Chapter 16

Good governance in the country shall be advanced through the collaborative efforts of the government, business and civil society. Efforts shall address current weaknesses in the delivery of services through: (a) implementation of policies and programs; (b) enforcing national and local government accountability; (c) fighting graft and corruption; and (d) ensuring law enforcement and justice. Moreover, participation of the marginalized sectors in decision making, both at the local and national levels, shall be promoted.

The government shall institute reforms in three directions: (a) improving moral standards in government and in society; (b) implementing a philosophy of transparency; (c) strengthening the ethic of effective implementation in the bureaucracy.

Good governance promotes the collective responsibility of the government, civil society and private sector in improving the lives of all Filipinos, particularly the poor. Governance is not the exclusive domain of the public sector, as it requires the distinct contributions of the business sector in creating wealth and employment, and of civil society in promoting moral values and accountability.

The government ensures a conducive political and legal environment. It exercises policy making, standard setting and regulation to uphold the national interest and to provide basic public goods and services. It also addresses inequities in the distribution of wealth and resources.

Good governance is guided by three interrelated principles: (a) a sound moral foundation; (b) a philosophy of transparency and accountability; and (c) an ethic of effective implementation.

Under the principle of a sound moral foundation, improving ethical standards is a core vision of the Macapagal-Arroyo Administration. This impresses upon the citizenry the need to nourish the values of accountability, transparency, and integrity.

The principle of transparency is one of the values that form the backbone of democratic societies (the others are accountability and the rule of law). It means that government’s decision-making processes shall be subject to full public disclosure at every stage in order to restore and maintain public confidence in the honesty of their leaders and the integrity of public policies and government processes.

The philosophy of accountability refers to the responsible use of power by the government to advance public welfare. It requires that those who hold positions of public trust should account for their performance to the public. Effective accountability requires appropriate external feedback and should be linked to an appropriate incentive and penalty system.

The Administration shall have a new culture in governance. A culture of plain talk and common sense will prevail. Cabinet secretaries will do less cluster and interagency committee work and instead concentrate on running their departments. Less meetings will result in more tangible results such as generating jobs, improving peace and order, or fighting graft.

Subsidiarity means the extent to which the government utilizes various levels to manage development initiatives effectively. Local government units (LGUs) are expected to manage the administrative, political, economic and cultural affairs within their jurisdiction, consistent with the requisites of devolution and local autonomy. However, there will be seamless efforts from national to local governments to be investor friendly.

Circumscribed governance recognizes that the government shall limit itself to activities that cannot be performed more efficiently by the private sector. Given the government’s limited resources, it will focus on setting a clear and consistent policy framework, promoting appropriate laws, and ensuring fair and impartial enforcement of the law. Government action shall be restrained by the citizens’ basic rights enshrined in the Constitution.

Empowerment recognizes the primary responsibility of citizens to chart their own development, with the state providing measures to facilitate the same. It is based on the assumption that citizens should not be mere spectators in the business of government but should proactively take part in the identification of solutions to problems and in the actual implementation of these solutions.

Strategic partnerships and critical collaboration are anchored on the collaborative effort and enduring partnership among government, the business community and civil society to reduce poverty, attain economic growth with social equity, and achieve an improved quality of life, especially for the poor.

Guided by the foregoing principles of good governance, the delivery of basic services to the people and ethical standards of society shall be improved and institutions of governance shall be strengthened. Improving service delivery is anchored on the citizens’ rights as taxpayers and customers to high quality goods and services at reasonable prices.

One of the essential functions of government to sustain development is to maintain overall macroeconomic stability. Reducing instability is part and parcel of a propoor policy stance. Thus, government shall focus on providing the enabling environment in which private initiatives can flourish and serve the common good. Furthermore, the strength of institutions is anchored on the creativity and synergy that arise from the unity in purpose of government, business and civil society achieved through consultation and consensus.

Improving Service Delivery

Filipinos have begun to appreciate the value of good governance. The country’s recent economic crisis caused by crony capitalism, graft and corruption and incorrect policies has impressed on them how important the quality of government is in sustaining economic growth and reducing poverty. Corruption, for one, diverts to private pockets public funds that should go into antipoverty programs. Aside from this, poor targeting of health and education services has reduced the opportunities for improving the country’s human capital. The preferential bias for the poor needs to be felt in terms of access to basic goods and services.

For the past eight years, the government has been pushing the passage of the Reengineering Bill which would empower the President to reengineer the Executive Branch of government including government-owned and/or -controlled corporations (GOCCs) and state universities and colleges (SUCs). However, the Bill has not received much political acceptability as advocacy has been quite limited.

As of 1999, the Philippine civil service had 1.4 million public officers or 1.93 percent of the total population. This compares favorably with other developing countries in Asia whose civil service institutions are over two percent of their respective population. The country’s civil servant to population ratio of 19:1000 is much lower than Singapore’s 23:1000, Europe’s 70:1000 and Brunei’s 73:1000. These countries maintain a higher proportion of civil servants despite their advanced technology and computerized bureaucratic processes and procedures.

