Govt. & Taxes, Philippines

Thursday, June 29, 2006

How bloated is the Phil. bureaucracy?

Going through the Civil Service Commission (CSC) figures, there are only 1.5 million government personnel: 1M in national government agencies (NGAs) + 100,000 government corporations (GOCCs) and financial institutions (GFIs) + 400,000 in local government units (LGUs).

But my estimate is that there could be3.5 million government personnel. How come?
LGUs alone, there are around 42,000 in the country. A barangay (brgy.) would have a minimum of 14 personnel: brgy. captain + 7 brgy. councillors + brgy. secretary + brgy. treasurer + head of Sangguniang Kabataan (SK) + head of brgy security + brgy. nutritionist + brgy. health officer. Some barangays that can mobilize other revenues aside from what they get from the national government, the IRA, can have about 100+ personnel. If we take an average personnel of 20 personnel/brgy., at 42,000 brgys. nationwide, that's 840,000 people.

Municipal, city and provincial governments will have an army of their own employees, whether permanent or casual/contractual. My estimate is that there could be at least 1.2 million personnel in LGUs aside from barangay. The Union of Local Authorities of the Philippines (ULAP) also boasts of 1.7 million membership nationwide. This alone is much higher than the 400,000 LGU personnel listed in the CSC. So I guess it is safe to put the number of LGU personnel at 2 million.

For NGAs, there should be more than 1 million personnel if casuals, contractuals, consultants, and "draftees" are included. It is common practice that some known athletes who receive salaries and allowances from the Phil. Sports Commission (PSC), are also "draftees" in the AFP (Army, Air Force, or Navy) and draw another set of salaries. This is being done by the AFP to prop up its image, where the AFP is mentioned when those athletes win the big cycling races, boxing, other sports where there are no strong sponsorship by private commercial teams. But it also reflects that the AFP and other agencies that practice this have bloated budget because they have allowances for personnel who are actually non-soldiers.

Government enterprises would also have more than 100,000 personnel. Those GOCCs and GFIs have their own subsidiaries; and sometimes, those subsidiaries also create their own subsidiaries, that even the DOF and COA cannot monitor them; they only surface when the accummulated losses of the mother GOCC or GFI becomes very big that they run for bail-out (ie, new subsidies) and there are investigations and strict accounting procedures undertaken.

Another government bank for OFWs?

Three government banks -- DBP, LBP, and PPSB (Phil. Postal Savings Bank) -- and possibly to include OWWA, planning to create an OFW bank. Their purpose is to help reduce remittance fees charged by private commercial banks and remittance centers.

The plan is that OFWs can send their remittances to the Postal Bank through post offices abroad, their folks in the Philippines an withraw the money through Postal Bank ATMs in post offices (POs) here, if POs are wired. If not, they can withraw from DBP, LBP and PPSB branches.

For me, this is another government bureaucracy and intervention.
If remittance fees are high, then it means (a) there are not enough competition, not enough players of remittance centers/banks, and (b) government taxes, registration fees and procedures, are high and complicated. Hence, one option for government if it is really serious in helping OFWs and their families in income repatriation is to (i) liberalize further bank and remittance centers competition, and (ii) cut high taxes and complicated procedures, and scrap the unnecessary ones.

This is similar to the phenomenon of why "placement fee" by potential and returning OFWs are high. There aren't enough competition among reliable manpower recruitment agencies, mainly because of the high costs of getting POEA accreditation. The costs are both official/published fees + unofficial/under-the-table bribes so that their application for business will be approved, and at a faster pace.

Sunday, June 25, 2006

Phil. bureaucracy, Legislative, Judiciary

Below are some bureaucracies under the Legislative and Judicial branches, and constitutioal offices:

1) House of Representatives
+ House Electoral Tribunal
+ deputy speakers
+ 57 regular committees, 16 special (ad hoc) committees
+ pork barrel

2) Senate of the Philippines
+ Senate Electoral Tribunal
+ 36 regular committees, special committees
+ pork barrel

3) Commission on Appointments

4) Supreme Court (SC)
+ lower courts (RTC, MTCs)
+ Presidential Electoral Tribunal

5) Sandiganbayan

6) Court of Appeals

7) Court of Tax Appeals

8) Civil Service Commission (CSC)

9) Commission on Audit (COA)

10) Commission on Elections (COMELEC)

11) Commission on Human Rights (CHR)

12) Office of the Ombudsman

Phil. bureaucracy, Executive branch

Below is a list of the different bureaucracies of the Executive branch.
The bureaucracies in the Legislative, Judicial branches, and other constitutional offices in another posting.

