent. The prevalence of patriarchal control and patriarchal beliefs has been traced as the root cause of the gender gap. This is aggravated by the race among ship owners to reduce costs in order to maintain profits. Women officers interviewed for this research defied all the patriarchal beliefs common in the industry. The fact that the country has produced women captains and women chief engineers shows that women, like men, can also excel in a seafaring career. It is just a matter of time and a matter of changing ship owners’ perceptions. Filipino women captains can navigate a ship. The gender gap in the male-dominated maritime sector can only be narrowed down with the empowerment of women. Using Longwe’s Empowerment 192 Public Policy Empowering Filipino Women Seafarers in the Maritime Sector Framework, this research recommends that the five levels of welfare, access, conscientization, mobilization, and control be addressed. The welfare needs of women seafarers can be achieved if they are given jobs and decent pay so they can afford to meet their practical needs. Women seafarers must be given access to trainings and educational institutions. This can be achieved by providing more scholarships to women or by encouraging schools to use their gender and development (GAD) budget to support female cadets in maritime schools. Conscientization means women are made aware of their condition and are informed about their human rights. This can be achieved by providing gender and empowerment courses in maritime schools. Both male and female maritime students should take such courses. Mobilization means encouraging women seafarers to do something or take action in order to improve their working conditions and fight for their human rights. This can be done by first encouraging them to organize, form associations, or join trade unions. Once united and organized, women seafarers can easily link up and form networks with women seafarers from different nationalities. The ultimate goal of empowerment is control of decision making and control of resources. Decision-making bodies in both private and public sectors are all controlled by men. To penetrate decision-making bodies, more Filipino women should be encouraged to reach the helm as captains and chief engineers. More women should also be encouraged to set up their crewing agencies and shipping companies through government support. To further realize the empowerment of Filipino women seafarers and promote gender equality in the maritime sector, the following specific programs or steps are recommended: 1. The immediate creation of an Inter-Agency Committee on Women Seafarers with the Maritime Industry Authority (MARINA) as the coordinator. All government agencies involved in the education, training and deployment of women must be represented, such as DOLE, POEA, CHED, Maritime Training Council. Trade unions, seafarers’ organizations, crewing agencies, and shipping companies must also be represented in the committee. The Philippine Commission on Women (PCW) should be included to ensure that the rights and welfare of women seafarers are protected. The committee will assess the situation in maritime schools and in the industry. The committee will also serve as a venue for continued dialogue among stakeholders on issues related to women seafarers. Volume XV (2016) 193 Tangi 2. A Program or Strategy on the Empowerment of Women Seafarers must be formulated for short-term and long-term goals. The program or strategy must include target number of students in maritime schools and target number of women to be deployed onboard domestic and international vessels. The program must also provide scholarships for women in maritime schools and training centers. Mentoring of women junior officers and career tracking should also be included in company policies. 3. A new legislation, the Empowerment of Women Seafarers Act, is another way forward. The comprehensive legislation shall recognize the important role of women in the development of the maritime industry. It must enshrine the promotion of gender equality and women empowerment in the maritime sector. It must declare unlawful any form of gender and racial discrimination, sexual harassment, and bullying. It must uphold and protect women’s right to reproductive health, maternity benefits, social security, and their right to work in a safe and harmonious environment. It must provide women seafarers access to trainings, education, and financial resources to improve the maritime-related business. The law must also improve the general working conditions of women seafarers, including giving them breaks or days off during their period. It should also consider the situation of mothers who wish to apply for shorter contracts in order to have time to look after their children. Philippine registered ships must not be allowed to leave with only one woman seafarer on board. 4. The proposed law on the empowerment of seafarers must “engender” maritime schools, training centers, and the maritime sector in general. The law must also seek to promote gender-sensitive maritime education by introducing subjects on gender sensitivity and implementing gender- fair policies, such as hiring more female faculty and introducing GAD policies in maritime schools. Shipping companies and crewing agencies will also be encouraged to formulate their GAD policy. Sexist terms and language in the industry must be eliminated. For instance, the term “SEAMAN” must be replaced with the gender-fair term of “SEAFARER.” Another macho term, “MANNING AGENCY” must be replaced with “CREWING AGENCY.” 5. Require ships registered in the Philippines to hire more women seafarers and women cadets or trainees. The government can make this requirement a precondition for the renewal of registration of both foreign 194 Public Policy Empowering Filipino Women Seafarers in the Maritime Sector and local ships. MARINA has been offering lower ship registration fees to foreign vessels. 6. The Anti-Sexual Harassment law must be fully implemented and awareness of the law should be broadened. No seafarer has been sent to jail for sexual harassment because victims either do not have the resources to pursue the case in court or they are not fully aware of their rights. A helpline for women and male victims of sexual harassment must be set up. It is the obligation of shipping companies to create a working environment onboard that is free from sexual harassment. 7. Women seafarers must be encouraged to organize and form networks. Women seafarers will have more chances of ventilating their grievances and advocating for their rights and welfare if they are organized. Organizing an independent union for women seafarers is something that can be considered in the future. 