Free tuition pressuring Congress to pass law

FOLLOWING the allocation of P8.3 billion to fund free tuition in state universities and colleges (SUCs), the passage of a free higher education bill will be a government priority in January if the program is to be implemented by the second half of 2017.

 “The agreement in Congress and in the Senate is, first week of next year, we will start hearings on the bill. It needs to be a law soon,” Senator Sherwin T. Gatchalian told BusinessWorld during a Friday phone interview.

Congress plans to pass House Bill 5905 or the Free Higher Education Act “not later than February” since the program to offer free education for undergraduate students in SUCs will be implemented in June.

“We at the Senate and the House (of Representatives) already agreed to fast track this bill in order to compliment the appropriate budget. This is the best way to clear up the issues and prevent abuse,” said Mr. Gatchalian.

The Free Higher Education Act, rejected by Congress in 2015 and 2016, seeks to exempt Filipinos from paying for units in any SUCs, though Mr. Gatchalian said free education will only be offered to “qualified, deserving, intelligent, hard-working, but poor and underprivileged students.”

President Rodrigo R. Duterte in a speech on Friday previously said that free education will be subject to qualifying process.

Mr. Gatchalian said the original goal was to pass a law before putting the scheme into operation, but the opposite happened.

“That (passing the bill into law) was the original goal. To come up with a law first and then put in the budget. But things happened in reverse, and now we have the unusual situation of having a budget for a program, but no law,” he said.

With the sudden “insertion” of the budget of funding for free tuition in SUCs, government agencies are grasping for proper data to plan for the program’s rollout, as are legislators.

“How many young people were disenfranchised because of lack of classrooms but passed the entrance exams, how much budget do we need for additional classrooms and facilities, how many students issue promissory notes because they cannot pay tuition fees, how many actually pay their accounts payable, what are the income demographics of those who were disenfranchised, and more,” said Mr. Gatchalian as he cited the information the government still needs to generate a comprehensive law.

According to the National Economic and Development Authority (NEDA), the government will have to conduct a study after the first implementation in 2017 to see whether or not the program should be continued.

“That’s something that we need to study… There’s such a thing as unintended consequences, but we won’t know until we give it a try. It could work, but we have to find out if the net effect, the overall effect is positive… Anyway, its budget is for 2017, we will need to evaluate it after so we can make a recommendation whether it should be continued,” said NEDA Undersecretary for Policy and Planning Rosemarie G. Edillon in an interview with BusinessWorld.

However, Budget Secretary Benjamin E. Diokno said that free higher education will be a “continuing program” as the Department of Budget and Management (DBM) will not be conducting an evaluation until after a few years, unlike NEDA which will be conducting a study right after 2017 ends.

“It will be a continuing program. An evaluation of whether it is effective or not won’t be done until after a few years of operation,” said Mr. Diokno.

DBM will also be working with the Commission of Higher Education (CHEd) to come up with the implementing rules and regulations (IRR) for the program.

“We actually will have to study this issue yet. I think the track we want to take is to proceed cautiously by doing an IRR with CHEd that will hopefully implement the program equitably and efficiently and increase its sustainability, then study the experience as to its effectiveness and financiability,” said DBM Undersecretary for Budget Policy and Strategy Group Laura B. Pascua in a text message to BusinessWorld.

According to Mr. Gatchalian, the program’s second-half implementation gives the government enough time to come up with guidelines.

Despite the lack of data, Mr. Gatchalian is confident of the bill’s passage into law after being resubmitted to Congress on the last day of June 2016.

Revenue generated in the proposed tax reform is expected to finance the tuition fees of undergraduate students enrolled in SUCs as well as the government’s aim to provide free medical benefits and hospitalization for the elderly, the poor and the jobless beyond 2017.

“If the tax reform package is passed, then we will have additional revenue coming in (for the free tuition and medical benefits in the years following 2017),” Socioeconomic Planning Secretary Ernesto M. Pernia told BusinessWorld on the sidelines of a media briefing last week.

But according to Undersecretary for Policy and Planning Rosemarie G. Edillon, other programs could compete with health and education for funding.

“Of course (education and health) have to compete with the other demands, demands of the social sector for health, basic education, infrastructure,” Ms. Edillon said during an interview last week.

The comprehensive tax reform package seeks to lower personal income tax rates to be at par with regional levels and expand value-added tax coverage by limiting exemptions on purchases of raw food, education and health care, while increasing excise taxes on fuel products and automobiles.

According to Mr. Pernia, the budget for 2018 largely depends on the comprehensive tax reform program as tax gains will be used to allocate funds for conditional cash transfers, electricity subsidies, health discounts covered by the Philippine Health Insurance Corp. (PhilHealth), among others.

Budget Secretary Benjamin E. Diokno said that free higher education will be sustained in the following years and “will be financed out of government revenue” much like the budget allotted for 2017.

“It will be in the GAA (General Appropriations Act), like in 2017. It was funded out of the government budget. So we will look at its sustainability,” said Ms. Edillon.

Mr. Gatchalian, meanwhile, is confident that the program will be sustained given the rapid growth of the economy and the commensurate growth in revenue collection.

The government will be basing its plans for infrastructure and social services spending on the five-part tax reform program the Department of Finance (DoF) first proposed to Congress in September.

But delays may hamper the passage of the Comprehensive Tax Reform Bill into law as the bill is still pending before the House Committee on Ways and Means.

