Gross Domestic Product of Selected Asian Countries

(annual percent change)

n.a. –not available

Source: Various government statistical agencies

    The loss in confidence was largely due to political turmoil. Capital flight, measured by net unclassified items in the balance of payments, more than tripled from $1.8 billion in 1999 to $6.8 billion last year. In turn, this caused the peso to depreciate more than other Asian currencies.

Low inflation. Inflation has remained single-digit, averaging 6.8% in the first quarter (full-year target: 6%-7%). Adequate inventories and timely importation and distribution of key agricultural products kept the lid on food prices. Continued support for food caravans for agri-commodities and a new drug scheme to import cheaper but quality drugs from India also helped provide affordable products.

    Stable exchange rate. The peso-dollar rate has improved from the historic lows late last year and in early January. Trading has remained market-oriented and exchange rates freely floating. The Bangko Sentral occasionally participates to dampen sharp fluctuations but not to reverse the direction in the exchange rate. We will continue policy actions to ensure legitimate demand and orderly exchanges in the currency market, such as: a 90-day holding period requirement for capital inflows in peso time deposits; expansion of the coverage of the Currency Risk Protection Program (CRPP); and required reporting of foreign exchange transactions of banks.

    Lower interest rates. The benchmark 91-day Treasury bill rate has declined substantially from 12.2% average in January to 9.9% in April. That is below the 10.5% level before the 1997 Asian Crisis. Modest inflation and several cuts in U.S. rates allowed the BSP to lower its key rates five times by a total of 300 basis points since the Administration took over. This helped lower interest rates - 9.5% for overnight borrowings - and boost bank lending. In addition, the Bureau of Treasury suspended the auction of its high-cost bonds since March to ward off pressures for higher rates.
    As lower interest rates led to greater demand for loans, net domestic credits of local money banks rose by 13.7% in February compared to 1.4% during the same period in 2000, although there was a much higher increase in public sector credit (37.2%) than private sector (7.1%). At the same time, the total loan portfolio of the country's commercial banks increased by 5.9% as of February 2001, from 1.1% over the same period last year. There was higher lending to the manufacturing sector (up 8.3%), as well as the financial institutions, real estate and business sector (1.8%), and the wholesale and retail trade sector (11.8%).

    Access to credit. As the government encouraged more access to bank lending through lower rates, we also took initiatives to make credit available to the poor and low-income households. The partial lifting of the general moratorium on the licensing of new thrift and rural banks has been approved to allow the entry of microfinance-oriented banks, subject to additional existing licensing requirements. Microfinance-oriented banks can reach out to the poor and low-income households by providing a broad range of financial services to their microenterprises and small businesses.

    The BSP has its own rediscount windows to fund productive sectors through the banking system. These windows are the P20-billion regular rediscount facility and the $500-million Exporters' Dollar and Yen Re-discount Facility. Availments under the EDYRF amounted to $28.4 million and ¥33.4 million for the first quarter of 2001, compared to the $31.2 million and ¥9.1 million availments in the fourth quarter of 2000. Existing policies allowed rural banks to participate in rediscounting eligible papers of indirect exporters. Recent changes in policy also made rural and cooperative banks eligible participants under the facility, particularly to rediscount microfinancing loans with favorable terms such as an interest rate equivalent to the 91-day T-bill rate in the last auction of the preceding month.
   
    Financial stability. The authorities continued to implement regulatory changes to further ensure financial stability. In response to the global initiative to curb money laundering, the government is proposing amendments to the Bangko Sentral Charter. The bill aims to enhance the BSP's supervisory and enforcement powers especially on suspicious deposits, further improve prudential standards for the banking system, intensify competition in the sector, and enhance the BSP's independence as central monetary authority.

Sources: DOF and DBM

    The BIR, the Department of the Interior and Local Government (DILG) and local government units (LGUs) have signed a Memorandum of Agreement (MOA) to improve tax collection. The DILG will help BIR press LGUs to comply with withholding tax laws and make prompt remittances. The LGUs, represented by the League Presidents, shall help Revenue District Offices track down unregistered and delinquent taxpayers.

    The Bureau of Internal Revenue shall implement various measures, namely: 1) documentary stamp tax metering; 2) compromise settlement program; 3) strict monitoring of LGU remittances; 4) intensified audits; and 5) other tax administration reforms, which include the large taxpayers' unit, tax computerization, and improvement of third-party information system. Measures for BOC are: 1) creation of the National Anti-Smuggling Agency; 2) closer monitoring of importers using exemptions and bonded warehouses, especially trading warehouses; 3) correct valuation of imports; and 4) adjustments in the processing fee.