8. Setting up of a Seafarers Resource/Research Center in the University of the Philippines is also recommended. The number of Filipino seafarers has been growing annually, but studies on the industry have not been that extensive. The UP research center can initiate multi-disciplinary studies on occupational ailments, social protection, and also the social costs of seafaring. These recommendations are far from perfect and conclusive. According to feminist historian Gerda Learner, patriarchy is historically constructed, and it took more than 3,000 years to perfect. 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Laursen, Wendy. “Breaking Stereotypes, and Women at Sea.” The Maritime Executive. 2015. http://www.maritime-executive.com/article/breaking-stereotypes-and-women- at-sea. 196 Public Policy Empowering Filipino Women Seafarers in the Maritime Sector Longwe, Sara H. “Addressing Rural Gender Issues: A Framework for Leadership and Mobilization.” Paper presented at the Third World Congress for Rural Women, Madrid, Spain, October 1-4. 2002. Lopez, Melissa Luz T. “Remittances Top 2015 Goal on Record December Inflows.” Business World Online. February 19. 2016. http://www.bworldonline.com/content.php?section= TopStory&title=remittances-top- 2015-goal-on-record-december-inflows&id=123353. Maritime Industry Authority. “The Philippines: Your Home Ship Registry.” 2015. http://marina.gov.ph/overseas/oso_shipregistry_brochure.pdf. Mies, Maria. Patriarchy and Accumulation on a World Scale. London: Zed Books Ltd., 1986. Moser, Caroline O.N. Gender Planning and Development: Theory, Practice, and Training. London: Routledge, 1993. Nyamu-Musembi, Celestine and Andrea Cornwall. “What is the ‘Rights-based Approach’ All About?: Perspectives from International Development Agencies.” IDS Working Paper 234, November. 2004. Institute of Development Studies. http://opendocs.ids.ac.uk/opendocs/handle/123456789/4073. Office of the President Philippine Commission on Women. RA 9710 Magna Carta of Women: Implementing Rules and Regulations. Manila: Philippine Commission on Women. 2010. http://pcw.gov.ph/sites/default/files/documents/laws/republic_ act_9710.pdf. ———.“Sexual Harassment.” n.d. http://pcw.gov.ph/sites/default/files/documents/ resources/sexual%20harassment1.pdf. Parker, Rani. Another Point of View: A Manual on Gender Analysis Training for Grassroots Workers. New York: United Nations Development Fund for Women, 1993. Philippine Overseas and Employment Administration. “OFW Global Presence: A Compendium of Overseas Employment Statistics 2006.” 2006. http://www.poea. gov.ph/ofwstat/compendium/2006.pdf. ———.“Overseas Employment Statistics.” 2016. http://www.poea.gov.ph/. ———.“POEA Accredited Manning Agencies.” 2016. http://www.shipboardtraining. com/resources/POEA%20List%20of%20%20Accredited% 20Manning%20%20 2016.pdf. Seafarer Times. “WIMAPHIL launches ‘She to Sea’ Campaign.” June 28. 2013. http:// seafarertimes.com/2013-14/node/1024. Tangi, Lucia Palpal-latoc. “Pinays Aboard: A Study on the General Working Conditions of Filipino Women Seafarers on Board International Vessels.” 2012. MA thesis, College of Social Work and Community Development, University of the Philippines. ———.“Filipino Women Navigate Male-dominated World of Seafaring.” June 15. Interaksyon. 2015. http://interaksyon.com/article/112387/ focus-filipino-women-navigate-male- dominated-world-of-seafaring, ———.“Women Sea Officers Challenge Sexism, Gender Stereotypes on Board.” March 13. 2016. http://news.abs-cbn.com/focus/03/13/16/women-sea- Volume XV (2016) 197 Tangi officers-challenge-sexism-gender-stereotypes-on-board.http://verafiles.org/ women-sea-officers-challenge-sexism- gender-stereotypes-on-board/. Turnbull, Peter. “Promoting the Employment of Women in the Transport Sector – Obstacles and Policy Options.” 2013. International Labour Organization Sectoral Activities Department Working Paper No. 298. http://www.ilo.org/wcmsp5/ groups/public/---ed_dialogue/---sector/documents/publication/wcms_234880. pdf. United Kingdom Department for Transport. “Seafarer Statistics, 2013.” January 29. 2014. https://www.gov.uk/government/uploads/system/uploads/attachment_ data/file/275606/seafarer-statistics-2013.pdf. ———.“Seafarer Statistics, 2015.” January 27. 2016. https://www.gov.uk/government/ uploads/system/uploads/attachment_data/file/495308/seafarer-statistics-2015. pdf. United Nations Conference on Trade and Development. Review of Maritime Transport 2011. Geneva, Switzerland: United Nations, 2011. http://unctad.org/en/docs/ rmt2011_en.pdf. United Nations Development Programme. “Sustainable Development Goals.” 2015.http://www.undp.org/content/undp/en/home/sdgoverview/post-2015- development- agenda.html. United Nations Office of the High Commissioner for Human Rights. Frequently Asked Questions on a Human Rights-Based Approach to Development Cooperation. New York and Geneva: United Nations, 2006. http://www.ohchr.org/Documents/ Publications/FAQen.pdf. World Economic Forum. “Global Gender Gap Index 2015.” http://reports.weforum. org/global- gender-gap-report-2015/rankings/. 198 Public Policy Mind the Skills Gap: The Case of the Philippines SENATOR JUAN EDGARDO “SONNY” M. ANGARA The Collegiate Delusion?* To many families in the Philippines, the “end-all, be-all” of getting a formal education is graduating from college. It’s not such a bad deal because in many ways, a college degree is a ticket to a well-paying job and a respectable career. Yet as a society, it seems as if we are wired to believe that gaining a college degree is the only path that our people should take. And one Filipino comedian1 tweeted: “Noong bata pa ‘ko, pangarap kong makapagtapos ng pag-aaral. Ngayon tapos na ‘ko mag-aral, wala na ‘kong pangarap!” Or in English, “When I was a child, my dream was to finish my studies. Now that I’ve finished, I no longer have dreams.” This emphasis on a college degree disregards the experiences of several successful personalities—apprentices who eventually became masters, who started off without any formal qualification in the professions that they succeeded in. We recall Henry Ford, who invented the Model T car, which jumpstarted the automobile revolution in the 20th century. Other notable apprentices are Sir Ian McKellen2 , who credits his theater apprenticeships for his success— though he eventually got an English degree from Cambridge. Or renowned designer Alexander McQueen, who apprenticed at a Savile Row tailor where he reportedly assisted in making suits for Mikhail Gorbachev and Prince Charles.3 * Senator Angara originally delivered this speech in a policy dialogue held by the British Council on 26 October 3015 at the Marco Polo Hotel, Ortigas, Pasig City. Volume XV (2016) 199 Angara What matters isn’t necessarily education and the qualifications that one earns from it, but the skills they acquire and are able to develop, and make profitable later on. Many studies have emphasized the link between economic growth and skills development—which includes formal instruction in schools and universities, but also unstructured on-the-job experiences and enterprise- based trainings. A 2012 UNESCO briefing paper highlighted how skills development programs—including technical vocation courses—help overcome social disadvantage by helping