1) Office of the President (OP)
+ Office of the Executive Secretary
+ 40 Presidential advisers/consultants
+ 100+ govt. corporations and banks (see GOCCs below)
+ dozens other offices (see Other Executive Offices below)

2) Office of the Vice-President (OVP)

3) Department of Agriculture (DA)
+ regional and provincial offices
+ 11 attached agencies; biggest are Bureau of Fisheries and Aquatic Resources (BFAR), Fiber Industry Devt. Authority (FIDA), Fertilizer and Pesticide Authority (FPA)
+ 12 attached corporations; biggest: National Food Authority (NFA), National Irrigation Admin. (NIA), Philippine Coconut Authority (PCA), Phil. Rice Research Institute (PhilRice)

4) Dept. of Budget and Management (DBM)
no attached agency, no regional offices, no attached corporation

5) Dept. of Education (DepEd)
+ regional offices
+ thousands of public elementary and high schools
+ 3 attached agencies, like the Phil. High School for the Arts

6) Dept. of Energy (DOE)
+ 5 attached corporations: National Power Corporation (NPC), National Transmission Corp. (Transco), Phil. National Oil Company (PNOC), Power Sector Assets and Liabilities Mgt. Corp. (PSALM), National Electrification Administration (NEA)
no regional offices, no attached agency

7) Dept. of Environment and Natural Resources (DENR)
+ regional, provincial, and community offices
+ 3 attached agencies: Env'l. Mgt. Bureau (EMB), Mines and Geo-sciences Bureau (MGB), Natl. Mapping and Resource Info Authority (NAMRIA)
+ 2 attached corporations: Laguna Lake Development Authority (LLDA), Natural Resources Devt. Corp. (NRDC)

8) Dept. of Finance (DOF)
+ 9 attached agencies; biggest: Bureau of Internal Revenue (BIR), Bu. of Customs (BOC), Bureau of Treasury (BTr)
no regional offices
+ 3 attached corporations: Phil. Deposit Insurance Corp. (PDIC), Trade and Investment Devt. Corp. (TIDCOR), Cooperative Development Authority (CDA)

9) Dept. of Foreign Affairs (DFA)
+ 4 attached agencies, like the Foreign Service Institute (FSI)
+ regional offices

10) Dept. of Health (DOH)
+ regional offices
+ 1 attached agency, the Commission on Population
+ 6 attached corporations/hospitals; biggest: Phil. Children's Medical Center (PCMC), Lung Center of the Phils. (LCP), Natl. Kidney and Transplant Institute (NKTI), Phil. Heart Center (PHC)

11) Dept. of the Interior and Local Government (DILG)
+ regional offices
+ 6 attached agencies; biggest: Phil. National Police (PNP), Bureau of Fire Protection (BFP), Bu. of Jail Management and Penology (BJMP)

12) Dept. of Justice (DOJ)
+ 9 attached agencies; biggest: Bureau of Corrections, Natl. Bureau of Investigation (NBI), Public Attorney's Offices (PAO), Land Registration Authority (LRA)

13) Dept. of Labor and Employment (DOLE)
+ regional offices
+ 7 attached agencies; biggest: Technical Educ. and Skills Devt. Authority (TESDA), Natl. Labor Relations Commission (NLRC), Phil. Overseas Employment Admin. (POEA)
+ 2 attached corps.: Occupational Safety & Health Center (OSHC), Employees Compensation Commission (OCC)

14) Dept. of Land Reform (DLR, formerly Dept. of Agrarian Reform)
+ regional offices
+ 1 attached agency, the National Commission on Indigenous Peoples (NCIP)
+ 1 attached bank: Land Bank of the Philippines (LBP)

15) Dept. of National Defense (DND)
+ regional offices
+ 5 attached agencies; biggest: Armed Forces of the Phils. (AFP), Phil. Veterans Affairs Office (PVAO), Government Arsenal
+ attached corp.: PHIVIDEC Industrial Authority

16) Dept. of Public Works and Highways (DPWH)
+ regional offices; no attached agencies
+ 3 attached corps.: Metropolitan Waterworks and Sewerage System (MWSS-Regulatory), Local Water Utilities Administration (LWUA), Public Estates Authority (PEA)