    In addition, a Tax Study Group was formed to recommend measures to improve collection. Some long-term steps to be studied further are: 1) the imposition of taxes on the hard-to-tax group; 2) review of the minimum corporate income tax base; 3) rationalization of fiscal incentives; 4) financial sector taxes; and 5) review of excise taxes on motor vehicles.

    Non-tax revenues. Other revenue activities have been considered, such as: 1) rationalizing fees and charges; (2) enforcement of RA 7656 requiring government-owned and -controlled corporations (GOCCs) to pay dividends of at least 50% of net income; (3) sale of idle, non-performing assets and future earnings from state assets; (4) review, inventory and control of debt guarantees and contingent liabilities; (5) rationalization of tax expenditures; (6) inventory of special funds and accounts, and transfer of those with fulfilled objectives to the General Fund; (7) debt reduction schemes such as debt-for-asset swaps; (8) sale of shares in privatized GOCCs; and (9) collection of taxes arising from court decisions. In addition, the government expects to raise about P7 billion from privatization in 2001.

Department of Budget and Management

    Fiscal discipline. To limit the deficit, 2001 disbursements are set at P713.20 billion. Because the 2001 budget was not passed, last year's outlays are deemed in force. Of this sum, P481.5 billion is re-enacted, with P199.2 billion as automatic appropriation and P2.4 billion as supplemental spending for the May elections. Another supplemental budget of P10.9 billion is expected to be passed in June.

    An austerity program was launched through Administrative Order No. 4, on the purchase, use and disposal of government motor vehicles, and Administrative Order No. 5, mandating a 10% cut in non-personnel expenses of all government units (except social services, land reform and tourism, priority areas allowed 5% savings). The three-year Medium Term Expenditure Framework (MTEF) was adopted to better match resources and spending. Basic to MTEF is the Sectoral Effectiveness and Efficiency Review (SEER), to determine whether programs are relevant and effective based on MTPDP. For greater accountability, DBM has told agencies to report on key performance indicators. A technical group will recommend measures to minimize government exposure in loan guarantees, performance undertakings and other enhancements for BOT projects.

    Reducing business costs. DTI cut the processing time for certifications and applications for tax and duty exemptions in imports of spare parts and supplies, as well as the applications for Special Investor Resident Visas. It shall further expand the Online Business Name Registration System to accommodate more applications and speed up pre-verification of documents. Eventually, the system will include payments, actual verification, and harmonization of trade data.

    Building a knowledge-based economy. The department approved P5.5 billion in investments in information and communications technology (ICT) from January to April. They are expected to generate 6,387 jobs. A new IT help desk will serve as a resource, information, and coordinating center for consumer complaints. DTI also facilitated three business missions to look into ventures in ICT.

    We are allocating P152 billion to the integrated infrastructure program this year. Some 32% or P50 billion shall go to public works and transportation, including projects for the Autonomous Region for Muslim Mindanao. We also approved the Metro Manila Urban Transportation Integration Study (MMUTIS) Master Plan to address the transport and traffic situation.
   
    Projects of the Department of Public Works and Highways (DPWH) are being fast-tracked to improve basic services. They include Bondoc Peninsula roads in Quezon, Antique coastal route, the Davao-Bukidnon link, and sections of the Pan-Philippine Highway in Agusan del Sur-Compostela, Samar-Leyte, Bicol and Cagayan Valley. Among those inaugurated as of April 30 were the Ormoc Flood Control Project, Bugallon Bridge in Pangasinan, and the Bohol Circumferential Road Northern Segment. Projects started include the Halsema Highway in the Cordilleras, the Zamboanga-Pagadian Road, the Megadike at Sta. Rita Pampanga, and the Libungan-Alameda Road in North Cotabato.

    DPWH also began an intensive flood control program. More than 200 maintenance personnel shall pursue the Bantay Estero program to ensure the cleanliness of 16 critical esteros in Metro Manila. Another high priority is road maintenance. DPWH shall coordinate and facilitate solutions to road problems and safety measures in accident-prone areas. The World Bank-assisted Road Information and Management Support System (RIMSS) aims to improve the quality of road services, streamline public works operations, and reduce graft and corruption.

