2007 Alternative Budget Initiative

Imperatives of Real and Equitable Growth

AN ALTERNATIVE PROPOSAL FOR FINANCING THE MILLENNIUM DEVELOPMENT GOALS IN THE 2007 BUDGET

(An NGO-Legislators’ Initiative)

11 October 2006

TABLE OF CONTENTS List of Tables I. Executive Summary A. Introduction …………………………………………………………………………..

1

B. Rationale ……………………………………………………………………………..

1

C. Overview of Proposed Changes …………………………………………………..

2

D. Summary of Proposed Changes by Sector/Area Macroeconomic Assumptions and Sources of Financing …………….………..

4

Education …………………………………………………………………..………..

5

Health ……………………………………………………………………….………..

7

Agriculture ………………………………………………………………….……….. 11 Environment ………………………………………………………………..……….. 13 Debt ………………………………………………………………………….……….. 16

II. Technical Papers and Submissions Macroeconomic Assumptions and Sources of Financing …………………………..

18

Alternative Budget for Education …………………………………………….………..

20

Alternative Budget for Health ………………………………………………………….. 34 Agriculture & Fisheries Sector ………………………………………………..……….. 50 Analysis on the DENR Proposed Budget FY 2007 ………………………………….. 55 An Overview of the Debt Situation under GMA …………………………….………..

61

LIST OF TABLES TABLE NO.

TITLE

PAGE

1

Summary of Proposed Amendments (in thousand Pesos)

3

2

Other Suggested Sources of Funding (in thousand Pesos)

3

3

Basic Education - Budget Items to be Increased (in Pesos)

6

4

Basic Education - Budget Items to be Decreased (in Pesos)

7

5

Higher Education - Budget Items to be Increased (in Pesos)

7

6

Department of Health - Budget Items to be Increased (in Pesos)

9

7

National Health Insurance Program - Budget Item to be Decreased (in Pesos)

10

8

Department of Agriculture - Budget Items to be Increased (in Pesos)

12

9

Department of Environment and Natural Resources Budget Items to be Increased (in Pesos)

14

10

Overall Budget by Sector

20

11

Social Services Budget by Sector

20

12

Education Sector Budget by Level

21

13

Basic Education Statistics, 2005-2006

23

14

Key Performance Indicators in Education

25

15

National Achievement Test Results (in Mean Percentage Scores)

25

16

Proportion of Teachers Who Are Not Science/Math Majors

26

17

Resources Available and Resource Gap in Basic Education in Current Prices, 2007-2015, (in million Pesos) (High cost - MTPDP GDP growth rate assumption)

29

18 & 19

Alternative Budget Proposals for Basic Education

20 & 21

Budgetary Interventions in Higher Education (SUCs and CHED)

32

Summary of Obligations and Proposed New Appropriations by Department (in thousand Pesos)

34

23

Total Distribution by Function, CY 2003 to 2007 (in billion Pesos)

35

24

Health Expenditure in Asian Countries, 2001

36

25

Department of Health Proper Budget Allocation Per Person Per Region CY 2007

36

Infant and child mortality rate in the Philippines & other countries,1990 & 2003

37

Mortality among Immunizable Diseases (Under 1; 1-4; 10-14 years) Number and rate/100,000 population Philippines, 2000

37

MDG Goals, Targets and Corresponding DOH Programs

39

22

26 27 28

30-31

TABLE NO. 29 30 31 32 33 34 35 & 36

TITLE

PAGE

Summary of the Yearly Cost Estimate for the Programs and Projects for the reduction of child mortality, DOH 2005

41

Summary of the Yearly Cost Estimate for Programs and Projects to Improve Maternal Health, 2005 DOH Estimates

41

Summary of the Yearly Cost Estimate for Programs and Projects to Combat HIV/AIDS, 2005 DOH Estimates

42

Summary of the Yearly Cost Estimate for Programs and Projects to Combat Malaria, 2005 DOH Estimates

42

Summary of the Yearly Cost Estimate for Programs and Projects to Combat Tuberculosis, 2005 DOH Estimates

43

Summary Costing for Health-Related MDGs, based on DOH Computation of 2005

43

Alternative Budget Proposals for Health

47-48

37

Contribution by sector to total fisheries production, 2001

50

38

Service Area of all Irrigation Systems, in hectares, as of December 2005

53

39

Distribution of Philippine Debt, as of end-September 2005

61

40

NG Debt with Contingent Liabilities, as of Dec 2005 (in billion USD)

66

41

NG Contingent Liabilities, 2001-May 2006 (in million Pesos)

66

IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget

EXECUTIVE SUMMARY A. Introduction This alternative budget proposal is the result of cooperation between concerned members of Congress and civil society organizations who believe that the time is now ripe to present alternative to the Filipino people. They have found the proposed 2007 budget severely deficient in providing adequate funding for the Millennium Development Goals.

A UNDP-funded study, May Pera Pa Ba?, conducted by graduates of the National College of Public Administration and Governance of the University of the Philippines showed financing gaps running to hundreds of billions of pesos. However the Joint Committee could not increase MDG funding significantly for two reasons. One is severe time constraints. The other is the budget law itself which limits the flexibility of Congress in increasing expenditure levels for the MDGs. Legislators can only reduce but not increase the budget without proposed revenue measures.

What the Committee did was to reduce certain lump sum expenditures and replace these with line items for MDG-related goals. While the proposals are limited to six areas -- budget policy, education, health, agriculture, environment and debt, it is expected that the alternative budget for 2008 will be much more comprehensive.

B. Rationale The national budget is among the most important and crucial pieces of legislation that Congress has to pass annually as it embodies the real thrusts and priorities of the government.

Regardless of persuasive rhetoric, a policy, program or project without the necessary and sufficient funding is meaningless.

This year’s budget carries the theme: “Imperatives of Growth” with the evident bias to push for the “Super” Regions. Growth is a good thing, but the way the budget is crafted, the questions that begged to be asked are: Is the projected economic growth sufficient to reduce poverty? And against the backdrop of the country’s poor: Is it equitable?

It has also been established by several studies, either by academic institutions, government agencies like the Commission on Audit (COA) and the Office of the Ombudsman, and international agencies like World Bank, that the national budget is a staple source of graft and corruption. Graft and corruption has been found to abound where so much discretion is exercised in the usage of funds, and where transparency and accountability are hardly present.

The “Pork Barrel” of legislators is often characterized as such. To address this issue, several guidelines have been issued by the Department of Budget and Management (DBM) and other agencies to limit the discretionary power of legislators on the fund’s usage, and to allow greater transparency so as to prevent corruption.

But while that is being done on the so called “pork”, lump sum appropriations under the exclusive and non transparent control of the President abound in the 2007 Proposed Budget.

Special Purpose Funds (SPFs) now comprises around 60% of the 2007 budget. And among the SPFs that are especially vulnerable to the Presidential discretion are: the National Unification

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget Fund, the Calamity Fund, the Contingent Fund, the E-Government Fund, and the P67 billion Unprogrammed Fund -- which totals to around P70 billion for 2007.

In addition to the foregoing premises, this alternative budget adopts the framework of the country’s commitment to the Millennium Development Goals (MDGs).

Given the limited time however, this alternative budget focuses only on the following key areas: a) education; b) health; c) agriculture; d) environment; e) macro economic assumptions and sources of financing; and e) short and long term policies in addressing the debt.

This alternative budget not only tries to ensure that key areas and policies are not neglected.

Equally important is its courageous attempt to address the issue of accountability and transparency by containing blatantly unreasonable lump sum appropriations, and replacing them with line item proposals. Finally, this joint effort between non-government organizations and legislators emphasizes Congress’ constitutionally-mandated power of the purse, and the primary role of Congressmen as policy-makers and fiscalizers.

C. Overview of Proposed Changes This alternative budget on key social services is proposing a P22.7 billion in additional allocations for MDG-related activities. The funding for this is proposed to be taken from the P36 billion that will be freed from half of the Intelligence and Confidential Funds, some Unprogrammed Funds, and from portions of some unreasonably large lump sum appropriations, whose usage, is very vulnerable to abuse and corruption.

This proposal is asking for a P6.2 billion increase in the budget of the Department of Education for basic education, and P441 million in additional scholarships under the Commission on Higher Education. An additional P983 million is also being proposed to be added to the budget of State Universities and Colleges to restore their MOOE and PS to their 2002 level.

A total of P8.5 billion is being proposed to augment the budget of the Department of Health (DOH) to be used for disease prevention and control, support primary health care, child and maternal survival, and reproductive health. However, in view of questions on selection of beneficiaries, need for a proper accounting of how previous allocation were disburse, and until such time that safeguards for misuse are firmly established, this budget proposal seeks that we peg the Premium Subsidy for Indigents under the National Health Program to its 2005 level of P750 million, and re-allocate the remainder of the P3.5 billion supposedly for this subsidy to other more pressing concerns (as identified above) in the DOH. As regards the Department of Agriculture (DA), the proposal is to increase it to P7.03 billion to augment funding for farm to market roads, irrigation repair and rehabilitation, water resources planning and management, soil conservation, and maintenance of water impounding system, and conservation, regulation and protection of fisheries and aquatic resources, among others.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget Table 1. Summary of Proposed Amendments (in thousand Pesos) BUDGET ITEM PROPOSED 2007 PROPOSED BUDGET INCREASE (DECREASE) Education 156,977,610 5,521,218 Basic Education* 134,708,493 6,269,000 School Feeding 4,013,000 (2,172,000) Higher Education CHED Scholarship 441,000 441,000 SUCs 17,815,117 983,218** 5,753,494 15,158,832 Health 8,503,494 11,658,832 - DOH (2,750,000) 3,500,000 - ALGU (Philhealth) Agriculture 3,292,618 3,736,800 Environment 7,457,216 7,730,000 TOTAL 182,886,276 22,741,512

ALTERNATIVE 2007 BUDGET 162,498,828 140,977,493 1,841,000 882,000 18,798,335 20,912,326 20,162,326 750,000 7,029,418 15,187,216 205,627,788

* including DepEd-School Building Program ** to augment the MOOE and PS of SUCs which are classified by CHED as Centers of Excellence

Cognizant of the importance of protecting and preserving the environment, the budget of the DENR is proposed to be increased from P7.46 billion to P15.19 billion so as to fund the implementation of a number of environmental laws such as the Clean Air Act, Clean Water Act, and the Solid Waste Management Act. The proposed alternative budget for environment also includes funding for coastal clean up, mangrove reforestation, coral reef rehabilitation, community-based forestry program, and many others. Most importantly, this proposed budget includes a P4 billion proposal for 432 municipalities, more than 50% of whose households have no access to clean water and sanitation.

Table 2. Other Suggested Sources of Funding (in thousand Pesos) IDENTIFIED SOURCES PROPOSED 2007 SUGGESTED AMOUNT Intelligence and Confidential Funds* Unprogrammed Funds - Infra & social ** - Special shares of local government units in the proceed of national taxes*** TOTAL

1,126,339

563,170

AVAILABLE FOR ALTERNATIVE BUDGET 563,170

30,500,000

30,500,000

7,095,374 38,721,713

1,907,158 2,470,328

5,188,216 36,251,385

* across the board reduction of intelligence funds has been done during the time of President Estrada ** 2007 budget does not contain special appropriations language *** to be retained at 2005/2006 levels

Primary sources of funding include P30.5 billion of the P67 billion unprogrammed funds in the Special Purpose Fund which are not covered by special provisions.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget D. Summary of Proposed Changes by Sector/Area

MACROECONOMIC ASSUMPTIONS AND SOURCES OF FINANCING

Social Watch has earlier criticized the national budget for not being responsive to the social development requirements of the country. The proposed budget for 2007 is no different. Even as there is an increase in the proposed obligations from P1.053 billion earlier proposed for 2006 and P1.126 billion proposed for 2007, interest payments for debt service remains the single biggest item at P328.733 billion followed by internal revenue allotments of P197.445 billion.

A new feature of the 2007 budget is a proposal that the IRA be automatically appropriated. This provision reiterates the same proposal in the 2006 supplemental budget, which is intended to provide additional funds to the 2005 budget reenacted for 2006. This new feature of the budget is also supported by bills filed by Congressmen.

It is a well known fact that constitutional provisions on the jurisdiction of Congress notwithstanding, it has actually limited “power of the purse.” Practically one third of the budget is already automatically appropriated for interest payments. This does not even include principal payments which is considered a “below the line” item. Now Congress with eyes wide open is giving up jurisdiction over the second largest item in the budget—IRA. It is not surprising that the Executive is proposing this. What is surprising is the fact that some Congressmen are filing bills in support of the initiative from the executive.

When Congress itself proposes the diminution or reduction of its “power” over the budget, it cripples itself and willingly places itself under the increased control of the executive. More and more, the notion of “balance of power” becomes an illusion.

What other constitutional prerogatives will Congress give up?

A third general observation is on the theme of the 2007, “Focusing on the Imperatives of Growth.” Earlier administrations have always endeavored to balance growth with equity and social development. It is generally accepted that growth does not necessarily bring equity.

Earlier experience with exclusive focus on growth has shown that yes, it can be attained but at the expense of democratic rights, and social development. Is history going to be repeated?

On the projected real GDP growth Real GDP growth is projected from 5.5-6.1% for 2006, and 5.7-6.5% for 2007. While this level of growth is “plausible” in the words of an economist, the more important question is: will this level of growth be sufficient to significantly impact on poverty? The answer might be no.

Economists have been pointing out that a growth rate of at least 7% is necessary to significantly impact on poverty.

Yes, we might have growth. But not growth with equity.

Summary conclusion The focus of the 2007 budget is on growth. Equity will not necessarily follow. As in earlier budgets, social development is not given the level of funding required even for the MDGs.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget

The proposal for automatic appropriation of IRA will further reduce legislative control over the budget and tilt even more the balance in favor of the executive. Let not Congress preside over the decimation of its power of the purse.

Assuming that the statistics are right, the macroeconomic assumptions might be attained.

However, projected growth will not be sufficient to reduce poverty significantly. The projections for inflation and interest rates might be too optimistic.

The budget is the most powerful instrument of the government to change the lives of people for the better. Whether it will be used for this purpose remains to be seen.

EDUCATION

BASIC EDUCATION The Second Philippines Progress Report on the MDGs showed that based on the current rate of progress, the MDG targets on universal access to primary education as measured by participation and completion rates may not be achieved in 2015. In a recent study commissioned by NEDA, Dr. Rosario Manasan computed the resource gap for basic education for 2007-15 at P357 billion (under a high cost and MTPDP GDP assumption) or about P40 billion per year. For 2007, the estimated resource gap is P32 billion on top of the proposed budget of P134.7 billion. (Manasan, 2006) Clearly, the Philippines has been under-spending in basic education. In 1997, national expenditure on basic education was about 3.2% of GDP. This went down to 2.5% by 2001 and further down to 2.1% by 2005. Similarly, per capita expenditure on basic education in real terms declined from P397 in 1997 to P339 in 2001 and to P289 by 2005 (based on 1985 prices).

(Manasan, 2006) The share of basic education has also been shrinking compared to its previous years. In 1995, the percentage share of DepEd in the national budget was 12.17%. DepEd’s share of the national budget peaked in 1998 at 15.96% but has consistently declined since then. By 2006, DepEd’s share in the national budget is down to only 11.55%. (DepEd, 2006) Over the long term, the budget for education must be increased progressively to cover the gaps in critical input and to address the problems related to quality and equity. The following policy interventions are recommended: 1. Fast track initiatives to address the gaps in critical input 2. Invest in quality, specifically in teachers' training, research, monitoring, evaluation, curriculum development and governance 3. Attend to poor and disadvantaged areas with high dropout, low survival and high illiteracy to catch up with the rest 4. Reach out to the out-of-school children and youth 5. Invest in teachers and teaching development

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget In view of the above premises, the alternative budget for basic education is proposed to contain the following: Table 3. Basic Education - Budget Items to be Increased (in Pesos) BUDGET ITEM PROPOSED PROPOSED ALTERNATIVE BUDGET AMENDMENTS BUDGET FOR 2007 1. Funding requirement for the creation of new teaching/non-teaching positions for 1,180,000 ,000 660,000,000 1,840,000,000 2007 2,760,000,000 2,000,000,000 4,760,000,000 2. Total for Classrooms School Building Program DepEd Classroom Construction Project

3. Alternative Learning System 4. Teachers Training 5. School’s MOOE (to be integrated into the budget of each National High School and Division) 6. School Health and Nutrition Program 7. National Education Test Development 8. Education for All (EFA) Information and Social Mobilization TOTAL

1,760,000,000 1,000,000,000

1,000,000,000 1,000,000,000

2,760,000,000 2,000,000,000

145,000,000 355,000,000 500,000,000 940,000,000 1,060,000,000 2,000,000,000 2,000,000,000 2,000,000,000 14,000,000 160,000,000

14,000,000 160,000,000

28,000,000 320,000,000

20,000,000

20,000,000

6,269,000,000

* Total additional funds required would be adequately covered by savings generated from the reduction of budget of the Food for Schools Program

Rationale: 1. Creation of Teaching and Non-Teaching Positions. This increase to P1.84 billion will adequately cover the current gap of 16,390 teachers based on a pupil-to-teacher ratio of 45:1 2. Classrooms. This increase is equivalent to 10,576 additional classrooms.

3. Alternative Learning System. This additional allocation is estimated to benefit at least 150,000 out-of-school children.

4. Teachers Training. Doubling the allocation for teachers training will fast track improvements in teaching capability and quality.

5. School’s MOOE. Increase the current per capita MOOE of schools by an average of 25% to finance quality-enhancing programs.

6. School Health and Nutrition Program. Doubling the allocation for this item would redound to wider and greater number of student beneficiaries. This will not only improve the health and nutritional conditions of students, but this might also lead to improve attendance.

7. National Education Test Development. This additional funding will improve monitoring of student achievement, including the development of alternative evaluation system 8. Education for All. Earmarked specifically for the promotion of EFA, including funding support for CSO initiated activities

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget Table 4. Basic Education - Budget Items to be Decreased (in Pesos) BUDGET ITEM PROPOSED BUDGET PROPOSED ADJUSTMENTS

Food for Schools Program

4,013,000,000

(2,172,000,000)*

ALTERNATIVE BUDGET FOR 2007 1,841,000,000

* Savings to be generated will be re-allocated to other priority expenditure items (see above table)

Rationale: The amount of P1.841 billion represents DepEd’s proposed budget for Food for School Program (FSP) that they submitted to DBM. This amount has in fact exceeded the P1.6 billion budget ceiling on this item that was given to them by DBM. Why should we give them more than double of what they think they needed? Secondly, it must first be established how this fund is really being disbursed, and how the beneficiaries are selected. For now, we can use the excess amount to other more pressing needs in basic education.