poorer families earn more, teaching disenfranchised youth to be more responsible and allowing more women to work and become productive citizens.4 Thus, the rallying cry for a country like the Philippines that is replete with social disadvantages shouldn’t just be “education for all,” but rather, “work- skills for all.” And as one speaker emphasized, work-skills that one can make profitable later on. “The Coming Jobs War” There is one what one author called, the Coming Jobs War. Jim Clifton, author and Chairman and CEO of pollster company Gallup, dubbed this challenge the “Coming Jobs War,” even likening its deep impact and wide scope to a world war5 referring to the coming competition for good jobs across the world. Citing six years worth of Gallup’s World Poll, Clifton argued that the foremost desire of any person in the world today is a job—whether it’s for themselves or for their loved ones. He further cited that as of 2011, 3 billion adults aged 15 and older answered they are working or are looking for a job. Many of them need full-time, formal employment to make a decent living. Yet, there are only 1.2 billion of such jobs in the world, highlighting just how intense competition over them will be. On one hand, the world needs to consider how it can quickly fill in the global shortfall of 1.8 billion decent jobs—it’s probably a bigger figure right now. On the other, it must assure that people have the skills needed for the jobs that already exist today. These imperatives are resoundingly true for the Philippines, where so many are poor, unemployed and underemployed. 200 Public Policy Mind the Skills Gap: The Case of the Philippines Respondents in the September 2015 Ulat ng Bayan Survey of Pulse Asia rated “creating more jobs” as the 4th most urgent national concern—the first being “increasing the take home pay of workers.” Both concerned with employment and the level of skills possessed by employees. And with the competition globalizing initiatives like ASEAN Economic Integration will bring, we need to respond to the issues that blunt the Philippines’ competitive edge like lack of access, flexibility and efficiency in education; job-skills mismatch caused in part by lack of labor market information; or the absence of effective dual education and training schemes. Improving Formal Education The first step at bridging the skills gap is to improve formal education. Thankfully, the Philippines has been undertaking important changes to its education system in the past years under the Aquino administration. At the onset, this underscores the need for better public education, and in turn, for greater budgetary support from the state, which the Aquino administration has consistently increased over the last few years from only P74.71 billion in 2010 to P364.66 billion in 2015. Should the proposed budget for 2016 be approved, the Department of Education will receive around P433.67 billion—pushing the state subsidy per public school student to P20,600 from P8,800.6 Open and Distance Learning Congress also passed two laws institutionalizing open, “classroomless” education—one for high schools7 and another for tertiary education8. For some, these mean not having to quit their jobs to fulfill their school requirements or travel kilometers to get their lessons and take their quizzes. Ladderized Education Congress also passed recently the Ladderized Education Act (RA 10647), which streamlines and harmonizes the interface between technical-vocational training programs with tertiary education. That is, a TESDA graduate’s training certificate can now be credited towards getting a full bachelor’s degree—thereby making the educational system more accessible and flexible and seamless. Volume XV (2016) 201 Angara This means a nursing aide can now study to become a registered nurse, without having to go through the full four to five academic years. In time, the same can be true for our welders who want to become metallurgical engineers; or plumbers working to become hydrologists. Specifically, the law institutionalizes the Philippine Qualifications Framework9— which acts as a nationwide system of educational standards, under which the Department of Education (DepEd), the Technical Education and Skills Development Authority (TESDA), and the Commission on Higher Education (CHEd) are tasked to match levels of qualification (or educational attainment) with the specific skills, competencies, and knowledge (“learning outcomes”) that graduates and course-finishers should have. I guess the model here would be something alongside the UK system where the guilds had developed or even the German apprenticeship system. The PQF then becomes the jump-off point for a true nationwide, ladderized education program (LEP). As skills and qualifications will be clearly matched, students can now seamlessly jump between education or training sectors— where hopefully they also earn while they learn. UNIFAST On top of this, President Aquino recently signed the Unified Financial Assistance System for Tertiary Education (UNIFAST) Act10 which among other things ensures that government scholarships and grants-in-aid are indeed given to those who deserve and need them most. A key realization here was that it’s not just the magnitude or amount of educational investment that matters, but also its efficiency and effectiveness of educational interventions. One of our key findings was that many recipients of government’s grants were not from the poorest families. There were no tracer studies for all the scholarship programs for the last two decades or so. There was no macro information on whether students had used their training which is funded by government money to good use—whether they were working in the same industries as they had receive degrees in. Things like that would hopefully be addressed with the passage of UNIFAST. 202 Public Policy Mind the Skills Gap: The Case of the Philippines Quality over Quantity This message was recently echoed by a special chapter in ADB’s flagship report on Asia for 2015.11 The chapter emphasized that a country’s quality of education (measured for instance by PISA12 and TIMSS13 science and mathematics test scores) not its quantity (often measured in years of educational attainment), was the true driver of its economic growth. In fact, the chapter highlighted that according to ADB estimates using labor force surveys, there is a growing “overqualification” problem in the Philippines, where people with high levels of educational attainment are working in jobs that do not require such qualifications14. In the Senate for instance, we have a security guard who graduated from a nursing course. On one hand, this could point to the paucity of high-skilled jobs that could absorb the high-skilled graduates. On the other hand, this may indicate a substandard quality of education, hinting at real-life instances such as the security guard I mentioned or where companies require college degrees from cashiers or sales clerks. Closer Interface between