17) Dept. of Science and Technology (DOST)
+ regional offices
+ 21 attached agencies! biggest: Science Education Institute (SEI), Phil. Science High School (PSHS), Phil. Atmospheric, Geophysical and Astronomical Services Admin. (PAG-ASA)

18) Dept. of Social Welfare and Development (DSWD)
+ regional offices
+ 3 attached agencies

19) Dept. of Tourism (DOT)
+ regional offices
+ 2 attached agencies: Natl. Parks Development Committee (NPDC), Intramuros Admin. (IA)
+ 3 attached corporations: Phil. Convention and Visitors Corp. (PCVC), Phil. Tourism Authority (PTA), Nayong Pilipino Foundation (NPF)

20) Dept. of Trade and Industry (DTI)
+ regional offices
+ 8 attached agencies; biggest: Board of Investments (BOI)
+ 6 attached corps.; biggest: National Devt. Co. (NDC), Phil. Economic Zone Authority (PEZA), Small Business Guarantee & Finance Corp. (SBGFC), Center for Int'l. Trade Expositions and Missions (CITEM)

21) Dept. of Transportation and Communication (DOTC)
+ regional offices
+ 6 attached agencies; biggest: Maritime Industry Authority (MARINA), Office of Transportation Security (OTS, LTO?)
+ 8 attached corps: Phil. Ports Authority (PPA), Manila International Airport Authority (MIAA), Phil. Postal Corp. (PhilPost), Phil. National Railways (PNR), Light Rail Transit Authority (LRTA)

22) National Economic and Development Authority (NEDA)
+ regional offices
+ 5 attached agencies; biggest: National Statistics Office (NSO)
+ 1 attached corp.: Phil. Institute for Development Studies (PIDS)

23) Office of the Press Secretary (OPS)
+ 6 attached agencies; biggest: Bureau of Broadcast Services (BBS), Phil. Information Agency (PIA), National Printing Office (NPO)
+ 1 attached corp.: People's TV Network, Inc. (PTV)

24) State Universities and Colleges (SUCs)
113 total (M.Manila 8; Region1 5; CAR 6; R2 5; R3 13; R4 11; R5 8;
Visayas: R6 11; R7 5; R8 11
Mindanao: R9 9; R10 7; R11 4; R12 6; Caraga 4)

25) Other Executive Offices, Government-owned and controlled corporations (GOCCs) and government financial institutions (GFIs)
100+; some listed in the budget materials, some are not;
biggest: Social Security System (SSS), Government Service and Insurance System (GSIS), Development Bank of the Philippines (DBP), Bases Conversion Devt. Authority (BCDA),
Clark Devt. Corp. (CDC), Subic Bay Metropolitan Authority (SBMA),
Home Mutual Devt. Fund (HMDF), Home Guaranty Corp. (HGC),
Phil. Amusement and Gaming Corp. (PAGCOR), Phil. Charity Sweepstakes Office (PCSO),
Commission on Higher Education (CHED), Energy Regulatory Commission (ERC),
Housing and Land Use Regulatory Board (HLURB),...

26) Joint Legislative-Executive Councils

27) Local Government Units (LGUs)

a) Metro Manila (MM) or National Capital Region (NCR)
+13 cities and 4 municipalities
+ Metro Manila Development Authority (MMDA)

b) 79 provinces
clustered in 16 regions (17 including NCR), including the Autonomous Region in Muslim Mindanao (ARMM, 5 provinces) and Cordillera Administrative Region (CAR, 6 provinces).
A region is composed of around 5 provinces on average.

c) 83 cities
13 in NCR and 70 in the provinces

d) 1,525 municipalities

e) 42,000 barangays

Thursday, June 22, 2006

Privatization vs. price regulation and franchise

The National Transmission Corp. (Transco), a government corporation in charge of transmitting power produced from various power plants in the country to distribution utilities and electric companies, has been on privatization auction since 2003. And past attempts have been failures.

Recently, the Energy Regulatory Commission (ERC), another government agency that tells energy companies like Transco how much they can charge, how much they can earn, has given Transco lower-than-expected revenue ceiling. ERC set Transco's maximum allowable revenue for 2006-2010 at P192.2 billion (around $3.63 billion at P53/$), from P35.6 billion in 2006 to P41 billion in 2010. Whereas Transco applied for a revenue ceiling of P35 billion in 2006 to P97.5 billion in 2010. (source: BusinessWorld, June 21 '06)

Meanwhile, whoever wins the privatization bid for a 25-year concession will still have to obtain a congressional franchise to operate Transco (net income 2005, P16.2 billion). The 25-year contract has been valued by Sinclair Knight Merzas at $2.6 billion, and grid maintenance and upgrades for the next 10 years estimated at $2.5 billion.

