Fourth Meeting of the
Legislative-Executive Development Advisory Council
12:15 p.m. - 1:35 p.m., 09 March 2000
Heroes Hall, Malacañan

 SUMMARY OF DISCUSSIONS AND AGREEMENTS

 Presiding Officer

             With His Excellency President Joseph Ejercito-Estrada presiding, the LEDAC meet­ing was called to order at 12:15 p.m.   Secretary Jose T. Pardo led the opening prayer.

 Attendance

 The following officials attended the meeting:

 A.        Executive 

1.      His Excellency, President Joseph Ejercito-Estrada

2.      Her Excellency, Vice-President Gloria Macapagal-Arroyo

3.      Executive Secretary Ronaldo B. Zamora (OES)

4.      Secretary Felipe M. Medalla (NEDA)

5.      Secretary Benjamin E. Diokno (DBM)

6.      Secretary Jose T. Pardo (DOF)

7.      Secretary Manuel A. Roxas II         (DTI)

8.      Secretary Mario V. Tiaoqui (DOE)

9.      Secretary Jose Jaime C. Policarpio, Jr. (PLLO)

10.  Secretary Rodolfo T. Reyes (OPS)

11.  Undersecretary Mario V. Roño(DENR)

12.  Undersecretary Feliciano M. Gacis (DND)

13.  Undersecretary Demetrio L. Ignacio            (OP-PMS)

14.  Assistant Secretary Renato P. Santiago (DILG)

15.  Dr. Aprodicio A. Laquian (OCS)           

B.         Senate 

16.  Senate President Blas F. Ople

17.  Senate Majority Floor Leader Franklin M. Drilon

18.  Senator Juan Ponce-Enrile

19.  Senator Rodolfo G. Biazon 

C.                 House of Representatives 

20.  Speaker Manuel B. Villar

21.  Deputy Speaker Erico B. Aumentado

22.  House Majority Floor Leader Eduardo R. Gullas

23.  House Minority Floor Leader Feliciano R. Belmonte, Jr.

24.  Representative Danilo E. Suarez 

D.                 Local Government Units 

25.  Governor Jose D. Lina (League of Governors) 

E.         Other Officials 

26.  Undersecretary Thomas G. Aquino (DTI) 

27.  Undersecretary Conrado V. Apacible (PLLO)

28.  Undersecretary Salvacion Z. Perez (PLLO)

29.  Assistant Secretary Sergio B. Andal (OP-PMS)

30.  Assistant Director-General Ofelia M. Templo          (NEDA)

31.  Director General Romulo L. Neri (CPBO)

32.  Deputy Director-General Rodolfo V. Vicera (CPBO)

33.  Deputy Secretary Emma L. Reyes (Senate)

34.  Director Ronald R. Golding (Senate PSG)

35.  Director Irah Ruth B. Borinaga (Senate PSG)

36.  Director Bernardino E. Sayo (OP-PLLO)

37.  Director Margarita R. Songco (NEDA)

38.  Director Socorro V. Zingapan (NEDA)

39.  Director Victoria V. Quimbo (NEDA)

40.  Director Antonio De Guzman, Jr. (Senate)

41.  HEA Victor Emmanuel S. Dato (NEDA)

42.  Ms. Jean Encinas-Franco (Senate PSG)

43.  Mr. Roy  Victor L. Rosales (NEDA)

44.  Ms. Jezebel L. Estrada (NEDA) 

F.         LEDAC Secretariat             

45.  Director Eugenio R. B. Inocentes III

46.  Assistant Director Virgilio V. Salentes

47.  Mr. Aureo P. Castro

48.  Mr. Archimedes C. Lazaro

49.  Mr. Ricardo R. Sunico

50.  Ms. Myrna N. Cacpal

51.  Ms. Marlene M. Vegafria 

G.        PLLO 

52.  Atty. Fe Lioaoa S. Baun

53.  Ms. Evelyn S. Ruiz

54.  Ms. Irene Afortunado 

H.                 PMS 

55.  Ms. Clemecia A. Cabugayan

56.  Mr. Rudy N. Funclara

57.  Mr. Reynaldo B.  Mira

58.  Mr. Antonio C. Avendaño

59.  Mr. Jaime A. Bondal

60.  Mr. Lupo Mendoza 

I.          Other Staffs 

61.  Ms. Milagros C. Cruz (Office of Sen. Ople)

62.  Mr. Nikon Fameronag (Office of Sen. Ople)

63.  Atty. Raul L. Lambino (Office of Sen. Legarda)

64.  Atty. Regina P. V. Evangelista (Office of Sen. Drilon)

65.  Atty. Roberto Herrera-Lim (Office of  Sen. Tatad)

66.  Atty. Dean Karlo R. P. Laviña (Office of the House Speaker)

67.  Mr. Jeffrey T. de Mesa (OP-Protocol

Agenda

The meeting had the following agenda: 