The Civil Service Commission has reported that the 1.4 million total government workforce is comprised of 959,966 personnel in the National Government Agencies (NGAs), 390,561 in GOCCs, and 94,971 in LGUs.

Despite the low density of public servants to population, the dominant public perception is that the government is bloated. However, the issue is more of efficiency, distribution, and cost.

In the national government, efficiency problems arise as workers are spread thinly across an extraordinarily large number of departments, agencies and bodies, whose functions are poorly delineated and sometimes duplicative and redundant. Moreover, the perception of a bloated bureaucracy lies in the distribution of government employees in terms of central offices vis-à-vis field units, and in terms of distribution among functional or occupational groups. In terms of cost, the wage bill has reached 45.8 percent of the total national government budget in FY 2000, representing a growth of 10.6 percent from 1999.

Streamlining the bureaucracy is not about trimming the number of national government employees. Rather, it is about addressing the pervading dysfunctions that impede the effectiveness of governance, as follows:

1. Government tends to be weak in performing its core government functions;

2. Government is too involved in societal activities, thus competing with the private sector in certain areas where the latter is more efficient and effective;

3. There is unclear delineation of functions among levels of government — national, local and corporate sector;

4. There is unnecessary proliferation, duplication, overlapping, and diffusion of functions, programs and activities among and within departments/agencies;

5. Poor delivery of services to the public manifested by cumbersome procedures, rampant rent-seeking in securing licenses and permits, and unequal access to government services is observed; and

6. There is lack of standard nomenclature of various offices of the government that would readily indicate the functions, powers, leadership structure, organizational placement, and comparability of agencies.

Pending the passage of the Reengineering Bill, administrative streamlining activities have proceeded in the Department of Health through Executive Order (EO) No. 102, Department of Social Welfare and Development (EO 15), National Statistics Office (EO 5), Department of Budget and Management (EO 95), Department of National Defense (EO 112), Department of Trade and Industry (EO 124), Department of Agriculture (EO 162) and Department of Agrarian Reform (EO 290).

To enable agency heads and managers to meet performance targets, the government has begun to grant them greater flexibility in the management of their budgets. The imposition of across-the-board mandatory reserves on government agency budgets has been lifted, and the banking system utilized in settling accounts payables.

A Budget Dialogue Group, composed of representatives from the private sector, local government units and the National Government was established on January 15, 1999 by virtue of EO 64 as a venue to discuss planned reform measures and government spending priorities.

Moreover, the DBM and the National Economic and Development Authority (NEDA) have started to conduct Sectoral Effectiveness and Efficiency Reviews (SEERs) of programs and projects, also as part of the MTEF. The SEER is intended to update the rolling 1999-2004 Medium-Term Public Investment Plan (MTPIP) and to generate program – as well as project–level information for the DBM Technical Budget Hearings and Congressional budget reviews. As a result, agency expenditure proposals were subjected to tests for consistency with government priorities and ranked accordingly.

To encourage agencies to focus on the ultimate outcomes and outputs of these programs and projects, and to improve indicators against which the agency’s performance shall be measured, the Organizational Performance Indicator Framework (OPIF) has been implemented initially in the 2001 Budget Call. Furthermore, DBM has initiated discussions with the Civil Service Commission (CSC) on the development of a process for linking agency performance with personnel performance. For its part, NEDA shall strengthen its monitoring and evaluation capabilities in order to conduct an in depth evaluation of government intervention in key programs and projects.

A tighter and more efficient linkage between planning and budgeting requires integration of off-budget items into budget deliberations. Off-budget items present significant fiscal risks to the national government since they can potentially generate large budgetary obligations. Contingent liabilities borne by build-operate-transfer (BOT) and similar projects are good examples. The government is now confronted with substantial obligations, as some contingent events have become realities. The DOF is currently engaged in estimating the magnitude of the contingent liabilities of the national government. The DBM and the Coordinating Council for Private Sector Participation (CCPSP) are working with the DOF in developing a system to rationalize the inclusion of contingent liabilities in the budget.

Conflicting laws, rules and regulations govern the procurement process in the Philippines. Problems of delays, collusion, lack of transparency, excessive use of discretionary criteria and lack of competition have long plagued the government procurement of goods, services and infrastructure projects. These problems have led to rampant graft and corruption and have increased the costs of doing business for both the government and the private sector.

These problems are being addressed under four broad strategies: administrative measures, legislative bills, NGO participation as a reform partner and other complementary electronic initiatives.

The administrative track has introduced three basic changes:

1. Streamlining of the prequalification process to a simple eligibility check and strengthening of the post-qualification process;

2. Shifting the basis for award from the "Lowest Evaluated Bid" to the "Lowest Calculated Responsive Bid"; and

3. Removal of bracketing in evaluating the bid price, eliminating a floor on bid prices and using the available budget as the ceiling on bid prices.

Already, these rules have been adopted by certain agencies. The Department of Public Works and Highways (DPWH), for instance, recently used the postqualification system in determining qualified bidders and spent only one hour to post the result, which would otherwise have taken months to complete under the previous prequalification system.