HIGHER EDUCATION Table 5. Higher Education - Budget Items to be Increased (in Pesos) PROPOSED BUDGET PROPOSED BUDGET ITEM ADJUSTMENTS

CHED Scholarship Program SUCS*

441,000,000 17,815,117,000 TOTAL

441,000,000 983,218,000 1,424,218,000

ALTERNATIVE BUDGET FOR 2007 882,000,000 18,798,335,000

* to augment the MOOE and PS of SUCs which are classified by CHED as Centers of Excellence

Rationale : 1. CHED Scholarship Program. This additional amount is envisioned to be used as scholarship fund for both the faculty members and students of SUCs, with preference to those classified

by CHED as Centers of Excellence. Subject to a detailed guideline to be issued by CHED, this additional scholarship fund should also give special attention in supporting medicine and nursing students in SUCs with the condition that they will work within the country for at least equal to the number of years they spent as state-sponsored scholars.

2. Additional MOOE and PS for SUCs classified as Centers of Excellence. This amount just restores the level of MOOE and PS of SUCs to that of 2002. This will give SUCs the needed flexibility to hire urgently needed personnel and support programs and projects deemed urgent and necessary in their pursuit of academic excellence and extension services.

HEALTH

The Second Philippine Progress Report on the MDGs acknowledges the poor performance of the health sector and cited that one of the largest factors responsible for this poor performance is the low and ineffective public spending for health. The government allocates less than one per cent of its Gross National Product (GNP) for health, much lower than the World Health Organization’s (WHO) recommended level of five per cent. In a recent interview, WHO representative Dr. Jean Marc-Olive noted that the Philippines has the lowest investment on

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget health as compared with other countries of the world. Under-investment in health is both an immediate and long-term policy concern.

This low and ineffective spending continuously pose serious implications to public health especially child and maternal survival and the attainment of health-related MDGs: a) reduce child mortality (MDG 4); b) improve maternal health (MDG 5); and c) combat HIV/AIDS, malaria and other diseases (MDG 6). First, while rate of progress in efforts to reduce child mortality suggests probable achievement of MDG 4, the recent decline in coverage of fully immunized children puts a child born in the Philippines at a greater risk of dying especially in the poorer provinces/areas. Second, the current rate of 172 maternal deaths per 100,000 births which is the highest maternal mortality rate in Asia and the stagnant if not deteriorating performance in key maternal care interventions cast doubts in attaining MDG 5. Additional efforts and resources in keeping our mothers alive are needed especially for tetanus toxoid vaccination, the provision of pre-natal care, and births attended by professional health provider among others. Third, without adequate financing to combat HIV/AIDs, the progress report noted that the low prevalence and slow rate of increase in the number of cases of HIV/AIDS threatens to become a full-blown epidemic. In addition, despite advances in treatment, malaria, together with tuberculosis, which are ancient diseases, continue to be in the top 10 leading causes of morbidity in the country for decades now.

The level of government health expenditure has not changed significantly in terms of level and category over the years. In its budget proposal for 2007, DOH noted that although there has been an increase in trend from 2004 to 2007, the DOH budget remains lower that its 2002 level.

For 2007, hospital services get the biggest share at 65% while public health programs get a mere 15% share amounting to 1.49 Billion pesos. There is no significant improvement in the spending for vital public health programs such as the prevention and control program of major diseases like TB, malaria and other vaccine-preventable diseases. These are mainly prevalent infectious diseases which requires substantial amount of investment to make an impact, not to mention systematic planning and implementation. Although delivery of these basic health services has been devolved to the LGUs, given their apparent incapacity if not misprioritization, national government intervention is still necessary.

Policy issues that must be addressed are: • Primary health care; • Child survival; and • Reproductive health.

In view of the foregoing, below are the health-related items being proposed to be included in the 2007 budget.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget Table 6. Department of Health - Budget Items to be Increased (in Pesos) BUDGET ITEM PROPOSED PROPOSED ALTERNATIVE BUDGET BUDGET FOR ADJUSTMENTS 2007 Disease Prevention and Control Vaccine Preventable disease control (Expanded program on immunization 497,158,000 448,316,606 945,474,606a (EPI), Vaccine Self-Sufficiency) EPI Vaccines EPI 2nd Dose Measles Vaccination EPI Logistic Support Tetanus Toxoid Immunization of Pregnant Women

Tuberculosis prevention and control

452,608,456 49,155,725 406,111,148 37,599,277

154,007,000

452,870,000

Treatment of Category I & II Cases Treatment of Category III Cases Treatment of MDR Cases TB in Children Laboratory Logistics Capability building, PPMD Operations, M&E, Etc

Malaria Prevention and Control

110,330,000 4,070,000 300,000,000 79,200,000 9,445,700 103,831,300

2,900,000 1,724,202,970

Treatment of Cases Prophylaxis for Pregnant Women and Visitors Laboratory Supplies Insecticide Impregnated Mosquito nets In-Door Residual Spraying Capability Building, research, TA, Equipments, etc

Family health including population policy & primary health care initiatives Epidiemiology & Disease Surveillance Prevention and control of other infectious diseases including Dengue, Leprosy, Filariasis, Food and water borne disease, Soil transmitted Helminthiasis, Acute respiratory infections, CDD, STD/AIDS and other Reproductive tract infections, Dental Diseases and other infectious

Additional Budget for Reproductive Health Establishment of BEMOC and CEMOCf Micronutrients Micronutrient supplementation (Micronutrient supplementation for 14.3 million under-five children which entails

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1,727,102,970c 9,217,687 1,109,180,000 1,395,600 410,000,000 35,000,000 162,309,683

51,098,000 22,282,000

28,939,000

102,196,000

153,294,000d

46,202,000

68,484,000e

439,177,802

468,116,802

STI/HIV/AIDS Control of Diarrheal Diseases (for Children) Control of Acute Respiratory infections (for Children) Deworming (for Children) Dengue prevention and control

Sub Total

606,877,000b

358,253,587 4,883,610 48,000,000 48,000,000 50,000,000

756,384,000 3,212,965,378

3,965,349,378

4,603,956,950 28,512,000 658,060,000

4,603,956,950 28,512,000 658,060,000g 502,200,000

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget administration of vitamin A 200,000 i.u. per capsule twice a year (57M) and iron drops for 8.9 million low-birth-weight infants.)

Micronutrient Supplementation of Pregnant and Lactating Women

155,860,000

Sub Total

5,290,528,950

5,290,528,950

TOTAL

8,503,494,328

9,255,878,328

* Data to generate magnitude of financial shortfall is not complete and updated. The budget items are largely based on the Department of Health’s computation for the three health-related MDGs (goals 4 to 6) which are directly related to its programs. See following details/ breakdown of expense items as computed by DOH.

Notes: a/ Based on DOH computation for annual cost of programs and projects for the reduction of child and maternal mortality. b/ Based on DOH computation for annual cost of programs/projects to combat tuberculosis. c/ Based on DOH computation for annual cost of programs/project to combat malaria. d/ The alternative budget proposes a Child Survival Package/Program which consists of Education, Training, Monitoring, Module Development and Promotions of good health practices that ensure child survival. These activities focus on the following components 1. Skilled attendance during pregnancy, delivery and the immediate postpartnum 2. Care of the newborn 3. Breastfeeding and complementary feeding 4. Micronutrient supplementation 5. Immunization of children and mothers 6. Integrated management of sick children 7. Use of insecticide-treated bednets e/ The proposed additional budget intends to Improve on data collection, generation and analysis towards a regularly updated and timely dissemination of data/information on the status of the health of the population f/ BEMOC – Basic Emergency Management Obstetric Care CEMOC – Comprehensive Emergency Management Obstetric Care Based on DOH computation but planning and implementation plan has to be drafted by DOH together with civil society organizations. g/ Based on DOH computation for annual cost of programs/projects to reduce child and maternal mortality.

Table 7. National Health Insurance Program - Budget Item to be Decreased (in Pesos) BUDGET ITEM PROPOSED PROPOSED ALTERNATIVE BUDGET BUDGET FOR 2007 ADJUSTMENTS ALGU - Premium subsidy for indigents under the National Health Insurance Program

3,500,000,000

(2,750,000,000)*

750,000,000

* Reduction will be re-allocated to other priority expenditure items

Rationale: Maintain the budget at the 2005 level (at Ph 750,000,000) until a thorough report is submitted on the evaluation/assessment of -1. Previous distribution scheme and how program beneficiaries were identified, 2. Profiles of program beneficiaries and the Impact of the program on intended beneficiaries 3. The monitoring plan in place to justify increase as proposed, from 750 million to 2.5 billion.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget The proposed alternative budget intends to address the following targets -Reduction of child mortality and Improve maternal health • Fully immunized child coverage will increase from 84.5% in 2005 to 100% in 2015 • Coverage of tetanus toxoid vaccination will increase from 80% in 2005 to 100% in 2015 • Hepatitis B coverage will increase 45.6% in 2005 to 100% in 2015 • Proportion of children aged 0-5 years of age who are given Vitamin A will increase from 79% in 2004 to 100% in 2015 • All under five children will be given micro-nutrient supplementation Combat HIV AIDS, Malaria and other Diseases • To reduce TB morbidity rate from 290 in 2006 per 100,000 population to 250 in 2010 and 190 in 2015; Includes treatment of TB cases among children • To reduce Malaria morbidity rate from 269 per 100,000 population in 2006 to 138 in 2010 and 1 in 2015 • To reduce STI prevalence rate from 5% of the general population in 2006 to 1% in 2010 and 0.5% in 2015

AGRICULTURE

Agriculture accounts for more than one third of the total labor force -- rising to nearly one half of agri-based manufacturing and service sectors are included. However, its share to total GDP has declined from about one-fourth in the early ‘80s to less than 20% in 2000. Growth rates in the sector can be described as erratic, at best, but for the most part, productivity per hectare is declining.

A global study estimated that a 10% increase in crop yield reduces the proportion of people living on less than US$1/day by 6 to 12%. No other sector of the economy shows such a strong correlation between productivity gains and poverty reduction. Given the fact that the incidence of poverty among agricultural households is about four times that than the rest of the population, a sustained increase in agricultural productivity would certainly redound to a significant poverty reduction and improve the living standards of our farmers.

STRATEGIES TOWARDS THE SUSTAINABILITY OF AGRICULTURE AND FISHERY SECTOR While the Agriculture and Fisheries Modernization Act (AFMA) had a defined path towards agricultural modernization, its target budget allocation has not been met. The additional budget of P20 billion in AFMA’s first year of implementation and the P17 billion over the succeeding years (on top of the regular DA budget) never really materialized. And while AFMA somehow promised additional infrastructure funds for agriculture, it remained silent on the need to shift from highly intensive and environmentally damaging technologies to more sustainable production practices. It is also evident that greater effort must now be exerted to ensure that bureaus that promote sustainable production practices are sufficiently funded and their absorptive capacities are enhanced.

In view of the foregoing, additional funds for agriculture is hereby being proposed for FY 2007, which will:

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget

1) focus on the development, enhancement, promotion and mainstreaming of sustainable agriculture practices, 2) conservation, regulation and protection of fisheries and aquatic resources, and 3) provide rehabilitation funds for rural infrastructures damaged by Typhoon Milenyo Table 8 below shows the details of the funding proposal.

Table 8. Department of Agriculture - Budget Items to be Increased (in Pesos) BUDGET ITEM PROPOSED PROPOSED ALTERNATIVE 2007 BUDGET ADJUSTMENT BUDGET FOR 2007 1. Irrigation Repair and Rehab concentrating on communal and shallow tube well 7,540,924,000 1,000,000,000 8,540,924,000 systems 2. Water resources planning and management, soil 15,000,000 76,810,000 conservation, and 61,810,000 maintenance of water impounding systems 3. Farmer Training specific on SRI and seed banking to add on to “extension, support, 663,996,000 160,000,000 823,996,000 education and training services” 4. SusAg Demo Farms in Key Provinces 40,000,000 40,000,000 5. Farm to Market Roads 1,500,000,000 1,500,000,000 6. Post harvest facilities 1,699,294,000 1,000,000,000 2,699,294,000 7. Legal, advisory and technical services on fishing 10,000,000 17,000,000 technology, post-harvest, 7,000,000 fisheries resource studies and management 8. Conservation, regulation and protection of fisheries 9,200,000 11,800,000 21,000,000 and aquatic resources Total 3,736,800,000 Rationale: 1. Irrigation Repair & Rehab. - Repair of existing communal systems is less costly than building new ones. Construction of shallow tube wells likewise costs the least benefiting more farm lands. Implementing agencies – DA/NIA 2. Water Resources and Soil Management. Assist in restoring soil fertility addressing farmlands that have acidity problems and complement water needs of farming communities.

Implementing agencies – DA/BSWM 3. Farmer Training. SRI or systems rice intensification is a water management techniques that assists farmers in lessening the farmland’s dependence on water. Seed banking will strengthen farmers’ organizations to work together in conserving and sharing traditional

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget

4.

5.

6.

7.

8.

seed varieties. The trainings can be done in partnership with NGOs and LGUs. The amount is approximately P2M/province. Implementing agencies - DA Regional Offices SusAg Demo Farms. - This is already being done by DA and would just have to be replicated in other areas. Implementing agencies - DA Regional Offices Farm to Market Roads. - This fund might even go to repair of farm to market roads and bridges that were damaged by Typhoon Milenyo rather than the construction of new ones.

Implementing agency - DA Post Harvest Facilities - Post harvest losses are high compared to other countries.

Productivity increases will go to naught if these losses are not addressed. Implementing agencies - DA Regional Offices Legal, advisory and technical services on fishing - Additional fund will be evenly split for legal assistance to help LGUs and Bantay Dagats in enforcing the Fisheries Code and for the purchase and distribution of cold storage facilities in major fishing areas. Implementing agencies - DA/BFAR Conservation, regulation and protection of fisheries and aquatic resources - Entire amount will go to the establishment of fish sanctuaries where they will be most useful. This will be done in partnership with fisherfolk organizations, Bantay Dagat and LGUs. Implementing agencies - DA/BFAR

ENVIRONMENT

Overall, government efforts to ensure environmental sustainability can be characterized by gaps, gaps and more gaps. First, the inconsistency of development plans with landmark documents such as the Philippine Strategy for Social Development (PSSD) and Philippine Agenda 21 (PA 21). Second is the widening policy-action gap. Third is the gap between small victories in sound environmental policies that were passed and the scant resources that government actually allocates to implement them. Fourth is the inconsistency in the priorities taken by each incoming DENR secretary, considering the frequent turn-over in that department.

And fifth, the conflicting dual role of DENR as protector of the environment and franchiser of exploiters of natural resources.

Ensuring environmental sustainability cannot be achieved by mere lip service and rhetoric. It must ultimately translate into government spending for environment and natural resources. The Sbilanciamoci!1 Campaign in Italy has demonstrated that it is indeed possible to use public expenditure to ensure social and environmental justice.

The government must stop looking at the environment and natural resources as a tool to pumpprime its growth agenda. It has to realize that the carrying-capacity of our environment and natural resources has reached an alarming stage. In fact, the government, primarily the DENR has to panic with the current state of our environment and natural resources. Hence, the trend of minimal government spending for this sector has to be reversed.

1

Sbilanciamoci! is a campaign involving 44 associations, NGOs and networks working on globalization, peace, human rights, environment, fair trade and ethical finance. Since 2000, it has proposed alternatives to the Italian budgetary policies, arguing for social and environmental priorities. It publishes yearly reports, meets policy makers, and organizes conferences to promote a different use of public resources and a new role of public actors in the economy.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget In view of these, this budget proposal seeks to increase the DENR’s budget from P7.5 billion to P15.2 billion. This will provide the DENR with an additional P7.7 billion, which it can use to fund six priority areas shown below: 1.

2.

3.

4.

5.

6.

Land Use and existing legislation; Urban Ecosystem; Forest Ecosystem; Coastal and Marine Ecosystem; Critical Habitats and Biodiversity; and Water and Sanitation System

Programs on these five areas must be directed at ensuring the sustainability of our environment and natural resources. Bulk of the allocations of these funds must be given to Capital Outlay to ensure that funds are used for actual program implementation.

Table 9 below shows the proposed breakdown of the increase.