Department of Energy

    Electricity in the countryside. To improve the lives of poor and marginalized sectors, the Department of Energy expanded access to low-cost electricity in the countryside. DOE also promoted the efficient use of power and increased generation using indigenous sources. With the Accelerated Barangay Energization Program (ABEP), electrification brought geographically remote and economically marginalized areas into the mainstream of development. ABEP has powered 290 barangays. DOE released P58 million for electrification, livelihood, reforestation, watershed management and environment enhancement projects in 50 barangays nationwide.

    Power rates relief. Short-term measures were adopted to reduce rates while the Power Reform bill is still in Congress:

• Suspension of the Power Purchase Cost Adjustment (PPCA) in March

• Discounts for minimum home billers from 44  electric cooperatives

• Several rate reduction schemes, including the 20-centavo/kwh cut in PPA in March

• One-Day Power Sales (ODPS) program to show customers how the electricity spot market  would work after the power sector restructuring

• Extension of the Economic Recovery Assistance Program to 25 July 2001 to help financially strapped power-intensive    industries   that had decreased consumption or stopped operations in the grids

• More stringent cost-cutting measures to  generate savings and help stabilize power rates,  including shifting to cheaper energy alternatives amid rising oil prices  

Energy conservation. DOE aggressively promoted efficiency programs such as the Power Conservation and Demand Management Program (Power Patrol), the Fuel Conservation and Efficiency in Road Transport (Road Transport Patrol), the Demand-Side Management Program (DSM), and the Government Enercon Program, among others. Between 22 January and 22 March 2001, local production of geothermal, oil, natural gas, coal, hydro and new and renewable energy sources (NRE) was improved, increasing oil import savings to $305.88 million.

Metropolitan Waterworks and Sewerage System

    Better water sourcing. The Umiray Angat Transbasin Project was completed in March, increasing the capacity of MWSS to deliver water to Metro Manila by 25%. Four more major supply projects are to be finished this year. MWSS also took measures to ensure the effective, transparent and quality service provided by concessionaires. It launched the Public Performance Assessment (PPA) to evaluate the concessionaires' sewerage service coverage and septic and sanitation obligations.

    Environmental protection is important for sustained agricultural productivity. Toward this priority, the government achieved the following in the past 100 days:

    Sustainable land use. The Department of Environment and Natural Resources (DENR) processed 2,542 free patent applications to promote equitable access to land resources. At least 329 hectares of degraded forest lands have been reforested, 64% by the private sector. Massive replanting has been directed nationwide. In lahar-ravaged areas, P14.3 million was earmarked for release to 42 barangays from January to March.
   
    Management of protected areas. DENR started up 124 Protected Area Management Boards (PAMBs). Information dissemination and discussions on biodiversity were also done. Support to NGOs serving integrated protected areas continued for the welfare of indigenous communities.

    Fighting pollution. In support of environmental laws, DENR worked on the implementing rules and regulations of the Clean Air Act and the Solid Waste Management Act. It recommended privatization of vehicle emission testing by tapping gasoline stations, to prevent graft and strengthen private-government partnership.

Department of Science and Technology

    The Department of Science and Technology (DOST) developed the Philippine Research, Education and Government Information Network (PREGINET) Project, which aims to provide faster, more affordable Internet access, particularly in rural areas. While intended initially for academic institutions, the research community and government, PREGINET could also serve industry and the public in general. It could be the country's information superhighway, similar to the U.S. National Science Foundation Network (NSFnet) and Singapore ONE set up in the 1990s. To spur private sector participation in R&D and technology development, DOST implemented the Virtual Center for Technology Innovation to put in place infrastructure for training and certification of I.T. professionals and for the development of higher value-added products and services. Also boosting information and communications technology in the countryside, DECS is setting up computer labs with 20 PCs each in all 4,000 public high schools.

    DOST has developed new packaging products for small and medium enterprises, particularly for kalamansi concentrate, peanut kisses, pickled vegetables and marine food. It has begun work on verifying clean technologies for local firms, starting with Batangas metalworking shops and a Bulacan cement maker.

National Economic and Development Authority

    Official Development Assistance. For faster implementation of aid programs and projects, the government is reviewing current loans and working on fast-tracking disbursements, while considering their conditions. Aid reviews are being done with the World Bank, ADB and the Japan Bank for International Cooperation (JBIC), to address bottlenecks and set time-bound measures to bring implementation on track.
   
