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Minutes of the First LEDAC Meeting Summary
of Discussions and Agreements Presiding
Officer With Her Excellency, President Gloria Macapagal Arroyo presiding, the LEDAC meeting was called to order at 1:30 p. m. Senate President Aquilino Q. Pimentel, Jr. led the opening prayer. Attendance The following government officials attended the meeting: A. Executive 1.
Her Excellency, President GLORIA MACAPAGAL ARROYO
B. Senate 14.
Senate President AQUILINO Q. PIMENTEL, JR. C.
House of Representatives 18. Speaker
FELICIANO R. BELMONTE, JR. D. Local Government 30.
Executive Director SANDRA T. PAREDES
League of Provinces E.
Other Officials 31.
Deputy Director-General RAPHAEL P.M. LOTILLA
NEDA F. NEDA/LEDAC Secretariat 47.
Director EUGENIO R.B. INOCENTES III
G. Presidential Legislative Liaison Office (PLLO) 62. Director FE LIOAOA S. BAUN H.
Presidential Management Staff (PMS) 66. Mr. ANTONIO AVEDAÑO I. Senate Policy Studies Group (Senate-PSG) 71. Director
RONALD R. GOLDING J. Others 74. Director
ANTONIO J. DE GUZMAN
Senate Agenda The meeting had the following agenda:
Agenda Item
Presented
By I. FOR INFORMATION a.
Status
and Updates on the
Common
PLLO b.
Status
Report on the Fiscal Situation
DBM/DBCC II. FOR DISCUSSION a. General Appropriations Act of 2001 DBP(Presentor)/NEDA b.
New Central Bank Act (including
BSP (Presentor)/DOF/NEDA c. Power Sector Reform Bill NEDA(Presentor)/DOE III. OTHER MATTERS a. Shift in Customs Valuation System NEDA (Presentor)/DOF b. Other Legislative Measures
b.1
New ARRM Organic Bill
DND (Presentor) 1.
Call To Order 1.1
After calling the first LEDAC meeting to order, the President
welcomed the leaders of both Houses of Congress and thanked them for the
important roles they played leading to the transition and for the acts
they carried out to affirm the legitimacy of the present government. 1.2
The President informed the body that her Administration’s reform
agenda in the fiscal, banking, and power areas seek to restore the
confidence of business and the international communities in our country.
She also conveyed her hope that the legislative and executive branches of
government could pursue their common legislative agenda. 2.
Status and Updates on the Common Legislative Agenda 2.1
Undersecretary Antonio M. Gatuslao informed the body that in a
meeting between the leadership of both chambers of Congress and key
cabinet members held on 16 January 2001, sixteen bills have been
identified as priority to comprise the Common Legislative Agenda. 2.2 The
status of the sixteen identified bills are presented below: 1.
FY2001 General Appropriations Bill – Considering time constraint,
the probability for enactment of the budget by adjournment of Congress is
nil. 2.
New ARMM Organic Act – Senate and House panels have approved a
consensus version which will be presented for ratification by both
chambers on 4 February 2001. 3.
Power Sector Reform Act – The Bicameral Conference Report had
been approved and routed to panel members for signature. The executive is
considering to further study the immediate and short-term implications of
the bill. 4.
New Central Bank Act -
Bill has been approved in the Senate. It is pending in the Period of
Amendments on Second Reading in the House. 5.
Amendments to Omnibus Investments Code – The House has approved
the bill but the Senate sponsor (Senator Juan Ponce Enrile) has pointed
out the need to strengthen the measure by allowing flexibility in the
packaging of incentives. DTI, as lead agency, has been mobilized to draft
the substitute bill. 6.
Sustainable Forest Management Act – The bill has been approved in
the House but still on second reading in the Senate (floor debate). 7.
National Land Use Act – The House version is ready for floor
consideration. The Senate has given committed to fast track the
processing. 8.
Anti-trafficking in Women and Minors – The bill has been approved
in the House. It is still pending in committee level at the Senate. 9.
Anti-Child Employment in Hazardous Occupation – The bill has been
approved in the House. It is pending at the committee level in the Senate. 10.
Plant Variety Protection – The bill has been approved in the
House. It is pending on Second Reading in the Senate (floor debate). 11.
Protection for Integrated Circuits Layout Designs – The bill has
been approved in the House. It is pending on Second Reading in the Senate
(also for floor debate). 12.