School and Work Clearly, there is a need for closer interface between school and work. The education and jobs sector should be a real tandem, not a ceremonial one. And this requires in a trifocalized system like ours, agencies to work together. Thankfully, in the last few years, they have been working together. But we have, in my experience as a public servant, there have been times where they have not been working together. And not pursuing the same directions. So clearly, it’s not enough that we get more people into schools, especially if the instruction they receive leaves them ill-prepared for the world of work— highlighting what the ADB report cited as the importance of the quality of educational investment, on top of its quantity. And clearly we need to improve our economy. I think later on we have a session this afternoon on Supply and Demand. It’s not enough to produce the supply. You must also create demand. And I guess that’s a totally different debate altogether. Much has been written about industrial policy. And fostering the ecosystem for entrepreneurship. For science innovation. For our scientists to work. I was chatting with one of our speakers and we were looking at the British Council’s banner on Arts. And I was asking her about programs for Arts, Volume XV (2016) 203 Angara because you go abroad and half the entertainers are Filipinos. On a cruise ship. You go to Disneyland, during a Lion King show. You go to Drury Lane in the UK. And half the cast members could be Filipino. So it’s not enough that we create the supply. The point being we also have to create that demand. Official data15 shows that 34.8 percent or 932,000 of the 2.68 million Filipinos who were unemployed in April 2015, held a degree or had finished some college units. Some dub this the “educated unemployed” problem and pin the blame on a job-skills mismatch that stems from institutional discord between the education and jobs sectors. This problem becomes even clearer when 33.3 percent of the unemployed or around 894,000 are also high school graduates. What kind of basic education are we providing when our students are unable to land a job right after? The K to 12 system16 will hopefully address this. The longer education cycle coincides with a decongested curriculum and multiple tracks that operate on the assumption that not every one is meant for the university. Stronger Public Employment Service Offices Part of what causes a rift between schools and jobs is the lack of a systematic way for collecting labor market information. That is, there is no institutional mechanism from which schools and companies can signal to each other what they’re doing or what they need. As Acting Chair of the Senate Committee on Labor, Employment and Human Resources, we pushed for the passage of a bill strengthening the Public Employment Service Office (PESO) across the country. At present, it is cities, provinces and first-class municipalities which have PESO offices. We have a few thousand across the country. Of course, the quality of the different PESO offices would vary, depending on the budgetary allocations given and also depending on the vigor with which its heads or leaders pursue disseminating labor market information. But hopefully, at 1 o’clock this afternoon, this PESO law will be signed by the President during the PESO annual national congress at the PICC. Definitely, one reform we made was to make it nationwide and make it required for all municipalities—because it is the third, fourth, fifth, sixth class municipalities, the poorest towns in the country which need this kind of labor market information. It is their citizens who need to know where the jobs are. 204 Public Policy Mind the Skills Gap: The Case of the Philippines I think there was a GMA 7 TV story about a poor lass from Samar, one of the country’s poorest provinces, who had spent all her money-savings for two weeks in Manila as a jobseeker and had gone home after not having found any jobs. So clearly, there are these information asymmetries which really get in the way and are easily addressed in the Information Age. All you need is a person manning a computer putting in the right data, and mining the data. In this age of Big Data, there’s almost no excuse for not having these types of information available in every nook and cranny of our archipelago. Almost like local placement agencies, these offices will also serve as clearinghouses for a locality’s labor market information. Employers will have a better idea of local labor pool’s skills and competencies while schools will have a better grasp on which jobs are in demand in the area. Such information will better inform our career guidance programs, but also lay the groundwork for a solid nationwide skills development program. Better Dual Trainings, Apprenticeships We are also overseeing Senate dialogues on reforming our current apprenticeship and dual training systems. For instance, we have a Labor Code which was passed as a Presidential Decree during the Marcos years of the 1970s, which prescribed a maximum of six months for an apprenticeship program. This may be too short for many companies, where we heard of apprenticeship programs lasting 1 or 2 years, especially in more advanced, high-tech, and technical industries. So, under current laws, allowing an apprenticeship to go beyond the six month limit means an apprentice should be regularized—in a sense, defeating the foremost incentive of the apprenticeship system. But if limits will be relaxed, safeguards are needed to ensure that apprentices—student- or trainee-workers who receive 75 percent of the minimum wage—are trained meaningfully and not abused as cheap labor. Part of the problem appears to be lack of buy-in from enterprises. Where there were 1,029 apprenticeship programs registered17 , only 875 out of the tens of thousands of companies in the Philippines were active participants. This ought to prompt us to revisit and rethink how more companies can be enticed to apprentice their workers. Can they be incentivized for instance to think of themselves also as learning institutions, rather than just profit-driven enterprises? Volume XV (2016) 205 Angara New Paradigms and Pedagogies Clearly, there is a need for new paradigms and pedagogies. The Philippines needs to consider these for the country’s skills development framework to be a meaningful and long-term driver of economic growth. It should consider that the world of work constantly changes. For instance, some scholars have even estimated that a significant percentage of jobs—up to 47 percent of jobs in the United States—may be automated within the next two decades.18 Some say the growing industries of the Philippines—the BPO industry for instance—would no longer exist in the next five to ten years. The jobs that our children will be working in may not even exist today. Industries may disappear in the next decade or so. Thus to meaningfully prepare, no less than large generational investments in education and skills development are needed. Sector-wide efforts—across businesses, schools and bureaucracies—should be exerted not just to implement programs well, but also to collect adequate information for scientific decision- making and perhaps even to pioneer experimental models. Clearly, there is a need to ramp up investments in research and innovation, in STEM education, while at the same time also encouraging an ecosystem which allows the entrepreneurial spirit to thrive. The jump from a developing country to a developed one cannot happen without us having both of these important factors. Any innovation and transformation in world of work will sooner or later reach the Philippines. And in that sense, there will always be a skills gap that we have to mind and be prepared to bridge. Thank you! Notes 1. Ryan Rems Sarita, 2015 winner of Showtime’s “Funny One” contest 2. The Queer Encyclopedia of Film & Television. pp. 210-211. Summers, C. (2005). 