    As agreed with multilateral lenders, NEDA hastened implementation of last year's delayed foreign-assisted projects. Loan disbursements leapt to 65.8 billion yen in the year ended March, the highest since JBIC began operations in the country. The agency has taken a more proactive stance in project monitoring and contract procurement. It confirmed nine projects under the 24th Yen Loan package, amounting to $434 million. These include four transport, two flood control, and three agricultural and environmental projects. Also approved was the 24th tranche of the P620-million JICA-funded Increased Food Production Program.

    NEDA confirmed the 2001 RP-Spain MOU on Financial Cooperation, making available $150 million for project-related Spanish goods and services, and $5 million for feasibility studies and project preparation. Commercial contracts were signed for four Spanish-assisted projects amounting to $105.67 million, which covers the health, agriculture and agrarian reform sectors.

Department of Foreign Affairs

    International Relations. In March, the Department of Foreign Affairs facilitated the signing of the following agreements: 1) RP-Chile MOU on Agriculture and Related Fields and Promotion of Agricultural Trade; 2) RP-Argentina MOU on Cooperation in the Field of Sanitary and Phytosanitary Matters; and 3) the RP-Ecuador MOU on Agriculture and Related Fields and Promotion of Agricultural Trade.

    DFA convened the second Philippines-Israel Joint Commission Meeting on areas of mutual interest, such as labor, economics and security. The Philippines, as country-coordinator for the ASEAN-Korean relations, successfully hosted the Fifth ASEAN-Republic of Korea Dialogue in Cebu on 27-29 March. The country also played a lead role in the Forum for East Asia-Latin America Cooperation. It participated in the Foreign Ministerial Meeting of the Forum in Santiago, Chile and is expected to host the next meeting later this year.

    The country actively participated in regional and international meetings and conferences, such as the ASEAN Standing Committee Meeting in Phnom Penh; Inter-Sessional Group Meeting on Confidence-Building Measures of the ASEAN Regional Forum in Kuala Lumpur; National Conference on Children in Hanoi; Asian Preparatory Meeting for the World Conference Against Racism, Racial Discrimination, Xenophobia and Related Intolerance in Tehran; and the Preparatory Conference for the Fifth Ministerial Consultation on Children in East Asia and the Pacific in Bangkok.

    The government sent a delegation to the ninth session of the United Nations Commission on Sustainable Development (UNCSD) as chair of the Philippine Council for Sustainable Development on 16-22 April. Philippine participation in this session enabled the country to present its position on issues of global and national importance, particularly on the need for international cooperation concerning energy, atmosphere, transport and information issues.

    DFA also undertook preparatory activities in conjunction with the country's forthcoming participation in Rio + 10, a global conference that will review the implementation of commitments made at the UN Conference on Environment and Development (UNCED) in 1992. These include preparatory activities for the conduct of a multilevel, multisectoral and multi-stakeholder review of PA 21, particularly the country's compliance with its commitments in Rio.

Department of Tourism

    International and Domestic Tourism. After putting its house in order, the Department of Tourism (DOT) intensified domestic and international promotions. They help generate earnings and provide livelihood opportunities for all tourism industry stakeholders.

    As part of this overall thrust, DOT promoted a "total culture of tourism" among Filipinos, including volunteerism, honesty and cleanliness, as well as a climate of industrial peace in tourism enterprises. In coordination with law enforcement agencies, a 24-hour tourism watch has been institutionalized to ensure security and provide information at all times for tourists and tourism service providers.

    The newly launched Lakbay Gabay Program aims to organize tours in areas with no priority or popular spots. It also harnesses LGUs, NGOs and tourism-related community groups to develop packages, including those for agri-tourism. DOT also helped organize a Cabinet task force to address NAIA access problems.

    The department has refurbished high-impact destinations like Intramuros, Luneta, and Malate in Metro Manila, and Davao, Iligan City, and Cagayan de Oro in Mindanao. Plans were also developed for Camiguin, Guimaras, Bohol and Mt. Pinatubo. It made efforts to ease transport and enhance infrastructure in the Banawe rice terraces.

    Promotions were intensified in Berlin, Hong Kong, Kuala Lumpur and Tokyo. New flights to key cities of Japan were awarded to PAL. On March 30, an exchange of notes with Japan was held in preparation for a JBIC loan for sustainable environmental management in northern Palawan.

    The Philippines' attendance in international conferences and fairs established a strong presence abroad, with two awards won: Best Marketing Effort at the International Tourism Bourse in Berlin and, for DOT's Mount Pinatubo Tours, the Gold Award in Ecotourism from Pacific Asia Travel Association. In Berlin the country was called the "comeback kid of Asia."

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