Table 9. Department of Environment and Natural Resources - Budget Items to be Increased (in Pesos) BUDGET ITEM PROPOSED PROPOSED ALTERNATIVE ADJUSTMENTS BUDGET BUDGET FOR 2007 750,000,000 2,556,112,000 1,806,112,000 Land Use 830,380,000 100,000,000 730,380,000 Land Management Service Survey of foreshores reservation, 107,710,000 100,000,000 7,710,000 Patrimonial properties and other lands Management/development of 105,505,000 100,000,000 5,505,000 ancestral lands 157,051,000 100,000,000 57,051,000 Field Network Survey Land resource, geodetic control, 223,567,000 100,000,000 123,567,000 plane and geophysical surveys 22,620,000 50,000,000 672,620,000 Mapping and remote sensing Not in 2007 Budget 100,000,000 100,000,000 National Land Use Act 100,000,000 100,000,000 Land Use Plan Preparation 750,000,000 1,021,966,000 271,966,000 Urban Ecosystem Environment management and 257,564,000 50,000,000 207,564,000 Pollution Control Toxic Substances and Wastes 87,764,000 50,000,000 37,764,000 Management Not in 2007 Budget 150,000,000 150,000,000 Clean Air Act 150,000,000 150,000,000 Clean Water Act 150,000,000 150,000,000 Solid Waste Management Act 100,000,000 100,000,000 Program for Potable Water Supply 100,000,000 100,000,000 Program for Sewage & Sanitation

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget Forest Ecosystem (Forests & Mines) Forest protection Community-based forestry program Soil conservation and watershed management Geoscience Development Services Not in 2007 Budget Reforestation Permanent Forest Boundary Delineation Review of Existing Forests Tenurial Instruments Mining Disaster Area Rehabilitation Coastal and Marine Ecosystem Management of coastal and marine resources Not in 2007 Budget Coastal Clean up Mangrove Reforestation Coral Reef Rehabilitation/Marine Sanctuaries Rehabilitation of Guimaras Province Critical Habitats and Biodiversity Protected areas and wildlife resources development Development and rehabilitation of the Hinulugang Taktak National Park Development rehabilitation of the Mt. Apo National Park Philippine Eagle Conservation Project Pawikan Conservation Project Tamaraw Conservation Project Operation and maintenance of the Crocodile Farm Institute Biodiversity Conservation Program Tarsier Conservation Project Pilot plantation establishment of selected forest species Not in 2007 Budget Biodiversity Hot Spots

2,137,639,000 474,072,000 66,189,000

50,000,000 100,000,000

524,072,000 166,189,000

62,272,000 131,125,000

100,000,000 100,000,000

162,272,000 231,125,000

150,000,000

150,000,000

100,000,000

100,000,000

40,784,000

100,000,000 100,000,000 800,000,000

100,000,000 100,000,000 840,784,000

40,784,000

150,000,000

190,784,000

150,000,000 150,000,000

150,000,000 150,000,000

210,934,000

100,000,000 100,000,000 630,000,000

100,000,000 100,000,000 840,934,000

145,817,000

200,000,000

345,817,000

4,042,000

10,000,000

4,042,000

992,000

25,000,000

25,992,000

4,978,000 4,779,000 3,862,000

15,000,000 10,000,000 10,000,000

19,978,000 14,779,000 13,862,000

8,515,000 11,373,000 5,000,000

10,000,000 130,000,000 10,000,000

18,515,000 141,373,000 15,000,000

3,236,000

10,000,000

13,236,000

200,000,000

200,000,000

Water and Sanitation System For 432 municipalities where less than 50% of population have access to water

4,000,000,000 4,000,000,000 TOTAL

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800,000,000 2,937,639,000

7,730,000,000

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget

DEBT

The problem of the debt remains a major factor in the government’s inability to invest in productive economic and social services to stimulate economic growth and human development. Since the 1980s, the size of the Philippines’ debt service has been increasing at an alarming rate and now accounts for much of government’s budget.

In fact, for this year, it is estimated that interest payments and principal amortization will amount to around 85 percent of our tax revenues. Even data on our net foreign and domestic borrowings will indicate that much of what we borrow actually goes to paying for amortization and interest payments.

Debt service has competed, quite successfully, with other expenditure items from government’s meager resources. It represents foregone spending for education, health, housing, infrastructure and other government spending which are necessary to develop the economy and improve the lives of the people who shoulder the economic and social costs of these debts.

Over the years, serious issues have been raised on the continued adherence of government to its honor-all-debt policy and the religious and indiscriminate prioritization of debt payments through the Automatic Appropriations Law. For one, the Filipino people continue to pay for illegitimate debts contracted under onerous circumstances such as those incurred by Marcos and his cronies which the government has assumed, and the guarantees extended by government on liabilities incurred by poorly administered GOCCs, like the National Power Corporation (NPC).

More than anything else, such policy has not only failed to solve the country’s debt problem but have in fact exacerbated it, with government becoming very debt dependent. This debt dependency has not only resulted in increasing the country’s debt stock, but has allowed government to engage in a dangerous debt management strategy likened to a Ponzi Game or borrowing to pay off debts, as well as resorting to changing some fiscal procedural, management, and reporting rules that allow it to juggle funds and statistics to make its “numbers” look good.

The crisis of a debt dependency has not yet manifested as a currency or debt crisis, but as a crisis of a country unable to reduce poverty, provide decent work for all its people (instead, pushing the Filipinos to go abroad), provide good infrastructure and essential social services, undertake thorough, comprehensive and genuine agrarian reform, and develop a dynamic vibrant domestic economy. It also certainly manifests itself in our inability to meet the millennium development goals.

Clearly, there is a pressing need to seriously study and reconsider the country’s policy on the debt. Needless to say, political will and genuine commitment to the welfare of the Filipino people are paramount requirements in making public expenditures effective instruments in achieving growth, equity, stability and development.

In view of the foregoing, we propose the inclusion of the following provisions under the FY 2007’s budget law:

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget 1. Continue implementing the policy of low interest rate and stable exchange rate to reduce the debt service.

2. Ensure close coordination between fiscal and monetary bodies for harmonious policy direction.

3. The BSP and the Department of Finance to regularly report to Congress on the status of the debt particularly on new loans obtained 4. The Department of Budget and Management to submit and present the complete proposed budget.

5. Assess future indebtedness by reviewing government’s growing contingent liabilities particularly the executive’s policy on providing sovereign guarantees even for private enterprises 6. For purposes of the FY 2007’s budget law, we propose the inclusion of the following in the general provisions of the budget law: a. By virtue of Section 24, Article VI of the Philippine Constitution, all new loans or debts that will be incurred by the National Government, including domestic and foreign debts that will be assumed by the National Government, shall first be approved by the House of Representatives. b. No amount in the General Appropriations Act that are intended to fund programs, projects or activities on education and health can be subject to impoundment by any of the instrumentalities of the Executive Branch, unless the President so requests in writing and is granted permission by both Houses of Congress. c. No appropriations under the 2007 GAA shall be used to pay for the unsecuritized portion of the Marcos and Bataan Nuclear Power Plant debts, instead all payments shall be made in escrow until the court cases are finally resolved.

.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget

Macroeconomic Assumptions and Sources of Financing 2007 Budget Proposal Social Watch has earlier criticized the national budget for not being responsive to the social development requirements of the country. The proposed budget for 2007 is no different. Even as there is an increase in the proposed obligations from P1.053 billion earlier proposed for 2006 and P1.126 billion proposed for 2007, interest payments for debt service remains the single biggest item at P328.733 billion followed by internal revenue allotments of P197.445 billion .

A new feature of the 2007 budget is a proposal that the IRA be automatically appropriated. This provision reiterates the same proposal in the 2006 supplemental budget which is intended to provide additional funds to the 2005 budget reenacted for 2006. This new feature of the budget is also supported by bills filed by Congressmen.

It is a well known fact that constitutional provisions on the jurisdiction of Congress notwithstanding, it has actually limited “power of the purse.” Practically one third of the budget is already automatically appropriated for interest payments. This does not even include principal payments which is considered a “below the line” item. Now Congress with eyes wide open is giving up jurisdiction over the second largest item in the budget—IRA. It is not surprising that the Executive is proposing this. What is surprising is the fact that some Congressmen are filing bills in support of the initiative from the executive.

When Congress itself proposes the diminution or reduction of its “power” over the budget, it cripples itself and willingly places itself under the increased control of the executive. More and more, the notion of “balance of power” becomes an illusion.

What other constitutional prerogatives will Congress give up?

A third general observation is on the theme of the 2007, “Focusing on the Imperatives of Growth.” Earlier administrations have always endeavored to balance growth with equity and social development. It is generally accepted that growth does not necessarily bring equity.

Earlier experience with exclusive focus on growth has shown that yes, it can be attained but at the expense of democratic rights, and social development. Is history going to be repeated?

On the projected real GDP growth Real GDP growth is projected from 5.5-6.1% for 2006, and 5.7-6.5% for 2007. While this level of growth is “plausible” in the words of an economist, the more important question is: will this level of growth be sufficient to significantly impact on poverty? The answer might be no.

Economists have been pointing out that a growth rate of at least 7% is necessary to significantly impact on poverty.

Yes, we might have growth. But not growth with equity.

How about the impact of oil prices? Economist Felipe Medalla points out that the GDP at 1985 constant prices does not capture the impact of oil prices on terms of trade. Gross National Income or GNI which adjusts GDP for net factor income from abroad and terms of trade is lower than GDP and GNP growth. In other words, the impact of oil prices on terms of trade may not be captured in the projections of the national budget.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget

Inflation Rate Inflation is forecasted for 6.9-7.0 in 2006 and 4.3-4.8 in 2007. This is on the assumption that oil shocks will be sharply reduced. This forecast is considered too low by economists. The Philippines has no control over oil shocks. These can be triggered by unexpected political tension in oil-rich countries like those in the Middle East.

Interest Rate Treasury bill rates which are used as benchmarks for lending by the financial market are projected at 6.4-6.5 for 2006 and 5.5-6.0 by 2007. While low interest rates is a situation devoutly desired by both the business sector and the government, economists feel that it might be at 6.0-6.5% by 2007.

Exchange rate The financial markets are optimistic about the exchange rate and project that it might even go lower than P50. Let us hope that the return of OFWs from troubled countries will not impact too much on foreign exchange inflows.

Exports and imports Exports are projected at $44.254 billion in 2006 and $48.901 billion in 2007. Good. But imports continue to outpace exports at $53.032 billion in 2006 and $59,396 billion in 2007.

Let us not forget the warning of the United Nations Development Program that while trade might bring more foreign exchange, the human component must not be forgotten. In other words, like “Growth with equity,” the call should be for “Trade on Human Terms.”

Nonetheless, we will still be needing more dollars to finance our imports.

Summary Conclusion The focus of the 2007 budget is on growth. Equity will not necessarily follow. As in earlier budgets, social development is not given the level of funding required even for the MDGs. The proposal for automatic appropriation of IRA will further reduce legislative control over the budget and tilt even more the balance in favor of the executive. Let not Congress preside over the decimation of its power of the purse.

Assuming that the statistics are right, the macroeconomic assumptions might be attained.

However, projected growth will not be sufficient to reduce poverty significantly. The projections for inflation and interest rates might be too optimistic.

The budget is the most powerful instrument of the government to change the lives of people for the better. Whether it will be used for this purpose remains to be seen.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget

Alternative Budget for Education The proposed budget for FY2007 allocates P162 billion for Education, Culture and Manpower Development or about 14.4% of the total proposed budget of P1,126 billion. In nominal terms, this amount represents an increase of 10.7% compared to the 2006 level of P146.3 billion. As in previous years, the Department of Education gets the biggest share amounting to P134.7 billion (including the P1.76 billion School Building Program), up from its 2006 allocation of P119.1 billion.

In her budget message, PGMA stressed the importance of education, citing that the sector continues to get top budget allocation. The education budget is designed to address the resource gap by delivering, among others, the following: 10,882 new teaching and non-teaching positions; 6,000 more classrooms; 42 million textbooks and reading materials; 1.3 million furniture; training of 50,000 teachers in Math, English and Science; 610,000 beneficiaries of the education voucher system; training of 6,200 pre-school teachers; and scholarship to 73,126 students.

Table 10. Overall Budget by Sector (in million Pesos) PROPOSE PROPOSE PARTICULAR FY2005 D FY2006 D FY2007 ECONOMIC SERVICES SOCIAL SERVICES DEFENSE GEN. PUBLIC SERVICES NET LENDING DEBT-SERVICE (INTEREST PAYMENTS)

173,875 255,533 47,634

196,945 293,714 52,657

223,173 329,381 53,853

2005 2006 2007 Per Cent Distribution 18.35 18.7 19.81 26.97 27.89 29.24 5.03 5 4.78

168,998 1,707

161,712 8,250

182,097 9,101

17.84 0.18

15.35 0.78

16.17 0.81

299,807

339,998

328,733

31.64

32.28

29.19

GRAND TOTAL

947,554

1,053,277

1,126,339

100

100

100

Table 11. Social Services Budget by Sector (in million Pesos) PROPOSE PROPOSE FY2005 D FY2006 D FY2007 SOCIAL SERVICES Education,Culture and Manpower Development Health Social Security, Welfare and Employment Housing and Community Development Land Distribution Other Social Services Subsidy to LGUs

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2005

2006

2007

255,533

293,714

329,381

26.97

27.89

29.24

131,217

146,323

162,017

13.85

13.89

14.38

13,864

13,538

14,454

1.46

1.29

1.28

46,245

58,558

73,138

4.8

5.56

6.49

3,033 4,098 975 56,101

2,752 4,422 6,529 61,593

3,618 4,265 3,833 68,057

0.32 0.43 0.1 5.92

0.26 0.42 0.62 5.85

0.32 0.38 0.34 6.04

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget Table 12. Education Sector Budget by Level 2005 Actual 108 B 17.5 B 1.08 B

DEPED (Department of Education) SBP (School Building Program) SUC (State Universities & Colleges) CHED (Commission on Higher Education) TESDA (Technical Education and Skills Development Authority) Others

2006 Adjusted 118.1 B 1.0 B 16.7 B

2.4 B 2.22 B

TOTAL

131.2 B

2007 Proposed 132.9 B 1.8 B 17.8 B 1.1 B 2.4 B 6.0 B

146.3 B

162.0 B

While PGMA proclaimed its commitment to Education for All as a top priority agenda of her administration, the same is not reflected it its expenditure program. Despite the apparent priority given to education, the proposed budget allocation for 2007 is hardly sufficient to keep up with inflation and the projected increment in enrollment. In reality, public expenditures on education sector (education, manpower and culture) as a percentage of gross domestic product (GDP) has consistently declined and is now only 2.5% of GDP (2.0% for Basic Education). Similarly, the percentage share education to total proposed budget for 2007 will go down to only 14.4%, with basic education getting a share of only 12% of the proposed 2007 national budget.

PROPOSED 2007 BUDGET Education 14.4%

DEBT 30.0%

Basic Educ 12%

Health 1.3% Labor/Welfare 6.5%

Other Soc Services 7.1%

Econ Services 19.8%

Defense/Public Order

Other Public Services 10.4%

10.6%

In fact, real per capita spending on education has been declining since 2001. The current level of expenditure is low and falls short of the requirements for quality education. It places the Philippines among the lowest spenders in education in Southeast Asia and the rest of the world.

International benchmarks set the desirable level of education expenditure at 5% to 6% of GDP and 18% to 22% of total public expenditure.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget

E d u c a t io n B u d g e t a s P e r C e n t o f G D P

19

9 19 0 9 19 1 9 19 2 9 19 3 9 19 4 9 19 5 9 19 6 9 19 7 9 19 8 9 20 9 0 20 0 0 20 1 0 20 2 0 20 3 0 20 4 0 20 5 06

4 .5 4 .0 3 .5 3 .0 2 .5 2 .0 1 .5 1 .0 0 .5 0 .0

R e a l P e r P u p il E x p e n d it u r e o n B a s ic E d u c a t io n

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Education, along with health and other basic social services, bore the brunt of the fiscal crisis that hit the country since 1997. The proposed alternative budget intends to correct this situation to put the education sector back on its track. This is consistent with the mandate of the Constitution, with existing laws relevant to education and with international agreements signed by the Philippine Government, particularly the International Covenant on Economic, Social and Cultural Rights, the Education for All (EFA) and the Millennium Declaration which adopted the Millennium Development Goals (MDGs).

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget Current Trends and Issues in Basic Education An estimated 19.5 million students enrolled in some 50,000 public and private schools around the country for the School Year 2006-2007.2 About 13.04 million were enrolled in elementary schools while 6.42 million were high school students. According to figures released by the DepEd, combined enrolment in public schools over the last 5 years has been growing at an annual average rate of 2.5%.3 That means that 374,000 children are added each year in the school system, entailing additional provisions of at least 7,500 teachers and classrooms. DepEd figures also indicate that for the last 20 years, enrolment grew faster at an annual rate of 2.72% on the average, a rate that is even higher than the actual growth in population.

In contrast, enrolments in private schools have been declining especially after the 1997 Asian crisis. This indicates a consistent trend of migration from private to public schools particularly at the high school level as a result of economic difficulties and rising cost of education.

Tremendous pressure is exerted on the public school system, especially given the limited public resources, the cumulative backlogs of previous decades and slow growth of the economy over the past decade.

Table 13. Basic Education Statistics, 2005-2006 Elementary

Secondary

TOTAL

No. of Schools Public Private Total

37,161 4,788 41,949

4,915 3,372 8,287

42,076 8,160 50,236

No. of Teachers Public Private

341,789 ...

126,141 ...

467,930

No. of School Divisions No. of District Offices No. of Barangays without Elementary School No. of Municipalities without High School

182 2,273 267 4

Source: DepEd. Fact Sheet, Basic Education Statistics (as of August 31, 2006).

For the current school year, the public sector absorbed the bulk of students in both elementary (93.6%) and secondary (80.6%) levels. As shown in the chart below, the share of the private sector in secondary education shrank from 32% in SY 1994-95 to only 19% in the current school year.

2

DepEd releases enrolment figures on a regular basis, usually during the start of the budget deliberation in Congress and before the start of the new school year. The figures include enrolment statistics of previous years, estimates of the current school year and projection of the coming school year. The discrepancies in the figures cited in this paper with those cited in previous reports of DepEd are due to the adjustment in the population reference and the changes in the methodology for computing performance indicators.

3 Combined public and private enrollment is growing at the rate of 2.5% per year over the last 12 years, with growth rate in the public sector significantly higher than that of the private sector. Statistics indicate that public secondary enrollment is growing at over 5% annually while enrolment in private secondary schools actually decreased compared to 10 years ago. (DepEd Factsheets and Budget Reports, various years)

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget

Share of Private Sector in

Share of Private Sector in

Secondary Education (SY1994-95)

Secondary Education (SY2004-05) Private 19%

Private 32% Public 68%

Public 81%

PERFORMANCE AND LEARNING OUTCOME4 Latest statistics available from DepEd show some alarming trends. Participation, cohort survival and completion rates for elementary and secondary level have generally been going down.

During the same period, dropout rate at the elementary level went up from 6.51% in SY 2001-02 to 8.9% in SY 2003-04. The same trend is also noted at the secondary level – from 8.53% in SY 2001-02 to 14.30% in SY 2003-04. These figures show the continuing and increasing fallout of children from the school system.

The holding capacity of the public school system remains a major problem of the education sector. A study commissioned by the World Bank noted that “for every 1,000 entrants to Grade 1, 312 do not complete elementary schooling, 249 finish the six-year elementary at an average of 9.6 years due to repetition, and only 439 finish elementary in six years.” What is most alarming is that among the “688 who complete elementary schooling, only 7 graduates score at least 75% in achievement tests in English, Science and Math, which is the standard for mastery of required competencies.”5 The poor and declining quality of education is clearly shown by the consistently low scores obtained by pupils in achievement tests administered by the Department of Education over the years. The increases in test results show only marginal improvement and the scores fell far short of desirable level. Students score very low in science, particularly the 4th year pupils.