3. “Alexander McQueen - Unqualified success: 11 famous ex-apprentices,” The Telegraph, http://www.telegraph.co.uk/education/11075468/Unqualified- success-11-famous-ex-apprentices.html?frame=3027270 4. Adams, Arvil V. 2011. The Role of Skills Development In Overcoming Social Disadvantage. Background paper prepared fro the Education for All Global Monitoring Report 2012 of the UNESCO. 206 Public Policy Mind the Skills Gap: The Case of the Philippines 5. Clifton, Jim. 2011. The Coming Jobs War. New York: Gallup, Inc. 6. As explained by DepEd Secretary Bro. Armin Luistro, found in the following http://www.mb.com.ph/aquinos-term-cited-as-golden-age-of- education/ 7. “Open High School Act” (R.A. 10665) 8. “Open Distance Learning Act” (R.A. 10650) 9. As created by Executive Order 83, series of 2012 10. R.A. 10687, signed on October 15, 2015. 11. 2015. A Smarter Future: Skills, Education and Growth in Asia. A special chapter in ADB’s Key Indicators for Asia and Pacific 2015 – 46th Edition. [Online]. Accessible via http://www.adb.org/publications/key-indicators- asia-and-pacific-2015. [Accessed on October 22, 2015]. 12. Programme for International Student Assessment, which is administered under the OECD. 13. Trends in International Mathematics and Science Study. 14. ADB calculated their estimates based on a framework by the ILO that maps occupation and tasks to skills and education. 15. April 2015 Labor Force Survey (final results) 16. As underpinned by R.A. 10533, the Enhanced Basic Education Act of 2013 17. According to December 2013 data from the Department of Labor and Employment 18. See Frey and Osborne’s “The Future of Employment” accessible through http://www.oxfordmartin.ox.ac.uk/downloads/academic/The_Future_of_ Employment.pdf Volume XV (2016) 207 Speech Review: “Mind the Skills Gap: The Case of the Philippines” EMILY CHRISTI A. CABEGIN* The speech refers to the “skills gap” in the Philippines which is the phenomenon in which employers find it hard to fill in available job positions because not enough workers have the skills that match employer requirements. The speaker started with an important observation of the existing social bias in favor of formal college education against technical and vocational training, as well as the more informal and less structured apprenticeship programs. To buttress his point that it is not so much academic credentials but acquired skills that matter, he cited examples of highly successful former apprentices in varied industries such as Henry Ford in the automotive industry, Sir Ian McKellen in theater and Alexander McQueen in fashion design. He then brought across his message that the rallying cry for the Philippines should be “work-skills for all,” or for all Filipinos to be equipped with the employability skills that are necessary to secure a decent job. The speaker then shifted to the demand side of the labor market, citing that in the Philippines where many are unemployed and underemployed, the strongest clamor is for better wages and more jobs. However, he returned to the discussion of the skills gap by linking this with the high level of unemployment. This focus became more apparent in the latter part of the speech when, after citing statistics showing that the bulk of the unemployed were at least high school graduates, he posed the question: “What kind of basic education are we providing when our students are unable to land a job right after?” * Email: [email protected] 208 Public Policy REVIEW: Mind the Skills Gap: The Case of the Philippines He then enumerated various undertakings of the government in bridging the skills gap, including the high priority accorded to education, as reflected in the almost quintuple increase in the budget from PHP74.71 billion in 2010 to PHP364.66 billion in 2015. Legislative reforms were made in open learning and distance education, the ladderized education from vocational training to a college-degree program, and the improved provision of labor market information for job seekers through the strengthening of Public Employment Service Offices (PESO) across the country. He also mentioned that dialogues had been held to reform the dual training and apprenticeship programs. He concluded his speech by emphasizing the need for large investments in research and innovation to increase the country’s global competitiveness, which goes hand-in-hand with the need for a continuing process of knowledge and skills development. Discussion While I agree that there is some presence of a skills gap resulting in hiring difficulties for some high-skilled jobs, I refute the view that the skills gap is the underlying cause of unemployment and underemployment in the country – that Filipino workers cannot get decent jobs primarily because they do not have the right skills and hence, placing the blame on the educational system for the hundreds of thousands of jobless new graduates at the secondary and tertiary levels every year. I contend that the persistently high level of unemployment in the Philippines, which averaged close to 3 million annually over the last five years, is mainly the result of a deficient aggregate demand relative to a large and growing mass of the labor force, rather than primarily due to a shortage of skilled labor supply. The problem of high unemployment is primarily a job crisis rather than a job skills crisis. It is principally a problem of the economy not being able to generate enough jobs for the large volume of an increasingly educated and skilled workforce, rather than largely a problem of the education sector not being able to produce the skilled workers to fill in a large number of available jobs. a. The Philippines continued to experience rapid population growth during the lost two decades of economic stupor in the 1980s and the 1990s. The country’s labor force was growing at an average of 3 percent during the 1980-1999 period, while the economy (in terms of GDP constant prices) was growing only at only 2.2 percent. Volume XV (2016) 209 Cabegin During this period, the number of unemployed grew by almost 7 percent, and