Shift in Customs Valuation – The bill has been approved in the
House. It is for Second Reading in the Senate. 13.
Lateral Attrition for Optimum Revenue Collection – The bill has
been approved in the House. It is pending on Second Reading in the Senate. 14.
Upgrading the Court of Tax appeals – The bill has been approved
in the House. It has been approved on Second Reading in the Senate. 15.
Tariff Rates Adjustment for Certain Tariff headings – The bill
has been approved in the House. It is to commence committee deliberation
in the Senate. 16.
Deferment of the Imposition of VAT on Certain Services –
Bicameral Conference Committee Report ratified by both chambers. 2.3
Undersecretary Gatuslao also reported that as of 4 February 2001,
seven (7) other measures have completed the legislative process and will
soon be submitted to the President for consideration. These are: 1. Strengthening the Philippine Science School System; 2. Special Appropriations for May 2001 Elections; 3. Tax Exemption for AFP Personnel; 4. VAT Imposition on Certain Services; 5. Production Quality Excellence Incentives; 6. Regulating the Practice of Landscape Architecture; and, 7.
Cash Incentives to National Athletes. 2.4
He also reported a total of five (5) bills of national impact which
are at the penultimate stage of the legislative process: 1. New Organic Act for ARRM; 2. Fair Elections Act (or the Lifting of Political Ad Ban); 3. Correction of Typographical Errors in Civil Registry; 4. Defining the crime of Forgery; and, 5.
Incentives to Recipients of Medal of Valor. 2.5
Undersecretary Gatuslao underscored the urgency of four (4) other
measures which are in the advanced stages of legislative process: 1 Concurrence to Presidential Amnesty Proclamation for MILF; 2 Administrative Naturalization Act; 3 Concurrence to PNP Reorganization Plan; and, 4
National Procurement Reform Act. 3
Status Report on the Fiscal Situation of the Government 3.1
Secretary Emilia T. Boncodin updated the Council on the present
fiscal situation of the country. 3.2
Secretary Boncodin reported that the economy is recovering as can
be gleaned from latest NEDA reports indicating that in 2000 the economy
/GDP grew at 3.9 percent. She added that the inflation rate since 1998 had
been on the downtrend although in the last months of 2000 and early this
year, inflation had been on the upswing. 3.3
Secretary Boncodin likewise informed the Council that the budget
deficit posed a threat to the recovery. The public sector deficit is
currently 4 percent of GNP. Unless effectively addresses, the budget
deficit could grow to as much as Php 170 billion by year 2001, as
estimated by the DBM staff. 3.4
Secretary Boncodin informed the Council that the projected revenues
for the period 2000-2001 are estimated at Php 565.1 billion while
disbursements are projected at Php 734.7 billion. This situation is
compounded by the fact that interest payments comprise 25 percent of the
total expenditure program. 3.5
Secretary Boncodin alerted the Council that as a worst case
scenario for year 2001, the budget deficit could reach Php 216 billion. 3.6
She also reported that as of January 25, 2001, the Bureau of the
Treasury’s free cash of Php 63.5 billion is equivalent only to 3.4 weeks
of disbursements. 3.7
To remedy the situation, Secretary Boncodin proposed a deficit
reduction strategy which comprises four components: tax administration
reform; tax structure reform; asset sale; and, expenditure
rationalization. If implemented, the deficit reduction strategy could lead
to a manageable deficit level of Php 145 billion which is 3.8 percent of
GNP. She added that a balanced budget may be realized only in 2006. 4.
