Why Philippine Internet is slow, and what we can do to solve it


“Engage!” I muttered, to myself, as my finger pressed “enter”. The script executed. Faster than an eye blink, the command traveled nearly thirteen thousand kilometers way, on the other side of the planet. Tython received it, and started to chew on my script.

Tython is a 1.22 kg heavy, 19.7 cm wide, and 3.6 cm tall server made of polished aircraft grade aluminum that I named after the Jedi homeworld. I got it last Christmas, partly as a present to myself, and partly as business expansion. The guys I rent colocation data center space from, had it on sale. Pre-owned. I was broke, but I took it. I will finish paying for it by next Christmas. It isn’t the fastest, or most powerful piece of silicon anywhere in the Interwebs, but, it is mine. It is doing this work; an extension of my will.

Over three thousand kilometers away in Culver City, a little flat box that I rent, and I called Multiversary, which is as wide, as tall, but not as long as a pizza box would answer Tython’s “call.” If it could talk, I imagine Multiversary would say to Tython in a booming voice like that of a Guardian of Forever, “State your business! None may pass without The Key!”

All this happened faster than you can blink an eye.

Tython waved a copy of my public key. It’s like a badge. An ID telling Mutiversary that Tython represents me. He has orders from their master. Multiversary looked at its private key to verify if Tython’s key is authentic.

“You may enter!”

Tython stepped in, and pokes around Multiversary.

My instructions were simple. Go to the domains folder, and rsync that. My script told Tython exactly what I want it to do. In plain english, the script translates to telling the computer to look at folder A, and folder B. Compare them. If B is different from A, then copy what’s different from A to B. If the difference in B from A is just one word, out of a paragraph, then it will only copy that one word from A to B to make them identical.

Rsync is a powerful little tool. It is a lifesaver for people like me. If you’ve ever used Dropbox, this whole process is Dropbox-like.

In this case, I knew very well how different B was from A. It was 45 Gigbytes different. It was a fresh backup. I wanted to start over with this work. If 45 Gigabytes was money, it would be worth 45 Billion.

Yeah, with a big B.

That’s a lot.

It is the same size as 11.25 4GB USB drives that you can buy from CD-R King.

The script zoomed. This is work. People pay me to back up their websites, and online world. It took less than five minutes to write the bash script. It wasn’t hard. In fact, quite trivial in the world I thrive in.

Did I mention, as all this was happening while I was in Manila? I watched it go from half a world away. I was doing this remotely from Manila, Philippines. It is +8GMT on your clock. Manila might was well translate to Hades— the underworld capital of the Internet. It was a Tuesday here. It was a Monday in Milwaukee. Oddly, I sometimes think of it as me in the future, time traveling to the past to affect the future.

I got up to get some lunch. There was nothing more to do, but wait for the script to finish syncing.

Twenty minutes later, I get back to my laptop. Forty-five Gigabytes copied across state lines, done.

It was like copying files from a laptop to an external drive that was sitting on my desk.

If I had done this from California to Manila it would have taken a month of round the clock downloading, and it might not even get done.

I’m a microscopic fish in a big pond. If it took me a month to do this sort of work, who would hire me to work?

That’s how bad it is.

It will take a month to transfer 45 Gigabytes across thirteen thousand kilometers versus three thousand kilometers in fewer minutes than it would take to eat lunch.

Is the Internet limited to people like me who make our bread, and cheese online? All my clients are hosted on super fast data centers. Tython for example operates at 1 gigabit per second. It’s a business plan, sure. At the level data centers around the world operate, they buy bandwidth in bulk. Tython also exists on a first world country where the Internet was invented. There is a world of difference between Manila, and Washington. The difference is like one of those Chinese tablet running Android that you can get for a hundred dollars or less, and an iPad.

The Global Information Technology Report which highlights the “Networked Readiness Index (NRI)” clearly describes the difference in measurable numbers. The index measures the tendency for nation-states to exploit information and communications technology opportunities. The Global Information Technology Report 2014 report entitled, “Rewards and Risks of Big Data” highlighted that the Philippines jumped 8 places up to 78th position and is now ahead of Vietnam, and is identified that the country’s ICT readiness is where it ‘most improved’. While it is a good thing that the Philippines jumped so high, in so little time, clearly there is room for improvement.

The United States ranks 7th in the world.

In terms of affordability, the Philippines ranked 75. In terms of infrastructure, and digital content: 89. In terms of skills, 69.

The Internet and productivity


Like how bad the traffic is, much productivity is lost just because the Internet is slow. So much business opportunity is lost because the Internet is slow, and expensive. This fact escapes no one. And yet, everyone seem to complain about how bad the Internet is. Like a wall of frustration asking: how can this be better? More importantly, I think the question is: how can this be simpler? Like Magic. Like being ubiquitous. It just is. You know?

Haven’t you been to the point of emailing a client a deck or document, and it took ages to send? A couple of megabytes that shouldn’t take a minute to send, but takes forever to deliver?

That’s loss of productivity right there.

Coincidently, the World Bank says that investment in broadband boosts GDP: for every 10-percentage point rise in broadband penetration there is an economic growth of 1.38-percentage points for low, and middle income countries— country bracket where the Philippines is.

The Internet as general purpose technology


Broadband Internet, and the underlying infrastructure is a general purpose technology. Electricity, railroad, roads— they are examples of general purpose technologies. General Purpose Technology affect the entirety of an economy. These technologies speed the economy along. Many companies around the world can’t operate without electricity— doctors can’t heal the sick with out patients undergoing diagnosis— which all require electricity— laboratory tests, x-rays, CT-scans, MRIs, etc. Roads and railways are general purpose technologies because they transport people— you and I— across vast distances. They transport food– vegetables, poultry, meat, etc. from across provincial, and city lines. So in the same vein, the Internet is now as essential. Businesses cannot thrive without email. Even small businesses need to communicate using it.

Marketing people send decks; have websites built, and they interact on social media. In our professional, and private lives, we use the Internet to communicate with people. Virtual has created whole new opportunities.

Speaking of opportunities, Business Mirror recently published an article on the pros and cons of a digital store, and so the Internet, just as technology has become, highly entrenched in the modern economy.

Government and the Internet

Screenshot of i.Gov.PH

A few years ago, the now defunct Commission on Information and Communications Technology published the Philippine Digital Strategy 2011 to 2016 (PDS). The CICT was established by President Gloria Macapagal-Arroyo, and subsequently abolished by President Benigno S. Aquino III. The PDS, actually, if you read it is nothing to phone home about. At one point, the so-called strategy mentioned a legislative agenda, but nothing specific is indicated in the report. The PDS evolved into the e-Government Master Plan.

The Philippine Government is moving forward with its [E-Government Master Plan. It draws input from the Philippine Digital Strategy. The EGMP was developed by the National IT Promotion Team, and the National Computer Center, and it worked on, and with input from South Korea. The Master Plan is about integrating, and interconnecting government agencies, and prioritizing e-Government projects. This is an important, and crucial step.

Clearly, the government is keenly aware of how important the Internet is, especially with respect to, and in delivering services online. There are many social media strategies at play across various levels of government for example. The government’s I.T. engine is on the move. It is moving ahead with— meant to interconnect government agencies, and enhance delivery of services to the public. Quite recently, the Department of Justice recently launch the e-Subpoena initiative, which the Philippine Daily Inquirer dubbed, “a web-based information system that speeds up the transmittal of court subpoenas and notices to the police”. The Department of Science and Technology also announced
Fiber optic cable for fast ‘Net to connect 160 agencies.” Lastly, and not least bit, the Presidential Communications Development, and Strategic Planning Office, launched Open Data as part of its Open Government Initiative. There is also a Big Data Initiative in the pipeline.

