SONA 2006 Executive Summary

Introduction

The past year saw the country on a steady and sure growth, notwithstanding the internal political turmoil, the global oil crisis and rising prices of commodities that has threatened to disrupt and undermine the economic gains that have already been made. Through it all, the President demonstrated to the nation and the world that she is undeterred by destructive politics, remaining resolutely focused on the economy, investments and jobs, and in pursuing her vision for the Philippines – a modern country founded on social justice and enjoying economic prosperity.

We achieved record revenue collections which further strengthened our fiscal position and renewed the confidence of investors in our economy. We created the jobs that fueled the growth of the economy. With the improved fiscal condition, more funds are being provided to pump-prime the economy. This is expected to further reduce the poverty incidence among Filipino families, which already saw a decrease of almost three percentage points from the 27.5% revised estimate for 2000 down to 24.7% in 2003.

HIGHLIGHTS OF ACCOMPLISHMENTS

BALANCED BUDGET

• P31.5 billion fiscal deficit from January to June 2006, P58.9 billion below target ceiling of P90.4 billion for the 1st semester 2006

• P471.1 billion revenues for the first 6 months of 2006, up by 21.1% from P389.4 billion collected last year

• Expenditures of P502.6 billion from January to June 2006 is P43.9 billion below the P546.41 billion ceiling for the first semester of the year

EDUCATION FOR ALL

• Constructed 6,592 classrooms, 10% more than the 6,000 target

• Tuition fee subsidies given to 350,000 students in SY 2004-2005 and 383,482 students in SY 2005-2006

• Distributed 97,980 education vouchers for SY 2006-2007
• Built 1,385 out of 1,617 classrooms in unserved barangays

• Provided 3,512 of the 4,769 public high schools with computers

• Procured and distributed 105 million textbooks

• Allocated 5,300 new teacher positions

AUTOMATED ELECTIONS

• Supported the computerization of electoral process through increase of the proposed budget of the COMELEC by as much as 135% and the creation of a Technical Working Group to propose amendments to RA 8436 (Election Modernization Law)

• Signed EO 498 on 26 January 2006 creating the Office of the Senior Presidential Adviser on Electoral Reforms to examine the whole electoral process and system and make the necessary recommendations

• Certified for immediate enactment House Bill 5352 and Senate Bill 2231 which aim to amend Republic Act No. 8436 allowing COMELEC to determine the advanced technology most suitable to the conditions and needs of the Philippine electoral system.

TRANSPORT AND DIGITAL INFRASTRUCTURE

• Reduced travel time from Mindanao through Visayas to Luzon by 10 hours and cargo transportation cost by 30 percent through the expansion of the nautical highway system

• Pursued the following transport infrastructure projects: improvement of around 1,375 kilometers of road along the Nautical Highway; development of new airports in Negros Occidental (Silay City), Iloilo (Sta. Barbara/Cabatuan), and Bohol (Panglao); and development of ports in all the Roll-On and Roll-Off (RoRo) routes.

• Launched in 2005 the Philippine Cyberservices Corridor, an ICT belt stretching over 600 miles from Baguio City to Zamboanga to interconnect the countryside and isolated regions of the country and encourage more investments in the information and communications technology-related industries.

TERMINATE HOSTILITIES

• Conducted 12th Round of GRP-MILF Exploratory Talks in Kuala Lumpur on May 2-4, 2006, which resulted in substantive gains in the Ancestral Domain agenda.

• Established the Mindanao Trust Fund Reconstruction and Development Program (MTF-RDP) in December 2005 to support post-conflict reconstruction and development in the conflict-affected areas in Mindanao once a formal GRP-MILF peace agreement is signed.

• Established the Kalayaan Barangay Program or KALAHI para sa Kalayaan, a local peace building initiative in 600 areas affected by the communist insurgency which aims to accelerate delivery of basic services in the 600 barangays and transform them as enabling communities for peace and development.

• Signed the Agreement on Cessation of Hostilities with Rebolusyonaryong Partidong Manggagawa ng Mindanao on 28 October 2005, at Balay Mindanaw Peace Center, Cagayan de Oro City.

HEALING THE WOUNDS OF EDSA

• Convened the Council of State on 24 January 2006 to forge a strong consensus among the political leaders on how to strengthen the economy, social equity and political renewal.

• PCGG cases favorably decided by the Supreme Court since 2001 include: a) COCOFED - declared coco levy funds as public funds; and b) Marcos Swiss Accounts - recovered 35 Billion Pesos from the said accounts.