Budget for Year 2001 4.1
The President sought the comments and ideas of the legislators on
the presentation. 4.2
Senate President Aquilino Q. Pimentel Jr. suggested that the Senate
adopt the proposed Executive amendments, incorporate them as Senate
amendments and work on the budget during the June 3 to June 7, 2001
sessions. The President may likewise call for a special session prior to
the resumption in June specifically to deliberate on the budget. 4.3
Senator John H. R. Osmeña expressed doubts as to whether the
Senate would be able to tackle the budget during the proposed June
sessions considering that it is post election period and some Senators may
not be available. He suggested instead to wait for the August convening of
Congress and to operate on the year 2000 budget in the meantime. 4.4
Secretary Boncodin expressed concern that by August 2001, the
government would already be preparing for the 2002 budget. It will be
untenable for the government to be deliberating on two budgets at the same
time in a short period. 4.5
Secretary Boncodin proposed reconstituting the 2000 budget and
passing a supplemental budget that would incorporate the requirements of
the May 2001 elections and the new programs of the Arroyo Administration. 4.6
Senator Osmeña assessed Secretary Boncodin’s proposal as a
viable option provided the National Treasurer would certify the sources of
revenue for the new budget items. 4.7 After considering all the points raised, the President indicated that the Council consensus is to work on the reconstitution of the 2000 budget and the passage of a supplemental budget for additional requirements. 5.1
BSP Governor Rafael B. Buenaventura recalled that on June 2000, the
Philippines together with fourteen other nations had been identified by
the Financial Action Task Force of the G-7 Economic Summit as being
non-cooperative in the fight against money laundering. Governor
Buenaventura cited two reasons therefore: (a) presence of deficiencies in
anti-money laundering systems due to strict bank secrecy laws; and, (b)
absence of legislation criminalizing money laundering. As a result,
transactions involving the Philippines are expected to undergo a closer
scrutiny mainly because of the lack of appropriate laws against money
laundering. 5.2 Governor Buenaventura stated that while appropriate legislation is being prepared to address the problems of money laundering, the BSP had issued a number of administrative measures for banks to signify the country’s commitment to fight money laundering and to bring the country’s monetary regime closer to international standards and good practices. The measures include the following: 1.
Banks with FOREX corporations shall report details of all foreign
exchange transactions (BSP Circular dated 20 June 2000). 2.
Banks and non-banks shall establish and record true identity of its
clients (Circular Bo. 251 dated 07 July 2000). 3.
Banks and non-banks shall be required to report suspicious
transactions (BSP Circular No. 253 dated 31 July 2000). 4.
Banks are prohibited from issuing cashier’s, manager’s, or
certified checks payable to cash or numbered account (BSP Circular No. 259
dated September 2000). 5.
Foreign exchange corporations that are subsidiaries or affiliates
of banks, quasi-banks, and non-bank financial intermediaries shall require
documents from resident buyers of foreign exchange in amounts of $ 10,000
or more (BSP Circular No. 264 dated 27 October 2000). 5.3
In addition, the Monetary Board has approved on 27 October 2000 the
establishment of a special committee that will be in charge of evaluating
and investigating suspicious transactions reported by banks. The BSP is
currently working with the Bankers Association of the Philippines (BAP) on
guidelines for enabling banks and regulators to examine Foreign Currency
Deposit Units (FCDU) accounts under certain conditions. 5.4
Governor Buenaventura, however, cautioned the Council that these
foregoing measures are insufficient to effect the removal of the country
from the list of non-cooperative countries. 5.5 The
following are proposed or pending legislations: 1.
Amendment to the BSP Charter: Relaxation of the Deposit Secrecy
Provision; 2.
An Act Curtailing the Illegal Activities of Racketeers and Powerful
Syndicates in the Philippines; 3.
The Eradication of Racketeers and Professional Syndicates Act of
1998 (Senate Bill 1323); 4. Comprehensive Dangerous Drugs Act of 2000 (Senate Bill No. 2170); and, 5.
The Anti-Money Laundering Act (Unnumbered Senate Bill). 5.6
The President asked House Speaker Feliciano R. Belmonte Jr. about
the feasibility of passing the New Central Bank Act before Congress
adjourns. House Speaker
Belmonte informed her that it will be difficult to do so because the House
and Senate versions are very different from each other. Likewise, while
the House version had originally been approved on Third Reading, it was
recalled due to still controversial provisions. Nonetheless, the House is
preparing a version that can be approved on Third Reading. There will not
be enough time to enter into bicameral discussions with the Senate. 5.7
The President noted the present initiatives of BSP as a movement
forward at the moment. 6.
Power Sector Reform Bill 6.1
Economic Planning Secretary Dante B. Canlas reported on the results
of the cabinet discussion on the status of the power sector reform bill
held earlier in the day. Secretary Canlas informed the body that the
President has directed DOF Secretary Alberto G. Romulo to lead in
undertaking a review of the benefits and costs of the enactment of the
bill and to hold consultations with stakeholders on the issues identified
by the Cabinet. Secretary Canlas identified the issues discussed in the
Cabinet as follows: 1.
