CHAPTER 33  financing the plan

Introduction

 

   There are several sources of financing the  programs and projects in the updated MTRDP to achieve the over-all goals for 2008-2010. These sources are: General Appropriations Act (GAA), Official Development Assistance (ODA), government owned and controlled corporations (GOCCs), government financing institutions (GFIs), 20 percent development fund of local government units, bond flotation and the priority development assistance fund (PDAF). Financing by the private sector may be of various schemes like the build-operate-transfer (BOT), the build-operate-own (BOO), and build-operate-lease (BOL).

 

   A good investment program is important in fund sourcing. The investment program is a source of feasible and implementable projects for the planning period. Projects must be prioritized given the limited resources of the government. The massive and increasing public investments for the past years have contributed to the high foreign obligations that is facing our country today. These pressing difficulties posed by this external environment necessitate greater efforts to raise local revenues and fiscal policy in order to finance development programs.

 

Situational Analysis

 

   The fiscal position of the Philippine Government depends mostly on the revenue taxes generated by the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC). Of the two agencies, the BIR is the biggest revenue earner for the government.

 

   For CY 2006, the BIR targetted a collection of at least P765.00 billion. Of this national target, Region 5 (Revenue District 10) was given a collection target of P2.825 billion which is 0.38 percent of the national target.

 

   The total collection for 2006 was P2.907 billion, surpassing its target by P81.865 million or 2.90 percent. It is 16 percent higher than the 2005 collection of P2.504 billion.

 

   The bulk of investments for the 2004-2007 planning period was borne by the national government with the private sector playing a role in complementing and supporting government initiatives. Investments were channeled towards economic activities that generated employment, promote trade and industries, good governance and capital intensive projects like roads and bridges, irrigation systems and other infrastructure-related projects. These projects partially achieved economic growth in the region.

 

   The government's allocation of financial resources for 2004-2006 was not sufficient to cope with the development requirements of the region. The region's three year average share for 2002-2006 in the national budget was only 2.98 percent (Table 1). However, the 2007 share was 3.34 percent, a measly increase of 0.42 percent over the 2006 level. The individual agency proposed budgets did not materialize due to the limited resources. In 2004 and 2006, the budgets were re-enacted (2002 and 2005 levels) which deprived some new projects of funding.

 

   RDC resolution numbers 05-19, 05-20 and 05-21, series of 2006, were passed requesting an increase in the budgets of the Fiber Industry Development Authority (FIDA), Environment Management Bureau (EMB) and Mines and Geosciences Bureau (MGB) to support their major programs and projects.

 

   On decentralization efforts, the budgets of eight state universities and colleges (SUCs) and five agency regional offices were receiving their allotment from the Department of Budget and Management (DBM) Regional Office 5 which led to fast and on-time releases compared to those agencies receiving their allotment from DBM Central Office. The five agency regional offices are: Department of Health (DOH), Department of Education (DepEd), Technical Education and Skills Development Authority (TESDA), Department of Public Works and Highways (DPWH) and Commission on Higher Education (CHED). The eight SUCS are: Bicol University (BU), Catanduanes State College (CSC), Camarines Norte State College (CNSC), Camarines Sur State Agricultural Colleges (CSSAC), Partido State University (PSU), Sorsogon State College (SSC), Don Emilio B. Espinosa Memorial State College of Arts and Trades (DEBESMSCAT) and Camarines Sur Polytechic Colleges (CSPC).

 

   One of the initiatives undertaken in the budget review was the conduct of a dialogue between officials of the Regional Development Councils and Agency Central Offices where the latter gave a briefing on agency lump sum funds. In 006, the RDC endorsed the budget proposals for CY 2007 of 28 agencies for incorporation into the agency budget proposal. In this manner, the RDC mandate to push for critical regional projects was exercised.

 

   Implementation of programs and projects funded from Local Government Units (LGUs) was sourced from the Internal Revenue Allotment (IRA) including the 20 percent Development Fund of the LGU. Most of the LGUs are highly dependent on the IRA so that there is a need to enhance and strengthen their revenue generating capacities as provided in the 1991 Local Government Code (LGC) to veer away from too much dependency on national aid. In 2005, a reclassification of LGUs was undertaken, which reflected a downgrading of the Cities of Legazpi and Naga from first class to second class cities (Table 2). This reclassification was based on their income and served as basis for the determination of the financial capability of the LGUs to provide in full or in part the funding requirements of developmental projects and other priority needs in their locality. Likewise, the income of the LGU is used as a factor in the allocation of national or other financial grants. For the provinces, only Albay, Camarines Sur and Masbate have been classified as first class provinces; Camarines Norte and Sorsogon are second class and Catanduanes is third class province.