The government is clearly focused on delivering e-services to the public. It is clearly leveraging technologies towards this purpose. This is a laudable thrust.

Internet speed in the Philippines

There have been many who are questioning how bad the Internet in the Philippines is. Most especially after this infographic went viral:


Senator Bam Aquino, for example is seeking to investigate how slow the Internet is.

Stakeholders should work for better internet service. Source:
Stakeholders should work for better internet service.

Senator Bam Aquino called on stakeholders to work for better internet service

Remember the Global Information Technology Report? Here are other countries who are ahead of the Philippines in terms of Network Readiness: Sri Lanka, 76; Greece 74; Trinidad and Tobago 71, South Africa, 70; Brazil, 69; Thailand, 67; Indonesia, 64; China, 62 It goes without saying that South Korea is 10, Hong Kong (SAR) is 8, Singapore is 2.

Philippine Star columnist Boo Chanco asked for the opinion of the National Telecommunications Commission with regard to the viral message saying the Internet in the Philippines is slow, and crappy. NTC Chairman Gamaliel Cordova wrote Mr. Chanco back to say it is all the fault of R.A. No. 7925, which in plain english is “An Act to Promote and Govern the Development of Philippine Telecommunications and the Delivery of Public Telecommunications Services”.

As Chairman Cordova put it to Mr. Chanco:

“R.A. No. 7925 was issued in 1995 when the Internet was still an emerging and expensive technology. This is the reason why NTC wants this law reviewed, and amended to make it more applicable to the present situation.”

Lawyer Cecile Soria— a co-author of the netizen bill Magna Carta for Philippine Internet Freedom— disagrees. She writes: “RA 7925 does not define a value-added service. It does however say that a value-added service provider is.”

“Value-added service provider (VAS) – an entity which, relying on the transmission, switching and local distribution facilities of the local exchange and inter-exchange operators, and overseas carriers, offers enhanced services beyond those ordinarily provided for by such carriers.

(Another pertinent part of the law is section 11, but you can read that on your own).

Anyway, Atty. Soria notes that Philippine Long Distance Telephone Company’s Philippine Stock Exchange filing does not consider Mobile Internet as part of the Value-Added Services.

“Wait!” Winthrop Yu says:

“The assumption here is that NTC cannot regulate ISPs because they are VASes, the fact is NTC can and does regulate ISPs here in the Philippines and does treat them as common carriers (except for the need for a congressional franchise if they are only ISPs and not otherwise telcos).

One fact I keep pointing-out — Data Usage Caps, while thoroughly legal and a contractual mater for which the telcos/ISPs do not need prior NTC approval, are proof of “over-subscription”. And the NTC can issue a “freeze order” preventing the telcos from accepting new applications while they are “over-subscribed”.

Getting back to VAS … the issue came to a (somewhat heated) head in 2003 or 2004, when the question arose as to whether VOIP was a “voice service” or a VAS. At our (PICS) open symposium on the topic which included NTC the telcos and the independent ISPs, the discussion started like this —

NTC Commissioner #1: We have determined that VOIP is a “voice service” …

NTC Commissioner #2: He does not speak for the entire Commission!

In the end NTC sided with us and declared that VOIP was NOT a “voice service”, and that VOIP (as well as the entities that provided the service) were VASes.

In summary — our situation is very different from that in the US. Re-classifying Internet (and the services that run on it) as common carriers or telecommunications services would create a barrier to entry (Congressional franchise requirement) and further restrict the playing field, exacerbating an already cartelized industry and resulting in even poorer, slower service in the future.

Confucius applies — Be Careful What You Wish For.

“Winthrop,” Grace Mirandilla-Santos began, “You’re correct; that’s one big implication of redefining the internet as a basic telecom service. Unless, we can push that NTC regulate the service providers, not the service. PTEs with permission to offer a VAS does not cease to be a PTE. In fact, because of its default advantage over strictly ISPs, and given the growing importance of the Internet, NTC can and should step in to protect consumer welfare (one of its 3 core mandates, apart from promoting a healthy competitive environment and universal access).”

Lawyer Oliver Reyes says, “If ISPs are classified as public utilities, yes they have to comply with 60/40 nationality rule (60% PH ownership), only amendment to Constitution can change that.”

“Taking off from Oli’s answer,” Grace added, “if the ISP happens to be a PTE (public telecom entity) like PLDT, Globe, etc, they need to comply with 60/40 rule. But if the ISPs are not PTEs, they don’t. And this is the situation today. However, since your ISPs cannot build their own network and are dependent on the PTEs’ infrastructure and IGFs (for international traffic), the PTEs naturally have the upper hand in everything related to the internet business.”

According to the eGov Master Plan the U.N. determined this:

UN Report -

Note, infrastructure not good enough.

The government is building e-services. They have been busy integrating the various agencies from an infrastructure, and software level. This is welcome, yes?

Then on the other hand you have the private sector with increasing average speed, and largely, anecdotal evidence of pissed off customers.

What are we to do?

Policy problem

While there has been marked improvement in the Network Readiness Index ranking, the Philippines does rank 75 in affordability, 89 in infrastructure, and digital content and 69 in skills. So clearly, there is room for much improvement. Clearly, the problem is an infrastructure one.

If the Philippines jumped 8 places given the current climate— think of how much it could jump with the right policy in place going forward. We need to take the next step in a National Broadband Plan given the mess that is called VAS. At the end of the day, the root cause of the problem is policy.

Wait hold on— isn’t the Free Market suppose to be a good thing?

Yes, it is, in fact, the problem per se, isn’t that the system isn’t a free market. The problem is the lack of direction. A lack of vision amongst the various stakeholders— at least from the perspective of infrastructure. (The government seem to be doing just fine in building e-services, with a mid-term assessment soon.)

In short, it is policy on the infrastructure, and business side that’s been missing.

Does policy mean we tell telcos to do this, or that? Does policy mean the death of the free market?

No, it does not.

Policy is— and should be— positive initiative that spurs innovation, investment, access to information; prevent unfair pricing, consumer exploitation, breaches of privacy. It should produce positive outcomes while minimizing cumbersome, confusing, changing regulations— or in the Philippines’ case— outdated laws like R.A. 7925. In short, policy is fair play in a free market.

Steps need to be taken

Truth be told, there is no single answer expect that it should be a meeting of the minds by various stakeholders. In my humble opinion, these are some of the steps that need to be taken to help solve how badly the Internet is in the Philippines.

First, Establish a strong foundation for growth by passing the Magna Carta for Philippine Internet Freedom (#MCPIF).

Second, establish a national broadband infrastructure plan, with the South Korean model as an ideal, and with stakeholders— in the public, private, and consumer spaces engaging in meaningful dialogue; (The e-government master plan seem to be on the right track, we’ll probably know more as DOST-ICTO finishes its assessment.) The infrastructure plan should include:

a) Ways to get more players in to be competitive;

b) Build more International Gateway Facilities;

c) Encourage building local exchanges, proxies, and data centers;

d) Create meaningful competition in the marketplace;

Lastly, ensure Quality of Service from all the Telcos, and properly monitored, and regulatory empowered by the National Telecommunications Commission.

The first step – #MCPIF

As early as the 15th Philippine Congress, netizens led by started to push for setting the stage for better policy, and this is called the Magna Carta for Philippine Internet Freedom (#MCPIF).