EO 262, amending EO 302, was issued, providing for the rules in procuring goods, supplies and materials, and PD 1594 was amended, governing civil works. These new rules have already been confirmed by the Economic Coordinating Council, the NEDA and the Procurement Policy Board.

Procurement reform bills have also been filed in the Senate and House of Representatives. The bills will consolidate under one law over a hundred laws and regulations governing government procurement. They also contain new procurement rules and processes, provisions for transparent advertisement of invitations and posting of bids through the Internet, procurement through electronic means, professionalization of procurement officials, and inclusion of penal provisions and civil liability. Furthermore, the "Procurement Watch", an NGO-based watchdog, has been organized to monitor on a strategic basis major procurement activities of government.

The DBM launched the first phase of the Electronic Procurement System (EPS) on November 22, 2000 in response to the government’s initiative to the global challenge of establishing an e-government. The elements of the first phase of the EPS include the following:

1. Public Tender Board, an electronic bulletin board where all government bid opportunities and decisions will be posted, providing a "one-stop" website for information on business opportunities, guidelines and awards;

2. Suppliers Registry, where all accredited suppliers of agencies will be listed; and

3. Electronic Catalogue, a virtual store for supply requirements of agencies.

These initial features will achieve the objective of transparency in public procurement activities as they provide a level playing field for all suppliers. The enhanced competition is expected to result in substantial savings and high quality acquisition for government agencies. The President also approved on November 22, 2000, EO 322 directing all government agencies, including GOCCs and SUCs, to participate in the EPS.

The present government accounting system is beset by a number of problems which include, among others, undue complexity of the system which inhibits full compliance with reporting requirements, inaccurate reflection of the full cost of agency operations and the inability of the system to allow benchmarking of costs with the private sector.

The keeping of three sets of accounting records by the agencies, the Bureau of Treasury and the Commission on Audit (COA) and the lack of regular reconciliation procedures has resulted in large amounts of unreconciled balances which cast doubts on the accuracy of the financial reports produced by the system.

The adoption of the accrual accounting system is expected to ensure compliance with reporting requirements of oversight agencies and the monitoring of operational efficiency and results, in accordance with the requirements of the MTEF.

Government audits are currently performed by resident auditors focusing on compliance by agencies of government laws, rules and regulations and the disallowance of expenditures which are considered irregular, unnecessary, excessive, extravagant and unconscionable.

The COA is shifting its audit focus towards program and project evaluation of agencies through the conduct of Value-for-Money (VFM) or performance audits. It also initiated several measures to eliminate corrupt practices in the auditing process through the implementation of the Team Audit Approach in lieu of residency audits.

The government is also working towards a strong and independent internal audit capacity within the agencies that will enable them to preaudit systems and transactions, as a tool of putting in place a sound internal control system.

Generating enough revenues to finance government spending has always been a challenge. The government’s poor tax collection efficiency has been identified as among the most critical institutional issues besetting the country’s revenue-raising agencies. Nevertheless, even if the Philippines succeeds in increasing its revenues and cutting back its investment gap, it will still require official development assistance (ODA) to meet its development financing priorities. For this assistance to be forthcoming, the country will need to improve its record of aid utilization.

Many of the pressing development challenges cannot be solved unless subjected to international or regional cooperation. This is seen, for example, in environmental protection, population management, and in the war against human rights violations, massive poverty, gender discrimination, AIDS, and dangerous drugs. This cooperation finds expression in bilateral and multilateral programs, through which the developed countries are able to assist the developing ones with ODA.

On the negative side, there is a disturbing trend of growing dependency on national government dole-outs that lead to relaxation of local tax collection efforts. A study of the LGU Guarantee Corporation on how much local revenue comes from IRA revealed that IRA dependency averaged at 74 percent for provinces, 42 percent for cities and 66 percent for municipalities.

The devolution of basic services and infrastructure development to the LGUs poses both an opportunity and a challenge for them. They now formulate and implement their own development plans. This opportunity carries the challenge of securing financing for these projects.

Improving Ethical Standards in Society

Corruption remains a challenge in governance. It robs the poor of public expenditures that would have been channeled to priority programs and projects. It erodes the confidence of citizens and entrepreneurs in the integrity of institutions. While corruption is regarded as an ethical issue, it is also a structural, economic and institutional issue arising from bureaucratic dysfunctions that impede transparency, predictability, and accountability in government operations.

In Asia, the Philippines has had the most number of laws (9) and number of agencies (14) that deal with graft and corruption. However, these laws remain unheeded and transaction costs with the government are among the highest in Asia.

The Philippines has well-designed laws confronting corruption. The problem is that these laws, rules and regulations are not fully enforced. The greater challenge is in harnessing preventive rather than punitive measures. Education on responsible citizenship starting with the young remains paramount. At the institutional level, corruption does not only persist in government but also in other institutions of society. While it is essential to exact accountability and integrity from government, the same principles should be observed and nurtured in the private sector and civil society.