 I.      FOR ADOPTION/APPROVAL 

A.        Highlights of the Previous Meeting 

 II.      FOR INFORMATION/DISCUSSION 

A.        Status and Updates on the LEDAC Common Legislative Agenda          

B.         Economic Assessment of/Prospects for Year 2000  

III.      OTHER MATTERS  

 IV.      DOCUMENTS DISTRIBUTED DURING THE MEETING 

A.                 Highlights of the Third LEDAC Meeting

B.                 Highlights of Recent Economic Performance and Prospects for 2000

C.                 Summary Update of the LEDAC Common Legislative Agenda 

1.         CALL TO ORDER 

1.1              After calling to order the Fourth LEDAC meeting under the Estrada Administration, President Estrada requested Secretary Pardo to lead the opening prayer. 

1.2              The President informed the body that, in the previous meeting of the Economic Coordinating Council (ECC), the leadership of both Houses of Congress promised to pass their respective versions of the Power Sector Restructuring Bill prior to the Holy Week recess. Moreover, the leadership of both Houses committed to pass the Power Sector Bill in the Bicameral Conference Committee by 20 May 2000. The President also stressed the importance of the passage of laws that would improve the efficiency of the power sector and the capital and financial markets, as well as funds to implement the government’s pro-poor economic programs. 

2.          ADOPTION OF THE HIGHLIGHTS OF THE PREVIOUS MEETING 

2.1       The first order of business was the adoption of the minutes of the Third LEDAC meeting. Executive Secretary Zamora moved for the adoption of the minutes which was seconded by Representative Belmonte. There being no objections, the minutes of the Third LEDAC meeting were adopted by the body. 

3.         FOR INFORMATION/ Discussion 

3.1       Status and Updates on the LEDAC Common Legislative Agenda (CLA) 

3.1.1     Secretary Policarpio’s presentation is summarized as follows: 

Targeted for Enactment by Yearend 1999: 

1. General Appropriations Act

2. Retail Trade Liberalization Act

3. Amendments to General Banking Act

4. Extension of the Life of COP-APT

5. Road Users’ Tax

6. VAT Suspension on Banks and Professionals

7. Amendments to HIGC Charter

8. Modernization of PRC

9. Establishment of  PESO

Targeted for Enactment by First  Quarter 2000: 

1. Shift in Customs Valuation

2. Power Sector Reform Act

3. Securities Regulation and Enforcement Act

4. New Central Bank Act

5. Safeguard Measures

6. Plant Variety Protection Act

7. Pre-Need Plans Code

8. TRO Reprieve for Government Infrastructure Projects

9. Right-of-way for Government Infrastructure  Projects

10. Electronic Commerce

Enacted into Law:

1. Extension of the Corporate Life of COP-APT

2. Establishment of Public Employment Service Office (PESO)

3. General Appropriations Act for FY 2000

4. VAT Deferment on Banks and Professionals

5.  Retail Trade Liberalization Act

6.  Amendments to HIGC Charter

Pending in Bicameral Conference Committee

1.                  Amendments to General Banking Act

•                      Follow-up required after Feb. 2, 2000 meeting

2.                  Modernization of PRC

•                      Unresolved issue: earmarking of earnings for modernization program

3.                  Road Users’ Tax

            Conflicting provisions:

•                      Basis in determination of fees

Ø                  GVW  versus  Engine displacement

•                      Vehicle Categories

Ø                  Distinction between public and private use

•                   Rate Adjustments

Ø                  Staggered system versus once-in-five-years

Ten Priority Measures in various legislative stages

1.         Power Sector Reform

Senate:

Approved on Third Reading

•                      Transmission Corporation and Amendments to DOE Law

On Second Reading

•                      Amendments to ERB Charter

 House:

On Second Reading

•                      Power Industry Restructuring Omnibus Bill

2.                  Securities Regulation and Enforcement Act

Senate: Approved on Third Reading

House:  On Second Reading

3.                  New Central Bank Act

Senate: Approved on Third Reading

House: For Second Reading

4.                  Safeguard Measures

Senate: Pending in Committee

 House: Approved on Third Reading

5.                  Shift in Customs Valuation

Senate: Pending in Committee

House: Approved on Third Reading

6.                  TRO Reprieve for Government Infrastructure Projects

Senate: Pending in Committee

House: Approved on Third Reading

7.                  Right -of-Way  for Government Infrastructure  Projects

Senate: Pending in Committee

House: Approved on Third Reading

8.         Electronic Commerce Bill

Senate: On Second Reading (Interpellation)

House: Pending in Committee

9.         Plant Variety Protection Act

 Both Chambers: Pending in Committee

10.              Pre-Need Plans Code

Both Chambers: Pending in Committee

Summary:

3.2.      Economic Assessment of/Prospects for Year 2000

 3.2.1    Secretary Medalla’s presentation is summarized as follows:

1.                The economy strengthened in 1999 and displayed greater macroeconomic stability. The domestic economy grew at the high end of the official target (2.8-3.2 percent, 2.6-3.2 percent fourteen months ago). GNP grew by 3.6 percent, also close to the high end target. This growth is higher than expected by most private analysts twelve to sixteen months ago. The private sector forecast range was 1.4 percent-2.2 percent vis-à-vis an actual growth rate of 3.2 percent. The growth rate of the Philippine economy, together with South Korea, is second only to Singapore if 1997, the start of the Asian financial crisis, is used as the period of reckoning. 

2.                  Secretary Medalla explained that it would not be appropriate to compare the growth of the Philippines with those of other countries because the latter economies contracted more in 1998. Countries bouncing back from a deeper recession will naturally display higher growth rates because of a lower base.

3.                  The 1999 growth is substantial considering that private corporations were going through debt workouts and industrial restructuring. With the debt workouts, the foreign exchange liabilities of the private sector contracted from US$18.48 billion in 1997 to US$17.50 billion in June 1998. Loans availed of from FCDU also fell from US$10.4 billion in 1997 to US$7.4 billion as of second quarter of 1999.

4.                  Manufacturing recovered in 1999, growing at 1.4 percent after contracting by 1.1 percent in 1998. There were six sectors which recovered in the last quarter following several quarters of decline: non-metallic minerals, tobacco, wood and cork, furniture and fixtures, leather, petroleum and coal. Some sectors continued to experience difficulties: beverage, chemical and chemical products, footwear, and non-electrical machinery.

5.                  Other macroeconomic indicators pointed towards recovery. The unemployment rate went down to 9.7 percent in 1999 from 10.1 percent in 1998.  Exports, in dollar terms, exhibited remarkable resiliency, growing by 18.8 percent in 1999 which exceeded the 15.1 percent Plan target for the year. Imports in dollar terms also recovered albeit at a slower rate than assumed in the Plan.

6.                  The current account posted a surplus in the first three (3) quarters of 1999 equivalent to 8.0 percent of GNP. The gross international reserves were valued at 4.2 months of imports.

7.                  The national government (NG) deficit, however, exceeded the target due to revenue shortfalls and overspending related to the settlement of accounts payables.

8.                  In 1999, inflation averaged 6.6 percent, lower than the government’s revised target of 7 percent and the 9.8 percent inflation rate in 1998. Inflation remained under control as bumper production in rice and corn did offset the inflationary pressures arising from the increase in domestic oil prices. The low inflationary environment was sustained as the inflation rate fell to 2.6 percent and 3.0 percent in January and February 2000, respectively.

9.                  In 1999, the 91-day T-bill rate fell as the government resorted to cheaper foreign borrowings to finance its increased budget deficit. Meanwhile, the expansionary monetary policy of the  Bangko Sentral ng Pilipinas, through the successive reductions of overnight borrowing rate, increased liquidity in the system which pushed down interest rates.

10.              While domestic oil prices jumped at double-digit rates, inflation settled below 6 percent since June 1997 due to slowdown in food inflation.