The low quality of education delivered by the public school system can also be gleaned from the poor performance of teachers in assessment tests, some of whom scored no better than the students they teach. A mere 19 percent of the nation’s 53,000 public high school teachers scored 75 percent or higher in the Self-Assessment Test for English (SATE) administered by the DepEd in May 2003.6 Relatedly, the low achievement scores of students in science is partly due to the lack of teachers with proper training in the science subjects.

4

DepEd adjusted and updated key performance indicators based on the 2000 Census, the new school age groups and the EFA formula. Thus, performance indicators previously reported by DepEd and cited in various DepEd reports may not be consistent with the figures culled from the latest DepEd reports.

5 6

Cited in the Draft Education for All Plan, Department of Education, August 2004.

“Teachers also get low English scores By Rainier Allan Ronda.” The Philippine Star, October 19, 2004.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget Table 14. Key Performance Indicators in Education 2001ELEMENTARY 2002-03 02 Participation Rate (based on 7-12 yrs. population) 94.31% 94.13% (based on 6-11 yrs. population) 90.10% 90.17%

2003-04 91.63% 88.40%

Cohort Survival Rate (old formula) Cohort Survival Rate (EFA formula)

67.11% 69.05%

68.11% 69.97%

69.03% 64.15%

Completion Rate (old formula) Completion Rate (EFA formula)

66.33%

66.85% 66.95%

65.75% 62.20%

6.51% 200102

7.30%

8.90%

2002-03

2003-04

69.35% 57.55%

65.06% 58.45%

66.29% 59.88%

48.46% 72.01%

50.31% 74.22%

50.95% 75.39%

71.49%

66.00%

63.11%

48.39% 71.01%

50.00% 59.90%

45.74% 58.22%

8.53%

13.03%

14.30%

Dropout Rate SECONDARY Participation Rate (based on 13-16 yrs. population) (based on 12-15 yrs. population) Cohort Survival Rate (based on Grade I) Cohort Survival Rate (based on First Year) Cohort Survival Rate (EFA formula) Completion Rate (based on Grade I) (based on First Year) Dropout Rate

Source: DepEd. Fact Sheet, Basic Education Statistics (as of August 31, 2006). http://www.deped.gov.ph/cpanel/uploads/issuanceImg/factsheet2006(Mar28).pdf

Table 15. National Achievement Test Results (in Mean Percentage Scores) NAT NAT NAT Subject Area Elementary English-RC Science Mathematics

SY 2002-2003 Grade 4 43.55 41.80 43.98 44.84

SY 2003-2004 Grade 5 48.05 48.42 46.66 49.08

Secondary English-RC Science Mathematics

4th Year 44.36 50.08 36.80 46.20

SY 2004-2005 Grade 6 58.73 59.15 54.12 59.10 4th Year 46.80 51.33 39.49 50.70

Source: DepEd, FY 2006 Budget Proposal, October 2005

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget Table 16. Proportion of Teachers Who Are Not Science/Math Majors Subject Majors Non-Majors General Science 42% 58% Biology 44% 56% Chemistry 34% 66% Physics 27% 73% Math 80% 20% Source: DepEd, FY 2006 Budget Proposal, October 2005

What is most distressing is that education quality has deteriorated to such an alarming level that the Philippines now ranks among the poorest education performers in Asia and the rest of the developing world. The 2003 Third International Mathematics and Science Study (TIMSS) participated in by 45 countries ranked the Philippines 41st in mathematics and 42nd in science.

The country trails the Asian countries that participated in the 2003 TIMMS, including Malaysia and Indonesia.

The Problem

International Comparison

TIMSS 2003 Results (Trends in International Mathematic and Science Study) Science

Ave. score

Mathematics

Ave. score

1. Singapore

578

1.

2. Chinese Taipei

571

2. Korea, Republic of

589

3. Korea, Republic of

558

3. Hongkong SAR

586

.

Singapore

605

.

34. Palestinian National Authority

435

34. Indonesia

411

35. Egypt

421

35. Tunisia

410

36. Indonesia

420

36. Egypt

406

37. Chile

413

37. Bahrain

401

38. Tunisia

404

38. Palestinian National Authority

390

39. Saudi Arabia

398

39. Chile

387

40. Morocco

396

40. Morocco

387

41. Lebanon

393

41. Philippines

378

42. Philippines

377

42. Botswana

366

43. Botswana

365

43. Saudi Arabia

322

44. Ghana

255

44. Ghana

276

45. South Africa

244

45. South Africa

264

In a recent report, the Asian Development Bank (ADB) expressed alarm about the deteriorating state of education in the Philippines. While the country used to be among the top performers in Asia, it is now among the lowest education performers in the developing world. According to the ADB, net enrollment ratio has deteriorated over the past two decades while survival hardly improved. The report noted that “For many years, the Philippines has had higher enrollment rates at all levels of education than those of other countries with comparable or even higher levels of income. Recently, however, several countries in the region, notably Malaysia and Vietnam, have gained an edge over the Philippines even in basic education achievement.” The report further revealed that the out-of-school ratio for primary school age children in the Philippines was worse than Indonesia and Vietnam.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget Literacy Indicators and the Out-of-School Children School enrolment and performance indicators tell only half of the story of the current state of basic education in the Philippines. The other half tells about the continuing problem of illiteracy and the increasing number of children missing an education. The Functional Literacy, Education and Mass Media Survey (FLEMMS) conducted in 2003 shows some positive results. Around 93% of Filipinos 10 years and above were found to be basically literate. The same survey also noted that 84.1% of Filipinos 6 to 64 years olds were functionally literate.

The statistical reports, however, also revealed certain alarming findings about the literacy and educational status of Filipinos. Notwithstanding the high level of school participation among Filipino children, literacy levels did not improve at all during the ten year since the last survey was taken in 1994. The FLEMMS 1994 showed that simple literacy was slightly higher at 94% while functional literacy was basically the same at 84%. These figures show the poor outcome of basic education in the Philippines – either children drop out before functional literacy is achieved or they continue schooling without learning enough to be functionally literate.

Consider the following realities: 1 in 10 Filipinos had never gone to school (6.8 million) 1 in 6 Filipinos is Not Functionally Literate (9.6 million) 1 in 3 children/youth is Not in School (11.6 million) 1 in every 3 entrants to Grade 1 drops out and fails to complete elementary school Over half (51%) of Filipinos have had at most only elementary education while some 9% have had no education at all.

Only 34.7% of Filipinos had completed high school or had achieved higher educational levels.

The Problem A significant portion of Filipinos are not fully literate Can Read and Write

88.6% 84.1%

And Compute And Comprehend

The situation gets worse if one looks at the literacy and education status of the poor and disadvantaged children. Among non-poor Filipinos, 45.3% were high school graduate or higher. Only 14.3% among rural poor Filipinos achieved that level of education attainment.

65.8%

HS Grad and Over

40.5% 0%

20%

40%

60%

80%

100%

Among the Poor, the percentage is even LESS! Can Read, Write, Compute And Comprehend

69.4% 54.3%

The FLEMMS 2003 showed that while 84.1% of Filipinos 6 to 64 years were functionally literate (can read, write and compute), only 65.8% can actually comprehend what they were reading.

Among poor Filipinos, only 69.4% were found to be functionally literate and only 54.3% can comprehend what they were reading.

A significant number of Filipino children are outside the school system. Based on the FLEMMS 2003, 11.6 million children and youth aged 6 to 24 years old were not attending school. About half of them or 5.6 million belong to the age group 15-21 years old. Poverty and related factors were the main reasons cited for not attending school. Some 30.5% cited employment as the reason for not attending school. One of every five (20%) cited the high cost of education as the reason for not attending school while another 11.8% cited housekeeping work. A significant

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget number mentioned lack of personal interest. However, this reason was not fully explained. This could possibly be more because of poverty related causes rather than simply losing interest in going to school.

The Problem R e a s o n s f o r N o t A t t e n d in g S c h o o l E m p lo y m e n t f o r w o r k L a c k o f p e r s o n a l in t e r e s t H ig h c o s t o f e d u c a t io n H o u s e k e e p in g Illn e s s /d is s a b ilit y C a n n o t c o p e w it h s c h o o l w o r k S c h o o l is v e r y f a r O th e r s 0

5

10

15

20

25

30

35

Various studies have noted that education deprivation is strongly linked to poverty. The poor has less access to education; has lower school life expectancy; and is more likely to drop out of school. The lack of education perpetuates and regenerates poverty.

While education has been found to be the best strategy to reduce poverty, yet government has been underinvesting in education, affecting most especially the poor and disadvantaged children.

P e rc e n t

In summary, education indicators consistently point to the low and deteriorating performance of the education sector in terms of access, quality, literacy and equity.

1) ACCESS - Dramatic rise in dropouts, low survival/completion rates and alarming increase of out-of-school children. This trend indicates an apparent reversal in improved access to education which was achieved in the past two decades - 1980s and 1990s.

2) QUALITY – Poor education quality and outcomes reflected in the low achievement levels, poor teaching quality and perennial shortages in key inputs, specifically teachers, facilities and instructional materials.

3) EQUITY – The poor, malnourished and disadvantaged children are increasingly being bypassed, deprived of education and constantly at risk of falling out of the school system.

4) EFFICIENCY- Poorly designed programs, poor targeting and misplaced priorities are creating a lot of inefficiencies and wastage in the system.

Simply stated, the problems can be summarized as follows: dropout remains alarmingly high and access is not equitable; quality is poor and declining; resources are too little; and the system is badly managed. Years of neglect, underinvestment and mismanagement have set back the education sector by at least a generation. Substantive reforms must be undertaken with immediate implications on the budget to set the education sector back on the right track.

Budgetary Interventions (Basic Education) The Second Philippines Progress Report on the Millennium Development Goals showed that based on the current rate of progress, the MDG targets on universal access to primary education as measured by participation and completion rates may not be achieved in 2015. The

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget continuing shortfall in education expenditure threatens the country’s attainment of the Education for All (EFA) and Millennium Development Goals (MDG) targets.

In a recent study commissioned by NEDA, Dr. Rosario Manasan computed the resource gap for basic education for 2007-15 at P357 billion (under a high cost and MTPDP GDP assumption) or about P40 billion per year. For 2007, the estimated resource gap is P32 billion. (Manasan, 2006) Clearly, the Philippines has been under-spending in basic education. In 1997, national expenditure on basic education was about 3.2% of GDP. This went down to 2.5% by 2001 and further down to 2.1% by 2005. Similarly, per capita expenditure on basic education in real terms declined from P397 in 1997 to P339 in 2001 and to P289 by 2005 (based on 1985 prices).

(Manasan, 2006) The share of basic education has also been shrinking compared to its previous years. In 1995, the percentage share of DepEd in the national budget was 12.17%. DepEd’s share of the national budget peaked in 1998 at 15.96% but has consistently declined since then. By 2006, DepEd’s share in the national budget is down to only 11.55%. (DepEd, 2006) Table 17. Resources Available and Resource Gap in Basic Education in Current Prices, 2007-2015, (in million Pesos) (High cost - MTPDP GDP growth rate assumption)

Year

Available Resources from NG

Available Resources from LGU

w/ MTPDP GDP growth

Levels In Million Pesos 2007 134,195 2008 148,912 2009 166,629 2010 183,694 2011 207,126 2012 232,301 2013 260,713 2014 292,778 2015 328,692 2007-2015

1,955,040

Resource Requireme nt

w/ MTPDP GDP growth

Available Resources from NG and LGU w/ MTPDP GDP growth

10,078 11,301 12,697 14,265 16,027 18,006 20,230 22,729 25,536

144,273 160,214 179,326 197,959 223,153 250,307 280,943 315,506 354,228

176,395 196,741 223,914 251,895 276,517 301,436 320,907 345,353 369,697

32,122 36,527 44,588 53,936 53,364 51,128 39,964 29,847 15,469

150,870

2,105,910

2,462,855

356,945

w/ MTPDP GDP growth

Gap

w/ MTPDP GDP growth

Source: Manasan, Rosario G. Financing the Millennium Development Goals: The Philippines (Paper presented during the validation meeting, Balay Kalinaw, UP Diliman Campus, Sept 26, 2006)

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget Over the long term, the budget for education must be increased progressively to cover the gaps in critical input and to address the problems related to quality and equity. The following policy interventions are recommended: 1. Fast track initiatives to address the gaps in critical input 2. Invest in quality, specifically in teachers' training, research, monitoring, evaluation, curriculum development and governance 3. Attend to poor and disadvantaged areas with high dropout, low survival and high illiteracy to catch up with the rest 4. Reach out to the out-of-school children and youth 5. Invest in teachers and teaching development For FY 2007, the following alternative budget for basic education is proposed: Alternative Budget Proposal for Basic Education, 2007 Table 18. Budget Items to be Increased BUDGET ITEM PROPOSED BUDGET 2007 1,180,000,000 1. Funding requirement for the creation of new teaching/non-teaching positions for 2007 2. Total for Classrooms 2,760,000,000 School Building Program Deped Classroom Construction Project 3. Alternative Learning System 4. Teachers Training 5. School’s MOOE (to be integrated into the budget of each National High School and Division) 6. School Health and Nutrition Program 7. National Education Test Development 8. Education for All (EFA) Information and Social Mobilization TOTAL

PROPOSED AMENDMENTS 660,000,000

ALTERNATIVE BUDGET FOR 2007 1,840,000,000

2,000,000,000

4,760,000,000

1,760,000,000

1,000,000,000

2,760,000,000

1,000,000,000

1,000,000,000

2,000,000,000

145,000,000 940,000,000

355,000,000 1,060,000,000

500,000,000 2,000,000,000

2,000,000,000

2,000,000,000

14,000,000

14,000,000

28,000,000

160,000,000

160,000,000

320,000,000

20,000,000

20,000,000

6,269,000,000

* Total additional funds required will be adequately covered by savings generated from the reduction of budget of the Food for Schools Program

Rationale 1. Creation of Teaching and Non-Teaching Positions. This increase to P1.84 billion will adequately cover the current gap of 16,390 teachers based on a pupil-to-teacher ratio of 45:1

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget 1. Classrooms. This increase is equivalent to 10,576 additional classrooms.

2. Alternative Learning System. This additional allocation is estimated to benefit at least 150,000 out-of-school children.

3. Teachers Training. Doubling the allocation for teachers training will fast track improvements in teaching capability and quality.

5. School’s MOOE. Increase the current per capita MOOE of schools by an average of 25% to finance quality-enhancing programs.

6. School Health and Nutrition Program. Doubling the allocation for this item would redound to wider and greater number of student beneficiaries. This will not only improve the health and nutritional conditions of students, but this might also lead to improve attendance.

7. National Education Test Development. This additional funding will improve monitoring of student achievement, including the development of alternative evaluation system 8. Education for All. Earmarked specifically for the promotion of EFA, including funding support for CSO initiated activities Table 19. Budget Items to be Decreased PROPOSED BUDGET ITEM BUDGET Food for Schools Program

4,013,000,000

PROPOSED AMENDMENTS (2,172,000,000)*

ALTERNATIVE BUDGET FOR 2007 1,841,000,000

* Savings to be generated will be re-allocated to other priority expenditure items (see above table)

RATIONALE: The amount of P1.841 billion represents DepEd’s proposed budget for Food for School Program (FSP) that they submitted to DBM. This amount has in fact exceeded the P1.6 billion budget ceiling on this item that was given to them by DBM. Why should we give them more than double of what they think they needed? Secondly, it must first be established how this fund is really being disbursed, and how the beneficiaries are selected. For now, we can use the excess amount to other more pressing needs in basic education.

Trends in Financing Higher Education 1. Continuing increase in cost of private tertiary education. The cost of private tertiary education had been rising, exacerbated by the crisis in pre-need industry. This affected enrollment particularly in private tertiary schools, with a significant decline in the enrollment levels - from a growth rate of 6.47% in 1997 to a decline of 2.8% in 2002.

2. Continuing exodus of college students to State Universities and Colleges (SUCs).

From a 10% share of all college students in 1980, enrollment share of SUCs increased to 21% in 1994, and 34% in AY 2002-03. For the period 1997 to 2003, enrollment in public higher education institutions grew rapidly by an average of 9.62 percent per year.

3. Continuing increase in the number of SUCs. The number of SUCs had considerably increased by as much as 160% since 1990. From 219 SUCs in 1999, the number expanded by 64% to 360 units (111 main and 249 satellite campuses) in 2004. As of 2004, 20.15% of tertiary education institutions are public.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget 4. Low priority given to tertiary education. o

From a high growth rate of 10.5% in 2002, nominal budget for SUCs has been registering negative growth rates in 2005 (–3.85%) and 2006 (-1.2%). This is reflected in the consistent decline in the share of the entire education sector in the national budget.

o

The share of the national government financing the SUCs has also been declining - from 85% in 2001 to 77% in 2005 - as schools are compelled to shoulder the expenses for specific items. Consequently, SUC spending per student had declined by 23% - from Php 17,000 in 2004 to Php 12,930 in 2006.

Budgetary Interventions (Higher Education) Proposal no. 1 Restore all the cuts made from Maintenance and Other Operating Expenses (MOOE) and Personal Services (PS) of State Universities and Colleges amounting to Php 983.218 million since Year 2002. The distribution of the budget for SUCs will be allotted to SUCs acknowledged as centers of excellence and academic development based on CHED’s assessment and recognized. However, the improvement of the quality of other State Universities and Colleges will also be taken into consideration.

Table 20. State Universities and Colleges (SUCs) BUDGET ITEM PROPOSED BUDGET

State Universities and Colleges

Php17.8 billion

PROPOSED ADJUSTMENTS

Php 983.218 million in MOOEs and PS to SUCs recognized as centers of excellence

ALTERNATIVE BUDGET FOR 2007

Php 18.78 billion

Proposal no. 2 Additional fund of CHED’s Scholarship Program amounting to Php 441 million. Such scholarship grant are earmarked for indigent but deserving students as well as faculty members of SUCs. Table 21. Commission for Higher Education PROPOSED BUDGET ITEM BUDGET Scholarship Program

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441,000

PROPOSED ADJUSTMENTS 441,000

ALTERNATIVE BUDGET FOR 2007 882,000

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget

The proposed addition funds seek to double the target beneficiaries of CHED’s scholarship program from 34,475 to at least 70,000 college students and faculty members. Meaningful intervention must be to provide scholarship to students taking up courses that are critical to national development.

References: Congressional Planning and Budget Department (CPBD). “Analysis of the President's Budget for Fiscal Year 2006." November 2005.

Department of Education. Education for All: A functionally-Literate Philippines (FY 2007 Budget). 21 September 2006.