Campaign finances must be looked into, inasmuch as the high cost of mounting a campaign would impel the eventual winner of an election to recoup his or her investment through illegal means.

Democratic institutions have been restored and efforts should now focus on the development of institutions necessary for the attainment of a strong and functioning democracy. The challenge rests on building and sustaining a democratic culture in the country, particularly a politically mature electorate.

More than political advertisements, the electorate must be empowered with information that would help them vote intelligently. The challenge is to develop the people’s appreciation of their vote as a means to reform the government and receive better services from it. Part of this challenge is the need to raise the awareness of the electorate on relevant issues and the corresponding platforms of the candidates.

One part of the corruption problem is that the private sector itself often initiates bribery in transactions with government agencies, e.g., law firms transacting with National Labor Relations Commission (NLRC) and accounting firms transacting with the BIR. Collusion in the bidding of contracts and other partnership agreements, bribery and special favors, among others, have emphasized the participation of the private sector in corruption.

To engage the private sector in the campaign against graft and corruption, the President created the Governance Advisory Council through EO 25 (July 18, 2001) composed of respected leaders from the private sector. It shall serve as an advisory body to the President with the principal function of formulating the governance agenda to promote the global competitiveness of the Philippines.

A successful anticorruption campaign involves not only going after corrupt individuals but strengthening public institutions and raising ethical standards as well. The failure of many anticorruption measures lies in fragmented efforts by existing antigraft bodies, in weak institutions and unenforceable rules, and the lack of vigilance of civil society. Moreover, there is a clear bias for investigation and prosecution as against prevention and education.

To be successful, the anticorruption campaign must adopt a programmatic approach, looking at the whole cycle of investigation, prosecution and prevention. Effective anticorruption calls for strengthening of antigraft bodies, providing focus on anticorruption efforts, addressing the weaknesses of corruption-prone agencies, and engaging civil society and the private sector in the campaign.

Strengthening Institutions

Institutions ensure stability and continuity in a democratic society. Well functioning institutions, economic openness, and strong market orientation will remain the prerequisites for continued economic growth and sustainable improvements in the quality of life. A capable government, sound policy making, and a strong capacity for implementation and regulation will provide a good foundation to pursue sustainable development.

Developing capacity for effective governance should be a primary means of reducing poverty. The sustainability of development efforts must be ensured in order for development initiatives to make a significant and lasting impression on the daily lives of all stakeholders, especially the poor. At the core of these efforts is the synergy of key actors of governance: government, civil society and private sector.

In this regard, the flourishing of partnerships among civil society, government and business in pursuing socioeconomic development is becoming a global measure to reduce poverty. These partnerships respond to the demands for representation and participation in governance and self-determination by the marginalized.

Corruption is principally a governance issue - a failure of institutions. Weak institutions cannot supply society with a framework for competitive processes. The complementary roles of the government, private sector and civil society are compromised under an environment of corruption.

Improving Service Delivery

The Reengineering the Bureaucracy for Better Governance Program shall be the overall strategy of the Executive Branch in improving service delivery and strengthening government institutional capacity. Comprehensive and enduring reforms shall be pursued to develop an efficient, effective, focused and performance-oriented bureaucracy.

The reengineering program shall rationalize the distribution of functions among government agencies, intensify public-private partnerships and leave to the private sector activities it does best. It supports a continuing "scrap-and-build" policy in the Executive Branch by allowing the creation of an agency or unit only upon the abolition of an equivalent organizational unit.

Two tracks are being pursued in the implementation of the reengineering program. One is the administrative track focusing on measures within the powers of the President to improve service delivery mechanisms in government. In support of administrative reengineering, the Public Sector Institutional Strengthening and Streamlining Agenda (PSISSA) shall be implemented.

The other is the legislative track advocating for the passage of the reengineering bill granting powers to the President to reorganize the Executive Branch. The bill also provides for impact mitigation measures to cushion the effects of adjustment processes on employees. The Integrated Administrative Reform Plan shall be formulated to guide the implementation of bureaucracy-wide reengineering.

The Presidential Committee on Effective Governance (PCEG) shall serve as the central body to ensure consistency in effecting the two-track approach. Among the strategies that shall guide the work of the PCEG are, as follows:

1. Ensuring strong and visible political commitment through the reform process;

2. Keeping department/agency heads publicly engaged in the reform effort;

3. Developing a cadre of reform champions/focal persons across the bureaucracy;

4. Crystallizing the purpose of the reform;

5. Matching reform strategy, comprehensiveness, speed and size with the window of opportunity for change;

6. Developing an impact mitigation strategy;

7. Reforming the compensation system for government employees; and

8. Sustaining and embedding gains from reforms.

At the same time, the compensation structure for government employees shall be rationalized. Salary distortions across agencies arising from exemptions in the application of the Salary Standardization Law shall be corrected. The Civil Service Commission (CSC) shall determine the desirability of having a single salary structure for all government employees and the relevance of the present position classification system. The "one size fits all" approach shall be reviewed as it makes it difficult to tailor careers and incentives to specific position clusters.