The #MCPIF does the following policy changes: lays a foundation for innovation, and investment; grants universal access to information; establishes a framework to prevent consumer exploitation, and cybercrimes; prevent breaches in privacy; and lastly lays a foundation for cybersecurity. The #MCPIF does this through four pillars: Rights. Development. Governance. Security.

The freedom doctrine

The Magna Carta for Philippine Internet Freedom starts off by “invoking the spirit of the 13th century Angevin charter”, as one journalist called it. As our group—— said before the Philippine Senate Science and Technology Committee, “To borrow from John F. Kennedy: We are here to promote the freedom doctrine.

Why is this important? Because it is important to start at the beginning. As one of the drafters of #MCPIF, I can tell you that it was important to us that Internet legislation would begin from a Bill of Rights perspective. Without this, you get legislation like the Cybercrime Prevention Act (#RA10175).

On a personal note, it was important to me that we started with freedom because that was what the code was about. The Internet is a network of networks. It was a means by which to interconnect different networks, and to get them to speak with each other. The Internet protocol suite— Transmission Control Protocol (TCP) and the Internet Protocol (IP)— provided an expression that put intelligence at the edge, and together with a robustness principle— “Be liberal in what you accept, and conservative in what you send”— it was only right to do something similar from a legal, and analog perspective.

So you have expressions in the #MCPIF that talk about art, and culture; because to me, truth, and beauty can be created from ones, and zeros. This is why you have Universal Access to the Internet. This is why there are expressions in the #MCPIF that allow jailbreaking, and rooting of devices because to me, tinkering, pushing the boundaries of possibilities; the ability to cultivate curiosity, and ultimately, innovation is very important even if only 1 out of 10 kids do it. The future can be built by that one kid, and it is important that his possibility exist for that one kid.

From a fictional perspective, If you’ve ever read Batman, and see his desire to to build a better Batmobile? That’s exactly what this is about. If you’ve ever seen Iron Man, and Tony Stark was building his suit? That the itch that you can’t stop unless you scratch. That’s the same thing with ideas, and world shattering innovation— from Apple to Facebook to Google to Microsoft and everything in between. Each of their founders had an itch to scratch that they couldn’t stop until they scratched it, and scratched some more.

“What if X could be done like this? What if Y looked like this?”

This is all from my perspective, you have to understand. This is why I am glad my co-creators from agreed to put it there. This is why I hope that our politicians, and the public also accept all this. The Core of #MCPIF is about laying down this foundation for innovation, for growth through this perspective.

Open Government
The government launched as part of its goal for better transparency in government.
The government launched as part of its goal for better transparency in government.

There is a provision in the core of #MCPIF on Open Government. It is a proto-freedom of information act, and lays a foundational framework for the good work is. One of its salient feature is to require agencies to provide data in open standards format— text, comma-separated-values, and similar standard that is readily processable.

The Open Government provision (Section 13) came about because of a twitter discussion with Undersecretary Manolo Quezon, Journalist Jojo Malig, and members of @PHNetDems.

Jojo from his perspective wanted data to be easily parsed. PDF in the journalist perspective, for example, took too long to parsed— especially coming from the government’s disaster relief agency.

Undersecretary Manolo, and the good folks over at the Presidential Communications Development & Strategic Planning Office (PCDSPO) have been championing Open Government. PCDSPO together with Secretary Edwin Lacierda, and Deputy Press Secretary Abigail Valte have been championing Open Data in government as well.

The inclusion of Open Government into #MCPIF for me, is important because we’re talking about Internet Freedom here. What comes from Internet Freedom is the ability access to the global Internet as an open platform. This open platform was designed to be a place where one can innovate, learn, organize, and express oneself, and the idea that is Open Government runs parallel to this. We shouldn’t simply be paying lip service to transparency in government. There is much cynicism attached to “Daan Matuwid,” and for me, the work by people not only at PCDSPO that pushes for greater transparency in government is a good step towards the right direction. We can no longer afford to simply pay lip service. However slow the process is, going forward, using technology to bring readily available information to people is important especially with Big Data, Open Data, Freedom of Information Act in the pipeline. Laying the foundation of real internet Freedom is an important step in building towards transparency, and open government is part of that foundation.

Second step

While #MCPIF does have provisions regarding the amendment of the telecom act, and provisions on network neutrality, and such— all aimed at pushing not only for fair play in a free market, but to establish a clear framework for the future, it is just the first step.

While this was designed more as framework, it is important to take the next crucial step— establish a national broadband infrastructure plan— at least the first in a series of plans that culminate in the effective delivery of not just infrastructure— network rollouts— and such, but of research, and digital literacy.

It is presently clear that there is a need for a national broadband plan. What currently exists is an E-Government Master Plan— which is great— but is entirely focused on government, and government services. A national broadband infrastructure plan requires all the stakeholders to work together. It really needs a Multistakeholder governance model similar in instance as the Internet Engineering Task Force.

How to begin?

Broadband Tool Kit is a good place to start with research. It says about Government with regard to a national broadband plan:

“The government of the Republic of Korea, for example, was one of the early broadband leaders. It has developed six plans since the mid-1980s that have helped to shape broadband policy in the country. The Korea example shows that policy approaches can effectively move beyond network rollout and include research, manufacturing promotion, user awareness, and digital literacy. It also highlights the possibilities for sector growth based on long-term interventions focused predominantly on opportunity generation rather than on direct public investment.”

In a whitepaper published by Cisco and the International Telecommunications Union, they said:

“Research conducted for this report suggests that the introduction or adoption of a broadband plan is associated with 2.5% higher fixed broadband penetration, and 7.4% higher mobile broadband penetration on average.”

International Gateways
Submarine Cable Map

Fiber-optic submarine cables represent points of failure. Undersea cables connecting the Philippines to the rest of the Internet originate in the Western Philippines, specifically in the region near or at Manila. In the event of a catastrophic failure due to natural disaster or war— this could cause a lot of problems.

It is without doubt, expensive. Whether it is engineeringly difficult— maybe impossible— or politically difficult to do— for example to setup cables from Davao to Australia; from Cebu to Guam or other parts of the country to another— is something I clearly have no answer for.

The same goes for proxies, exchanges, fiber within the Philippines’ territory, and so on.

Third step – Quality of Service

With regard to the NTC— there is a need for strong regulatory power, and strong regulatory desire. Testing of equipment, and clearly a need for consumer welfare protection that is currently absent, and have been absent for quite some time. In short, there should be fair play in the market place.

VAS or not to VAS

Clearly, there is also a problem with choosing VAS or not to VAS. The present debate on how slow the Internet is, rests on how this is answered. The requirement for congressional franchise to be an ISP should Internet be non-VAS will add a barrier for entry. Yet, the current situation where there are too few players simply because the cost to build your own network is just too astronomical is likewise a barrier.

A debate clearly needs to happen on what is best for the country. Policy is part of the problem, and this goes right smack into the middle of that.

Will introducing Cooperatives into the picture make the situation better? Will the government building IGFs, and licensing this to private corporations, and ISPs solve the competition problem?

How much bandwidth is the Philippines consuming— sending out to the world? How much money would it cost to build more submarine cables? Are there more cheaper alternatives? Here is a study from 2001 with regard to Internet costs in developing countries. What and how much would it take to give every subscriber sustained, reliable Internet?

Is it ethically wise for submarine cables to be owned by the government, or for bandwidth to be paid for by public funds— especially in light of Arab Spring where government can simply turn off the tap?

Is this better off handled by private corporations, but what policy should be made to increase competition in the market place to drive broadband penetration?

Will a privately run non-profit, but publicly funded corporation owning IGFs, running exchanges, buying bandwidth, and selling licenses to customers help alleviate the problem?

As you can see, the questions, and the picture is entirely complex.