• Continued to engage all segments of society in a new government of political reform and economic change and introduced reforms in the military as recommended by the Feliciano Commission to address the legitimate grievances of military personnel.

ELECTRICITY AND WATER FOR ALL BARANGAYS

• Provided electricity to 5,867 barangays from January 2001 to June 2006 under the Expanded Rural Electrification Program, bringing the total number of energized barangays to 39,469 out of the 41,945 barangays, attaining 94.10% barangay-level electrification.

• Provided water services to 37 out of the 210 identified waterless areas in Metro Manila through MWSS concessionaires under the President’s Priority Program on Water (P3W) benefiting 25,340 households for Phase III of the MWSS program. Earlier water supply projects implemented under Phases I and II benefited 67,618 households in 61 communities within Metro Manila.

• Completed 61 projects while 172 on-going projects were implemented outside Metro Manila to benefit 23,260 households in 541 waterless barangays in 2005, including 40 Kalayaan barangays in conflict areas.

OPPORTUNITIES TO CREATE 6 TO 10 MILLION JOBS

• The April 2006 Labor Force Survey (LFS) which was released on 15 June 2006 posted an employment growth of 2.5%. or an additional employment of about 803,000 from April 2005 to April 2006.

• Generated a total of 3.3 million jobs from January 2005 to March 2006 through various interventions: more than 1 million jobs were created through microfinance and SME lending, more than 300,000 jobs from agribusiness land development and around 2 million from the development of various sector/industries which include housing, tourism, infrastructure, ICT, mining, ecozones and apprenticeship.

DECONGESTING METRO MANILA

• Pursued the development of the following priority rail/road projects: Northrail Project, Rail Linkage Project, MRT/LRT Loop Project, Southern Luzon Expressway Extension (SLEX) Project, Southern Tagalog Arterial Road (STAR) extension from Lipa City to Batangas City, Manila-Cavite Expressway Extension Project linking the existing R-1 Expressway to Noveleta, Cavite and C-5 (25.5 kms), Manila North Road (McArthur Highway) project, Plaridel Bypass Project, and Circumferential Road–6 (C-6).

DEVELOP SUBIC-CLARK

• Improved investments with FDI pledges from SBMA amounting to P51.4 billion for the 1st quarter of 2006 or 140 times more than the same period last year. Investments committed through CDC were likewise higher by 29 times than last year’s first quarter investments.

• Constructed the Subic-Clark-Tarlac Expressway with Package 1 from Subic to Clark, 32.7926% complete and Phase 2 from Clark to Tarlac, 38.3116% complete as of 5 July 2006

• Commenced construction on Subic Bay Port Development project with Phase 1 and Phase 2 accomplishments at 69.95% as of 14 July 2006

• Upgraded the Diosdado Macapagal International Airport to improve its capability to operate and handle aircraft movement

OTHER MAJOR ACCOMPLISHMENTS

ECONOMIC GROWTH

Improved macroeconomic growth performance

• GDP grew by 5.5 percent and GNP rose by 5.8% for the 1st quarter of 2006

• Inflation of 7.1% for the first six months of 2006, lower than the 8.3% rate recorded in the same period last year

• Interest rates as of June 2006 further eased to 6.074% due to ample liquidity in the financial market fueled by strong demand for government debt papers

• Peso appreciated against the US dollar by 2.3% from P53.36 per US$1 on 21 January 2001 to P52.14 on 10 July 2006

• Balance of payments (BOP) surplus of US$2.13 billion in the 1st quarter of 2006 is 8.1% of GDP and nearly thrice the US$782 million surplus posted in the same quarter a year ago

• Gross international reserves (GIR) of US$21.147 billion as of end-June 2006 is US$197 million higher from the end-May 2006 level of US$20.950 billion

• OFW remittances of US$4.9 billion for the first 5 months of 2006 is 14.8% higher compared to the same period last year

Improved investment flow

• FDI inflow for the first 4 months of 2006 reached US$ 500 million, 2.7% higher than the same period last year.