Although there are interested bidders and buyers, and government says it wants to dispose of the company so it can get the money, winning bidders will encounter a number of traditional bureaucratic roadblocks.

First, the ERC. Why would a government agency tell you how much you can earn at the maximum, even if you put in a lot of modernization and productivity-enhancing tools and management processes (that require large sums of money)? Problem is, the ERC is mandated by the law that also mandates Transco privatization, to meddle in pricing and earnings of the privatized government power corporations.

Second, Congress. You may have won the bid by paying higher concession fee to the Department of Finance compared to your competitors, but what if Congress will give you a hard time to get a franchise, or worse, Congress will not give you a franchise, unless you give in to their demands, both official and under-the-table?

Third but less problematic, is the bureaucracy currently hired in the government-owned Transco. Many of them are fearful that they may not be hired by the new private owners, so they will put up a number of rationale and objections to kill, or at least postpone, privatization.

I think the lesser the risks that any of the 3 groups above plus other groups and concerns not mentioned here can possibly put up, the more bidders the government will attract, which means potentially higher revenues.

Tuesday, June 20, 2006

Sports in a less competitive environment

About the 3 Filipino climbers who have reached Mt. Everest, it's a good occasion to celebrate. Though I feel one of them is wrong when he claimed that "the Filipinos have achieved the impossible." What's impossible in climbing that mountain? Until this month, more than 3,000 people have climbed that mountain since 1953.Mountaineering is not a competitive sport. And it's dangerous to make it one.

Climbing big mountains like Everest is more on setting records. Like youngest person, oldest person, to climb the summit; first person to reach the summit without oxygen tank, first amputee to reach the summit, and so on.What is really rewarding is when a Filipino ever wins a gold in the Olympics in any of its 100+ sports events. Or when a Filipino cyclist ever rides in any of the 20 teams in the Tour de France (even if his team does not win). Or a Filipino ever reaches world tennis' top 20, or be a driver in any of the 10 teams in Formula 1, etc.

My beef is that we're not so much a competitive nation. Our political leaders, NGO leaders, even many business leaders, hate competition. They like protectionism. Tax and protect, tax and subsidize, tax and monopolize. And this mentality seeps unto various spheres of our lives, from sports to business to international trade.

Friday, June 16, 2006

Government privatization plans

Below are some government assets for privatization this year:
(source, a BusinessWorld story, the date I forgot to note :-/)

1) Makati property, formerly the International School (IS) campus, along Kalayaan avenue.
48,832 sq.m. (or 4.88 hectares), with a floor price of P1.186 billion.
Interested buyers are Century properties and AMA group of companies.
This property has been on auction since 2002, but past privatization plans have failed.
Government will get 80% of the proceeds, and IS to get the 20%.

2) Government share in Maynilad Water, 84% in subscription fees in a debt-to-equity scheme with the Lopezes.
Projected revenue is at least $22.67 million.

3) Iloilo airport, 60 hectares, near SM Manduriao.
(no amount of projected revenues reported)

4) Al Amanah Islamic Investment Bank of the Philippines.

5) PNOC-EDC, to sell 25 to 30% thru IPO.
Could yield P7 billion.

2005 privatization proceeds was P2 billion, mainly from sale of government shares in PNB to Lucio Tan.

Personally, I hope to see someday that ALL government corporations, financial institutions, and their subsidiaries, and most (if not all state universities and colleges) be privatized. Why?

One, use the proceeds to pay back and retire at least P1 trillion of the P6+ trillion government debts. This huge government debts is the main reason why government keeps on raising existing taxes (eg, VAT from 10% to 12%; corporate income tax from 32% to 35%), or invent and create new taxes.

Two, make the business environment's playing field more level and competitive. And why would government have corporations and financial institutions that directly compete with private corporations and financial institutions that government milk with multiple taxes, fees and regulations, which finance the same set of regulators, politicians and bureaucrats?

Three, reduce political patronage and bribery. To placate many disgruntled supporters, administration critics (opposition politicians, media people, NGO leaders, others), win them on the side of the incumbent President, and the OP runs out of regular agencies and bureaucracies to place them as Secretaries or Executive Directors, those government corporations and financial institutions are good depositories for them. As Presidents, CEOs, members of the board, VPs, other high officials.

