6 Develop a global partnership for development

Where we are?

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The Philippines has been working on further liberalizing its trade system and making the investment climate favorable to foreign investors. (Photo: NEDA)

As a way to expand its networks with other countries, the Philippines has been working on further liberalizing its trade system and making the investment climate favorable to foreign investors. In 1994, the Philippines acceded to the World Trade Organization (WTO), a multilateral body dedicated to rules and non-discriminatory trade. In line with the principles espoused by the WTO, the Philippines has unilaterally pursued trade liberalization anchored on import liberalization and tariff reduction. Under this liberalization program, the average tariff protection has gone down significantly. In addition, quantitative restrictions on almost all imports have been lifted.

In Southeast Asia, the Philippines is an active participant in the ASEAN Free Trade Area (AFTA) anchored on the Common Effective Preferential Tariff (CEPT) scheme. The applied tariff scheme for imports in the ASEAN ranges between zero and five percent, with few requested exceptions that may be subject to compensation. At this point, 60 percent of products in the inclusion list are subject to zero duty.

In addition, the Philippines is a founding member of the Asia-Pacific Economic Cooperation (APEC), an informal grouping that is committed to “open regionalism.” APEC seeks open and free trade and investment in the region by 2010 for industrialized economies, and by 2020 for the developing economies.

Addressing debt problems

The drawbacks from having a large public debt were realized in the Philippines in 1983 when the government declared a moratorium on foreign-debt servicing. A liquidity crisis forced the government to seek a standby credit arrangement from the International Monetary Fund (IMF). The IMF program meant strict observance of austerity measures. From 1984 to 1985, the Philippine real gross domestic product (GDP) contracted by about 11 percent.

The Philippines then sought debt relief from its Paris Club creditors, following the restoration of democratic political institutions in 1986. The Country obtained some debt reduction Program under the Brady bond scheme. At the same time, the Philippine government implemented consistent fiscal, monetary, and exchange rate policies aimed at stable growth. In addition, it pursued long-term industrial restructuring designed to enhance the international competitiveness of industries through import liberalization and tariff reduction.

Since 1986, the government’s fiscal policy aims to balance the budget. This is through a comprehensive tax reform package to widen the tax base and prudent government spending. Institutional changes have also been introduced at the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC). These changes enabled the national government to post a surplus from 1994 to 1997. However, the government budget was at a deficit in 1998, the financing of which caused the ballooning of public debt. In 2005, the outstanding debt of the national government stood at PhP 4.47 trillion or about 76 percent of the gross national product (GNP), according to the Philippine Statistical Yearbook. As a result, debt service has been absorbing about one-third of the national government budget.

In 2005, President Gloria Macapagal-Arroyo succeeded in having the Reformed Value Added Tax (RVAT) enacted, which expanded coverage along with a hike in the rate from 10 percent to 12 percent. This has had good effects on debt management. In addition, emerging fiscal reforms are proposing forward budgeting with a medium-term expenditure framework aimed at strengthening the links between planning and budgeting.

Meanwhile, the policy reforms that contribute to large increases in exports, whether of goods or factor services, have meant improvements in the ratio of debt service to export earnings. In addition, low inflation and declining interest rates have led to significant declines in interest payments on the public debt.

Access to essential drugs

The initiative of making low-cost yet quality essential medicines accessible to Filipino people, most especially the indigents, had been making progress for about a decade already. The government has been proactive in developing strategies toward implementation of laws and programs that would support this initiative. Interestingly, supports from private institutions, local communities and other sectors contribute a lot in achieving this progress.

In 2000, the Department of Health (DOH) initiated the Parallel Drug Importation Program (PDIP) as an innovative strategy to reduce the costs of essential medicines. This was expanded to the Gamot na Mabisa at Abot-Kaya (GMA 50) Program to ensure that affordable, high quality, safe and effective drugs and medicines are always available, especially to the poor.

Access to benefits of new technologies, especially information and communications

In terms of information and communications technology (ICT), significant progress had already been achieved in this sector. Fixed telephone line, cellular mobile telephone and internet subscriptions have all been growing rapidly over the past two decades. One of the challenges, though, has been the disparity in terms of geographical reach of ICT services. In response to this, efforts have already been exerted to bring ICT services to the unserved and underserved areas.

Targets for MDG8
  1. Develop further an open, rule-based, predictable, non-discriminatory trading and financial system
    • Developing countries gain greater access to the markets of developed countries
    • Least developed countries benefit most from tariff reductions, especially on their agricultural products
  2. Address the special needs of least developed countries
    • Net Official development assistance (ODA), total and to the least developed countries, as percentage of OECD/DAC donors' gross national income
    • Proportion of total bilateral, sector-allocable ODA of OECD/DAC donors to basic social services (basic education, primary health care, nutrition, safe water and sanitation)
    • Proportion of bilateral official development assistance of OECD/DAC donors that is untied
    • Market access
    • Debt sustainability
  3. Address the special needs of landlocked developing countries and small island developing States
    • Official development assistance (ODA) received in landlocked developing countries as a proportion of their gross national income
    • ODA received in small island developing States as a proportion of their gross national incomes
    • Proportion of bilateral official development assistance of OECD/DAC donors that is untied
    • Market access
    • Debt sustainability
  4. Deal comprehensively with the debt problems of developing countries
    • Total number of countries that have reached their HIPC decision points and number that have reached their HIPC completion points (cumulative)
    • Debt relief committed under HIPC and MDRI Initiatives
    • Debt service as a percentage of exports of goods and services
  5. In cooperation with pharmaceutical companies, provide access to affordable essential drugs in developing countries
    • Proportion of population with access to affordable essential drugs on a sustainable basis
  6. In cooperation with the private sector, make available the benefits of new technologies, especially information and communications
    • Telephone lines per 100 population
    • Cellular subscribers per 100 population
    • Internet users per 100 population