• BOI and PEZA approved a total of P95.50 billion for the period January to May 2006

• Retained in California Public Employees’ Retirement System (CalPERS) permissible investment destinations which ranked the Philippines 14th among 26 other emerging markets

• Approved the 2006 Investment Priorities Plan (IPP) that sets the incentive guidelines for 11 priority areas

• Removed from the US "priority watch list" of International Property Rights (IPR) violators

Sustained export performance

• Exports from January to May 2006 reached US$18.687 billion, 16% higher than the US$16.113 billion reached in the same period last year

Environment Protection

• Operationalized the Anti-Environment Crime Task Force resulting to the confiscation of 6,122 cu. m. of illegally transported forest products amounting to P8.5 M and recovering P50 M-worth of elephant tusks and ivory religious images

• Conducted geohazard assessment of various municipalities

Modernized agriculture to ensure food security and enhance farmers welfare

• Achieved 3.94% growth in agriculture during the first quarter of 2006 from -0.5% during the same quarter last year

• Implemented the Agriculture and Fisheries Modernization Act (AFMA) with the following accomplishments:

? Generated 22,525 hectares of newly irrigated/rehabilitated areas from July 2005 to June 2006 benefiting a total of 90,917 farmers and generated some 19,500 jobs

? Distributed 261,749 bags of hybrid rice seeds for wet/dry croppings from July 2005 to June 2006 benefiting 162,674 farmers
? Distributed 47,320 bags of hybrid seeds to 553 corn clusters and another 78,433 bags of rice and corn seeds under the La Nina Mitigating Measures

? Established a National Cold Chain System, which reduced post-harvest losses for vegetables in Benguet, Cebu and Northern Mindanao by about 20-45%

? Granted loans amounting to P2.040 million which generated 74,306 jobs for farmers/fisherfolks, and guaranteed loans amounting to P169 million which generated 1,261 jobs for farmers

• Provided direct copra marketing assistance to 14,139 farmers

• Provided P23.8 million loan assistance to 199 farmers’ cooperatives benefiting 9,898 farmers in the 1st semester of 2006 for livelihood projects and enhancement of entrepreneurial skills of coconut farmers and farm workers

• Constructed additional facilities/structures within the General Santos Fish Port Complex in General Santos City, South Cotabato

• Implemented 28 subprojects with an aggregate of 324.32 kms. (40% of 888 km. target) of farm-to-market roads, 309 has. of communal irrigation, and 2 schemes of potable water supply

• Provided financial support to 519 micro livelihood and capability-building projects amounting to P142.6 million with 210,753 beneficiaries nationwide

Farmers’ Empowerment

• Assisted 2,961 farmers in acquiring post-harvest facilities of their preferred brand at reasonable prices payable on easy terms

• Released P9.2 million for the Cooperative Development Incentive Fee and Post-Production Incentive benefiting 105 farmer organizations

• Assisted participating entrepreneurs secure loans representing 60% of the total capital needed for their proposed agribusiness projects under the Young Farmers’ Program-NFA Component program

• Allowed farmers organization to import rice subject to payment of tariffs and taxes

Promoted the Philippines as the preferred tourist destination

• Generated 1.19 million tourist arrivals for the first five months of 2006, 11.9% more than last year’s comparable period

Sustained infrastructure support through construction and maintenance of national roads and flood control projects

• Constructed/improved/rehabilitated a total of 11,686.50 kilometers of national roads and 23,625.09 lineal meters of national bridges.

• Implemented the President’s Bridge Program with the construction of 49 “Tulay ng Pangulo sa Barangay” which has a total length of 1,627.95 lineal meters; 134 “Tulay ng Pangulo sa SZOPAD/Mindanao” with a total length of 1,438.67 lineal meters; and 51 “Countrywide Bridge Projects” with a total length of 1,127.76 lineal meters.

• Completed 882 flood control projects nationwide

Strengthened economic relations through the enhancement of bilateral and multilateral cooperation

• Strengthened Philippine-China economic cooperation to improve access to markets under the ASEAN-China FTA (ACFTA)

• Strengthened world trade relations through participation in the 6th WTO Ministerial Conference

• Concluded the Fifth RP-Spain Joint Commission for Cooperation [JCC] providing for the framework on the design, programming and implementation of Spanish Official Development Assistance (ODA) in the Philippines

• Forged trade agreement with the Egyptian government during the 4th RP-Egypt Bilateral Consultation granting both countries “most favored nation” (MFN) treatment in accordance with the General Agreement on Tariffs and Trade (GATT)

• Signed the ASEAN-ROK Joint Declaration for Cooperation to Combat International Terrorism at the 38th ASEAN Ministerial Meeting in Laos

• Signed MOU for Cooperation and Capacity Building between the League of Cities (LCP) and League of Municipalities of the Philippines (LMP) and the Federation of Canadian Municipalities (FCM) and the Union of British Columbia Municipalities (UBCM)

POWER REFORMS, ENERGY INDEPENDENCE AND SAVINGS

• Laid foundation for energy independence and power sector restructuring, which led to the turn around in National Power Corporation’s (NPC) finances, and the acceleration of development of alternative sources of energy and implementation of alternative fuels program.