Is there something else out there?

While the questions and the picture is complex. The tentative steps forward towards faster, more reliable Internet rests on: 1) the #MCPIF — the freedom doctrine; 2) a National Broadband Plan driven by a Multistakeholder governance model; 3) A Quality of Service law that spurs innovation, investment, prevent consumer exploitation, unfair pricing and breaches of privacy as well as minimizing cumbersome, confusing, and changing regulations. Lastly, this can be solved by the government, the private sector, and the public working with fairness, and equality— the right mix of policy.

Navigating the troubled waters of the West Philippine Sea

Who would stop China’s aggression in the region?

According to Foreign Policy, the Philippines’ case over China is an existential question over when is a rock, not a rock?

For many Filipinos, the question framed in their mind is this: Will America take a side in the territorial dispute?

The question is resharpened after Manila, and Washington signed a new 10 year defense agreement called the Enhanced Defense Cooperation Agreement.

According to the government, the benefit for the Philippines are the following:

  • Interoperability
  • Capacity building towards AFP modernization
  • Strengthening AFP for external defense
  • Maritime Security
  • Maritime Domain Awareness
  • Humanitarian Assistance and Disaster Response (HADR)

The government doesn’t see this as a new treaty. A treaty requiring approval from the Senate, and an agreement such as this, merely being executive in nature. Malacanang says this new agreement is simply an implementation of the Mutual Defense Treaty.

For America— increase boots on the ground in their pivot to Asia; increased soft power as more American troops are in town to provide humanitarian assistance; the strengthening of ties in the region, and ultimately, America cares about that International Shipping lane called the South China Sea.

Natashya Gutierez writes, “No categorical commitment from US on China dispute“. She goes to quote United States President Obama who said in a join Press Conference with President Aquino, “We don’t even take a specific position on the disputes between nations. But, as a matter of international law and international norms, we don’t think that coercion and intimidation is the way to manage these disputes”.

Hours later, RG Cruz quotes Barack Obama that the U.S. will defend the Philippines. “Through our treaty alliance “the United States has an ironclad commitment to defend you, your security and your independence,” Cruz quoted President Obama. The U.S. President said these words during a toast in a State Diner held in his honor at Malacanan Palace.

It is universally agreed that China will grow. It is an emerging success story in the region even as today it grapples with some economic turbulence.

Whether there is a commitment from Washington to defend Manila or not is an entirely separate issue. What these challenges with China show us two things:

a) The Philippines’ defense is primarily our problem; though nice to have America on our side, and we should take what is given. Learn, train, and occasionally ask for help when we need to, but ultimately, we need to start building our Armed Forces from nothing. We don’t even have fighter squadrons, and as Yolanda taught us, barely the resources (but lots of will) to help our countrymen, for example. So the country needs to claw our way out of that pit of nothing.

b) There is a need to counter-balance China in the region, and ultimately it is in our national interest that the Philippines will need to step up in an increasing diplomatic, economic, and military leadership role in the region.

That, ladies and gentlemen, should be the ultimate goal.

This doesn’t happen over night. Nation building doesn’t happen over night. Arguably, our nation’s growth, and the many changes in the Philippines since Aquino took the helm has advanced us to the point that we can dream again; that our democracy is out of the recovery room, and ready to heal.

This is where we are now. Healing.

Sure there are complications. Corruption is little diminished, but still potent. Our country’s infrastructure from the Airport down to our communication lines are arguably some of the world’s weakest. You need only to step into the MRT or LRT each day to see how things could be better; much less ride through potholes and traffic. The line between liberal thinking, and conservative thinking is growing each day, but ultimately, in spite of having a rather liberal Supreme Court, conservatism is still king.

Ultimately, no one with a keen mind will surely expect Aquino to eradicate poverty in our time, or to fix decades of weakness in a single presidency. That’s just insane to think, or to expect. Not only does it show a tiny world view, it underlines a narrow view of who we are, where we are, and ultimately where we ought to go as a nation. These weakness in the Philippines will not be fixed in a single presidency, much less two. It would take good men and women in both the public and private sphere to advance our country forward.

Similarly, to expect America to send the George Washington Carrier Strike Group to the West Philippine Sea, and say to China: “Get out” is likewise a narrow, and provincial view. The civilized, and neighborly way is to go through international arbitration— which is what good nations do to resolve their differences. And our nation has done that. America supports it. And ultimately should we succeed in this legal framework, that benefits our neighbors as well. That’s what real leaders do.

President Aquino is correct: that our dispute with China over a bunch of rocks does not define our entire relationship with China. We remain to have economic ties to that nation, and continue to do so. America has a similar understanding: there maybe friction in the relationship— just like everyday there could be friction with our personal neighbors, but that ultimately does not define the relationship. America has deeper economic ties to China.

Foreign Policy quoted Ely Ratner. He is deputy director of the Asia-Pacific Security Program at the Center for a New American Security Think Tank. He said:

“What kind of great power will China be? Are they willing to play by the rules of the game or overthrow the system? As much as there ever is, this is a clear-cut test of their willingness to bind themselves to rules that may end up not being in their favor.”

That said, there is no shame is asking for help— and EDCA is one of many framework for cooperation with America. We should take it. The rest, well? That’s up to us. It is in our national interest that the Philippines will need to step up in an increasing diplomatic, economic, and military leadership role in the region.


Truth in Advertising?

A closer look at the BIR’s name-and-shame campaign

The BIR serves it’s latest volley in its name-and-shame campaign. This time, it targets lawyers—Makati lawyers, specifically—implying that their tax-avoiding ways are a burden to the country.

Before anything else, let me get this out of the way: a lot of lawyers in private practice are most probably not paying the correct taxes. But that is true for most independent service professionals in this beloved country of ours. The only sector of society that you can count upon to be paying the correct taxes is the employees, whose salary is held hostage to the prior withholding of taxes due.

Having gotten that off my chest, let’s proceed to the BIR’s latest creative masterpiece.


The ad leads with the a controversial statement: “[O]nly 53.7% of all taxpayer lawyers in Makati filed their income tax returns.”

We need to break down this statement though to understand 1) what the BIR is trying to say, and 2) what the statement really means.

First of all, the ad is disingenuous. The fact is that non-filing of an income tax return is not equivalent to non-payment of taxes. Since lawyers are covered by the expanded withholding tax system of the Tax Code, income taxes arising from their professional fees are already withheld from the payments they receive from their clients. This means that the taxes have been paid, whether or not the lawyer actually files an income tax return.

Based on the footnote, the ad defines the term “taxpayer lawyers” as “[L]awyer taxpayers who have filed BIR Form 1701 or Annual Income Tax Return for Self-Employed Individuals, Estates, and Trusts for return period 2012.” In the case of lawyers, who are those required to file BIR Form 1701? They are lawyers who are engaged in trade, business or practice of profession and those lawyers who, in addition to practicing their profession, receive a salary as well (meaning those with more than one source of income). This eliminates lawyers who work as employees and law firm associates and those who are members of a partnership of lawyers. This leaves us with lawyers who are in solo private practice.

The ad next mentions 840 as the total number of lawyer taxpayers registered in BIR Makati Revenue Region. Again, the footnote explains who they are: “Taxpayers registered with PSC 7411 (Legal Activities) in BIR Makati Revenue Region which covers RDOs 44 (Taguig Pateros), 47 (East Makati), 48 (West Makati), 49 (North Makati), 50 (South Makati), 51 (Pasay City), 52 (Paranaque), 53A (Las Pinas City), and 53B (Muntinlupa City).”