Department of Education. FY 2006 Budget Proposal. October 2005.

Department of Education. Factsheet. August 2006.

“Teachers also get low English scores By Rainier Allan Ronda.” The Philippine Star, 10/19/2004.

Department of Budget and Management. BESF 2003-2005.

EFA Global Monitoring Report, UNESCO, 2003/2004.

Manasan, Rosario G. Financing the Millennium Development Goals: The Philippines (Paper presented during the validation meeting, Balay Kalinaw, UP Diliman Campus, Sept 26, 2006).

National Statistics Office. 2003 Functional Literacy, Education and Mass Media Survey (FLEMMS), 2005.

Performance Indicators for Basic Education, SY 2002-2003 to SY 2004-2005.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget

Alternative Budget for Health

(“If health is wealth, then, we need to fund for the Filipinos’ wellness!”)

The Proposed Health Budget for CY 2007 The proposed health budget for CY 2007 is P11.66 Billion which accounts for only 1% of the Total Government Budget of P1.126 Trillion and ranks 8th in the budget allocation among National Government Agencies. An increase of P1.021 Billion from its 2006 budget is earmarked for adjustments in Personal Services (Php 397,483,000), the budget gap for the provision of Hepatitis B vaccines (Php 150,198,000), the budget gap for the provision of lowcost quality drugs and medicines including establishment of additional Botika sa Barangay (Php 120,000,000), and in the provision for backlog infrastructures of various retained hospitals (Php354,000,000).

Table 22. Summary of Obligations and Proposed New Appropriations by Department (In thousand Pesos) DEPARTMENTS OBLIGATIONS 2005 2006 2007 2007 (ACTUAL) (ADJUSTED) (PROPOSED) (APPROPRIATION) Education 108,225,263 118,087,260 132,948,493 124,241,854 Public Works and 50,669,829 62,328,189 73,567,928 65,286,040 Highways Interior and Local 57,713,297 45,614,998 51,142,791 50,916,522 Government National Defense 75,615,818 46,642,803 49,462,695 49,326,721 Agriculture 3,263,530 3,197,774 3,292,618 3,099,353 (inclusive of the 18.5 Billion Agricultural and fisheries modernization Program component) State Universities and 17,508,494 16,666,627 17,815,117 16,645,252 Colleges Transportation and 8,538,274 14,257,430 17,505,574 16,531,719 Communication Health 10,5466,975 10,575,633 11,658,832 11,162,998 Commission on Elections 1,855,151 3,280,761 9,809,719 9,717,962 The Judiciary 8,286,882 8,534,736 9,675,485 9,180,831 Although there has been an increasing trend from 2004 to 2007, DOH budget remains lower than its 2002 level.

Table 23. Total Distribution by Function, CY 2003 to 2007 (in billion Pesos)

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget 2003 PARTICULARS

Administration Regulation Public health Hospital Services TOTAL

Amount

% Share

1.39 0.21 1.41 6.89 9.9

2004 Amount

% Share

14% 2% 14% 70%

1.38 0.21 1.4 6.57

100%

9.56

2005 Amount

% Share

14% 2% 15% 69%

1.39 0.25 1.13 6.95

100%

9.72

2006

2007

Amount

% Share

Amount

% Share

14% 3% 12% 71%

1.57 0.49 1.16 6.75

16% 5% 12% 67%

1.8 0.59 1.49 7.11

16% 5% 14% 65%

100%

9.97

100%

10.99

100%

The pattern of DOH budget distribution does not change over the years. Hospital services gets more than 50% of the total DOH budget as depicted in the table.

The passage and full implementation of the Local Government Code in 1991 resulted in the decentralization of health services and direct service provision by the Department of Health has been retained and limited only to the 72 DOH managed hospitals and sanitaria all over the country.

As proposed for CY 2007, hospital services amounting to P7.1 Billion or 65% of the total DOH Budget will be allotted while Public Health will only get a 14% share amounting to P1.49 Billion.

(See Figure 7: Presentation of the DOH - Number and Percent Total Distribution by Function)

This figure shows that hospital services gets the biggest share amounting to 7.1 billion or 65% of the total DOH budget.

Public health programs has a 14% share (P1.49Billion), general administration services with 16% (P1.80 Billion) and regulation gets 5% (P0.59 Billion).

Likewise, the Central Office gets 26% of the Total Budget (P2.9B) with the 12 Metro Manila Hospitals getting a 24% share while CHDs (P1.5 B) and the CHD Hospitals (P4.0 B) get a share of 14% and 36% respectively with CHD hospitals getting a bigger share. (See figure 6 – From DOH Presentation)

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget

Compared with the health expenditure of other Asian countries against the GDP, the Philippines registered 3.2% (2003 / National Statistical Board) which is way below the 5% norm set by the World Health Organization (WHO) for developing countries.

Table 24. Health Expenditure in Asian Countries, 2001 % OF GDP COUNTRY China 5.5 Indonesia 2.4 Malaysia 3.8 Philippines 3.2 Singapore 3.9 Thailand 3.7 Vietnam 5.1 Source: 2003 PNHA, NSCB From the paper presented by the Congressional Planning and Budget Department entitled An Analysis of the President’s Budget for Fiscal Year 2006

The DOH admits that budget per person is just P95.96 for an average nationwide allocation with Luzon having the highest per person allocation of P109.87.

Table 25. Department of Health Proper Budget Allocation Per Person, Per Region CY 2007 % % CENTER FOR POPULATION DOH POPULATION HEALTH BUDGET BUDGET DEVELOPMENT DISTRIBUTION ALLOCATION SHARE (IN ‘000 PESOS) Luzon 48,606,822 57.42 5,340,466 65.75 Visayas 17,690,188 20.90 1157,424 14.25 Mindanao 18,354,805 21.68 1,624,991 20.01 Philippines 84,651,815 100.00 8,122,88 100.00

BUDGET ALLOCATION PER PERSON 109.87 65.43 88.53 95.96

Note: Luzon budget allocation includes the 12 MM hospitals Source: 1995 Census Based City/Municipal Population Projections, National Statistics Office

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget Health situation… need for a bigger budget Health wise, “the Philippines still lags behind majority of our Asian neighbors,” admits the DOH. A recent survey by the National Statistics Office (NSO) revealed that in 2003, “a child born in the Philippines is at a greater risk of dying than children born in other South East Asian country.”

The National Demographic Health survey (NDHS) showed that infant mortality rates in the Philippines are still high compared to other countries in the region such as Vietnam, Brunei, Singapore, Thailand and Malaysia. Sixty two percent (62%) of children are born at home and only 59% of births are attended by health professionals.

Table 26. Infant and child mortality rate in the Philippines & other countries,1990 & 2003 INFANT UNDER 5 COUNTRY INFANT UNDER 5 MORTALITY RATE MORTALITY MORTALITY RATE MORTALITY (per 1000 live RATE (per 1000 live RATE (per births) (per 1000 live births) 1990 1000 live 1990 births) 2003 births) 2003 Vietnam 36 19 51 23 Singapore 7 3 8 3 Thailand 34 23 40 26 Malaysia 16 7 21 7 Brunei 10 5 11 6 Philippines 34 29 66 40 Source: NSO, DHS 2003

From 1990 to 2003, the country registered and continues to register double-digit rates of infant and under five mortality.Past studies have also shown that in developing countries, the problem of malnutrition has been the cause of death of 60 percent of children less than five years old (USAID-HKI).

Table 27. Mortality among Immunizable Diseases (Under 1; 1-4; 10-14 years) Number and rate/100,000 population Philippines, 2000 CAUSE UNDER 1 1-4 YEARS 5-9 YEARS 10-14 YEARS Measles (B05) 412 20.9 877 11.5 104 1.1 34 0..4 Tetanus (A36) 146 7.4 11 0.1 47 0.5 51 0.6 Tuberculosis of 24 1.2 117 1.5 78 0.8 63 0.7 meninges (A17) Diptheria (A36) 5 0.3 12 0.2 7 0.1 0 0.0 Other Tuberculosis (A 14-A18,B90) Acute poliomyelitis, including late effects (A80)

36

1.8

67

0.9

67

0.7

111

1.3

0

0.0

2

0.0

6

0.1

3

0.0

Source: NSO, DHS 2003

Micronutrient malnutrition, particularly with reference to vitamin A, iron and iodine deficiencies, has been found prevalent in the Philippines as shown by the results of the National Nutrition Survey (NNS) of the Food and Nutrition Research Institute (FNRI) in 1993, 1998 and 2003.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget In spite of the advances in science and technology, women still die due to pregnancy and childbirth in the 21st century. Everyday, 10 Filipino women die from childbirth-related complications. The Philippines has 172 deaths per 100,000 live births and has among the highest maternal mortality rates in the world.

People still die in the Philippines because of tuberculosis and malaria which are highly treatable and preventable. In spite of the advances in science and technology and decades of handling the control of such diseases, about 70 Filipinos die of tuberculosis daily.

According to the DOH, the life expectancy of Filipino males have increased to 67.9 years in 2002 from 67.6 years in 2001 in the same way that the expectancy of Filipino females increased from 71.6 years in 2001 to 71.9 years in 2002 with average life expectancy for Filipinos at 69.9 years.

Latest report of morbidity showed that the leading causes are still dominated by infectious diseases, but, hypertension and diseases of the heart consistently belong in the ten leading causes. Lifestyle related and degenerative diseases are the leading causes of mortality in the country.

Pneumonia is the top cause of morbidity at 971.6/100,000 population in 2004 and is closely followed by bronchitis at 900.8/100,000 population.

The General Fertility Rate (GFR) is at 119 live births/1,000 woman aged 15-44 and a Total Fertility Rate (TFR) of 3.5 births per woman aged 15-49 in the year 2003 (NDHS 2003).

Financing the health-related MDGs (goals 4,5,6) In spite of the national government’s commitment to the MDGs…budget to pursue such goals have yet to be included in the budget The Philippines commitment to pursue the attainment of the Millennium Development Goals (MDGs) by 2015. Together with other member nations who committed to the MDGs, they have set goals and targets at eradicating poverty and hunger globally, in reducing child mortality, in improving maternal health, and in combating HIV/AIDS, malaria and other infectious diseases.

Likewise, the Department of Health says that direction and thrusts for the medium term are based on two documents which are the global commitments specified in the Millennium Development Goals (MDGs) and the targets set in the nation’s Medium Term Development Plan (MTPDP). Likewise, the National Objectives for Health (NOH 2005-2010) specifies concrete ways of achieving targets set in the MDGs and the MTPDP and health priorities under the MTPDP such as reducing the costs of medicines commonly bought by the poor to half the 2004 prices and making them available nationwide in coordination with the PITC, in expanding the coverage of the health insurance particularly for indigents a premium subsidy, in strengthening the national and local health system through the implementation of the Health Sector Reform Agenda (HSRA), in improving the Health Care management System, in improving health and productivity through research and development, and in establishing drug treatment and rehabilitation centers and expanding existing ones. The comprehensive Drugs Act transfers the supervision of all drug treatment and rehabilitation centers to DOH. This is in recognition that drug abuse is not just a social ill, but, also a medical and health problem that must be met.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget But, in spite of the said commitment and pronouncements, resources and finances are yet to be allocated by the Philippine government. There has been so little budget allocated for healthrelated MDGS by the government and is actually donor-driven or backed up by outside sources (ODA).

Table 28. MDG Goals, Targets and Corresponding DOH Programs PHILIPPINE TARGET HEALTH PROGRAMS/ GOALS ACTIVITIES WITH DIRECT IMPACT ON MDGS Goal 1 Eradicate extreme poverty and hunger

Goal 4 Reduce Child mortality

Target 2 Halve the proportion of population below the minimum level of dietary energy consumption and halve the proportion of underweight under five children

•

Target 3 Halve the proportion of people with no access to safe drinking water of those who cannot afford it by 2015 Target 6 Reduce children under five mortality rate by two thirds by 2015

•

• •

• • •

• • Goal 5 Improve maternal health

Goal 6 Combat HIV/AIDS,

Target 7 Reduce maternal mortality rate by three quarters by 2015

•

Target 8 Increase access to reproductive health services to 60% by 2005, 80% by 2010 and 100% by 2015

•

Target 9 Halt and reverse the spread of

•

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•

• •

NEEDED FUNDING/ GAP (DOH ESTIMATE ANNUALLY IN PHP) 2005

Micronutrient Supplementation/ ”Garantisadong Pambata” Breastfeeding and Complementary Feeding Program Nutrition Education and Information Dissemination Environmental Health

Integrated Management of Childhood Illnesses Expanded Program on Immunization Micronutrient Supplementation (Garantisadong Pambata) Breastfeeding and complementary Feeding program Newborn Screening Program Tetanus toxoid immunization to pregnant women Provision of Iron to Mothers Gender and development Ligtas Buntis Establishment of Basic and Comprehensive Maternal and Obstetric Facilities Promotion and Prevention of AIDS

Cost P1,469,938,544 DOH 370,544,000 ODA 3,500,000 Gap P1,095,894,544

Cost P4,760,729,673 DOH 107,880,277 ODA 11,230,000 Gap P4,706,817,950

Cost P 358,263,587 DOH 22,899,667

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget malaria and other diseases

HIV/AIDS by 2015 •

Target 10 Have halted by 2015 and begun to reverse the incidence of malaria and other major diseases

• • •

prevention services Provision of Drugs and Other Logistic Supplies Malaria Control TB Control Program Establishment and Strengthening of TB Networks

Total

ODA Gap

163,377,920 P 181,976,000

Malaria Cost P1,727,102,970 DOH 19,200,000 ODA 364,400,890 Gap P1,353,602,080 Tuberculosis Cost P 606,877,000 DOH 166,877,000 ODA 261,200,000 Gap P 178,800,000 Cost P8,922,911,774 DOH 687,400,944 ODA 803,708,810 Gap P7,517,090,574

In a recent study conducted by Dr. Rosario Manasan for the UNDP, “the amount of resources needed to support the attainment of the health-related MDGs on basic health is equal to PhP 8.8 Billion or 0.13% of GDP) in 2007 and equal to a cumulative total of P101.2 Billion (0.10% of GDP in 2007 to 20015.”

The DOH as presented by ASEC Mario C. Villaverde of the Department estimates that about P7.517B is still needed to finance the gap for the health programs and projects related to the attainment of the MDGs. For 2005, a total of about P8.99 B is needed to finance the healthrelated MDGs, but, the DOH is estimated to be contributing P0.69 B annually while the ODA are contributing about P0.78 B annually. Below are some estimates by the DOH: •

To reduce child mortality, targeting reduction of children under five mortality by three quarters by 2015, an estimated budget gap of P1,095,894,544 annually (DOH estimate) has yet to be included in the budget of the national government. This will cover a) integrated management of childhood diseases/ control of acute respiratory infections; b) Expanded Program on Immunization/EPI vaccines/EPI 2nd dose Measles Vaccination, EPI Logistics Support; c) Micronutrient Supplementation (“Garantisadong Pambata”); d) Breastfeeding and Complementary Feeding Program; e) Newborn Screening Program and f) deworming.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget Table 29. Summary of the Yearly Cost Estimate for the Programs and Projects for the reduction of child mortality, DOH 2005 BUDGET GAP TOTAL COSTS DOH FUNDING ODA REDUCTION OF CHILD (PHP) (PHP) MORTALITY ASSISTANCE (?)

(PHP) (PHP) Micronutrient 502,200,000 7,584,000 1,500,000 493,116,000 supplementation EPI vaccines 452,608,456 362,960,000 2,000,000 87.648,456 EPI 2nd Dose Measles vaccination 49,155,725 0 0 49,155,725 EPI Logistics Support 406,111,148 0 0 406,111,148 Control of Diarrheal diseases 6,979,605 0 0 6,979,605 Control of Acute Respiratory Infections 4,883,610 0 0 4,883,610 Deworming 48,000,000 0 0 48,000,000 Total 1,469,938,544 370,544,000 3,500,000 1,095,894,544 •

To improve maternal health, targeting maternal mortality rate by three quarters by 2015 and increased access to reproductive health service by 60% by 2005, 80% by 2010 and 100% by 2015, an estimated budget gap of P4,706,817,950 annually has to be budgeted by the national government. This budget estimate will cover a) tetanus toxoid immunization to pregnant women; b) provision of iron to mothers; c) gender and development; d) “Ligtas Buntis”; and e) Establishment of Basic and Comprehensive Maternal and Obstetric Facilities.

Table 30. Summary of the Yearly Cost Estimate for Programs and Projects to Improve Maternal Health, 2005 DOH Estimates TOTAL COSTS DOH MDG PROGRAM ODA BUDGET GAP (PHP) FUNDING ASSISTANCE (?)

(PHP) (PHP) (PHP) Reproductive health 4,603,956,950 54,281,000 1,180,000 4,548,455.950 Micronutrient supplementation of 155,860,000 16,000,000 7,758,000 132,102,000 pregnant and lactating women Tetanus toxoid Immunization of 37,599,277 37,599,277 0 0 pregnant women Establishment of CEMOC and BEMOC 28,512,000 0 2,292,000 26,220,000 Total 4,825,928,227 107,880,277 11,230,000 4,706,817,950 •

To combat HIV/AIDS, targeting to halt and reverse the spread of HIV/AIDS, malaria and other diseases by 2015, a budget gap estimate of P181,976,000 has to be budgeted to cover a) mass treatment for STI; b) clinical care of HIV/AIDS cases; c) Provision of TA to Field Health Workers and d) the surveillance, research, treatment of cases etc.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget Table 31. Summary of the Yearly Cost Estimate for Programs and Projects to Combat HIV/AIDS, 2005 DOH Estimates BUDGET GAP TOTAL COSTS DOH FUNDING ODA MDG PROGRAMS AND (PHP) PROJECTS (PHP) ASSISTANCE (?)

(PHP) (PHP) Mass treatment for STI 148,977,000 0 0 148,977,000 Clinical Care of HIV/AIDS cases 34,000,000 8,000,000 3,000,000 23,000,000 Provision of TA for Field Health Workers 9,999,000 0 0 9,999,000 Surveillance, Treatment of 166,277,587 14,899,667 150,377,920 0 Cases,etc.

Total 358,253,587 22,899,667 153,377,920 181,976,000 •

For the control and prevention of tuberculosis, an estimated budget gap of P178,000,000 has to be budgeted annually (DOH estimate) to cover a) the treatment of category I and II cases; b) the treatment of category III cases; c) treatment of MDR cases; d) TB in children; e) Laboratory logistics; and f) capability building, PPMD operations, M&E etc.