the unemployment rate has increased from 4.9 percent in 1980 to 9.8 percent in 1999. b. The recent economic growth in the Philippines, which is among the highest in Asia, has not been inclusive but more characteristic of a jobless growth. While the country’s GDP (at 2000 constant prices ) grew at an annual average of 6.5 percent for the period 2011-2015, the level of employment has only increased by an annual average of 1 percent during the same period. c. The levels of unemployment and underemployment in the country that averaged 10 million in the last five years reflect a deficient absorptive capacity of the domestic labor market. This led to a massive diaspora of Filipino talents to find productive work overseas. In 2015, there were 2.5 million overseas Filipino workers. In the 2016 global competitiveness index, the Philippines ranked 56th out of 138 countries in terms of the capacity to retain talent, which is far below ASEAN neighbors such as Singapore which ranked 6th, Malaysia in 8th place, Indonesia in 36th place, Thailand in 42nd place and Lao PDR in 43rd place. d. The Philippine economy failed to generate enough jobs for its educated workforce and in fact lost its skilled talents primarily to high-income OECD (Organization for Economic Co-operation and Development) countries. Of the estimated 1.7 million highly educated ASEAN-born population working in OECD countries in 2006, more than half (56 percent) were from the Philippines. The number of highly educated Philippine-born workers in OECD countries grew at an average of 6 percent annually between 2000 and 2006 (Cabegin, 2015). e. Improving education does not necessarily improve employability. Statistics reveal that it is the more educated and better skilled individuals who are more likely to be unemployed. In 2015, unemployment rates for young workers 15-24 years old were 22 percent for those who completed at least a college education, 23 percent for graduates of post-secondary education, and 13 percent for those with secondary or lower level education. f. A number of studies have shown that the Philippines has an overeducated workforce. Mehta et al. (2013) found that in the Philippines, unlike in Thailand and India, the increase in the supply of a better educated workforce has not been matched with 210 Public Policy REVIEW: Mind the Skills Gap: The Case of the Philippines a rising demand for skilled workers. This has resulted in declining returns for secondary and tertiary education. In examining the qualification mismatch in seven countries , the ILO (2015) found that it is only in the Philippines where the mismatch is primarily due to over-qualification rather than under-qualification, and where about one-third of the employed Filipino youth were in occupations that required less education than they acquired. Focusing on the skills gap as the primary reason for hiring difficulties of firms is the same as placing the blame on unemployed graduates and the school system that produces them. Instead, the private business sector should be examined, since it is unwilling to train from the existing reservoir of new talents according to higher job standards, and to employ new job entrants at competitive wages. The Philippine Statistics Authority (2016) noted that 26 percent of the main reasons cited as to why vacancies are hard to fill involve nil or few applicants; 17 percent is due to lower-than-expected wage offers and competition from overseas work; and another 17 percent is due to lack of work experience. These reasons have less to do with the skills gap than with the unwillingness of the business sector to invest in in-house training programs and to engage in apprenticeship programs as well as to upgrade wages and compensation levels to attract skilled and highly educated workers. Focusing on the skills gap as the underlying cause of unemployment is skirting around the root problem: That the domestic economy is not able to generate enough decent jobs to absorb an increasingly educated Filipino workforce. The persistently high levels of unemployment and underemployment among the country’s new graduates are mainly the result of a shortage of better paying high-skill jobs, rather than a shortage of high-skilled labor. Notes 1. The seven countries include Cambodia, Fiji, India, Indonesia, Pakistan, the Philippines and Samoa. References Cabegin, E. 2015. “International Tertiary Student Mobility in the ASEAN: Implications on the Labor Market.” Philippine Journal of Labor and Industrial Relations 33: 46-76. Volume XV (2016) 211 Cabegin International Labour Organization. Asia-Pacific Labour Market Update. Geneva: ILO, October 2015. Retrieved from http://www.ilo.org/ wcmsp5/groups/public/---asia/---ro-bangkok/documents/publication/ wcms_410962.pdf Mehta, A., Felipe, J., Quising, P., & Camingue, S. Where have all the educated workers gone? Services and wage inequality in three Asian Economies. Metroeconomica 64(3) (2013): 466-497. Philippine Statistics Authority. Job Vacancies: 2013-2014. LABSTAT Updates 20(5) March 2016. Retrieved from: https://psa.gov.ph/sites/default/files/ HARDTO-FILL% 20VACANCIES%20MARCH%202016.pdf 212 Public Policy About the Authors Senator Sonny Angara is the Senate’s leading voice for tax reform to raise the take-home pay of ordinary workers and to make our country a more attractive investment destination. He is now the chairman of the Senate committees on local government, and ways and means. He was the representative of Aurora Province for nine years before he was elected senator in 2013. Sen. Sonny values education as a tool to fight poverty and ensure social mobility. He has pushed for laws that ensure greater access to education and scholarships for poor and deserving students. He has also authored several laws to ensure better jobs and working conditions for Filipinos. He took up his elementary and high school studies at Xavier School, and finished his undergraduate degree in International Relations at the London School of Economics. He went on to study law at the University of the Philippines College of Law, and earned his Master of Laws degree from the Harvard Law School. Aside from being a legislator, he is a lawyer, a regular newspaper columnist, and has been a professor of Law and a member of the UP Board of Regents. He is happily married to wife Tootsy and they have three children. Aileen S.P. Baviera is a Professor at the Asian Center, University of the Philippines. She also has a visiting professor appointment with the Asia- Europe Institute, University of Malaya in Kuala Lumpur. Her specializations include contemporary China, Southeast Asia-China relations, and Asia Pacific security, with secondary interests in regional integration and Asian civil society. She is editor-in-chief of Asian Politics & Policy (Wiley- Blackwell), and sits on the advisory board of Contemporary Southeast Asia and the Australian Journal of International Affairs. She is also founding president of Asia Pacific Pathways to Progress Foundation, Inc., a