Updating the benefit enhancement measures of government shall also be undertaken to complement efforts at improving productivity and performance measurement in government. Granting of performance incentive pay and merit increases shall be attuned to the emerging reforms in measuring agency and individual performance.

Hence, harmonizing performance evaluation methodologies and instruments across levels shall be prioritized, i.e., Organizational Performance Indicators Framework (OPIF), Performance Commitments (PC) of Department Heads with the President, Career Executive Service Performance Evaluation System (CESPES), and Performance Appraisal System (PAS) in the Civil Service.

Expenditure discipline will continue to be imposed, with economic growth fueled by the private sector instead of government pump priming. Prudent expenditure management would include: (a) the implementation of an austerity program for the national government and the GOCCs; (b) nonfilling of new positions except key posts; (c) deferment or purging of projects, particularly low priority ones; and (d) strengthening of accountability for outcomes and outputs. However, disbursements for basic social services (i.e., poverty reduction, frontline public services, El Niño mitigation, critical ongoing infrastructure projects) will remain a priority.

These measures will be complemented by the shift to "performance-based budgeting" to make agencies fully accountable for the quality, speed and volume of their products and services. Among the public expenditure management (PEM) reforms that need to be intensified are as follows:

1. Improving operational flexibility, allocative efficiency and aggregate fiscal discipline through the Medium-Term Expenditure Framework (MTEF);

2. Improving the Sector Efficiency and Effectiveness Review (SEER) as a process of determining priorities in programs, projects and activities vis-à-vis development imperatives in the MTPDP; and

3. Operationalizing the Organizational Performance Indicators Framework (OPIF) to assess whether or not the major final outputs and outcomes of agencies contribute directly to desired societal outcomes and priorities enshrined in the MTPDP.

Furthermore, off-budget accounts and contingent liabilities will be incorporated in the budget program and the budget law to ensure full disclosure and enhance transparency. This will tighten expenditure prioritization by limiting expenditure estimates within hard resource

constraints and force the matching of costs with available resources during the annual budget process. The omnibus repeal of provisions in GOCC charters on automatic guarantees will also be pursued. The public expenditure process will also be more strategic by focusing on policies that will reflect changes in macroeconomic conditions as well as in priorities of the government.

In support of the performance-based budgeting, Report Card Surveys, which involve the periodic measurement of public satisfaction in the delivery and availment of public goods and services, can be used. The DBM shall introduce report card surveys in evaluating allocative efficiency of public expenditures.

In the light of the new developments in International Public Sector Accounting Standards and emerging trends in information and communications technology (ICT), the COA as the central accounting authority has embarked on a Government Accounting Simplification and Computerization Project which will revise the existing accounting system. It aims to simplify the government Chart of Accounts that will produce timely, user-friendly and accurate financial statements. It will also introduce responsibility accounting by cost centers that will allow benchmarking of cost with the private sector.

The government shall also rationalize financial management and accounting policies and procedures in line with best practices and International Public Sector Standards. A Government-wide Integrated Financial Management Information System will cap the reforms in government financial management and accounting.

In order to strengthen the audit function and its role in promoting public accountability, the COA shall pursue reforms in its organizational structure and audit approaches. There shall be a shift from mere compliance audits to financial and value-for-money or performance audits of government-wide programs and projects in order to determine whether desired results are achieved and the benefits envisioned accrue to intended beneficiaries.

There shall also be a shift from residency audits to the Team Audit Approach in order to promote efficiency and objectivity in audits, preserve the independence of the auditors and obviate corrupt practices in connivance with personnel of audited agencies. Audit engagements are also being conducted regularly.

The updating of auditing rules and regulations and continuous capability building of government auditors will continue to be a primary concern of the COA to enhance its audit effectiveness.

In an effort to gain momentum from the initial successes achieved in the reform of the government procurement process, the DBM-led Procurement Policy Board will work for the refinement of the implementing rules and regulations of Presidential Decree (PD) No. 1594 and EO 262. Continuous dialogues with various stakeholders will be conducted on procurement reforms.

An executive measure on e-procurement will likewise be issued and the passage of the Procurement Reform Bill will be advocated. The bill aims to speed up the implementation of programs and projects, and forestall corruption through transparent

and less-discretionary procurement procedures.

The DBM, through its Procurement Service, will aim for the achievement of a real-time Internet-based procurement system which would include online ordering, payments, accreditation of suppliers, document submission and bidding. This will enhance transparency in the process, encourage greater competition and bring down prices of goods and services.

Finally, coalition with civil society will be continued and expanded. One of the hallmarks of the reforms in procurement is the establishment of a civil society–led "Procurement Watch" which will help monitor the procurement activities of the government.

As a tool for streamlining processes and service delivery in government, ICT innovations shall be tapped to bring down operational costs. The government shall continue to explore the feasibility of 24-hours–7-days-a-week (24-7) government service, particularly in information centers of the government.