Table 32: Summary of the Yearly Cost Estimate for Programs and Projects to Combat Malaria, 2005 DOH Estimates MDG PROGRAMS AND TOTAL COSTS DOH FUNDING ODA BUDGET GAP (PHP) PROJECTS (PHP) ASSISTANCE (?)

(PHP) (PHP) Treatment of cases 9,217,687 0 9,217,687 0 Prophylaxis for Pregnant women and 1,109,180,000 0 41,676,536 1,067,503,464 visitors Laboratory supplies 1,395,600 0 1,395,600 0 Insecticide Impregnated Mosquito 410,000,000 0 164,000,000 246,000,000 nets In-door residual spraying 36,000,000 0 601,384 34,398,616 Capability building, research, TA, 162,309,683 19,200,000 137,509,683 5,600,000 Equipments etc.

Total 1,727,102,970 19,200,000 354,400,890 1,353,602,080 •

For the control and prevention of malaria, a budget gap estimate of about P 1,363, 502, 080 has to be allocated annually (DOH estimate) to cover a) treatment of cases; b) prophylaxis for pregnant women and visitors; c) laboratory supplies; d) insecticide impregnated mosquito nets; e) in-door residual spraying; and f) capability building, research, TA, equipments etc.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget Table 33. Summary of the Yearly Cost Estimate for Programs and Projects to Combat Tuberculosis, 2005 DOH Estimates BUDGET GAP TOTAL COSTS DOH FUNDING ODA MDG PROGRAMS AND (PHP) PROJECTS (PHP) ASSISTANCE (?)

(PHP) (PHP) Treatment of Category I &II Cases 110,330,000 110,330,000 0 0 Treatment of Category III Cases 4,070,000 4,070,000 0 0 Treatment of MDR Cases 300,000,000 0 200,000,000 100,000,000 TB in children 79,200,000 7,200,000 0 72,200,000 Laboratory Logistics 9,445,700 9,445,700 0 0 Capability Building, PPMD Operation, M & 103,831,300 36,831,300 61,200,000 6,800,000 E, etc.

Total 606,877,000 166,877,000 261,200,000 178,800,000

Table 34. Summary Costing for Health-Related MDGs, based on DOH Computation of 2005 TOTAL COST MDGS PROGRAMS AND PROJECTS (P) REDUCTION OF CHILD MORTALITY 1,469,938,544 IMPROVE MATERNAL HEALTH 4,825,928,227 COMBAT HIV AIDS, MALARIA AND 2,692,233,557 OTHER DISEASES 358,253,587 HIV/AIDS 1,727,102,970 MALARIA 606,877,000 TUBERCULOSIS GRAND TOTAL 8,988,100,328

A growing population…

A bigger health budget becomes more urgent for a growing population of 85,236,913 (2005 Department of Health Philippines estimate) at a rate of 2.36% (NSO 2000) or a total of 2 million added annually.

As mentioned in the paper presented by the Congressional Planning and budget Department entitled An Analysis of the President’s Budget for Fiscal Year 2006, “the Medium-Term Development Plan (MTPDP) 2004-2010 aims to make health care delivery responsive to the needs of the population, especially the poor. Meeting this goal, however, may prove difficult given the country’s high population growth, which puts more pressure on already tight fiscal position. Unless the government makes major decision shifts on population policy, improves revenue mobilization and effectively targets its health spending to the most vulnerable sectors, there is no guarantee of the health objectives coming to fruition.”

Meanwhile, the unmet need for family planning in the Philippines is at 17% of which 8% is for spacing. The level of unmet need has declined from the 20% level in 1998. (Unmet need for

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget family planning is defined as the percentage of currently married women who either do not want any more children or want to wait before having their next birth, but are not using any method of family planning). (Philippines National Demographic and health survey 2003) From the same survey, more than half of women with at least a high school education are current users of contraception compared with less than one in five women with no formal education. The use of any method of family planning also increases with wealth status.

However, over two–thirds of current users of modern methods obtain their contraceptive supplies from a public source (67 %), 29% from a private medical source and 3% from other sources. Compared with data from the 1998 NDHS, there has been a decrease in reliance to the public sector (from 72% and an increase in use from the private sector (from 26 %).

Without the necessary intervention on the part of government to ensure the availability of modern contraceptives, where will the men and women get their family planning commodities and services? The Botika ng Barangays do not include in their list essential family planning commodities to be sold at affordable prices in their respective barangay.

Other priority health concerns The aggressive promotion of primary health care and breastfeeding has to be supported with resources and finances to improve mother and infant nutrition. Breastfeeding with all its healthful and economic advantages is the best form of feeding during the first six months of infancy. Although most Filipino babies (about 88%) are breastfed for some time, NDHS data indicate that supplementation with other liquids and foods occur too early.

The first breast milk or colostrum, is particularly beneficial to newborn because it contains high concentration of antibodies that protect children against certain infectious diseases. In the Philippines today, among newborns, less than two months of age, one in seven is not breastfed, and 19 percent are receiving supplementary foods in addition to breast milk.

The Botika ng Barangay when made use of and managed properly will address the poor’s access to safe, affordable and quality medicines that they need especially in far-flung communities. However, it has been noted that the corresponding support and backing up of Local Government Units is yet to be generated. We have to convince LGUs that it is both beneficial in terms of addressing their constituencies’ need for these safe and affordable medicines and as a sustainability measure at the same time. Moreover, herbal medicines and reproductive health commodities need to be included in the Botika ng Barangay.

Some practices like storing medicines at the homes of the Barangay Chairperson have to be discarded right away and a clear plan has to be designed in the management and implementation of such health-related undertaking.

Likewise, the LGUs which are expected to finance and deliver basic social services are performing below expectations. For fiscal year 2006, the LGUs were required to include in their budgets the implementation of basic social services responsive to the MDGs, which include nutrition services, maternal and child health services (DBM Policy, per LBM No. 47 (July 2005) (source: Paper on “The Gnawing Realities of poverty and State Negligence in the Lives of Children, Will We See an End?” by G,H.S. Ambat). For LGUs like Makati City, it is easy to

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget provide for the programs and projects for the attainment of the health-related MDGs. At the rate Makati is investing in health, especially in child and maternal health services, it is most likely that it will achieve and perhaps do better than just achieving the national target. However, for 4th class LGUs like Malinao in Aklan with a population of 23,000 in 2004 and dependent on the National Government for financing, it is a different story altogether.

As admitted by the Secretary of Health last September 13, 2006 at the House of Representatives presentation of the Department of Health’s Accomplishments and the Proposed Budget for CY 2007, even syringes could not be supplied by some LGUs for the immunization program in some localities such that the proposed budget for 2007 had to include syringes to ensure its implementation. Meaning the national government can really provide such accommodations if they want to and really need to.

The continuing exodus of trained, skilled and experienced health professionals ha had negative impact in the delivery of health services at the community level and in the retention of health service providers in hospitals and health units. A long term and short term solution to such exodus has to be addressed right away to save an already ailing health care system in the Philippines. Working abroad has to be career choice instead of a necessity. We have to accelerate training of health professionals like providing for scholarships to indigent but qualified students, but, have to work or render services in the Philippine Health Care Delivery System equivalent to the number of years of which they have trained. We also need to look into negotiating with recipient countries in terms of a per capita “training pay-back scheme” to support the program for acceleration and retention of health professionals in the Philippines.

We also need to improve the working conditions and benefits of our health professionals and encourage LGUs to devise mechanisms on how to improve the benefits of their community health workers.

Below are some hard realities: o The Philippines is now the number one (1) exporter of nurses. “An estimated 85% of employed Filipino nurses (more than 150,000) are working internationally.

(Alken et al 2000) About 70% of all Filipino nursing graduates are working overseas. “(Bach 2003) o The Philippines also ranks number two (2) as exporter of doctors. About 68% of Filipino doctors work overseas, next to India.” (Mejia, WHO, 1979). o Offers abroad are simply irresistible considering the a)higher compensation and benefit packages (US$180 a month vs. US$4,000 a month USA); b) more job opportunities abroad (more than 200,000 nursing positions available yearly in about 32 countries); c) more economic, social and political stability; d) better living conditions abroad; e) better career growth abroad; and f) better working conditions. o Some of the reasons why they leave are a) low compensation and benefits; b) family obligations and security; c) political instability; d) poor working conditions; and e) graft and corruption o The top five (5) countries of destinations are the United States of America (USA), the United Kingdom (UK), Saudi Arabia, Ireland and Singapore. o Mushrooming of nursing schools because of the demand abroad. In a matter of ten months, an additional 109 schools were established in the country- from 251 in June 2003 to 370 in April 2004. There were only 40 nursing schools in the ‘70’s and about 170 in the ‘90’s. o As a consequence of the rapid proliferation of nursing schools is the deteriorating performance in the National Nurse Licensure Examinations. The average

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget

o

o

o

o

proportion of nursing graduates passing the Philippine Nurse licensure examinations in the 70’s to 80’s was 80-90%. With 1994 as a reference year, passing rate was 61.45% and succeeding years have all been below, even reaching a low of 45%. Current rate is at 49.4% and not even reaching 50%.

The total number of licensed nurses have decreased to an average of 4,500 (1999-2002) compared to more than 15,000 in the early 1990s. It is now again increasing as not only original nursing graduates are taking, but also, second courses majority of whom are “nursing medics” Doctors are now shifting to nursing in order to work abroad. WHY? There is too much political instability, very poor working conditions, there is the threat of malpractice law, low salaries and benefits and the continuing peace and order problem.

A decreasing enrollment of first year medical students (for the past two years ranging from 18% to 74% with an average of 30%), a decreasing number in applicants for the residency positions in training hospitals, the closing down of three (3) medical schools and a decreasing performance in the physician licensure exam.

Three (3) hospitals in Mindanao and two (2) hospitals in Isabela have no more doctors and nurses; b) disparities and inequities are heightened; c) a decrease in health services coverage; d) hospitals across the country lament the loss of senior nurses and less ideal nurse:patient ratios and an increasing vacancies of MDs and RNs.

Source: The Brain Drain Phenomenon and Its Implications to Health by Jaime Galvez Tan, MD,MPH as presented in the 3rd Alfred J. Ganapin Advocacy Forum Series in September 30, 2005.

Research, production and distribution of herbal medicines should be accelerated and financially supported.

The National Health Insurance of the Philippines or NHIP should be strengthened and supported to accommodate more indigents among its beneficiaries and should not allow itself to be used by government officials for their own benefits and selfish motives or for election purposes. A system has to be drafted in identifying who the real indigents are in each and every barangay in the Philippines and in the distribution of such PhilHealth cards.

It has been noted that the number of indigent beneficiaries suddenly increase during election years. Our proposal for the year 2007 budget is to retain its P750 million premium subsidy to avoid its being manipulated for the elections, because 2007 is an election year.

Alternative Health Budget The health budget for CY 2007 needs to be increased by P8.503 Billion, but, the allocation for premium subsidy for NHIP has to be slashed by P2.75 billion and maintained at its 2006 level which is at P750Million, until a thorough report is submitted on the evaluation/assessment of -1. Previous distribution scheme and how program beneficiaries were identified, 2. Profiles of program beneficiaries and the Impact of the program on intended beneficiaries 3. The monitoring plan in place Below are some budget items where additional budget is highly recommended:

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget Table 35. Budget Items to be Increased BUDGET ITEM

Disease Prevention and Control Vaccine Preventable disease control (Expanded program on immunization (EPI), Vaccine Self-Sufficiency)

PROPOSED BUDGET

497,158,000

PROPOSED ADJUSTMENTS

448,316,606

EPI Vaccines EPI 2nd Dose Measles Vaccination EPI Logistic Support Tetanus Toxoid Immunization of Pregnant Women

Tuberculosis prevention and control

37,599,277

154,007,000

452,870,000

103,831,300

2,900,000 1,724,202,970

Additional Budget for Reproductive Health Establishment of BEMOC and CEMOCf Micronutrients Micronutrient supplementation (Micronutrient supplementation for 14.3 million under-five children which entails

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1,727,102,970c 9,217,687 1,109,180,000 1,395,600 410,000,000 35,000,000 162,309,683

51,098,000 22,282,000

28,939,000

102,196,000

153,294,000d

46,202,000

68,484,000e

439,177,802

468,116,802

STI/HIV/AIDS Control of Diarrheal Diseases (for Children) Control of Acute Respiratory infections (for Children) Deworming (for Children) Dengue prevention and control

Sub Total

606,877,000b 110,330,000 4,070,000 300,000,000 79,200,000 9,445,700

Treatment of Cases Prophylaxis for Pregnant Women and Visitors Laboratory Supplies Insecticide Impregnated Mosquito nets In-Door Residual Spraying Capability Building, research, TA, Equipments, etc

Family health including population policy & primary health care initiatives Epidiemiology & Disease Surveillance Prevention and control of other infectious diseases including Dengue, Leprosy, Filariasis, Food and water borne disease, Soil transmitted Helminthiasis, Acute respiratory infections, CDD, STD/AIDS and other Reproductive tract infections, Dental Diseases and other infectious

945,474,606a 452,608,456 49,155,725 406,111,148

Treatment of Category I & II Cases Treatment of Category III Cases Treatment of MDR Cases TB in Children Laboratory Logistics Capability building, PPMD Operations, M&E, Etc

Malaria Prevention and Control

ALTERNATIVE BUDGET FOR 2007

358,253,587 4,883,610 48,000,000 48,000,000 50,000,000

756,384,000 3,212,965,378

3,965,349,378

4,603,956,950 28,512,000 658,060,000

4,603,956,950 28,512,000 658,060,000g 502,200,000

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget administration of vitamin A 200,000 i.u. per capsule twice a year (57M) and iron drops for 8.9 million low-birth-weight infants.)

155,860,000 Micronutrient Supplementation of Pregnant and Lactating Women

Sub Total

5,290,528,950

5,290,528,950

TOTAL

8,503,494,328

9,255,878,328

* Data to generate magnitude of financial shortfall is not complete and updated. The budget items are largely based on the Department of Health’s computation for the three health-related MDGs (goals 4 to 6) which are directly related to its programs. See following details/ breakdown of expense items as computed by DOH.

Notes: a/ Based on DOH computation for annual cost of programs and projects for the reduction of child and maternal mortality. b/ Based on DOH computation for annual cost of programs/projects to combat tuberculosis. c/ Based on DOH computation for annual cost of programs/project to combat malaria. d/ The alternative budget proposes a Child Survival Package/Program which consists of Education, Training, Monitoring, Module Development and Promotions of good health practices that ensure child survival. These activities focus on the following components 1. Skilled attendance during pregnancy, delivery and the immediate postpartnum 2. Care of the newborn 3. Breastfeeding and complementary feeding 4. Micronutrient supplementation 5. Immunization of children and mothers 6. Integrated management of sick children 7. Use of insecticide-treated bednets e/ The proposed additional budget intends to Improve on data collection, generation and analysis towards a regularly updated and timely dissemination of data/information on the status of the health of the population f/ BEMOC – Basic Emergency Management Obstetric Care CEMOC – Comprehensive Emergency Management Obstetric Care Based on DOH computation but planning and implementation plan has to be drafted by DOH together with civil society organizations. g/ Based on DOH computation for annual cost of programs/projects to reduce child and maternal mortality.

Meanwhile, reduction of NHIP budget to 2005 level is also recommended: Table 36. Budget Items to be Decreased PROPOSED BUDGET ITEM BUDGET ALGU - Premium subsidy for indigents under the National Health Insurance Program

3,500,000,000

PROPOSED ADJUSTMENTS

(2,750,000,000)*

ALTERNATIVE BUDGET FOR 2007 750,000,000

* Savings to be generated will be re-allocated to other priority expenditure items

Rationale: Maintain the budget at the 2005 level (at Ph 750,000,000) until a thorough report is submitted on the evaluation/assessment of -1. Previous distribution scheme and how program beneficiaries were identified, 2. Profiles of program beneficiaries and the Impact of the program on intended beneficiaries 3. The monitoring plan in place to justify increase as proposed, from 750 million to 2.5 billion.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget The proposed alternative budget intends to address the following targets -Reduction of child mortality and Improve maternal health • Fully immunized child coverage will increase from 84.5% in 2005 to 100% in 2015 • Coverage of tetanus toxoid vaccination will increase from 80% in 2005 to 100% in 2015 • Hepatitis B coverage will increase 45.6% in 2005 to 100% in 2015 • Proportion of children aged 0-5 years of age who are given Vitamin A will increase from 79% in 2004 to 100% in 2015 • All under five children will be given micro-nutrient supplementation Combat HIV AIDS, Malaria and other Diseases • To reduce TB morbidity rate from 290 in 2006 per 100,000 population to 250 in 2010 and 190 in 2015; Includes treatment of TB cases among children • To reduce Malaria morbidity rate from 269 per 100,000 population in 2006 to 138 in 2010 and 1 in 2015 • To reduce STI prevalence rate from 5% of the general population in 2006 to 1% in 2010 and 0.5% in 2015

References: Congressional Planning and Budget Department (CPBD). “Analysis of the President's Budget for Fiscal Year 2006." January 2006.

Department of Health CY 2007 Proposed Budget, September 2006 Department of Health Proposed Budget for CY 2007, Presentation by Secretary of Health Francisco T. Duque III, MD, MSc, Committee Hearing , September 2006 Department of Health, Program of Work Fiscal Year 2007, distributed during Committee Hearing September 2006 Financing Health Related MDGs, Mario C. Villaverde, M.D., MPH, CESO III, Assistant Secretary of Health, Presentation during the May pera pa ba? forum, UP NCPAG, September 2005 Manasan, Rosario G. Financing the Millennium Development Goals: The Philippines (Paper presented during the validation meeting, Balay Kalinaw, UP Diliman Campus, Sept 26, 2006).

May pera pa ba? Moving Forward with the Millennium Development Goals, Social Watch Philippines, UNDP and UP NCPAG, June 2006 Philippine National Demographic Survey 2003 The Brain Drain Phenomenon and its Implications to Health, Jaime Z. Galvez Tan, M.D., MPH, (Paper presented at the Third Alfred J. Ganapin Advocacy Forum Series, September 30, 2005) The Philippine Phenomenon of Nursing Medics: Why Filipino Doctors are becoming nurses? A Primer, Medical Action Group, 2005 The President’s Budget Message FY 2007, “Budget: Strong Regions for a Strong Republic”, August 2006 WHO / UNICEF Regional Child Survival Strategy: Accelerated and Sustained Action Towards MDG 4, WHO – Western Pacific Region and UNICEF, 2006

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget

Agriculture and Fisheries Sector Agriculture accounts for more than one third of the total labor force—rising to nearly one half if agri-based manufacturing and service sectors are included.

