1. MEDIUM-TERM MEDIUM-TERM FISCAL PROGRAM Secretary Emilia T. Boncodin Department of Budget and Management Presentation to GOCCs/GFIs September 15, 2004 Heroes Hall, Malacañang

2. POLICY OBJECTIVES  Balance the national government budget in 6 years  Reduce CPSD to GDP ratio to 3% in 6 years  Reduce Public Sector Debt to GDP ratio to 90% in 6 years

3. National Government Fiscal Position 1986-2004 (Percent of GDP) AquinoRamosEstradaArroyo

4. National Government Deficit 1986-2004 (percent of GDP) AquinoRamosEstradaArroyo

5. GOCCs Deficit (14 MNFGCs) 1986-2004 AquinoRamosEstradaArroyo P billion

6. PUBLIC SECTOR DEBT TO GDP RATIO * As of Sept. 2003 Source: BTr, NSCB

7. ACTION PLAN

8. Deficit Targets, 2004-2010 (Percent of GDP)

9. Debt Targets, 2003-2010 Debt Targets, 2003-2010 (percent of GDP)

10. SPECIFIC MEASURES:

11. 1. National Government Revenues Expenditures Debt Management Measures to Address Fiscal Problem 2. Government-owned and/or Controlled Corporations/Government Financial Institutions Rate Adjustment Rationalization Streamlining Compensation Privatization/Outsourcing Debt Guarantee 3. Local Government Units IRA Adjustment

12. REVENUE PROGRAM

13. NG REVENUES, 1986-2004 NG REVENUES, 1986-2004 (percent of GDP)

14. TAX REVENUES,1986-2004 TAX REVENUES,1986-2004 Ratio to GDP

15. NG REVENUES, 2004-2010 (Percent of GDP)

16. TAX REVENUES, 2004-2010 TAX REVENUES, 2004-2010 (Percent of GDP)

17. A. Improving Administrative Efficiency 1. Periodic adjustment of fees and charges 2. Improve enforcement mechanisms to increase collection efficiency: BIR: Computerization/Automation of operating system; Enhancement of Audit Program; Intensified enforcement procedures; Conduct taxpayer compliance verification drive. BOC: Modernization of information systems and technology; Create Task Force Anti-Smuggling; Strengthening of Internal Audit Service; Purchase of Container X-rays for ports 3. Rate Adjustment ACTION PLAN: Revenues B. Privatization

18. ACTION PLAN: Revenues B. Proposed Legislative Measures 1. Gross income tax system for corporation and self employed 2. Indexation of the excise tax on sin products 3. Increase excise tax on petroleum products 4. Rationalize fiscal incentives Php B 16.8 7.0 29.7 5.0

19. ACTION PLAN: Revenues 5. General Tax Amnesty with Submission of SAL 6. Lateral Attrition System 7. Franchise Tax on Telecommunications to replace VAT 8. Two-Step Increase in the VAT rate Php B na 19.9 5.0

20. EXPENDITURES

21. NG Expenditures to GDP, Philippines Source: DBM

22. BUDGET FLEXIBILITY MARGINS 1992 2004 1997

23. Personal Services, Selected Asian Countries Personal Services, Selected Asian Countries (Percent of GDP)

24. Personal Services, Selected Asian Countries Personal Services, Selected Asian Countries (Percent of Tax Collections)

25. Capital Outlays, Selected Asian Countries Capital Outlays, Selected Asian Countries (Percent of GDP)

26. Expenditure Targets, 2004-2010 Expenditure Targets, 2004-2010 (Percent of GDP)

27. ACTION PLAN: Expenditures Administrative Measures A. Issuance of Economy Measures Administrative Order to be issued by PGMA directing cost-reduction program on utilities, supplies, travel, etc.

28. B. Rationalization of Personal Services 1. Objectives Deactivation of functions no longer relevant Consolidation/rationalization of duplicating functions Strengthening of important functions 2. Mechanics Voluntary but time-bound separation opportunity but with option to (1) remain in government service; or (2) be separated with incentives Action Plan…Administrative: Expenditures

29. C.Improvement of Management and Control of GOCCs EO to improve governance of GOCCs/Other Government Corporate Entities (OGCEs)  Improve operational responsibility of supervising departments/agencies over GOCCs/OGCEs attached to them  Impose moratorium on establishment of subsidiary GOCCs pending assessment of operations of all subsidiary GOCCs Privatization/Outsourcing Action Plan…Administrative: Expenditures

30. D.Fully implement devolution provision of the LGU Code MFC to be primary conduit for funds (except IRA and mandated shares to LGUs) E.Increase social safety net program within the budget F.Transfer to the General Fund of all balances of dormant accounts Action Plan...Administrative: Expenditures

31. ACTION PLAN: Expenditures Legislative Measures A.Enactment of Fiscal Responsibility Bill Reduce public debt to more manageable levels by imposing debt cap No new expenditure without new revenue measure

32. B.Rationalize government retirement and pension schemes Suspend RA 1616: All retirement paid by GSIS Select veterans’ benefits that can be reasonably funded Make pension benefits commensurate to premium contributions Action Plan...Legislative: Expenditures

33. C.Rationalize government compensation system Simplify position classification Simplify compensation structure and implement performance-based compensation system Rationalize compensation of board members and corporate officers D. Remove automatic guarantee provisions in certain GOCCs Action Plan...Legislative: Expenditures

34. DEBT MANAGEMENT

35. 1. Bond exchange to lengthen debt maturity 2. Make more use of ODAs than commercial borrowings 3. Debt cap 4. Limit borrowings to high priority import projects ACTION PLAN:Debt Management