ICT shall also be used not only to streamline processes but also to promote transparency, lessen human discretion and reduce opportunities for corruption. Among the initiatives on improving systems and procedures in support of anticorruption that shall be sustained are, as follows:

1. Government Purchases Information System (GPIS) for monitoring price information and minimizing price collusion, overpricing and other irregularities in the procurement process;

2. Vehicle Registration and Licensing Computerization to enable on-line transaction processing;

3. National Crime Information System to improve crime prevention and apprehension by linking the five institutional pillars of the Philippine Criminal Justice System;

4. Civil Registry System to facilitate the processing of civil registry documents;

5. Customs Computerization to create a queueless, cashless and no-delay system for clearing shipments;

6. Tax Computerization to enhance tax collection, processing, monitoring and accounting nationwide; and

7. Electronic Bid Board System to facilitate the procurement of supplies and materials through the net.

The government shall learn from the best ICT practices in the private sector and civil society, both here and abroad, to institute areas for replication.

Domestic resource mobilization shall be accelerated to finance development. Revenue performance shall be improved through the following measures:

1. Improving tax collection efficiency;

2. Plugging tax leaks and addressing tax evasion;

3. Rationalizing fiscal incentives to minimize foregone revenues;

4. Completing the Comprehensive Tax Reform Program; and

5. Reforming revenue administration.

At the same time, measures to further develop the capital market including pension reforms, will partly promote domestic savings, and keep mandatory government spending on social security manageable. Foreign and local investment shall be encouraged.

Complementing domestic resources and foreign private capital flows, ODA will continue to play an important role as a source of development financing.

Extensive amendments to the Local Government Code (LGC) shall be pursued to strengthen LGUs and seamless efforts from national to local governments to be investor-friendly.

The Macapagal-Arroyo Administration commits to support the principles of decentralization and devolution, wherein LGUs must take a larger role, in line with the LGC. Local governments are, in most instances, well positioned to respond to the diverse needs of their constituents.

The national government shall promote, nurture and support the emergence of autonomous, empowered and vibrant LGUs. However, it shall promote seamless efforts from national to local governments to be investor friendly. The capability of LGUs to mobilize enough resources to finance the delivery of services at the local level shall be strengthened so that they do not depend on IRA alone. In this regard, local governments shall be encouraged to venture on alternative revenue raising and credit financing schemes.

The primacy of private enterprises in undertaking economic activities, particularly those involving direct production and distribution of goods and services and those which create broad economic and social returns, are reiterated in the government’s economic policies.

As a general rule, only when the private sector is unwilling or unable to wholly undertake the production and delivery of vital goods and services shall the government directly participate in such activities. However, in order to encourage the fullest participation of, and to avoid unfair competition with private enterprises, the granting of special privileges to certain government entities (i.e., government corporations) shall be avoided.

The government may use the corporate approach to directly undertake the following:

1. Activities which by their nature may be more efficiently and effectively operated by the government as monopolies, such as public utilities and large-scale infrastructure activities, generally involving large, immovable and indivisible fixed assets;

2. Activities which, without being natural monopolies, require very large and physically indivisible capital investments and long and highly uncertain gestation periods, such that the private sector is unwilling to undertake them;

3. Activities in which the government should directly participate in the interest of national welfare, security and defense, notwithstanding likely private sector involvement, such as large-scale income distribution undertakings or those which would have wide-ranging social and economic implications; and

4. Activities which are noncommercial in nature (e.g., civic, cultural, educational and scientific activities).

Government intervention in these activities is by no means intended to be permanent. The government shall withdraw from directly engaging in these activities once the private sector has demonstrated the initiative and the capacity to take over such functions.

Another aspect of governance is the regulatory role of government. It must be market-friendly and must not impose undue burden on society. Thus government regulation shall focus on safety, technical and environmental standards. Government financial assistance, which may be provided in exceptional cases, shall be transparent and targeted at services that may be financially unprofitable, but yield high social rates of return.

The Macapagal-Arroyo Administration is committed to regulation that imposes the least burden to society while promoting individual and group welfare. In banking, for instance, depositors will be protected in case of bank failures. State banking will be reviewed thoroughly to avoid passing on to taxpayers bad debts of state banks. In the power and water utilities, the government will make sure that international safety standards are met, and both electricity and water are provided to users round-the-clock at reasonable rates. Moreover, the government will continue to aim for food security, but state trading in rice and other agricultural commodities must not impose undue burden on taxpayers.

Good governance operates under an investor-friendly and transparent regulatory framework and a level playing field. Government intervention may be necessary to establish a level playing field, acting as a regulator, so that players in the field play fairly. It is for this reason that an enabling environment for sustainable development, with competition policy as the central element, should be in place.

The mark of a capable government, besides its ability to facilitate collective actions, is its ability to set the rules that underpin markets and permit them to function efficiently. Government has to do more than establish sound rules of the game, it also has to make sure those rules are enforced consistently and without undue delay, and that private actors — business, labor, and trade associations — can have confidence that the rules will not be changed overnight or used to harass them or delay transactions. Predictability results primarily from laws and regulations that are clear, known in advance, and uniformly and swiftly enforced. Governments that change the rules frequently and unpredictably, announce changes but fail to implement them, or enforce rules arbitrarily, or allow rules to degenerate into red tape will lack credibility, and markets will suffer accordingly. Thus, the first priority is to lay the initial building blocks of lawfulness: protection of life and property from criminal acts;

restraints on arbitrary action by government officials; and a judicial system that is fair and predictable; and reduction of red tape.