 

   Projects funded from Official Development Assistance (ODA) were given priority particularly in allocating the counterpart from the Government of the Philippines (GOP) in the agency budget proposal. Special projects of NEDA like the Country Program for Children (CPC), the United Nations Program in Masbate, and the Second Kennedy Round (KR2) were successfully funded from grants of UNICEF, United Nations Population Fund and Japan.

 

   Another special project which took off in 2006 was the Agriculture, Social Support and Environmental Facilities (ASSEF) which is a grant from the Agencia Española Cooperacion de Internacional (AECI) for implementation by 4th, 5th, and 6th class LGUs. Both the KR2 and ASSEF projects required LGU counterpart.

 

   Projects funded by locally generated revenues of LGUs were taken from real property taxes and other fees collected from local businesses. In 2006, because of poor revenue generating capacities of LGUs, the dependency on the IRA ranged from 54.34 percent to 92.01 percent. (Table 3). For the cities, Naga City had the least dependency ratio of 54.34 percent in 2006, followed by Legazpi City with 64.06 percent and followed by Masbate City with 86 percent. For the provinces, Catanduanes had the highest dependency ratio of 97.24 percent, followed by Camarines Sur with 92.01 percent. Performance of real property tax collection of the provinces and cities was affected by Typhoons Reming and Milenyo (Table 4).

 

Objectives

1. To be able to finance priority regional programs and projects given the limited resources, strengthening of the local planning, budgeting, resource generation and decentralization of agency budget releases  in the next planning period.

2. To increase the budget of regional agencies based on their major final outputs (MFOs) and strategies for the delivery of basic services.

3. To expand domestic resource mobilization efforts through intensified collection of taxes from professionals and the business sector.

4. To improve local government's revenue generating and collection capacities to make them less dependent on national aid and enhance the regionalization efforts.

Strategies

 

   In support of the overall development objectives, financial policies and strategies will focus on:

• Improving the generation of local financial resources of LGUs through a more responsive financial intermediation mechanism and an improved revenue collection system. This will be done through improved tax administration efficiency, tax mapping activities, intensive tax information and collection drives and updating of the local revenue tax code.

• Improving and expanding the structure of financial resource allocation through a more responsive regionalized budget system that is directly supportive to the annual budgetary translation of regional programs/projects and priorities that are recommended by the RDC.

• Attaining fiscal discipline through prudent and efficient use of financial and fiscal resources, ensuring judicious allocation of resources to priority programs, projects and activities that will attain regional goals and objectives.

• Tapping other sources of funds, either local or foreign to provide adequate provision for a continuing support for public services delivery and other activities geared toward the achievement of a better quality of life of the Bicolanos.

• Updating of the Regional Development Investment Program (RDIP) to come up with feasible programs and projects for fund sourcing and implementation.

• Having viable project proposals for fund sourcing with high impact to the region through the Bicol Project Development Committee (BPDC) and facilitate ODA funding for private sector projects.

• RDC to work out the creation of a lump sum fund for the region similar to that of the Regional Budget Allocation Scheme (RBAS).

• Oversight agencies to meet all newly-elected officials on the reforms in the preparation of plans and budgeting.

Funding Sources for 2008-2010

 

   Fund sources for 2008-2010 shall  be from the General Appropriations Act (GAA), Official Development Assistance (ODA), Regular Calamity  Funds, Local Government Units (LGUs) and the Private Sector through its BOT, BOO, BOL schemes.

 

   Economic sector projects will be sourced out from the regular appropriations of the Department of Agriculture (DA), the Department of Environment and Natural Resources (DENR), the Department of Agrarian Reform (DAR), the Department of Tourism (DOT), the Department of Trade and Industry (DTI), the Environment Management Bureau (EMB) and Mines and Geosciences Bureau ( MGB) as major agencies in the areas of agriculture, fisheries, mines and geo-sciences, agrarian reform, forestry, trade, tourism and environment.

 

   Earmarked for ODA are the River Basin Watershed Management Program (RBWMP) with the following sub-projects:flood control, watershed management and irrigation modernization. Likewise, the Agrarian Reform Communities Development Program (ARCDP) will cater to agrarian reform communities. LGU counterpart will be needed for the critical foreign-assisted projects.

 

   Calamity funds will be used to fund the rehabilitation of damaged crops and facilities including infrastructure, health and school buildings destroyed by Typhoons Reming and Milenyo.

 

   Social services projects are likely to be financed from the regular budgets of the social agencies like Department of Health (DOH), Department of Education (DepEd), state universities and colleges (SUCs), Technical Education and Skills Development Authority (TESDA), Department of Social Welfare and Development (DSWD), Department of Labor and Employment (DOLE) and other major implementing agencies.

 

   Projects under the infrastructure sector will be financed from a combination of ODA and regular budgets of the Department of Public Works and Highways (DPWH), Department of  Transportation and Communications (DOTC), National Irrigation Administration (NIA), Philippine Ports Authority (PPA), the LGUs and the Priority Development Assistance Fund (PDAF).

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