nonprofit established to support projects and programs for international dialogue, cooperation, and cultural understanding. Prior to joining academe, she was executive director of the nonprofit Philippines-China Development Resource Center, and had served as head of the Center for International Relations and Strategic Studies of the Philippine Foreign Service Institute. Emily Christi A. Cabegin obtained her PhD Economics at the University of the Philippines and was awarded a Robert Solow post-doctoral fellowship by the Centre Cournot pour la Recherche en Economie. She was a short-term About the Authors visiting researcher at the Institute for the Study of Labor, Bonn Germany and at the Department of Global Health and Population, Harvard University. Her labor research works are in the areas of international labor migration, disadvantaged employment, labor policy, youth employment and wages. She is Associate Professor at the School of Labor and Industrial Relations, University of the Philippines. Clarissa C. David teaches communication research methods and theory in the UP College of Mass Communication. She conducts research in public opinion, political communication, public interventions, and communicating policy. In addition to academic research she conducts policy-oriented research and communication strategy consulting in the areas of public education, health, and governance in the Philippines. Loraine Gallevo possesses more than 10 years of experience as a finance professional in the fields of tax and accounting. She has gained extensive tax experience as a former auditor and accountant for multinational companies in the Philippines. Loraine has obtained professional certifications as a Certified Public Accountant (CPA) and Certified Internal Auditor (CIA). Ms. Gallevo earned her bachelor’s degree in Business Administration and Accountancy from the University of the Philippines in 2006. She is currently pursuing Masters in International Studies focusing on public fiscal policy in the same university. Xylee Javier completed her degree in BS Economics and Master in Development Economics from the University of the Philippines School of Economics in 2002 and 2008, respectively. She is currently the Team Manager of the Data Management Unit of the UPecon-Health Policy Development Program where she is involved in the providing technical assistance to the Department of Health and PhilHealth in select activities including policy assessment, design, monitoring and assessment of implementation research, data management and analysis and operations monitoring of FP/MNCHN and TB indicators, and monitoring of Universal Health Care implementation. Her other research interests include Income Taxation Analysis, and Poverty. Together with Commissioner Quimbo, she has worked on several studies on potential tax reform packages on personal income tax structures. The two authors are also part of the team that assisted in the analysis leading to the passage of the measure increasing the tax exemption cap for bonuses of salary and wage earners, now Republic Act 10653. 214 About the Authors Stella A. Quimbo is a member of the Philippine Competition Commission. She is currently on leave as Professor at the UP School of Economics where she served as Department Chair from 2012 to 2015. From 2011 to 2013, she was a Prince Claus Professorial Chair Holder at the Erasmus University of Rotterdam in the Netherlands. Commissioner Quimbo has extensive research in the field of Health Economics, Industrial Organization, Microeconomics, Education, Poverty, and Public Policy and Regulation. This includes her authorship of numerous scientific publications. In 2009, NAST conferred on her the Outstanding Youth Scientist Award. In 2010, she was awarded as one of The Outstanding Women in Nation’s Service. In 2015, she was a recipient of the UP President Edgardo J. Angara Fellowship and UP Diliman Centennial Faculty Grant. In 2016, she was a Freedom Flame Awardee of a German foundation for liberal politics, Friedrich Neumann Foundation for Freedom Philippine Office. She obtained her BS in Economics (summa cum laude), MA in Economics and PhD in Economics from the University of the Philippines in 1991, 1993 and 2000, respectively. She spent a year at Brown University as a post-doctoral fellow in 2002 at the Population Studies and Training Center. Romero F.S. Quimbo served as Pag-IBIG Fund President and CEO in 2002 and as Deputy Speaker of the House of Representatives. For six straight years from 2003 to 2008, Pag-IBIG became the most profitable tax-paying government corporation in the country. In 2006, in recognition of his leadership of Pag- IBIG, he was awarded of The Outstanding Young Men for Public Service. In 2010, he ran and won as representative of the Second District of Marikina City. Despite being a neophyte, he was elected as Deputy Majority Leader of the House of Representatives, an Ex Officio Member of All House Committees and Vice Chairperson of the Committee on Justice. He was reelected in the 2013 and 2016 elections. When the 16th Congress started, he was elected as Chairman of the Committee of Ways and Means. As the 17th Congress started, he was elected as Deputy Speaker, the second highest post in the House of Representatives. Known as a Tax Reform Champion in the Lower House, Deputy Speaker Quimbo is committed to pursue his advocacy in enacting laws, which will provide more equitable and responsive tax policies.Deputy Speaker Quimbo earned his BA History and Bachelor of Laws degrees from the University of the Philippines in 1991 and 1996, respectively. 215 About the Authors Meg Regañon is a recent graduate from the University of the Philippines School of Economics (UPSE), graduating summa cum laude with a degree in BS Economics last 2015. She is a Jose Encarnacion, Jr. Awardee for Excellence in Economics for obtaining the highest Economics Weighted Average out of the graduating class, and a Gerardo P. Sicat Awardee for having one of the best undergraduate thesis. She presently works at the Philippine Competition Commission as the Senior Technical Assistant to the Office of Commissioner Stella Luz Quimbo. Before joining the Commission, she was the Ways and Means Legislative Researcher at the Office of Hon. Romero “Miro” Quimbo, Chairperson of the House Committee on Ways and Means during the 16th Congress. Even as an undergraduate student, Meg has enjoyed the application of economic principles and tools to analyze real-world scenarios and advocating for public policies that are sound and grounded on evidence. She is an alumna of UP Economics Towards Consciousness, an academic- political organization based in UPSE. Her current research interests include Industrial Organization, Labor and Behavioral Economics. She hopes to obtain a Masters and PhD in Economics in the near future. Caesar A. Saloma is a professor at the National Institute of Physics, College of Science, University of the Philippines in Diliman, Quezon City. He obtained his PhD degree