To win the war on poverty, government officials and employees must embrace the core values of the Macapagal-Arroyo Administration: high ethical standards and leadership by example. It is not enough that only the top officials are honest. Integrity should cascade down the line of the government bureaucracy including the frontline services where businessmen have to get permits and licenses. Government, acting as society’s steward, must promote these values, within government itself and among the citizenry, to restore the confidence of the public and the business community in its ability and desire to serve.

The administration and key government officials must demonstrate unequivocal political commitment to the campaign by publicly adopting efforts against corruption. Overcoming public skepticism and the culture of tolerance demands proof of the government’s resolve to go after the big fish. Fasttracking high profile cases would demonstrate that anticorruption laws can be enforced in equal measure to all citizens, government officials and personnel regardless of position and stature. As important as the pursuit of these cases before the courts is their constant monitoring. Keeping the public abreast of the progress of these cases would put pressure on the anticorruption bodies to fasttrack them.

To safeguard democratic political institutions, electoral reforms are crucial. Credible and honest elections ensure political stability. Hence modernizing elections shall be pursued to move away from primitive methods of voter identification and ballot tabulation that have bred corruption and dishonesty among unscrupulous politicians and electorate. The electoral system will be fully computerized by 2004.

Preventive rather than punitive measures shall be pursued in the fight against corruption. Anticorruption efforts must be geared towards the creation of a culture of intolerance and the formation of an environment with safeguards against corruption.

Investing in the education of the young shall remain a priority. The school, along with the family and the church, remains the source of positive values such as honesty, integrity, transparency and pride in being a Filipino.

Advocacy programs on anticorruption shall be sustained to make the public aware of their role in safeguarding integrity in society and to make the government, private sector and civil society more accountable and ethical.

Moral awakenings that would instill proper work ethics and values are important but futile if not complemented with the necessary structures and mechanisms. Thus, in every sector of government, mechanisms will be established to stop the leakage of public funds. Furthermore, combating corruption begins with better systems. Monopolies must be reduced or carefully regulated. Official discretion must be clarified. The probability of being caught must be increased and the penalties for corruption (for both givers and takers) must be stiff.

The problem of corruption can be addressed through a package of policy measures such as liberalization, deregulation and privatization. Government reform is also part of the package. This means that steps can be taken to reform government so that it can work better and cost less, do away with confusing regulations, ensure greater transparency and increase accountability of government officials.

Streamlining agency rules and regulations as well as systems and procedures will make government functionaries less vulnerable to corrupt practices, especially when the rules and procedures are clear, simple, transparent, consistent and uniformly applied. Priority reforms shall be undertaken in the following areas where corruption is perceived to be most rampant: revenue collection, procurement, registration and licensing.

The Administration is committed to simple, fair, transparent and predictable rules. It is committed to reducing red tape in the bureaucracy by cutting in half the number of signatures required for the services of government agencies. Electronic procurement reforms will also speed up the delivery of public service and will save billions from anomalies and corrupt practices. A companion program to transaction reengineering is the Citizens’ Charter or Clients’ Charter, stating commitment and outlining specific procedures to facilitate transactions and allow the public access to information in government. Agencies can lessen information asymmetry by disclosing the procedures by which clients can access government’s products and services.

Not only the government, but also the private sector and civil society shall be tapped in the fight against corruption. The strength of the civil society over government and the profit sector lies in its power of advocacy and conscientization. Civil society shall hold the government accountable for its policies and outcomes, and the private sector for its products, services and processes. In areas of government-private sector interface such as in BOT, procurement and other contractual arrangements, the civil society shall ensure that transparency, integrity, accountability and the public good are upheld.

A concrete strategy to engage civil society in the fight against corruption is through civil society monitoring teams or "watchdogs". Civil society watchdogs can monitor critical and substantially-funded government projects or agencies and demand transparency and accountability in governance. The Procurement Watch and the Report Card Survey, among other initiatives of the civil society, shall be sustained. The Procurement Watch utilizes civil society organizations as partners of government agencies in enhancing transparency in government procurement. The Report Card Survey involves the periodic measurement of public satisfaction in the delivery and availment of public goods and services.

Other initiatives of civil society in support of anticorruption include the Tax Watch for monitoring and upholding integrity in the collection of taxes, and the Key Appointments Watch for ensuring transparency and probity in the selection and appointment of key officials in government agencies.

The private sector, as one of the major sources of funds used for corrupt practices, shall be tapped in developing responses to corruption. Involving the private sector will not only allow the formulation of realistic anticorruption policy responses but also put pressure on the private sector to maintain its own ethical business standards and practices.