• Initiated reforms which contribute to the efficient performance of the power sector to lower the sector’s drain on government resources, while energy independence programs were implemented to insulate the economy from the adverse effects of volatile oil prices.

• Significantly increased to 64% in 2005 the country’s self-sufficiency level in power generation compared to the 56% level in 2004.

• Cited as priority legislative measures of the Arroyo Administration the Renewable Energy Bill and Biofuels Bill which are expected to support the government’s goals on energy security and independence.

SOCIAL JUSTICE AND BASIC NEEDS

• Distributed 124,137 hectares of alienable and disposable lands to 141,215 qualified and deserving beneficiaries which is 24% more than the SONA target of 100,000 hectares.

• Completed 438 farm-to-market roads (FMRs) of 545.27 kilometers and 33 on-going FMRs of 75.34 kilometers nationwide.

• Gave security of tenure to a total of 63,734 informal settlers increasing the total of poor families given security of tenure to 374,439 since 2001.

• Provided socialized housing services to 62,792 households belonging to the bottom 30% of the income population from January 2005 to March 2006 bringing the total to 252,258 since 2001.

• Enrolled 3.46 million indigent families or about 17.3 million poor Filipinos under the National Health Insurance Program.

• Provided branded medicines under the parallel importation program, where consumers generated savings of as much as 82%, or an average of 61% compared to suggested retail prices, and generic medicines which are at least 50% of the 2001 price levels.

• Established a total of 6,998 Botika ng Barangay (BnBs) nationwide in partnership with the Kabalikat and Botika Binhi and the National Pharmaceutical Foundation.

• Implemented Hunger Mitigation Program (HMP) to reduce incidence of hunger. Component programs include: a) Food for School Program which provided rice to 444,101 children from November 2005 to March 2006 and 445,858 children from 24 April to 2 June 2006; and b) Tindahan Natin Program with 482 outlets in NCR and 452 outlets outside Metro Manila selling rice, noodles and other basic commodities at lower prices.

• Achieved strike prevention rate of 97% in the first half of 2006, the highest ever recorded.

• Facilitated the deployment of 5.1 million job openings in close to 200 countries worldwide or an average of close to a million Filipino workers per year. Target deployment per year is 1.0 million OFWs.

• Increased wage of workers and employees in the private sector in the NCR by P25.00 per. Almost all of the Regional and Tripartite Wages and Productivity Boards (RTWPBs) have already issued new wage orders granting another round of increases in workers’ salaries.

• Intensified anti-illegal recruitment drive resulting in the apprehension of 567 suspects for operating without licenses, filing of cases against 166 suspects, arrest of 95 illegal recruiters, referral of 41 others to other government agencies and the rest were released after proper interrogation.

• Negotiated with Saudi King Abdulah bin Abdul Aziz Al Saud for the release of more than 500 OFWs from imprisonment in various Saudi jails. Of these, more than 200 were already repatriated.

• Awarded scholarships certificated to 22,512 jobseekers including 312 OFWs from the more than 500 OFWs pardoned by the Saudi King under the PGMA Training for Work and Scholarship Project.

• Launched the Ladderized Education System to uplift technical-vocational education by helping trainees gain academic credits in pursuit of college courses and to reinforce their capacities for lifelong learning.

• Implemented the Kapit Bisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of Social Services: Kapangyarihan at Kaunlaran sa Barangay (KALAHI-CIDSS:KKB), a flagship poverty alleviation program of the government with funding assistance from the World Bank. This program on poverty reduction prioritizes funding barangay-level infrastructures and common service facilities that improve access to basic services and increase productivity. Among these projects are: farm-to-market roads, potable water systems, elementary and high school buildings, day care centers, hanging steel bridges, marketing center, and post-harvest facilities.

• Completed 1,217 projects out of the 1,611 community prioritized projects amounting to P1.8 billion approved for implementation under the Kapit Bisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of Social Services: Kapangyarihan at Kaunlaran sa Barangay (KALAHI-CIDSS:KKB)

NATIONAL SECURITY, PEACE AND ORDER

• Neutralized 97 Kidnap-for-Ransom (KFR) groups including Hector Cornista alias Toloy from July 2005 to June 2006. To date, only four active KFR groups in the target list of KFR syndicates remain.