A key to success of many countries in Asia is the sustained increases in the agriculture sector’s productivity. The Philippines’ agricultural productivity is declining.

The declining trend agricultural productivity for example, is causing apprehensions because agriculture is the primary source of livelihood of the majority of the population. In fact, poverty is far more extensive and involved greater numbers in agriculture than in any other sector of the Philippine economy. Poverty incidence among agricultural households is about four times that than the rest of the population.

The fishery sector, if viewed on the aggregate would show a not-so-worrisome trend registering modest growth over the past three years. Last year, it grew by 6.04%. However, the growth was for the large part, due to the aquaculture sector’s robust performance – sector which requires more capital investment and would therefore benefit those who have capital to begin with. Municipal fishery production grew by 4.75% over the same period but considering the number of small fisherfolks involved in the sector and most of them likewise living in poverty, such growth if divided among them would likewise be miniscule to lift them out of their miserable state.

Table 37. Contribution by sector to total fisheries production, 2001 SECTOR CONTRIBUTION % Aquaculture 39 Commercial marine fisheries 31 Municipal marine fisheries 26 Municipal inland fisheries 4 Source: Bureau of Agriculture Statistics, as cited in “Turbulent Seas: Status of Philippine Marine Fisheries,” DA and BFAR, 2004

Therefore, if government says it is for the poor, it addresses the concerns of the marginalized, then it should follow that agriculture and the fisheries sector should be at the forefront of its concerns.

The key objective would, therefore, have to be raising agriculture productivity. The question that follows is how do we raise agriculture productivity and increase the incomes of marginalized fisherfolks.

The agriculture and fisheries modernization act (AFMA) AFMA has very well defined the path towards agricultural modernization. It has identified the changes and major reforms that ought to be done. Under the AFMA law, it is suppose to allocate an additional budget of 20 billion in the first year and 17 B over the succeeding years of AFMA implementation on top of the regular DA budget.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget However, a look at the AFMA implementation revealed that there was really no additional budget that was given to DA. Although AFMA is a welcome move since it was expected to bring in the necessary investments for change to occur in the rural areas, it remains silent on the need to shift from highly intensive and environmentally damaging technologies to more sustainable production practices.

A Second Look at Current Agri Technologies Of the 4,822,739 farms in the country, many are already highly acidic—thus highly limiting its ability to attain maximum biological yields. Nueva Ecija and Isabela---both top rice producing provinces, have the most acidic soils from years of intensive use of chemicals. (PDI, 24 May 1999, “Nutrient Deficient: Rice Fields No longer Productive, says Expert”) Further, according to Jaime Tadeo, a farmer leader, rice produced in the country are already found to contain high levels of toxic substances at 0.08 ppm while only a maximum of 0.015 ppm is currently tolerated. This brings to fore the question of food safety.

Therefore, raising productivity levels by simply increasing or sustaining subsidies on inputs and in seeds will not give the country sustainable good yields. If we remain at status quo in terms of technologies used, we may end up increasing production in the short term but compromising food safety and ultimately failing to sustain the yields with productivity already stretched to a lower limit because of further eroded soils.

The fact is there are sustainable alternatives that have been found to increase yield to comparable levels (or even greater) at reduced costs to farmers and more importantly, increasing biological soil activity.

For the fishery sector, preserving water quality (by averting oil spill disasters, prohibiting mine tailings, domestic sewage, etc.) as well as protecting mangrove areas are musts. The expansion of aquaculture areas over the past years has led to the decline in mangrove swamps.

In 1965, mangrove areas covered about 4,500 sq. km. By 1981, an aggregate cover of only 1,460 sq. km. was intact, about 60% of the loss was due to the conversion of mangrove areas into aquaculture production.

Towards More Spending for Sustainable Agriculture Towards raising and sustaining agricultural productivity using sustainable agriculture and fishery practices, we need: 1) focus on the development, enhancement, promotion and mainstreaming of sustainable agriculture practices, 2) conservation, regulation and protection of fisheries and aquatic resources, and 3) provide rehabilitation funds for rural infrastructures damaged by Typhoon Milenyo

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget FARMERS’ TRAINING ON SUSTAINABLE AGRICULTURE PRACTICES An additional P200 million is being proposed to go into farmers training for systems rice intensification (SRI), seed banking and establishment of sus ag demonstration farms in strategic farming provinces.

SRI is a growing water management technology that has proven to increase rice yields to up to 9 metric tons/hectare compared to the current average of about 3.5 mt/ha. It is seed-neutral, meaning it does not have any bias on the kind of seeds that will be used but uses precise spaces in-between rice plants. The system has high labor absorptive capacity and therefore has potential for creating additional on-farm employment.

Seed banking is quite important for farmers to have access to good quality seeds suitable to the localities’ soil and climatic conditions. The spending makes public access to seeds that can be replanted rather than hybrid seeds, the productivity of which goes down each planting season.

Sustainable agriculture demonstration farms need to be supported for farmers to see that IPM, use of organic fertilizer, SRI, traditional seed varieties work. Executive Order 481 which pushes for sustainable agriculture practices would be supported by this additional funding.

The P200 M additional budget, to go to DA but will seek the assistance of NGOs and LGUs would go to the following: P160 M – SRI and seed banking training P 40 M - establishment of demo farms in key provinces

IRRIGATION Investment in irrigation is necessary. It immediately doubles production. The construction activity offers additional rural employment and investment lasts beyond one production cycle unlike when investing in seeds subsidy. Irrigation also reduces vulnerability of farmers to harsh weather conditions especially that of El Niño.

Although additional irrigation facilities are welcome, (shallow tube well and other small communal irrigation systems are preferred), repair should also be in the main agenda.

Development of new irrigation systems cost Ph300,000 pesos per hectare while the cost of repair is much cheaper at Ph 70,000 per hectare (National Irigation Authority).

While the rice may be the main beneficiary in irrigation investments, the impact on investments to be made in irrigation will benefit other crops as well.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget Table 38. Service Area of all Irrigation Systems, in hectares, as of December 2005 SYSTEMS SERVICE AREA National irrigation systems 695,774 Communal irrigation systems 543,262 Private irrigation systems 174,200 Total 1,413,236 Total Rice Lands 4,100,000 of w/c potential irrigable 3,126,340 Actual irrigated/ irrigable lands 45% Source of basic figures: NIA website, viewed October 2006.

An additional one billion pesos to the irrigation budget concentrating on repair and rehabilitation of existing small communal irrigation systems, construction of shallow tube wells and an additional P15 million for water, soil and analysis and water impounding mechanisms if spent accordingly would go a long way in increasing agriculture productivity.

FARM TO MARKET ROADS Another P1 billion is being proposed to repair farm to market roads and bridges damaged by the Typhoon Milenyo. The efficacy in putting up this rural infrastructure is no longer debatable. Not only are farmers direct beneficiaries in this investment but the rest of the rural population as well.

POST HARVEST FACILITIES According to the Congressional Commission on Agricultural Modernization it its study about eight years, ago, post harvest losses are significant, ranging from 10-37% for rice, 30% for corn and 40% for in vegetables, fruits and commercial fishery products. A P1 billion increase in spending for this program will translate in more earnings for farmers and fisherfolks.

ADDITIONAL SPENDING FOR THE FISHERIES SECTOR An additional P21.8 million for the exclusive use of FRMCs, legal assistance for Bantay Dagats who capture illegal fishers, establishment of fish sanctuaries, making available cold storage facilities is being proposed.

What is being presumed in all the above proposals is that the funds that will be made available will be fully absorbed and utilized according to its primary use. A Joc-Joc episode should no longer happen.

References: An Analysis of the President’s Budget for Fiscal Year 2006. Congressional Planning and Budget Department. 2005 Modernizing Agriculture. Report and Recommendations of the Congressional Commission on Agricultural Modernization. Congress of the Philippines.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget In Turbulent Seas: The Status of Philippine Marine Fisheries.

Bureau of Fisheries and Aquatic Resources. 2004

Department of Agriculture and

House Bill 5794. General Appropriations Bill. House of Representatives. October 2007.

Department of Agriculture, FY 2007 Budget. Department of Agriculture. 2007

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget

Analysis on the DENR Proposed Budget for FY 2007 Context •

The GMA government continues to pay lip service to the natural resource and environment sector.

•

On the policy side, the SONA of GMA from 2001-2006 had nothing to say about environmental sustainability. GMA, however, mentioned the usual rhetoric on reforestation and protection of watersheds as general programs. The 2006 SONA mentioned the environment in the context of boosting the creation of the “super regions”. In the 2004 SONA, GMA only made references to legislations on the environment signed in the previous years, Clean Water Act of 2003 and the Solid Waste Act of 2001.

•

The natural resource and environment sector is also not included in GMA’s priority 10-point agenda. While the MTPDP devotes a whole chapter on environment and natural resources, the focus is still on how to use the environment to grow the economy and not environmental sustainability. “The Medium-Term Development Plans and local development plans are basically plans for growing the economy, not sustainability plans that will deliver social and environmental justice” (Isagani R. Serrano, “Ensuring Environmental Sustainability”, Social Watch Philippines 2005 Report).

•

On the resources side, the budget of the natural resources and environment sector from 2005-2006 is less than 1 percent of the total government budget. While the proposed budget of Php 8.9 billion for the sector in 2007 represents a 14.9 percent increase from last year’s level it is still a mere 0.79 percent of the total government budget.

•

Overall, government efforts to ensure environmental sustainability can be characterized by gaps, gaps and more gaps. ¾ First, the inconsistency of development plans with landmark documents such as the PSSD and PA 21. ¾ Second, the widening policy-action gap. ¾ Third, the gap between small victories in sound environmental policies that were passed and the scant resources that government actually allocates for them. ¾ Fourth, the inconsistency in the priorities taken by each incoming DENR secretary, considering the frequent turn-over in that department. ¾ Fifth, the conflicting dual role of DENR as protector of the environment and franchiser of exploiters of natural resources.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget The Proposed DENR Budget for FY 2007 •

Bulk of the natural resources and environment sector is appropriated to the Department of Environment and Natural Resources. The Department’s budget totals PhP 7.4 billion or a mere 0.67 percent of government’s total budget (PhP 1.1 trillion) for FY 2007. This is a clear indicator that environment and natural resources continue to be a non-priority for the GMA government.

•

Of the PhP 7.4B budget of DENR, 56.2 percent goes to Personnel Services (PS), 31.8 percent goes to Maintenance and Other Operating Expenses (MOOE) and only 12 percent goes to Capital Outlay (CO).

•

Current Operating Expenses of existing programs and activities (PS + MOOE) eat up 88 percent of the Department’s budget. Such that for 2007, one can expect the DENR to just continue/maintain without upgrading/up scaling its plans, programs and activities for the environment. Since the budget is heavy on PS and MOOE, it shows that DENR is content on continuing its previous program and shows no plans of changing its track and priorities.

Given the dire condition of the environment and the critique of environmental groups on the DENR’s direction for the environment, we seem to be headed for deeper trouble.

•

Appropriations for CO at 12 percent means that out of the meager resources allocated to DENR, even smaller resources are actually allocated for new programs or expansion projects, infrastructure development and purchase of necessary equipments.

•

It must be pointed out, however, that new appropriations to the DENR will only amount to PhP 7 billion since Php 0.4 billion of the appropriations are already automatically appropriated. In effect, the Department has no hand in determining the use of these appropriations.

•

Furthermore, another PhP 0.7 billion of the Department’s budget are for foreign funded loan projects. In the end, the national government is actually only appropriating PhP 6.3 billion for DENR.

•

There are no clear appropriations for critical environmental policies (National Land Use Act, Clean Water Act, Clean Air Act, Solid Wastes Management Act) and biodiversity conservation programs.

•

DENR expects these programs to be funded by foreign assisted projects as it has done so in the past three (3) years. It shows that projects supposedly directed at ensuring environmental sustainability ranks low in DENR’s priority. While DENR appropriates counterpart funds for these FAPs, these funds are still subject to DBM allotments in relation to the availability of funds of the national government. And since environment and natural resources also ranks low in the government’s priorities, the actual funds for these projects are more often delayed if not alloted altogether.

•

The proposed budget of DENR only tells one side of the story, a despairing story on how DENR, as the lead agency, plans to spend for environmental sustainability. The other half tells of a more forlorn story on how the GMA administration plans to further exploit the environment and boost her “super regions”.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget Key Environment Issues MINING •

Even with recent large-scale mining disasters and widespread opposition against the Mining Act, the DENR’s budget shows that it plans to continue with large-scale mining projects, guised as responsible and sustainable mining projects.

•

In the Mining and GeoSciences Bureau’s (MGB) budget, appropriation for Mineral Lands Administration takes up 41.6 percent. This particular budget item finances operation dedicated to direct operational implementation of the Mining Act of 1995, such as the conduct of mineral land surveys and exploration, the process of mineral lands exploitation and utilization permit applications and the regulation of mining activities.

•

Encouraging the entry of new mining firms to the country is one of Sec. Angie Reyes’ 12 point agenda.

•

Geosciences Development and Services accounts for only 25.4 percent of the proposed budget of the MGB. Appropriation for this particular budget item provides support for environmental concerns such as water resources, sanitary landfills, land use, coastal management and others.

•

In the case of mining, it is clear that based on the proposed budget appropriations largescale mining is the DENR’s proposed priority for 2007 instead of environment protection and conservation.

FORESTRY •

While Community-Based Forest Management (CBFM) is the mandated national strategy for the sustainable development of forest lands (EO 263), commercial forestry remains to be the priority of DENR as shown in its budget.

•

At face value, the Forest Management Program budget projects a bright future for forestry with 56.2 percent total Office of the Secretary budget.

•

A closer look, however, reveals that Forest Management Service eats up 41.8 percent of the Forest Management Program. This item funds DENR’s support activities for industrial tree plantations and logging operations such as area surveys, delineation and issuance of Industrial Forest Management Agreements (IFMA) and Socialized Industrial Forest Management Agreements (SIFMA) and the granting of timber licences and permits.

•

Appropriation for Plantation Establishment, Maintenance and Protection only gets 13.3 percent of the Forest Management Program budget. This budget item funds DENR’s direct forest undertakings such as tree plantation establishment, maintenance and protection through private contractors.

•

The item on Forest Protection while getting 27 percent of the Forest Management Program has zero CO allocations.

•

CBFM only gets a 3.8 percent share of the Forest Management Program.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget •

While CBFM Agreements have the largest coverage in government forest tenurial agreements with over 1.5 million hectares, it has the lowest share in budget allocation.

•

On the other hand, IFMA and SIFMA areas covering less than 1 million hectares get almost half of the budget allocated for the Forest Management Program.

The Other Budget for Environment and Natural Resources •

The Sbilanciamoci! Campaign in Italy has demonstrated that it is indeed possible to use public expenditure to ensure social and environmental justice.

•

The government must stop looking at the environment and natural resources as a tool to pump-prime its growth agenda. It has to realize that the carrying-capacity of our environment and natural resources has reached an alarming stage.

•

In fact, the government, primarily the DENR has to panic with the current state of our environment and natural resources. Hence, the trend of minimal government spending for this sector has to be reversed.

•

With this, PRRM proposes to increase DENR’s budget from PhP 7.5 billion to PhP 15.19 billion.

•

This will provide DENR with additional funds amounting to PhP 7.7 billion. These additional funds must then be appropriated to six priority areas: 1) Land Use and existing legislation; 2) Urban Ecosystem; 3) Forest Ecosystem; 4) Coastal and Marine Ecosystem, 5) Critical Habitats and Biodiversity, and 6) Water and Sanitation System

Programs on these five areas must be directed at ensuring the sustainability of our environment and natural resources and not in boosting GMA’s proposed super regions. Bulk of the allocations of these funds must be given to Capital Outlay to ensure that funds are used for actual program implementation.

Proposed DENR Alternative Budget LAND USE AND EXISTING LEGISLATION

•

Increase appropriations by PhP 750 million for a comprehensive land use program that includes land surveys, delineation, resource mapping up to preparations for national and local land use plans that cuts across ecosystems; and,

•

Appropriate funds amounting to PhP 550 million to jumpstart the implementation and provide for a multi-sectoral review of programs in compliance with the 4 key environmental legislation: 1) National Land Use Act;

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget 2) Clean Water Act; 3) Clean Air Act, and; 4) Solid Waste Management Act, and provide clear guidelines for the use of these funds.

URBAN ECOSYSTEM •

Increase appropriations by PhP 50 million for projects reducing air pollution and monitoring of air quality in severely affected urban centers;

•

Increase appropriations by PhP 50 million for projects on solid, toxic and hazardous waste management;

•

Adopt a program and provide appropriations amounting to PhP 100 million for projects that provide and widen the coverage of household access to potable water supply, and;

•

Adopt a program and provide appropriations amounting to PhP 100 million for projects that provide and widen the coverage of household connection to sewage and sanitation facilities.

FOREST ECOSYSTEM •

Adopt a program and provide appropriations amounting to PhP 100 million for forest boundary delineation to clearly establish “forest protection areas” and “forest production areas”;

•

Adopt a program and provide appropriations amounting to PhP 100 million for the review of existing forest tenurial instruments;

•

Reduce appropriations for Forest Management Service by PhP 300 million and redirect these funds to CBFM. Since the bulk of this item consists of PS and MOOE, personnel assigned to this item must also be transferred to CBFM programs.

•

Over and above the re-allocation from the Forest Management Service, increase appropriations by PhP 100 million for CBFM;

•

Increase appropriations for Capital Outlay by PhP 50 million on Forest Protection;

•

Adopt a program and provide appropriations amounting to PhP 100 million for the rehabilitation of existing mines and mining disaster areas;

•

Reduce appropriations by PhP 50 million of the Mineral Lands Administration under MGB’s budget and redirect funds for rehabilitation projects, and;

•

Over and above the re-allocation from the Mineral Lands Administration, increase appropriations by PhP 100 million for Geosciences Development and Services under MGB’s budget.