The explanation shows that the total is not limited to Makati lawyers but actually includes those from other cities that fall under the Makati revenue region. And yet, the ad goes on to mention that 451 is the number of Makati lawyers who filed their income tax returns in 2012. So which is it? Is the ad referring to registered lawyers under the Makati revenue region or just those lawyers registered in Makati? The ad does not make this clear.

For all we know, all Makati lawyer taxpayers actually number 451, which would bring the percentage of Makati lawyers who filed their income tax returns to 100%.

The BIR attempts its own version of the coup de grace with its comparison of the 2012 income tax due as declared by “a certain lawyer in Makati” versus the income taxes withheld by a public school teacher for the same year. The implication is quite sinister and you could probably not be faulted for concluding that the Makati lawyer cheats on his income tax return.

You could be wrong though.

Here’s why:

The BIR is comparing apples to oranges. Note that with respect to the Makati lawyer, the ad uses “tax due” while it cites the “income tax withheld” on the part of the teacher. These are not the same. The “tax due” is the amount still to be paid by the taxpayer after taking into account his gross income and deducting the expenses he has incurred in practicing his profession and the taxes that have already been withheld from him during the year by his clients. Thus, it can happen that the Makati lawyer has a low “tax due” since the income taxes were already deducted from the payments he received. What the ad should have shown instead is the “income tax withheld” from Makati lawyer so that we can get a more accurate picture of whether Makati lawyer cheated on his income taxes.

Makati lawyer pays other taxes aside from income tax. Makati lawyer may be required to pay value-added taxes or percentage taxes, depending on the amount of gross professional fees he receives within a 12-month period.

The Tax Code entitles Makati lawyer to claim deductions from his income that are different from the deductions enjoyed by the public school teacher. Thus, Makati lawyer may, within limits, deduct expenses such as restaurant bills from meeting with clients, gas and transportation expenses, cellphone bills, office supplies, and other ordinary and necessary business expenses from his income. You can imagine that these things may add up and result in significantly reducing the amount of income tax that Makati lawyer has to pay. Unfortunately, this is a privilege that is not available to the public school teacher. Applying the deductions does not make Makati lawyer a cheat because the Tax Code allows him to do so.

So you see, while Makati lawyer may have a tax due of just P2,975, it does not necessarily mean that a) he is a cheat, and b) that amount is all he paid.

I agree that when you don’t pay your taxes, you are a burden to those who do. But it is a bigger burden to society when government—who should know better—deliberately obfuscates issues. This is a teachable moment that the BIR unfortunately squanders. The BIR is building up and exploiting the people’s fear of the taxman when the better approach is to make the tax system coherent and taxpayer-friendly.

Returning to face the challenge

To the regular followers and commentators at Propinoy,

I wish to take leave from my regular column here as I have recently been appointed to manage a project funded by an international aid organisation in the Philippines. This will prevent me from commenting on current affairs in the Philippines, at least for the duration of my engagement.

The last three and a half years that I have spent blogging in this space have truly helped me hone my thinking regarding the development challenges facing the country. I am glad to now have the opportunity to put some of the things that I have been espousing into practice (fingers crossed!).

Although this is but a temporary hiatus, I know that I shall miss the interaction, the feedback and the lively, thoughtful discussions I have come to expect from you over the years. I know that my fellow bloggers here at Propinoy are more than capable of keeping the flame alive, so that when I return, we can continue this conversation.

Yours truly,

Doy Santos aka “The Cusp”

Hand Reaching

The myth of Filipinos being “matulungin”

Hand Reaching

I was in Megamall earlier when I stopped by Chris Sports to look at their exercise bikes. After canvasing the prices, I began walking out of the store but then suddenly fell from an approximately 3-inch platform. I was on all fours wincing in pain for about a minute then stood up shakily. I have week knees and I’m prone to such accidents. This particular accident however disgusted me. There were quite a number of people in the store and not one single person offered any help nor asked if I was okay when I stood up. Even the salesperson who earlier assisted me just stood silently as I told him that they should put warning signs about the platform lest it cause more accidents. After telling him that, I left the store sorely and procedeed to do my errands.

As I was walking, I began thinking why nobody offered any help or showed even the remotest sign of concern. Are Filipinos so cold now that they only help others when it affects them personally or there’s a major disaster. I’ve heard of mugging cases when there were witnesses but they were just that, witnesses. Filipinos are known for being “matulungin,” right? Or is that just a myth? Guiltily, when I help other people, it’s usually coursed through charity work but when there are signs of danger, I freeze up and become one of those mute witnesses. Why is this? What happened to us? Is our sense of self preservation hindering us from helping our fellowmen?

When I tripped and fell in Europe, so many strangers were concerned about me. They even wanted to call an ambulance. Here I’m lucky if someone offers a hand so I can stand up. I hope I am wrong about how I see our helpfulness. I don’t want to think badly about our race but my experiences say otherwise.

The BIR and Doctors

The Bureau of Internal Revenue embarked on a shame campaign to force doctors to pay their taxes. The ad campaign compares doctors to teachers. Not only does the ad campaign shame doctors, they try to compare two professions that have distinct training and suggests that the medical profession rides on the backs of other professions or people. The ad suggests one is better than the other. Which is a false assumption, and even false comparison.

The practice of medicine is an exacting one. It has to be because you have to take human life seriously. It is training that not only goes beyond the four years of collage, four years of proper, a year of internship, another four years of residency, four years of specialty training and pretty soon you find yourself an old person, with nary money in your wallet to show for it. That’s also not counting the thousands of hours in loss sleep, loss of friendship, partnership, because the medical profession is an exacting one that demands you think on your feet when you’re sleep deprived. That’s the whole point of going on duty. You can see why many from the medical profession find the whole ad— insulting.

To compare this to the teaching profession for example, is not only comparing apples to oranges but inflicts an insult to both profession. There is without doubt that teachers are important. They shape young minds. People who grow up to be doctors, to be exact. Yes, they spend the traditional four years of collage, and non of the bootcamp like conditions required of the practice of medicine, but again— to compare the level of training between two professions is a false comparison. Teachers too have to prepare lesson plans, find ways to captivate young minds, go through days filled with kids of all sort of personality that is certain to test the greatest of resolve, and deepest of patience. And with nary money to show for it.

It is like comparing two different lives, and the troubles they encounter. It is like saying the person to your right had it better, and his life is greener than yours when you haven’t walked on the other’s shoes.

The practice of medicine in the Philippines— to set up your own clinic— has more in common with the calling of small businesses, or a small law firm or design studio. Even when the clinic is attached to a hospital, this is how doctors make their bread and cheese. Profit rises and falls depending on how many people get sick, or how hard the doctor works. A surgeon gets pay with how many people he cuts open. An anesthesiologist gets paid depending how many operations happen. A psychiatrist gets paid with how many crazy people there are. So it is a mom and pop operation. And yes, like in every profession there are those who do skip in paying their taxes or those who don’t declare their income.

For the teacher, as an example— they have no choice. The same goes with the office grunt, the secretary, the mailman, the police and so many other people whose lives depend on an assured salary, no matter how much the school, the business, the government makes money. They get paid no matter what. (Well, most of the time, anyway). So the revenue collector has already cut of the monies from the teacher long before the teacher gets it. There is a clear cut revenue stream.

A doctor can teach, and many do since that profession requires some doctors to be teachers and lecturers too, but a teacher can’t be a doctor without first going through the extensive training processes. So there is already a specialization.

So again, to compare one over the other is a false comparison. It is apples or oranges and the required training, and subsequent pay bracket are different.

Hence, why it is both insulting to medical profession, and sets a different, and rather false tone. Why incite jealousy and differentiation between different people? Obviously they choose different path.