• Conducted 11,191 anti-illegal drugs operations (buy-bust, house raids/searches and marijuana plantation eradication) which resulted in the arrest of 14,014 pushers and ushers, confiscation of drugs amounting to P2.9 billion and filing in court of 9,739 drug cases and dismantling of shabu laboratory located in Angeles, Pampanga, and destruction of 168,800 marijuana plants and 70,000 seedling worth P36.4 million in Ilocos Sur.

• Intensified campaign against street crimes, resulting in 54% reduction in crime incidents and on a monthly basis, street crimes decreased at a rate of 5% and achieving a monthly average of 87.44% street crime solution efficiency rate from March 2003 to June 2006.

• Implemented PNP’s One Strike Policy to demonstrate firm resolve to fight illegal gambling. To date, 44 PNP Commanders have been relieved, two are recommended for relief and three appeals were upheld in favor of the government.

• Neutralized a total of 89 terrorist personalities from July 2005 to June 2006 consisting of 86 Abu Sayyaf Group members and three Raja Soliman Islamic Movement members including leaders Hilarion Del Rosario alias Ahmad Islam Santos III, Pio de Vera y Abogne alias Ismael De Vera Obogne, Virgilio Cariño alias Boljak/Abu Baker Muslim/Abdul Muhain.

• Continued to exercise vigilance while peace negotiations are underway as the government pursued military operations against CPP/NPA/NDF resulting in the decrease of the communist terrorist movement by 41.3% from 11,930 in 2001 to 7,003 in 2005.

• Enhanced the country’s strategic relationship with the United States through continuing exercises such as the RP-US Balikatan and the Balance Piston 06-02 joint military exercise which, among others, aimed to sharpen Filipino soldiers' capabilities to move and communicate, to fix and finish off their targets

• Decreased by 36% the number of PNP personnel involved in administrative cases such as neglect of duties, irregularities, misconduct, incompetence, dishonesty, and disloyalty from 2,371 in 2005 to 1,517 from January to May 2006.

FIGHTING CORRUPTION THROUGH GOOD GOVERNANCE

• Conducted lifestyle check on government officials with the rank of director and above resulting in the dismissal of 13 officials: two from DPWH, six from BIR, five from BOC and the preventive suspension of three officials: one from BI and two from BOC.

• Rationalized the bureaucracy (EO 366, October 2004) for more effective and efficient delivery of services. Agencies were transferred to departments where their functions are more aligned, abolished offices attending to area-specific concerns or their functions are no longer relevant; and merged agencies with similar objectives.

• Encouraged more investments through reduction of red tape and operationalization of One-Stop-Shop Processing Centers thereby reducing time and costs in the issuance of documents.

• Strengthened Local-National Government Partnership for Development and enhanced partnership with vigilant government entities to watch procurement processes and delivery of supplies and materials in the field level.

CHALLENGES AHEAD

The Arroyo Administration remains resolute in carrying out its 10-Point Agenda of governance. Amidst great difficulties and challenges, the President ably steered the country in the right direction towards economic take-off.

The sound economic fundamentals and aggressive fiscal reforms instituted in the past year have yielded positive gains for the country. Our fight against corruption to improve the country’s fiscal situation has led to renewed investors’ confidence in the country. As a result, we now have the financial resources to carry out the strategic measures for global competitiveness outlined in the Medium Term Philippine Development Plan - our roadmap to economic prosperity.

The Government shall continue to invest in vital social needs to alleviate poverty through job creation, better education, improved healthcare, greater access to electricity and water, and reliable transportation and infrastructure.

More importantly, the Arroyo Administration shall focus its resources on regional development - building up “super” regions in North Luzon, Metro Luzon, Central Philippines and Mindanao. The enlarged development areas will boost economic and market potentials beyond what each region can generate, with economies of scale, synergies and complementation that will be more attractive to investors. In addition, a larger resource base of each mega-region will be available for the provision of social services and pump-priming infrastructure, particularly for the poorer provinces.

The President sees a brighter future ahead for the Filipino nation. Yet, much remains to be done. The Government shall continue to pursue reforms to sustain the gains achieved. It shall remain steadfast in its mission of uniting all segments of society to work together to attain the goal of making the Philippines a first world nation by 2020.