Impact of the assumption by the national government of liabilities
of NPC and of electric cooperatives to NEA; 2.
Creation of the PSALM versus an earlier proposal of the House on
CB-BOL type where NPC retains ownership of its assets while NPC-BOL
assumes its liabilities; 3.
Measures needed to enhance competition; 4.
Powers of the regulatory body; 5.
Treatment of the stranded costs of private distribution utilities;
and, 6.
Powers and functions of new entities such as PSALM, TRANSCO, and
ERC including the issue on proposed exemption of the new entities from
Salary Standardization Law. 6.2.
Secretary Canlas mentioned that other issues may emerge from the
consultations which will be conducted by DOF. 6.3
Senator Osmena submitted the following points: 1.
The Bicameral Conference Committee report on the Power Bill had
already been signed by the conferees of both the House and the Senate and
is ready for ratification by both chambers. 2.
A decision has to be made on whether the bill needs to be fast
tracked in time for the February 8, 2001 recess of Congress. 3.
Senator Osmeña suggested that to lighten the fiscal impact of this
bill, changes could be made on the timing of the assumption of the debts
of the NPC by the PSALM so it will not impact the 2001 budget. 4.
Senator Osmeña cited the immediate impact of having the Power
Sector Reform Bill passed. It will facilitate the release of ADB’s USD
200 million program loan and drive the privatization of the power sector. 5.
On the question of the PSALM versus the BOL, Senator Osmeña
emphasized that in the cases of APT, PCGG, Philippine Air Lines, and
National Steel, the experience has been that the privatization process
gets delayed in view of the presence of the incumbent’s vested
interests. It is best to establish a third party that will be neutral.
This is the basic rationale for the creation of the PSALM. 6.
Enhancing competition is a position well-supported. On the matter
of the powers of the regulatory body, the Senate version strengthen the
powers even more. 6.4
Senator Osmeña conveyed his willingness to meet with the DOF
Secretary tonight and come up with a revised conference committee report
the next morning. Secretary Romulo said he had taken note of the issues
raised by Senator Osmeña but suggested that the other sectors be also
allowed to be heard. 6.5
Congresswoman Loretta Ann P. Rosales raised the following issues: 1.
The seventeen depressed municipalities in Mindanao which according
to the ADB sponsored Navigant study will suffer from additional Php 843
million cost annually resulting from the loss of cross subsidy from
Visayas and Mindanao. 2.
The bill had been modeled after admitted that the bill was modeled
after the California model which is presently crisis-stricken. 3.
According to the Credit Suisse, after the sale of the assets, the
country will be left with a net stranded liability of USD 8 billion that
will be shouldered by the taxpayers and consumers for a period of 15
years. 4.
The cross ownership provisions favor the interests of the big power
producers by encouraging the cartelization of the industry. 6.6
The President stated that to avoid power shortage by 2005, the
government remains committed to the principle of power re-structuring.
However, the concerns of all stakeholders need to be seriously considered
and addressed, if warranted. She reiterated that the DOF had been
instructed to convene a full options study within about a month’s time.
The Arroyo Administration looks forward to having a consensus bill passed
within the Eleventh Congress. 6.7
In reply to the issues raised by Congresswoman Rosales, Senator
Osmeña enlightened the Council on the following: 1.
The seventeen Mindanao provinces will not be affected at all
because the bill does not privatize the system in Mindanao. Since there is
no inter connection between Mindanao and the rest of the country, the
power generated in Mindanao will be isolated and therefore will not be
affected. 2. The Navigant report is outdated considering that the problems identified by the Navigant report had already been addressed by Congress. 3. The bill is Filipino model and not a copy of any other country’s. 4.
The valuation of the proceeds of sale of the USD 5.6 billion assets
will depend on the economic conditions at the time they are disposed. 5.
The liabilities are not liabilities arising from the assets but are
liabilities arising from the Independent Power Purchase Agreements that
were entered into by the government during the power crisis in 1992/93.
These are legal contracts which will impact our credit rating in the
international market if the government reneges on the contracts. 6.