Yes, there is a connotation that doctors are rich. They drive expensive cars, take fancy trips. There is without doubt that there are rich doctors. And there is without doubt doctors who slave away like grunts especially in far flung areas. Obviously the training and required degree of labor while different in each, is no less hard on both. Don’t teachers slave away? Don’t surgeons spend hours and hours on the operating table?

There is no doubt that the government needs its fair share of the revenue. How else to pay for all the social service and infrastructure needs of the people. That’s why income is taxed. That’s why we have VAT and so many other taxes.

If we stared to blame doctors for not paying their taxes pretty soon people are going to ask, oh, hey, why single us out when the Philippine underground economy averaged 34.8% of GDP? How nearly 4 billion dollars were lost due to smuggling in 2011 alone. Pretty soon the blame game will descend to the lost of income due to the alleged wastes of the Pork Barrel scam. How many billions of pesos were lost in ghost projects.

The doctors and lawyers and other professions will ask: why us when you got all this waste that you can’t patch up? Do that first, then we’ll pay taxes. Don’t you think it is a chicken and egg problem? One does not preclude the other, after all doesn’t it?

Just because others aren’t good, why should you be good?

Why us, Jinggoy Estrada, Bong Revilla, and Juan Ponce Enrile asked too in the Senate for all the persecution they get from the pork barrel scam. Guess, the doctors have been singled out simply because the BIR can’t get Manny Pacquiao to pay. Or Janet Napoles. Or politicians involved in scam after scam. Why us, the doctors and lawyers and other professions ask? Well, because it doesn’t take much to screw you over, just like the teachers, policemen, soldiers, office grunts, you’re easy prey to be screwed over. Because the real thieves and abusers are unpunished by society that feeds on the small. Because when the taxman comes, if you don’t pay, you go to jail. Do you want to go to jail? Well, except if you are richer than doctors, and powerful swimming in wealth. Except when you’re old, handsome, or sexy. Tough luck. That’s the real shame campaign. Whoever said that life was fair?

Why there should be a Magna Carta for Philippine Internet Freedom

Opening Statement of Democracy.Net.Ph before the Senate Science and Technology Committee hearing on the Magna Carta for Philippine Internet Freedom delivered by Engineer Pierre Tito Galla, PECE

[Senator Ralph Recto, Senate President Pro-Tempore and chairman of the Committee on Science and Technology; Senator Francis Escudero, chairman of the Committee on Finance; Senator JV Ejercito;
Senator Manuel Lapid; and our sponsors, Senator Miriam Defensor-Santiago, chair of the Committee on Constitutional Amendments and Revision of Codes, and Senator Paolo Benigno Aquino IV, and author of the Magna Carta for Philippine Internet Freedom, or #MCPIF;

Honorable guests and representatives of the government, the media, the academe, and the Filipino niche of cyberspace;

Fellow citizens of the Republic of the Philippines, both online and offline;

Good day.]

Cyberspace is an alien world for many. Many are afraid; many more only grasp its fringes. Cyberspace exists as a domain of the mind, of zeroes and ones, of abstract concepts. It is not surprising, therefore, that the view of the Internet is one of the widest disconnect between a government and its people. Neither has walked in each other’s shoes.1

Our origins have been told many times: Democracy.Net.PH was formed when the Cybercrime Prevention Act was being signed into law2. We trooped not to EDSA or Mendiola, but on Twitter and on Facebook. We wrote and discussed over email, over social media, in the digital cloud, and over text messages and phone calls, what was wrong with Republic Act No. 10175. We brought together our expertise in technology, our advocacy of civil rights and Constitutional guarantees, and our common love for freedom.

We are ordinary citizens. We work for a living, like many of you, and like many of the people listening, and watching today. We have different political and philosophical leanings. Yet, we bonded in the shared belief that the awesome power of information and communications technology (ICT) is positive for the future of our country.

We appreciate being invited here today. We are humbled by the courage of Representative Kimi Cojuangco, who is our advocate in the House of Representatives, and by the enthusiasm of Senator Bam Aquino. We are deeply grateful to Senator Miriam Defensor-Santiago, for championing this cause, from the 15th Congress to this 16th Congress, when no one would give us the time of day; and to you, Mr. Chairman, Senator Recto, for this moment.

On behalf of Democracy.Net.PH, and of the netizens who helped craft the bill, thank you for the opportunity to discuss the Magna Carta for Philippine Internet Freedom.

Democracy.Net.PH and the Crowdsourcing Initiative of the #MCPIF
We have been constantly and pleasantly surprised by the reaction of OFWs to the #MCPIF; that of our friends on cyberspace; and that of the international community at large, who have constantly voiced that they were inspired by, and are watching the progress of the #MCPIF. We have been awed and inspired by the high praise that international digital rights advocacy group Electronic Frontier Foundation has given to our work, calling the Magna Carta for Philippine Internet Freedom “a success story”.3 At the 2013 Internet Governance Forum in Bali, we learned that other civil societies around the world want to copy and replicate the #MCPIF in their own countries. Because of the #MCPIF, the 2013 Web Index Annual Report has lauded Philippine lawmakers with the same praise they showered the parliamentarians of Brazil working towards a “Marco Civil da Internet”.4

With the #MCPIF, we have something special, something to show the rest of the world how netizens and Congress can work together to preserve, promote, and uphold our rights and freedoms.

Indeed, the Philippines is being cited as a model for participative democracy, that through crowdsourcing – the collaboration and direct participation of citizens enabled by the Internet and ICT – laws can be crafted that reflect most accurately our people’s aspirations.5

Promoting the “Freedom Doctrine”: The Holistic Approach of the #MCPIF for ICT Legislation
As we compared notes in the 2013 Internet Governance Forum in Bali, our belief that the #MCPIF is the right path has only deepened. In addressing the different and diverse issues of cyberspace and cybersecurity, what is needed is a holistic, rights-anchored law that will consistently uphold our rights online and offline.

Your honors, we understand where the government and Congress come from with respect to the cybercrime law. We understand its purpose: to curb prostitution, child pornography, and other nefarious crimes that have been perpetrated through and with the use of technology. We also understand where President Aquino is coming from: that there is perceived to be a need for responsibility and accountability with online speech.

We agree with the premise, the wants and desires.

We agree that there should be laws to curb cybercrimes. Malicious hacking is a crime. Those who take advantage of our women and children in cyberspace should be prosecuted and punished. A civilized 21st century Philippines cannot protect unjustified defamatory speech.

This, senators, honored guests, and friends, is where our common ground with the government ends.

Where the existing law is overly broad in what it seeks to curb, the definitions and elements of the crimes enumerated in the Magna Carta for Philippine Internet Freedom are narrow, specific, and clear in what they seek to prohibit. The #MCPIF restricts only and specifically the conduct necessary to prevent the evils we want to prevent. This much is to be expected, this much is required, of a law – any law – that affects our most basic and fundamental freedoms.

To enact a law affecting our people’s use of technology but focus on the punishment of petty crime misses the point. A law on the Internet and ICT cannot exist in a vacuum; the protection and promotion of rights and freedoms requires a more holistic approach than that offered by the Cybercrime Prevention Act.

To borrow from John F. Kennedy: We are here to promote the freedom doctrine.

The Four Pillars of the #MCPIF: Rights, Governance, Development, and Security
The Magna Carta for Philippine Internet Freedom is built on four pillars: rights, governance, development, and security.