from UP in 1989. His research interests are in signal processing, optical microscopy, photonics, complex adaptive systems, and the Philippine scientific enterprise system. Saloma received the 2004 Galileo Galilei Award from the International Commission for Optics for his significant contributions in optics that were achieved under unfavorable socio-economic conditions. He was also recognized with the ASEAN Outstanding Scientist and Technologist Award by the ASEAN Committee on Science and Technology in 2008. Saloma was elected to the National Academy of Science and Technology in 2005. He became an Inaugural Fellow of the Samahang Pisika ng Pilipinas in 2008, and a Senior Member of the Optical Society of America in 2010. Saloma first joined UP as a physics instructor in 1981 and to date, has mentored a total of twenty-two PhD graduates. He served as Director of the National Institute of Physics (2000-2006), Dean of the College of Science (2006 – 2011) and Chancellor of UP Diliman (2011- 2014). He received the Metrobank Foundation Outstanding Teacher Award in 2007 and the Presidential Lingkod Bayan Award in 2008. 216 About the Authors Lucia P. Tangi is a faculty at the Department of Journalism, College of Mass Communication in UP Diliman. She served as chair of the Department of Journalism from July 2012 to August 2015. In March 2013, she introduced the Philippine Journalism Research Conference which has become the benchmark for journalism research for undergraduate students. She also worked to make the department as the only CHED Center of Excellence in Journalism for 2013 and 2016. Before joining UP as a full-time faculty in 2007, Prof. Tangi worked as a full-time journalist in Manila, Hong Kong and Japan. She received four major awards in journalism while working as a reporter for the Hong Kong Standard from 1994 to 1999. Among the awards she received from the Hongkong Newspaper Society were second runner-up in Best Business Story (1995) for her article on cross-border fraud between China and HongKong and first runner-up Best General News Category (1996) for a news article on medical mishap which she co-authored with other reporters. In 1998, she received the Bronze Award from the Hong Kong AIDS Foundation for her story on a person living with AIDS. She also received in 1998 the Human Rights Award for her bodies of work on human rights situation in Hong Kong. 217 (PAGE INTENTIONALLY LEFT BLANK) (PAGE INTENTIONALLY LEFT BLANK) IN THIS ISSUE Territorial and Maritime Disputes in the West Philippine Sea: Foreign Policy Choices and their Impact on Domestic Stakeholders AILEEN S.P. BAVIERA “This article does not examine the wisdom or effectivity of the foreign policy approaches that have been taken by the Philippines in its interactions with other countries on the SCS. Instead, it looks at who the domestic stakeholders are, the effects of the international disputes on them, and their role in foreign policy choices made by the Aquino government. Using Putnam’s second level, or sub-state level, of analysis, it seeks to determine how foreign policy decisions reached at high levels are interpreted and implemented by domestic actors, and whether they have produced desired outcomes from the perspective of domestic stakeholders.” Social Media Use by Frontline Government Agencies: Review and Recommendations CLARISSA C. DAVID “Fostering communication with the general public and with special interest groups creates transparency. When people see news about the activities of an agency, even when the information emanates from the institution itself for public relations purposes, there is greater awareness of the kind of work being done within the agency. The general public usually has a limited understanding of the work of many of the biggest and most important agencies of the government, even those that deal directly with service delivery like the DepEd and the DOH. Any information about agencies is better than no information; left to the news media to report on the activities of agencies, very little information will trickle down to the public.” Do Investments Respond to Taxation and Incentives? Evidence from the Philippines STELLA A. QUIMBO, XYLEE JAVIER, MEG REGAÑON, LORAINE GALLEVO, AND ROMERO FS. QUIMBO “An important consideration in proposing any change in tax rates is the potential effect on total revenue collections by the BIR. A simple exercise was conducted using available data and parameters. It begins by computing the direct negative impact on BIR revenues (i.e., the revenue loss due to a reduction in the corporate income tax rate at the current income levels) was first computed. A possible indirect but positive impact on BIR revenues, which could arise via the investment channel, was further projected. Using the regression coefficients of the tax variable, the increase in investments resulting from a reduction in tax rates was projected.” Measuring the Performance of the Philippine Scientific Enterprise System CAESAR A. SALOMA “The ability of an institution or organization to generate new scientific knowledge that improves the accuracy of the understanding of natural phenomena is usually measured in terms of the number of peer- reviewed publications produced. Simply put, a commonly accepted indicator of a successful research endeavor is the publication of its research results in a refereed journal that is widely read by the scientific community.” Empowering Filipino Women Seafarers in the Maritime Sector LUCIA P. TANGI “While the world may have achieved strides in many aspects and sectors in terms of gender equality, the maritime sector appears to have been left behind. Previous studies done by the International Labor Organization (ILO) and the International Maritime Organization (IMO) show that women account for only two percent of the world’s seafarers. The majority of these women are in the hotels and services departments of passenger vessels or cruise ships. Their integration into the industry has been driven more by the demand for women’s jobs on board passenger vessels rather than to improve the gender gap in the industry. It is still rare to find women officers and ratings (skilled personnel) on foreign vessels, and most of the women who control the helms of these vessels come from developed countries.” Mind the Skills Gap: The Case of the Philippines SENATOR JUAN EDGARDO “SONNY” M. ANGARA “Clearly, there is a need for closer interface between school and work. The education and jobs sector should be a real tandem, not a ceremonial one. And this requires in a trifocalized system like ours, agencies to work together.” Speech Review: Mind the Skills Gap: The Case of the Philippines EMILY CHRISTI A. CABEGIN “I contend that the persistently high level of unemployment in the Philippines which averaged close to 3 million annually in the last five years is mainly a result of a deficient aggregate demand relative to a large and growing mass of the labor force rather than primarily due to a shortage of skilled labor supply.”