Gov’t gearing up for RCEP, EU trade deal negotiations in 2017

THE PHILIPPINES is gearing up to negotiate two big free trade agreements (FTA) next year, as countries under the Regional Comprehensive Economic Partnership (RCEP) approach a consensus on the partnership’s terms, and with trade talks with the European Union (EU) set to resume in the first quarter next year.

Finance Secretary Carlos G. Dominguez said that the government will give the trade deals “our priority attention.”

Mr. Dominguez said with a newly-installed government the Philippines wants to thoroughly review the proposed FTAs.

“So we have to think about [these] very carefully, we are a new administration, we want to see the pros and cons, we want to see how we will benefit,” Mr. Dominguez was quoted saying in a statement by the Department of Finance.

The RCEP is a free trade agreement (FTA) between the 10 Association of Southeast Asian Nations (ASEAN) member-states and its major Asia-Pacific trading partners China, Japan, South Korea, India, Australia, and New Zealand.

Mr. Dominguez has said that the government is more open to the China-led RCEP, which it views to be in line with its goal of pursuing stronger integration in Asia.

“I personally would like to look at RCEP closely because that’s the 10 ASEAN countries, I think. That one, we are more open to,” he said.

Mr. Dominguez said regional integration “is similar to what has been done in the EU, NAFTA (North American Free Trade Agreement) in North America and Mercosur (Mercado Comun del Sur) in South America.”

RCEP is considered a rival to the US-led Trans-Pacific Partnership (TPP), from which China was excluded.

In terms of merchandise exports, TPP is smaller than RCEP, as China’s $2.3 trillion in exports in 2014 exceed these of the US and Canada’s combined $2.074 trillion.

The future of the TPP remains uncertain however, with the election of America-first advocate Donald J. Trump to the US presidency.

Trade Secretary Ramon M. Lopez said earlier this month that he favors RCEP as the Philippines was not included in the first round of negotiations for TPP.

“This is better. This is what we’ve been prioritizing ever since. The Philippines never has been a part of the TPP. We were not part of the first batch so it’s okay if TPP doesn’t go ahead,” he said.

RCEP countries are considering opening up their markets to between 80% and 92% of all categories of goods. RCEP accounts for half of the world’s population, nearly 30% of global trade and $22.7 trillion in combined gross domestic product.

Moreover, the second round of FTA talks between the European Union (EU) and the Philippines is expected to resume early next year, after initial talks with a European delegation were held in May.

According to government data, exports to EU member countries account for 11%, or $525.29 million, of the total merchandise exports as of October. Imports from EU on the other hand, represent 10.3% of total imported goods valued at $710.48 million over the same period. — E.J.C. Tubayan

PNOC moving to monetize real estate holdings

STATE-OWNED Philippine National Oil Co. (PNOC) is planning to more efficiently use its real estate holdings, its president said.

“I’m putting up an iconic PNOC building that will house all energy-related government and private [entities],” Reuben S. Lista , PNOC president and chief executive officer.

Mr. Lista, who assumed office in November, likened the project to Petronas Towers, the 88-storey twin towers in Malaysia that are among the world’s tallest.

“We are sitting in the most expensive real estate in the country — 5.2 hectares at P550,000 per square meter,” he said. “In other words, we are wealthy.”

He said that if PNOC sells the property in Bonifacio Global City in Taguig, where it currently holds office and whose current tenants include the Department of Energy and the Philippine Economic Zone Authority, the company could easily raise around P27.5 billion.

However, if PNOC sells the property, the proceeds will go to the national treasury, Mr. Lista said. As a corporate entity, that is not what the company will do, he added.

PNOC, created by a presidential decree in 1973, is mandated to provide and maintain an adequate and stable supply of oil. Its amended charter includes energy exploration and development. Operations also cover energy development, including indigenous energy sources such as oil, gas, coal and geothermal.

“We are inviting everybody to invest with us,” Mr. Lista said.

He described the envisioned building to cater to state and private entities “that have anything to do with energy,” so they avoid navigating the Metro Manila traffic in doing their business with the government.

“We will build a beautiful building here,” he said. “We will turn the rest of the area into commercial spaces.”

“That is the ambitious plan that we have here,” he said about the planned development, which he said could include a shopping mall.

Asked if a study has already been made about the proposal, Mr. Lista said: “We have ideas already.”

“There was a study before but there are other offerors,” he said, referring to proposals under the previous administration suggesting the injection of foreign capital, separately from the offers from “two local interested parties.”

“So we are all studying this,” he said. “But this is good for the company and this is good for the country.”

He said he had discussed the proposal with Energy Secretary Alfonso G. Cusi.

“We discuss almost everyday. We are together almost everyday. It is an exchange of ideas between the secretary [and the PNOC], and he agrees with our thinking,” he said.

“We are just providing an energy center for ourselves, but in the meantime, make money along the side. We are not competing with real estate. Forget real estate. That’s not my concern. I’m building an iconic energy building,” he said.

Under Mr. Lista, PNOC is transforming into an operations company from a holding firm, taking upon itself the implementation of the ongoing programs of its subsidiaries.

“The transition will begin by January 2017,” he said.

In the past, PNOC has been viewed by industry participants as sitting on interest income from banks and its share of the gains from the Malampaya gas find and rental proceeds from its various property holdings.

Mr. Lista described the past PNOC management as “happy to earn from investments,” with the company’s equity of almost P8 billion parked in banks, earning an interest of 1.8% and making P144 million a year. — Victor V. Saulon

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