Wednesday, June 07, 2006

Passports, airports and OFWs

A friend, Geronimo "Indian" Sy, wrote in his newspaper column and blog, entitled "Passport to hell". He wrote,

"The Philippine green passport is one of a kind – it is perhaps the last one on earth that requires human hands to write the passport details. ‘Scripting’ it is called in Department of Foreign Affairs (DFA) parlance... Even African countries today use smart passports that are computerized and contain the biometrics of the passport holder. In the age of cutting edge technology, call centers and the push for information communications, ourpassport is an anomaly in the first order.

"...Everywhere else, airports are serving as gateways and symbols to a country’s progress. Here in the Philippines, our airports are a deterrence and a national shame. No need to ask any traveler, local or foreign. I wonder what our politicians feel when they travel – unless they get escorted direct to theVIP rooms. "

I immediately replied to Indian's posting and made the following comments:

1) I have also thought that the DFA should be more professional, more efficient.But since it's a government bureaucracy, an agency with monopoly power over issuance of passports, various forms of inefficiencies would come out. You have pointed out one of such inefficiency -- manual inputing of details (name, birthday, passport no., etc.) when it should be machine printed. Monopolists can always impose whatever inefficiencies, whatever price they will dictate, because consumers, the public, have nowhere else to go.

When I renewed my passport about 4 years ago, I brought my own pictures to save on expensive "passport photo" studios in the DFA premises. But the DFA guys are shrewed; they said the angle of pic, the background, the size, whatever, are not ok. I should get my photo at those studios nearby (something like P200 for 6 small pictures). I did so as I was told, just thinking how much commission those DFA guys get from those studios for compelling passport applicants to go to them.

2) On Phil. airports, government should get out in the business of building airports. Government's function is to stamp out criminals, drug smugglers, terrorists and bombers, other undesirables, who go through those airports. And to collect certain taxes from the flow of goods, services and people from those airports. Nothing more. If one consortium of businessmen build an international airport which many foreign airlines do not want to use because they're using an airport somewhere else, then that's the problem of that consortium.

But then again, government being a monopolist, it will always want to contaminate everyone else of its inefficiencies. Get bribes from contractors, from consortia/applicants, otherwise, no environmental clearance certificate (ECC), no business permit, no franchise, no airport. And that's precisely I think what happens to NAIA 3, or the absence of potential international airports in Cagayan Valley, in Northern Mindanao, in Western Visayas, especially nearby Boracay.

I saw Phuket international airport, a provincial airport compared to Bangkok international airport. But Phuket's I think is at least 2x the size of NAIA1, the main terminal. That's one reason why Phuket alone attracts hundreds of thousands, if not millions, of foreign tourists every year.

Btway, can passport issuance possibly be deregulated and privatized?
Accredited private travel agencies to be issued x number of passports by the DFA, and the travel agencies will print out and release the passports to Filipino nationals. If the issuing agency (DFA) can be inefficient and corrupt since it's a monopoly, then there will always be possibility that said agency will allow dubious people to have multiple passports. And I think ex-Comelec commissioner Garcillano is one good example of those dubious and cantankerous people who have more than 1 passport.

So, if the government monopoly is untrustworthy, could deregulation and privatization of passport issuance solve the problems (handwritten passports, slow and bureaucratic issuance, etc.)? Not entirely, I guess. Since the DFA will still have the final control on the number of passports to be printed, the database of people who have been issued passports, etc.

Maybe we just have to bear with government inefficiencies. For the next generation or two; or 3 maybe.

A friend, Cynthia Diaz, has this to add re. OFWs and passports:

"We hear on a daily basis about the problems that OFWs have overseas, but to tell you the truth, most OFWs are treated no more poorly in the countries they work in than they are during the process they have to go through to simply leave the Philippines to go to work for the first time. OFWs are overcharged in the fees that the employment agencies take from them and are mandated to have to use in order to get a job overseas. Technically I can't even bring my own neice to work for me without her having to pay an employment agency to "find" the job for her. The passport process is cumbersome and expensive with far too many bureaucrats involved. The POEA manages to milk as much as possible from every OFW before they are allowed to travel overseas and seems to see the OFWs they are supposed to protect as nothing more than "cash cows". Even when OFWs manage to get overseas, the services available from many of our embassies are marginal and seem to be bestowed only grudgingly by embassy workers who prefer to spend their time chatting with friends and texting."