11.              With better financial  position and a more stable macroeconomic environment, private corporations are poised for expansion in 2000. However, the government would have to build-up investor confidence.

12.              The government is targeting a 4 percent to 5 percent GDP growth rate in 2000.  The most likely sources of this growth will be:

•                      Services, which are expected to grow by at least 4.5 percent taking off from a 4.4 growth in 1999 fourth quarter;

•                      Industry, which is expected to fully recover by 4.1 percent - 5.1 percent, led by the acceleration of the manufacturing sector and utilities.  Construction will have a modest recovery. Manufacturing will be spurred by stronger consumption spending as job security improves;  and,

•                      Agriculture expected to return to its normal growth of 3.0 percent to 3.5 percent, down from its 6.6 percent growth.

13.              Stronger banking system - After a 4.6 percent contraction in 1998 and ten months of negative year-on-year growth in 1999, outstanding loans of commercial banks grew in November (1.88 percent) and December (0.45 percent). With a higher loan growth, the ratio of non-performing loans to total loans dropped from 14.6 percent in November to 12.3 percent in December.

 14.              Leading indicators were already showing that 2000 would be a better year than 1999: Total imports expanded by 28.7 percent in December 1999. Significant increases in imports of almost all items, including raw materials and intermediate goods (18.2 percent) and capital goods (32.8 percent), were observed too. 

15.              Other positive indicators include the strong sales of San Miguel Corporation products in January, the jump in car sales in the first month, and the upturn in appliance sales, also in January. Meralco energy sales grew by 11.4 percent in January, indicating upbeat demand across all user types. 

16.              The fiscal deficit for January 2000 of PhP 110 million is lower than the programmed level of PhP 920 million as both the BIR and BOC exceeded their targets for revenue collections. This is expected to boost confidence in the ability of the government to stay within the target deficit for the rest of the year. 

17.              However, total approved FDI commitments fell by 37.8 percent in 1999. Only Clark Development Corporation (CDC) registered higher commitments. 

18.              By country of investor, UK, France and China registered FDI increases. The Netherlands, British Virgin Islands and Australia registered market reduction in FDIs. 

19.              By sector, only the agriculture, trade, storage, and manufacturing sectors received additional investments in 1999 over 1998. 

20.              Crucial to the restoration of investor confidence is the ability of the government to maintain its deficit target through new revenue measures as well as prudent expenditure management. The implementation of ODA projects needs to be improved. The speedier passage of key bills which are critical to structural reform as well as the financing of the government’s expenditure program, is also critical for growth in 2000. 

21.              These bills include those relating to the power sector, the banking and financial sector, housing finance, rationalization of fiscal incentives and road users’ charges. 

4.        Discussions

4.1       Revised Securities Regulation Act of 2000

4.1.1       Senator Drilon noted the urgency of the passage of the Revised Securities Regulation Bill to revive investor confidence in the local economy.

4.1.2       House Speaker Villar concurred with Senator Drilon on the urgency of bill and explained that the House is awaiting the receipt of some proposal prior to passing the bill. House Speaker Villar explained that the House is considering a proposal to privatize the stock exchange.

4.1.3       Senator Drilon explained that the Bicameral Committee can take up proposals not covered by either version of the SEC Bill as long as the proposals are germane to the bill. He suggested that the bicameral conference committee expand the discussion by inviting resource persons to the meetings. He stressed that it is critical that the House pass its bill and go into the Bicameral Conference Committee.

4.1.4       House Majority Floor Leader Eduardo Gullas committed to the passage of the House version of the bill within a few days.  Minority Floor Leader Belmonte also committed to the speedy passage of the bill.

4.2       Cement Prices

4.2.1    Senator Drilon raised his concern on the effects of the rising cement prices on the general local economy and on construction activities. House Speaker Villar noted that the rising prices of cement were not typical as demand for cement was low. He opined that cement producers could be raising prices to compensate for earlier losses as the demand for cement did not seem to warrant the rising trend in cement prices.

4.3       Road Users’ Tax

4.3.1        Representative Suarez explained to the Council that the new road vehicles users’ tax to be charged to passenger buses and jeepneys would have a minimal effect of increasing fares by PhP 0.02 per passenger. In this light, he further reported that some bus operators had informed him that the operators would absorb the increase themselves and not pass on the cost of the new tax to the passengers. 