On the cartel issue, 94 percent of the power in Luzon is
distributed by Meralco and therefore it is in a position to have its
presence felt in the power industry. This is the reality unless we break
up the Meralco service areas. 6.8
The President explained that efforts should be made to explain the
bill to various stakeholders. She reiterated the agreement in principle to
pass the bill within the present Eleventh Congress and that the conduct of
a full options study could help address the concerns of the Civil Society. 6.9
In response to the clarification made by Secretary Romulo,
Congresswoman Rosales indicated that she believed that the removal of the
cross subsidy from Mindanao will impact negatively on the seventeen
Mindanao provinces. Congresswoman Rosales also said that the role of the
cooperatives should be further delineated. A more broad-based ownership
would encourage efficiency and equity considerations being achieved. 6.10
Congressman Florencio B. Abad emphasized that the government has
been debating, studying and discussing the bill for the past three
congresses and supported the suggestion to work on a consensus bill before
February 8th. He conveyed his willingness to participate in
marathon sessions on the bill. 6.11
Congressman Julio Ledesma IV informed the Council that he had been
studying the bill for the past five years and offered his expertise on and
knowledge of the financial impact of the bill. He also informed the
Council that the Navigant study itself recommends the passage of the bill. 6.12
The President instructed Secretary Romulo to meet the interested
stakeholders as soon as possible to work out a consensus Bicameral
Conference Committee version. Congresswoman Rosales expressed her
availability and willingness to meet on the bill. 6.13
Secretary Romulo pointed out that whether we like it or not we have
to confront this issue of the power bill and if we don’t, it could be
worse because the hemorrhaging will continue to bleed out budget and our
economy and consequently affect our response to the war on poverty. He
likewise stressed his understanding that the transmission should be left
strictly to the government and we should not allow the private sector to
intervene there. However, he said he wanted Secretary Roxas and the Civil
Society to be likewise involved. 6.14
Secretary Romulo then pointed out that the leaders of Congress are
here and that if we can have a consensus with the Civil society and also
have the commitment from Congress that they will be able to pass the bill
in June after the elections, then we have the best of both worlds so to
speak. 6.15
Senate President Pimentel informed the Council that they are ready
to pass this bill anytime the Bicameral Conference Committee submits it to
them. However, he added that if the bill is being targeted for passage by
February 8th, some actions must be done immediately within the
day. Senate President Pimentel stated that the Senate is empowering the
Bicameral Conference Committee to go into sessions even if Congress has
been adjourned. 6.16
Senator Osmeña pointed out that there is already a signed
Bicameral Conference Committee report but since the House panel had
already been reconstituted, he is willing to reconvene the committee with
the new members from the House and work within the time framework that may
be agreed upon. 6.17
Secretary Roxas emphasized that it is very important that the work
be accomplished by March 2001 in time for the planned road shows on the
Philippines in April, May, and June. 7.
Customs Valuation System 7.1
House Speaker Belmonte informed the Council that the Senate has
assured them that the Shift in Customs Valuation bill is workable and that
the bill can be passed by February 8th. Senate President
Pimentel confirmed the information. 8.
New ARMM Bill 8.1
Senate President Pimentel informed the Council that the Bicameral
Conference Committee report was signed in the morning and will be
presented to both houses for ratification and confirmation in the
afternoon. However, he pointed out that a certification of the bill as a
priority bill has to be issued. 8.2
The President then instructed Undersecretary Gatuslao to prepare
the certification. 9.
Other Items in the CLA 9.1
House Speaker Belmonte informed the Council that the Lateral
Attrition for Optimum Revenue Collection Bill has been approved by the
House and will be fast tracked by the Senate, per information of Senator
Enrile. Senate President
Pimentel informed the Council that it will be finished within the day. 9.2
House Speaker Belmonte informed the Council that the Upgrading of
the Court of Tax Appeals Bill has been approved by both chambers. 9.3
Secretary Roxas inquired on whether or not the Amendments to
Omnibus Investment Code Bill could also be facilitated on the next two
days. 9.4
Senator Enrile informed the Council that he had suggested to the
previous administration to re-think the present Investment Incentive
statute and consider the idea of setting a menu of incentives that may be
given to enterprises that will be set up in the country and to authorize
the implementing agency in government to grant tax incentives on the basis
of importance of the enterprise to the economy. He said the executive had
committed to conduct a study on the proposal. For this reason, the Senate
delayed consideration of the measure. 10.
Nomination of Vice President 10.1
The President informed the Council that she will soon announce the
nomination of her vice-president. She requested members of Congress to
support her nominee for the office of the vice president. 11.
Adjournment 11.1 The President adjourned the meeting at 3:30 p. m. |
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