The Magna Carta for Philippine Internet Freedom: Rights
The Magna Carta for Philippine Internet Freedom promotes civil and political rights, and upholds and promotes Constitutional guarantees in cyberspace, as they would and should be in our daily lives. The #MCPIF is anchored on this principle: that the Constitution is our foundation as citizens of the Republic and equally as Filipino netizens in cyberspace. Our rights online are our rights offline.

The Magna Carta for Philippine Internet Freedom: Governance
The Magna Carta for Philippine Internet Freedom provides for ICT governance that is anchored on Constitutional principles. The #MCPIF makes it clear that the state shall take the responsibility to ensure that the governance of the Philippine ICT framework is in keeping with the ideals and aspirations of the Filipino people. This is no more strongly advanced by the transparency and open governance advocacy of the administration which is well represented in the #MCPIF.

The Magna Carta for Philippine Internet Freedom: Development
The Magna Carta for Philippine Internet Freedom promotes the development of ICT in the Philippines. The World Bank says that investment in broadband boosts GDP: a 10-percentage point rise in broadband penetration provides an economic growth of 1.38-percentage points for low and middle income countries.6 The use of the Internet and ICT is an enabler for productivity, and is a job creator. In Brazil, broadband connectivity added 1.4% to the employment growth rate.7

Senators, honored guests, and friends, our people deserve no less an opportunity.

The Magna Carta for Philippine Internet Freedom: Security
The Magna Carta for Philippine Internet Freedom protects the Filipino people both online and offline. Whether the threats come from an evil cybercriminal or cyberterrorist, a hostile non-state actor, or a rogue nation state, the #MCPIF provides the mandate and the means for our leaders to defend our citizens from the threats present in cyberspace. We want to empower not just the Department of Justice, but also the Department of National Defense. China, with whom we have a dispute, is a heavy player on the Internet, reportedly having deployed a cyberspace-centric military unit in hacking operations against other countries.8 Our ally, the United States sees cyberspace as a new domain of warfare.9 With the leveling of the playing field that cyberspace grants, we must also learn how to defend our country, and have the ability to defend ourselves in the cyberspace battlefield.

In his inaugural address, President Benigno S. Aquino III said these words: “This is what democracy means. It is the foundation of our unity. We campaigned for change. Because of this, the Filipino stands tall once more. We are all part of a nation that can begin to dream again”.10

Mr. Chairman, honored guests, and friends online and offline: like the rest of our people, we began to dream. We share in our people’s belief in democracy. We share in that common foundation of unity. The Magna Carta for Philippine Internet Freedom rests on the foundation of democracy. The #MCPIF takes cognizance of our people’s rights, our country’s need to advance economically; our people’s desire for faster and reliable ICT services well worth the money we spend; our leaders’ thrust for transparency and open governance and, to our friends in the DOJ, our government’s need for tools and skills amidst great challenges to keep us safe. It is the hope of Democracy.Net.PH that we can all work together so that Congress can pass a law that upholds our rights online, and upheld offline. We ask the Senate to pass a law anchored on rights, governance, development and security. Let us, all of us, bridge this disconnect, this digital divide.

Senators, we humbly ask you to pass the Magna Carta for Philippine Internet Freedom.

Thank you.

End Notes

1. Dayao, C. Twitter.

2. de Santos, J. Yahoo! News. “The Wisdom of Crowds: Crowdsourcing Net Freedom.”

3. York, J. Electronic Frontier Foundation. “A Brief Analysis of the Magna Carta for Philippine Internet Freedom.”

4. 2013 Web Index Annual Report. The Web Index. Page 36.

5. McKenzie, J. “Crowdsourced Internet Freedom Bill a First for Filipino Lawmakers.” techPresident.

6. Kim, Y., Kelly, T., and Raja, S. “Building Broadband.” The World Bank.

7. UNESCO. “Broadband: A platform for progress.”

8. Sanger, D., Barboza, D., Perlroth, N. The New York Times. “Chinese Army Unit Is Seen as Tied to Hacking Against U.S.”

9. U.S. Department of Defense. “The Cyber Domain Security and Operations.”

10. President Benigno S. Aquino III. Inaugural address.

2014-02-28 21.31.56

Rock Supremo: Heroes are human too

I came to the Silliman Luce Auditorium with hardly any expectation except that I will be watching something about the life of Andres Bonifacio. When I exited, I had goosebumps all over and pining for a chance to watch it again.

Rock Supremo is a joint project of RockEd Philippines, Ballet Philippines, and the National Historic Commission of the Philippines. RockEd tapped local musicians to come up with songs with Ka Andres in mind, musicians such as SandwichPeryodikoEbe Dancel, and Gloc-9  among others. Since not much is known about the facts of the Supremo‘s life, the bands created songs as how they imagined Andres was when he was still alive. They presented Andres as human and not just a hero. He fell in love, was betrayed by his best friend, had moments of cowardice, etc. just someone as human as we are.

The songs the artists created were put into choreography and a cohesive stage performance by Ballet Philippines. I don’t think this has ever been attempted before in the history of Ballet Philippines. The approach to the choreography is modern. Raw even. It’s as far from classical as I’ve ever seen with the dancers changing costumes on stage, pirouettes and other moves not perfectly in synch, and there’s a big video screen as part of the backdrop. The overall effect was four-dimensional with the whole audio-visual modern approach and the presentation of the facets of Andres Bonifacio’s humanity.

It is my wish to watch Rock Supremo again, this time with the bands performing live. I regret not watching when that happened at CCP. It’s a blessing that I was to catch it in Dumaguete. I’ve grown to appreciate even more our OPM, ballet, and our heroes. Somehow, I can now relate more to Andres Bonifacio and I “know” more about his life, imagined it may be.

Salvaging the Malampaya Fund (Part Two)

The objective of the sovereign wealth fund, however, is not to be a stagnant financial reserve. Norway, the country with the largest sovereign wealth fund in the world, has avoided the “resource curse” by not spending its oil revenues. However, Jens Stoltenberg… states, “The problem in Europe with the deficits and the debt crisis is that many European countries have spent money they don’t have. The problem in Norway is that we don’t spend money we do have.” (http:www.theguardian,com/business/2013/sep30/Norway-oil-sovereign-wealthfund).

On the one hand, over-estimated withdrawals beyond institutional capacity to complete projects could open avenues to waste and corruption on misdirected large-scale projects as in the case of the Malampaya fund during the Arroyo administration, or treating the fund as an extra-congressional purse as in Aquino’s treatment of the fund. On the other hand, a completely “off limits” fund reserved for only large infrastructure spending would hinder the opportunity for immediate attention to human capital development, social services, infrastructure and environmental rehabilitation in more immediate smaller scale projects or providing emergency aid in the case of natural disaster. Thus, a balance must be achieved between short-term and long-term spending of the fund.

To achieve such a balance, several factors must be considered. Spending strategies should be based on a system that regulates the amount to be spent on an annual basis. Timor-Leste’s Petroleum fund, modeled after that of Norway, bases the amount for withdrawals and transfers on its ESI, or estimated sustainable income. The ESI is “the annuity value of government wealth in general and expected future petroleum revenue in particular” ( and provides a foundation for predictable spending.

In addition to a multi-stakeholders’ board and congressional scrutiny as part of the regulators of the fund, new institutions within the national government should be created specifically for deciding what short-term and long-term projects are to be pursued and if spending beyond the ESI would be plausible. Such institutions could be responsible for determining the rate of return to justify withdrawing from the fund for various projects. Priority of the decision-making process should be fiscal sustainability of the projects as well as the absorptive capacity of the country to implement and benefit from these projects.