4.3.2        President Estrada expressed his concerns about the impact of the new road users’ tax on the public considering the oil price increases. This will unnecessarily burden the public. The President explored the possibility of delaying the implementation of the new tax by two to three months. House Speaker Villar expressed his support for the President’s request to delay the implementation of the road users’ tax by a few months. 

4.3.3        Secretary Pardo explained that revenue pressures necessitate that the road users’ tax not be delayed by no more than three months. He noted that Secretary Lim of the Department of the Interior and Local Government (DILG) was misinformed that the road users tax would be PhP 5,000 and not PhP 500 as proposed by Representative Suarez. On the matter of oil price hikes, Secretary Pardo informed the group that the oil companies would raise prices using a graduated/socialized price increase scheme like that applied in Thailand. He suggested that the President consider discussing with the oil companies to soften their announced PhP2.50 increase. 

4.3.4        Rep. Suarez suggested that the Bicameral Conference Committee be allowed to finish work on the road users’ tax bill. The implementation of the measure could then be timed on the lowering of the benchmark price of Dubai oil.  

4.3.5        Senator Drilon, on the other hand, was of the view that the road users’ tax bicameral conference should be postponed or deferred. This would not confuse the public on the intent of the government. Representative Gullas supported Senator Drilon’s proposal. 

4.3.6        Vice-President Arroyo expressed her support for Senator Drilon’s position. She pointed out that administrative reforms and enforcement in revenue collection would be appropriate and more relevant. She expressed the view that the public would find it difficult to relate the proposed objective of the road users’ tax at this time of rising oil prices, as pro-poor. 

4.3.7        Rep. Suarez  noted that the road users’ tax will also fund implementation of the certain portions of the Clean Air Act which had become critical considering the air pollution in country based on the WHO report. He requested clarification from the council on what the position of the President would be. 

4.3.8        Senator Ponce-Enrile stated that the delay in the implementation of the road users’ tax may be further interpreted by the business and international community as a sign of lack of resolution to better manage/address the deficit. Secretary Medalla and Secretary Pardo expressed support for Senator Enrile’s representation to pass the law, but to postpone its implementation to later in the year. They cited the need to show the country’s creditors and investors the government’s resolve to address the deficit and to improve prospects for the launching of the government’s foreign currency bond floats. 

4.3.9        Senator Biazon suggested that the timing of the road users’ tax would be critical in minimizing negative public response. He suggested that the measure be implemented during the summer vacation like May in order to minimize public protest over the measure. 

4.4              Oil Exchange Bill

4.4.1        House Speaker Villar explained that the House is continuously working on the Oil Exchange Bill of Representative Garcia as a means of gaining leverage for the President in his discussions with oil companies and price hikes. 

4.4.2        Secretary Medalla voiced his concern on the proposed Oil Exchange Bill. He explained that local oil product prices are determined by the market. The government set price will be no more different from the international price. Senator Biazon supported Secretary Medalla’s position.  Moreover, Senator Biazon pointed out that should a government-run oil exchange materialize, this would put the government at the forefront of the oil pricing system. Vice-President Macapagal Arroyo extended her support to the positions taken by Secretary Medalla and Senator Biazon, stating that the market ought to govern the domestic oil price setting. 

4.4.3        House Speaker Villar noted that the Oil Exchange bill is still at a preliminary stage. Though he explained that the bill arose out of the public clamor for action on the manner in which oil prices are being set by the oil companies. 

5.         Other Matters

5.1              Senator Biazon requested for clarification from Secretary Pardo on the government’s position in the forthcoming World Trade Organization (WTO) Negotiating Conference. Senator Biazon suggested that this be taken up in the next ECC meeting. Secretary Pardo welcomed the legislator’s support in crafting a joint position including the necessary supporting legislation.

6.         Summary of Agreements

6.1       The LEDAC agreed to postpone the Bicameral Conference Committee for the Road Users’ tax for a few days to allow the President time to review the issues 

6.2       The LEDAC also agreed to expedite the passage of the Revised Securities Regulation Bill to schedule the Bicameral Conference Committee and consider passing the bill prior to the Holy Week recess. 

7.         ADJOURNMENT

            The meeting was adjourned at 1:35 p.m

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