Strengthening Institutions

For the private sector particularly business organizations to contribute to growth with equity, corporate governance reforms have to be pursued in accordance with the requirements of fair competition. Corporate transparency and level playing field provide assurance for a healthy business environment. Among the strategies to reform corporate governance are, as follows:

1. Addressing the weaknesses of corporate and capital market governance such as issues on ownership concentration, cross-ownership of corporations and banks, debt resolution procedures, etc.;

2. Improving the regulation of markets and institutional investors and upholding the autonomy and authority of the Securities and Exchange Commission (SEC) and the Philippine Stock Exchange (PSE) over market participants; and

3. Simplifying listing requirements and broadening disclosure requirements.

Likewise, the business sector needs to complement efforts of the government and civil society to reduce poverty. More than job creation, it needs to uphold its corporate responsibility towards improving the country’s social capital, particularly in augmenting material and spiritual resources to fight poverty. Business thrives in an environment where social harmony prevails. In ensuring this, the business sector plays a significant role in nurturing peace and order, specifically in sharing economic resources and opportunities to the poor in society.

Democratic governance is inclusive and participative. For citizens to mature in their individual and collective roles in nation building and development, volunteerism shall be encouraged in development endeavors. Civil society institutions shall exact accountability from the private sector and government, and uphold the societal good.

To achieve the vision of poverty reduction or economic growth with social equity, the government shall recognize the expertise and resources of civil society in supporting development efforts. Where government services are inadequate, civil society institutions shall exploit its advantage of providing alternative service delivery, particularly on social development services. It shall champion moral ascendancy in society in the same way that it personifies what it advocates in society.

Efforts shall also be made to develop effective channels of communication and information necessary for popular participation. Greater communication among government, business and civil society organizations should be encouraged as a means of developing a sustainable partnership and strategic alliance.

Civil society must not only participate in policy consultations that define priorities and preferences in allocating resources; they should also get involved in auditing-oriented and -related activities. In particular, accounting information and systems in government need to be understood by private sector practitioners and the academe if these sectors are to be engaged in the monitoring of public sector spending and financial management.

The bureaucracy’s overriding concern is providing full access to government services for the poor. Such concern for the poor will also emphasize building their capacity to assume responsibility for their well-being and learn to seize opportunities for growth. Towards this end, the government will mount programs seeking to develop civil society’s capacity to participate in development work.

The package of reforms being advocated for improving governance requires improving the institutional capability of government to plan, manage and implement strategic improvements.

The capacity of the government to steer development needs to be enhanced. In a changing environment of governance, there is a constant need to build up and improve the capability of the civil service to initiate strategic changes not only within their respective agencies or spheres of influence, but in other sectors as well.

For government institutions that will be privatized, institutional capacity enhancement is necessary for them to adapt to the required change paradigm and behavior from a public to a privatized environment. Parallel interventions may be necessary for institutions functioning in an enhanced regulatory environment.

At the national level, the primary task of providing strategic and critical capability building interventions to local executives in financial management, development management and other relevant areas must be lodged with the DILG. At the local level, five percent of LGU budget allocation every fiscal year should be allocated to HRD programs.

The institutionalization of regional development and decentralization thrusts of the government must be accompanied by a program to enhance the capability of people in the field. This program involves training in the various aspects of the planning cycle and development of models and techniques to generate information, statistics, indicator systems, etc.

The trend in local governance would indicate that LGUs would require capacity enhancement interventions in local planning, programming and project development to enable them to effectively and efficiently utilize their resources in addressing their development requirements. Another institutional development intervention is replicating at the LGU level the best practices of collaborative governance at the national level.

The government is also committed to undertake financial and budgetary reforms in the medium term, essentially on two fronts: (a) move from modified accrual to full accrual accounting in government operations; (b) move from postaudit to value for money audit. Hence, it is necessary to build up the financial and budgetary information before such systemic shifts, and also massively train government accountants and auditors before such moves are underway.

The changes in governance structures and relationships may require capacity enhancement or reorientation of government managers. Appropriate training interventions shall be pursued to retool them in response to changing demands and opportunities of development.

Good governance thrives on partnerships. Among these are: (a) new partnerships among the national government, the local governments and with civil society through decentralization and devolution; (b) and partnerships between workers and businesses to promote tripartism.

These new partnerships will enable the government to be responsive to the demands of society for an efficient system of social capital, which includes hard infrastructure like roads, ports and airports, and the infrastructure for social development and poverty elimination, like schools, training centers, health service facilities and hospitals.

National and local government relations will be characterized by complementation and collaboration, particularly in initiatives whose benefits spill over the geographical limits of LGUs. Inter-LGU cooperation will be forged to address common problems faced by contiguous local governments.

For LGUs, accessing and harnessing resources is now an important strategy. The strain on national resources because of factors such as increased population, higher cost of materials for projects require LGUs to be more aggressive in developing new partnerships. In this regard, LGUs shall develop funding partnerships and linkages with various sectors to improve delivery of basic services throughout the country. The private sector offers funding possibilities to viable projects while civil society provides skilled and dedicated volunteers to help bring social services and technical assistance to the grassroots.

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