COASTAL AND MARINE ECOSYSTEM •

Appropriate an additional PhP 800 million for programs on coastal and marine ecosystems;

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget •

In particular, DENR should adopt a program and provide appropriations amounting to PhP 150 million for comprehensive mangrove reforestation;

•

Adopt a program and provide appropriations amounting to PhP 150 million for coral reefs rehabilitation and protection and establishment of marine sanctuaries, and;

•

Adopt a program and provide appropriations amounting to PhP 300 million for sustained coastal and river systems clean-up.

CRITICAL HABITATS AND BIODIVERSITY •

Appropriate an additional PhP 630 million for programs on critical habitats and biodiversity;

•

DENR should adopt and provide appropriations amounting to PhP 200 million for the rehabilitation, protection and monitoring of Philippine biodiversity hotspots;

•

Increase appropriations by PhP 200 million for the protection and monitoring of National Protected Areas and the establishment of new protected areas.

WATER AND SANITATION SYSTEM •

Appropriate P4 billion for water and sanitation systems of the 432 municipalities where less than 50% of population have access to water.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget

An Overview of the Debt Situation under GMA More than 20 years after the Philippines experienced a severe debt crisis in the early ‘80s; after honoring all the debts of a fallen dictator and his cronies; after years and years of dutifully shelling out scare government resources for both the principal debts and their interests; the Philippines remains in a vicious trap debilitated by a cycle of debt dependence and underdevelopment.

Unfortunately, the country again is in grave danger from spiraling into a debt tragedy. For one, the government under the administration of Gloria Macapagal Arroyo is increasingly relying on debt to keep its finances afloat virtually making the government a debt addict. Second, this administration is changing some fiscal procedural, management, and reporting rules that allow it to juggle funds and statistics simply to make its “numbers” look good. Third, under GMA we are again witnessing unscrupulous borrowing practices and provision of government guarantees that can be expected to further add to our debt burden. And lastly, under the GMA administration the little gains achieved in attempts of the national government to recover and hold accountable those responsible for behest and onerous loans under the Marcos dictatorship are now being compromised.

The Over-all Debt Situation As of September 2005, total Philippine debt has ballooned to a staggering Php 6.5 trillion or UsD 116.3 billion. From Php 4.5 trillion or UsD 89.78 billion in 2000 and Php 1.8 trillion or UsD 74.7 billion in 1994, Philippine debt continues to grow at an alarming rate to the detriment of the Filipino people. The county stands as the 10th most indebted country in the world when it comes to total external debt as of 2002.

It is the Philippines’ public sector, which is directly responsible for 76 percent of these debts. By end-December 2005 the consolidated public sector debt (CPSD) has amounted to Php 5.1 trillion or UsD 96.0 billion. The CPSD consists of debts of the national government, the Central Bank - CB-BOL, the Bangko Sentral, local government units (LGUs), the 14 monitored government-owned-and-controlled corporations (GOCCs), government financial institutions and assumed contingent liabilities from private sector loans.

Table 39. Distribution of Philippine Debt, as of end-September 2005 (In billion UsD) (in trillion Php) Total Philippine Debt

116.3

Foreign Debt 71.6 Public 47.7 Private 23.9 Domestic Debt 44.7 Public 40.6 Private 4.1 Source: Bangko Sentral ng Pilipinas (www.bsp.gov.ph); Bureau of Treasury (www.treasury.gov.ph)

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6.518 4.014 2.672 1.342 2.504 2.274 0.230

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget GMA’s Debt Addiction The current Philippine government under Gloria Macapagal Arroyo (GMA) has opted to take an aggressive borrowings and repayment policy. The total borrowings of the Arroyo administration amount to more than the combined debts of the country’s past three presidents. In power for only 5 years and 7 months, GMA has already borrowed a total of Php 2.77 trillion. On the other hand, the combined debt of Cory, Ramos and Erap only totals Php 1.51 trillion.

Total Borrowings per Administration

3000000

2756680

2500000

2000000

1712485

1500000

725181 1000000

383370

500000 273446

109924

1044195

401015

146434 254581

314090 411091

0 Aquino, (383B) ( 1987-1991)

Ramos, ( 401B) ( 1992-1997)

Est r ada, (725B) ( 1998-2000)

Arroyo, (2.76T) (2001- July 2006)

Gross Domestic Borrow ings

Gross Foreign Borrow ings

Total Borrow ings

This clearly reflects how the government has become a virtual debt addict. The government has been too clever, perhaps having learned from the financial and debt crises it went through in the past, by developing a way to curb the usual paths towards a debt crisis and mastering tricks needed by a debt addict.

Lately the Arroyo government has been restructuring its bond debts by offering to exchange maturing bonds with new debt papers. An Asian Development Bank (ADB) paper entitled Empirical Assessment of Sustainability and Feasibility of Government Debt: The Philippine Case likened this practice to one playing the Ponzi game (or pyramiding): borrowing to repay old debts. According to the paper, this practice may have met the necessary conditions at the moment but is not sustainable in a few years.

Another trick employed has been to stay away from short-term external debt, shifting from foreign currency debt to local currency debt. Experts who have been monitoring monetary and debt crises throughout the world and have developed early warning systems generally look only at the external debt. One assumption here is that domestic debt can simply be erased by the government printing money which the Bangko Sentral is forbidden to do. Technically speaking, if the foreign currency debt is obtained from a Philippine resident, then it will not count as external debt. The government is an expert at playing this game, and has deliberately stopped reporting the foreign currency debt it owes to Philippine residents.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget

While this strategy allowed LIQUIDITY debt indicators to look good, SOLVENCY indicators speak of trouble. The public sector debt is huge, both as a proportion of GDP (93.4 percent as of 2005) and even worse, as a proportion of tax revenues (740 percent as of 2005). This is where the government is extremely vulnerable. And it is the OFW remittances that are preventing this solvency problem into becoming a liquidity problem.

The crisis of a debt addict is not manifesting itself as a currency or debt crisis, but as a crisis of a country unable to reduce poverty, provide decent work for all its people (instead, pushing the Filipinos to go abroad), provide good infrastructure and essential social services, undertake thorough, comprehensive and genuine agrarian reform, and develop a dynamic vibrant domestic economy. It manifests itself in our inability to meet the millennium development goals set by the UN, or in the Arroyo government's altering the student: classroom ratio from 50:1 to 100:1 in order to "solve" the problem of classroom/school building shortage.

The country is slowly but surely stagnating, with unemployment and underemployment consistently increasing, investment spending (in an economic, not financial, sense) consistently falling for six consecutive quarters, while ironically, despite high unemployment and underemployment, relying on consumer spending to fuel growth.

Debt Servicing Above All Else The most evident impact of the Philippines’ continued reliance on debt and its government’s lack of prudence in accessing and assuming debt is the ever-increasing burden of repayment. In 2005 alone, the Philippine NG paid PhP 678.95 billion in interest and principal debt payments.

This amount represents 85 percent of the country’s total revenue collection and 52.7 percent of the total government budget for the same year.

The Automatic Appropriation Law – [Sec. 31(B) of Presidential Decree 1177 in Sec. 26(B) Book 6 of the Revised Administrative Code of 1987] ensures that all the expenditures for both the Revenues after Debt Payments 900000 800000 700000 85 %

600000

amount ( in million pesos)

86%

500000 76%

400000 63%

300000 49%

200000 100000 0 2001

2002

Debt Servicing Initiative Available Funds An NGO-Legislators’

2003

year

2004

2005

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget principal and interest on public debt and national government guarantees of obligations are automatically appropriated. This means that the Philippine government is mandated by law to allocate first for debt payments even before spending for basic requirement and services.

The priority given to debt payments in the NG budget comes at the expense of genuine development of the country. A majority of Filipino people remain poor, hungry, uneducated, unskilled, unemployed and unhealthy. The government is unable to provide appropriate support for its most basic operations, services and development programs simply because the biggest allocation in the national budget goes to payments of debts, the proceeds of which did not necessarily benefit the people at the time they were incurred or even after.

amount ( in million pesos)

Debt Service vs. Econom ic and Social Services 800000 700000 600000 500000 400000 300000 200000 100000 0 2001

2002

2003

2004

2005

year Economic Services

Social Services

Debt Service

Prioritizing debt service over basic social and economic services decreases the country’s capability to develop its human resources and minimizes its potential to reduce poverty. In spite of the Constitutional provision, which states that education should be given the highest priority in spending, the government refuses to pay any attention to issues such as shortages in classrooms, desks, teachers, and textbooks. The negligible spending on health makes the country’s mortality and morbidity rate grow faster. Notably, a new record high of 16.9 percent in March 2006 hit the survey in hunger, with nothing to eat at least once in past three months. This surpassed the previous peak of 16.7 percent in December 2005.

PER MINUTE Debt Service: PER DAY Debt Service: Per capita Debt Payment: Per capita SOCIAL Spending: Per capita ECONOMIC SPENDING:

PhP 1.37 million PhP 1.98 billion PhP 8,400 PhP 3,400 PhP 2,300

On the Fiscal Deficit Despite the ballooning debt, increasing interest and principal debt payments the GMA administration continue to project an image of a stronger fiscal position. The manipulation of procedures, funds and statistics simply to project this image was discussed in a paper written by Maitet Diokno-Pascaul, former FDC president, last July 2006.

Using data from the COA audit reports of the National Government for the years 2002-2004, the combined debt-related cash outflows of PhP 4.5 trillion are 2.6 times the total tax revenues earned by the Arroyo government in the same period.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget

In order to keep afloat, Diokno-Pascual pointed at how the Arroyo government is borrowing heavily from itself. Based on the same COA reports, from 2002 to 2004 the Bureau of the Treasury “invested” PhP 953.6 billion in Treasury bills issued by itself. The amount came from the Bond Sinking Fund which is money set aside for payment of maturing government securities. In effect, the Treasury earns from lending to itself. Nearly a third or 31.4 percent of the non-tax revenues earned by the Arroyo government from 2001 to 2005 consisted of interest earned from money the Treasury lent to itself. What this means is that the Arroyo government augments its revenue by borrowing from itself.

At the same time, improvements in the deficit numbers were also achieved by massive cuts in government expenditures particularly for social and infrastructure spending.

From 2001-2005, the Arroyo government’s total expenditures exceeded total revenues by PhP892 billion. A deficit is not entirely a bad thing, especially if it is incurred in order to support employment-friendly growth. But in the case of the Arroyo government, only nine centavos of every peso it spent from 2001 to 2005 was used for capital outlay. In short, deficit spending was not channeled towards increasing and upgrading our productive capacity. Capital outlay fell from 2.1 percent of nominal GDP in 2001, to 1.3 percent of nominal GDP in 2005.

In 2005, the Arroyo government cut non-interest, non-IRA spending—social and infrastructure spending—by PhP50B or a significant 10% of the year’s program. In the first half of 2006, it cut even more posting cuts in social and infrastructure spending of 19 percent or PhP 60 billion.

Since 2001, spending on social services and infrastructure has consistently fallen from 11.1 percent of nominal GDP to 8.6 percent in 2005. In contrast, total debt service payments (interest and principal) have risen from 4.8 percent of nominal GDP to 5.5 percent over the same period.

Contingent Liabilities The growing indebtedness of the Philippines is also alarmingly bolstered by the advent of contingent liabilities. These liabilities arise from sovereign guarantees provided by the Philippine national government on loan projects of GOCCs, GFIs and private sector investors. When investments of these institutions fail they become incapable of paying their loans. Their debt payment obligations are automatically assumed by the Philippine government by virtue of the guarantee clauses within their loan contracts.

As of end-December 2005, the NG contingent debt amounted to PhP 586.4 billion pesos or 14.53 percent of the total NG debt, while the broader public sector’s contingent debt stood at PhP 627.4 billion.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget Table 40. NG Debt with Contingent Liabilities, as of Dec. 2005 (in billion USD) In billion UsD In trillion Php NG Debt Domestic Debt by instruments Treasury bills Treasury Bonds Loans Foreign Debt by creditor type Multilateral Bilateral Commercial Foreign Denominated Securities TOTAL NG Debt (NG outstanding + contingent liabilities)

73.18

3.89

40.75

2.16

12.02 28.19 0.54 32.47

0.63 1.50 0.03 1.73

4.48 8.25 0.58 19.16

0.24 0.44 0.03 1.02

84.27

4.47

Under the GMA regime, except for 2005, contingent liabilities have been growing annually by some 16 percent (2001 to 2004). Bulk of which is accounted for by direct guarantees provided by the national government to foreign debts.

Table 41. NG Contingent Liabilities, 2001- May 2006 (in million Pesos) 2001 Total 495,777 Domestic Debt 23,167 NG Direct Guarantee 22,984 Assumed GFI Guarantee 183 Foreign Debt 472,610 NG Direct Guarantee 456,093 Assumed GFI Guarantee 16,517

2002 591,738 21,065 20,881 183 570,673 54,852 15,821

2003 708,539 22,635 22,451 183 685,904 670,778 15,821

2004 833,708 33,135 32,951 183 800,573 787,821 12,752

2005 586,350 48,183 48,012 170 538,167 529,542 8,625

Jan- May 2006 591,912 48,134 47,983 151 543,778 536,357 7,421

Recently, the Philippine NG assumed contingent liabilities amounting to PhP 200 billion, arising from the mismanagement and ballooning debt of the National Power Corporation. The assumption of another PhP 300 billion of contingent liabilities remains pending.

This administration has also not escaped major controversies pertaining to flagship loan projects. Most recently, investigations were conducted in the Philippine Senate to look into GMA’s approval of the Php 28 billion North Rail project. This project was approved despite the lack of competitive public bidding, the questionable legality of the buyer credit loan agreement (BCLA) and the lack of the contractor’s engineering experience and expertise.

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IMPERATIVES OF REAL AND EQUITABLE GROWTH: An Alternative Proposal for Financing the MDGs in the 2007 Budget GMA’s Compromise Deals Under the administration of GMA, several institutions of government have been entering into compromise deals particularly in onerous and behest loan Marcos debt cases. Instead of pursuing the Marcos debt cases in order to bring to court those who were directly responsible for these loans and to recover what in effect they stole from the Philippine government.

Following the pronouncements of PCGG Commissioners, as a policy, the GMA administration will pursue compromises on these cases.

As a case in point, recently, the Philippine National Construction Corporation (PNCC), the descendant of the old and defunct Construction and Development Corporation of the Philippines (CDCP), has entered a flawed compromise settlement with Radstock Securities Limited, a Hong Kong-based firm who bought the receivables of Japanese Marubeni Corporation from CDCP Mining Corporation (a subsidiary of PNCC).

The original loan was pegged at around P2.5 billion to finance the purchase of copper concentrates and completion of other CDCP infrastructure projects. However, because the said loans have gone unpaid for 25 years, the debt value grew to P 17 billion.

After a long legal battle, Radstock Securities Limited had managed to get favorable rulings from the Regional Trial Court (RTC) and the Court of Appeals (CA) finding PNCC liable to pay Radstock the amount of P 13.151 billion plus interests and attorney’s fees. The Supreme Court also ruled in denying the junking of the case as appealed by PNCC although it lifted the writ of preliminary attachment to its properties.

Fearing a “final loss”, PNCC entered into “compromise agreement” overtly favorable to Radstock by giving away its prime properties priced at only 70% of its appraised value, its “bread and butter” in the toll ways operation, and 20 % of the PNCC’s capital stocks, in order to settle an estimated ¥5.6 billion or around PhP2 billion debt contracted in 1980, which was considered by many as illegitimate.

Short-Term Policy Proposals to Address the Debt Issue 1. Continue implementing the policy of low interest rate and stable exchange rate to reduce the debt service.

2. Ensure close coordination between fiscal and monetary bodies for harmonious policy direction.

3. The BSP and the Department of Finance to regularly report to Congress on the status of the debt particularly on new loans obtained 4. Transparency in the presentation of the budget The presentation of this year’s budget did not reflect the principal amortization on debt payments disallowing us to see the complete picture on debt servicing.

While this amount is said to be an off budget item, in the past appropriations bill this has been reflected.

It thus becomes misleading when the President’s budget message claim that our debt burden has been reduced and that we are moving towards a balanced budget regime.

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It is the right of the Congress given their “power of the purse”, to have copies and to be able to review these documents.

The broader public has every right to these public documents as well.

5. Assess future indebtedness by reviewing government’s growing contingent liabilities particularly the executive’s policy on providing sovereign guarantees even for private enterprises 6. For purposes of the FY 2007’s budget law, we propose the inclusion of the following in the general provisions of the budget law: a. By virtue of Section 24, Article VI of the Philippine Constitution, all new loans or debts that will be incurred by the National Government, including domestic and foreign debts that will be assumed by the National Government, shall first be approved by the House of Representatives. b. No amount in the General Appropriations Act that are intended to fund programs, projects or activities on education and health can be subject to impoundment by any of the instrumentalities of the Executive Branch, unless the President so requests in writing and is granted permission by both Houses of Congress. c. No appropriations under the 2007 GAA shall be used to pay for the unsecuritized portion of the Marcos and Bataan Nuclear Power Plant debts, instead all payments shall be made in escrow until the court cases are finally resolved.

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NGO-LEGISLATORS JOINT COMMITTEE MEMBERS

Office of Representatives: Francis G. Escudero, House Minority Leader Alan Peter S. Cayetano Teofisto ‘TG’ L. Guingona III Lorenzo R. Tanada III Mario Joyo Aguja Ana Theresia ‘Risa’ Hontiveros-Baraquel Teodoro A. Casiño Nereus O. Acosta Rolex T. Suplico Emmanuel Joel J. Villanueva Social Watch Philippines Civil Society Network for Education Reforms (E-Net) Action for Economic Reforms (AER) Global Call to Action Against Poverty (GCAP) Medical Action Group (MAG) WomanHealth Philippines Rice Watch and Action Network (RWAN) Philippine Rural Reconstruction Movement (PRRM) Freedom from Debt Coalition (FDC) Public Services Labor Independent Confederation (PSLink) South East Asia Regional Initiatives for Community Empowerment (SEARICE) Kaisampalad Alliance of Concerned Teachers (ACT) Tambuyog Youth Against Debt (YAD) member orgs ALYANSA Movement for the Advancement of Student Power (MASP) Samahang Demokratikong Kabataan (SDK) Sanlakas Youth Student Council Alliance of the Philippines (SCAP) UP Iskolar – Manila UP Kaisa – Diliman Youth for Nationalism and Democracy (YND)