To ensure fiscal responsibility in developing sound government since its independence in 2005, Timor-Leste has established various institutions responsible for “project appraisal, procurement, and monitoring against budget.” (Ibid.). These institutions include the Infrastructure Fund, a separate fund independent of the Petroleum Fund (PF), that serves multi-year projects, a review conducted by the Ministry of Finance’s Secretariat, and two boards that finalize projects according to the financial scope of the project.

Although withdrawals from the PF have gone beyond the ESI since 2009, justification to do so comes from the multi-layered decision making process of said institutions and must go through approval by the Parliament. However, it has been argued that spending beyond the ESI is due to the uncertainty of long-term oil prices, which maybe higher than projected at the start of the year, and high short-term returns on public investment—factors that go into determining the ESI (;ications/7387=timor=leste-petroleum-fund).

The law should support withdrawing within the ESI and make withdrawals beyond it difficult, since, according to the Overseas Development Institute, “constraints on implementation might suggest an incentive formula in the budget that ensures funding is tailored to the ability of ministries to execute their budget efficiently to achieve effective outcomes. It also calls for rigorous evaluation of expenditures and institutional arrangements which ensure that only projects with high expected returns are selected (Ibid).

The fund should be included in the national government’s budgeting process, involving both the executive and legislative branches. Such institutions and policies surrounding spending of the Petroleum fund have allowed it to grow effectively through sound management while still funding the national budget and other infrastructure-building projects.

The national government could consider borrowing to fund certain short-term projects and use the revenue to fund long-term infrastructure building projects –a method of spending that Timor-Leste has found affective. Borrowing funds for certain short-term projects has forced authorities to remain accountable in spending due to the pressure of accruing debt (Ibid).

Given the history of misspending the Malampaya fund and the web of conflicting laws surrounding it, the issue at hand is not only regulating the release of funds. It is also releasing funds within a system that takes into account high return rate for spending, including factors such as the ability of institutions to properly implement projects and the absorptive capacity of communities to benefit from them. A rigorous evaluation and budgeting process should be put into practice to maintain fiscal sustainability.

The sovereign wealth fund has the potential to address the issues of expenditure monitoring, meaningful investment, and long-term growth. Similar to Timor-Leste’s Petroleum Fund, the growth and monitored spending would contribute to the development of a large financial reserve, which can then be utilized for human capital development, social services, infrastructure and environmental rehabilitation to bolster long-term economic growth.

Bernadette Patino, a recent graduate of Indiana University, is a fellow researcher of Bantay Kita.

Salvaging the Malampaya Fund (Part One)

Since the inception of the Malampaya natural gas project in 1989, accumulating P183.57 billion between 2002 and October 2013 in revenue, both the national and local government of Palawan have been contending to gain control and shares in the project.

In this toss-up between the national and local government, the Malampaya fund—also known as the Malampaya Special Account under Fund 151, created to hold “the revenues from service contacts and the exploration, development, and exploitation of energy resource” (Presidential Decree 910)—has been largely subject to misspending on both sides.

Created by former president Ferdinand Marcos during martial law on March 22, 1976, Presidential order No. 910, Section 8 mandated the creation of the Special Fund to account for “government share representing royalties, rentals, production share on service contracts and similar payments on the exploration, development and exploitation of energy resources,” “to be used to finance energy resource development and exploitation programs and projects of the government and for such other purposes as may be hereafter directed by the President.”

Former president Gloria Macapagal-Arroyo issued Executive Order 848 on October 13, 2009, which reads, “The Department of Budget and Management (DBM) is hereby authorized to release funds, in such amount as may be necessary, from the SAGF-151 of the DOE, to the implementing agency (IA) concerned, for purposes as may be authorized by the President of the Philippines.” Another Presidential decree No. 1234 signed in 1977 placed the special fund within the general fund, obscuring the status of the Malampaya fund by rendering it an ambiguously defined hybrid of the two types of funds.

At the national level, the Office of the Ombudsman has charged former president Gloria Macapagal-Arroyo, along with “pork barrel queen” Janet Napoles and other government executives and officials, with plunder due to the misuse of P900 million from the Malampaya fund.

After tropical storm Ondoy and typhoon Pepeng devastated various parts of Luzon, Arroyo’s administration released the P900 million through the Department of Budget and Management after Secretary Rolando Andaya Jr. of the Department of Energy requested to use Malampaya funds for”relief operations, rehabilitation, reconstruction and other works and services to areas affected by natural calamities.”

Arroyo issued EO 848 to permit the release of funds to the Department of Agrarian Reform (DAR) for non-energy related projects—specifically, to assist farmers affected by the typhoon.

Through the DAR, the funds were received by twelve fake NGOs set up by Janet Napoles. The full audit report by the Commission on Audit as to the P900 million and the rest of the funds plundered by the Arroyo administration, on account of PD 910 and EO 848, is in progress.

But the audit has been criticized for not including spending of the Malampaya fund under the Aquino administration.

President Pnoy has faced criticism for using the Malampaya fund to finance the Armed Forces of the Philippines and the Defense department, instead of environmental and social infrastructure projects. Pnoy has claimed that the defense spending is intended to ensure the protection of the Malampaya field, thus it is in fact energy related.

In September 2013 the Supreme Court put a temporary restraining order on the release of the Malampaya funds due to its misuse being connected to the Priority Development Assistance Fund (PDAF) pork barrel scandal.

Recently the constitutionality of these martial law-era presidential orders, as well as Macapagal-Arroyo’s 2009 executive order, has been under evaluation by the Supreme Court. Critics of these orders have highlighted the susceptibility to misspending and opaque processes of transactions from the Malampaya Fund.

More recently, the Supreme Court rendered the pork barrel system unconstitutional, which is inclusive of spending Malampaya under PD 910, as well as PD 1869 and PD 1993.

The Supreme Court has yet to decide on another vital Malampaya issue—whether the reservoir belongs to the Palawan province or resides in national territory. Macapagal-Arroyo claimed that Malampaya was not part of Palawan province but national territory.

The dispute has significantly changed how the 60 percent share intended for the Philippine government was released. Instead of the 40 percent share guaranteed to the Palawan local government via the Local Government Code (RA 7160) of 1991, it is said to receive an undefined fraction, that is, “financial assistance,” from the Malampaya revenue as given by the national government.

The provincial government under Reyes and the two congressional districts accepted “financial assistance” from the national government.

Misspending of the local government’s already dubious share occurred at the local level. The Commission on Audit has advised that charges be filed against former Palawan governor Joseph Reyes due to the creation of fake projects, misspending, and connection to the murder of advocate Gerardo Ortega.

Because of Arroyo’s claim that Malampaya fell under national territory and did not belong to Palawan province, Arroyo and Reyes signed an Interim Agreement in 2005 stating that while the Supreme Court settled Malampaya’s territory dispute, the national government and the local government of Palawan are to equally split the 40 percent that was originally to go to the Palawan local government alone.

One option for the government is to think about creating a sovereign wealth fund from the proceeds of extractive industries like Malampaya and mining. Such sovereign wealth fund would allow the revenue to grow by investing it in a diverse portfolio of resources.

Countries such as Timor-Leste have been able to benefit from investing their revenue from natural resources.

The sovereign wealth fund has the potential to push for transparency in government spending, since the fund would be subject to oversight by a mult-stakeholder’s board, direction by investment advisors, and limits on withdrawals capped by an estimated sustainable income (ESI). Additionally, public awareness of the fund would be made possible through public disclosure of investments and return on investments, outflows and inflows. This will allow public monitoring and will prevent the rampant problem of Malampaya fund misspending

(to be continued).

Patino is a fellow researcher of Bantay Kita.

Ideas Towards Transformative Action