NINETEENTH CONGRESS OF THE )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES
H. B. No. 3187

Introduced by Representative Ralph G. Recto

AN ACT
MANDATING THE ANNUAL PUBLIC DISCLOSURE OF ALL CONTINGENT
LIABILITIES INCURRED BY ALL NATIONAL GOVERNMENT AGENCIES,
LOCAL GOVERNMENT UNITS, GOVERNMENT-OWNED OR -CONTROLLED
CORPORATIONS, GOVERNMENT FINANCIAL INSTITUTIONS, AND OTHER
GOVERNMENT INSTRUMENTALITIES

EXPLANATORY NOTE

The Philippine Government is mandated by no less than the 1987 Constitution
to recognize the role of the private sector in providing adequate social services,
promoting full employment, raising the standard of living, and improving the quality
of life for all Filipinos.

Encouraging the private sector to participate in the delivery of public services,
however, is hampered by the country’s market realities marked by stringent
regulations, uncertain socio-economic and political environment, and market
distortions caused by price control and subsidies.

To tap private sector capital and skills, the government was compelled to make
public sector investments more profitable by providing incentives, including assuming
investment risks. As such, the conferment of government guarantees on public sector
investment and borrowings became one of the prominent features of Republic Act No.
6957 as amended, otherwise known as the Build-Operate-Transfer (BOT) Law.

The benefits of government guarantees, however, come at a price. Studies
conducted by the University of the Philippines School of Economics showed that
government risk management practices severely understate the level of exposure and
risk arising from unfettered provision of guarantees. Philippine Institute for
Development Studies and the Development Budget Coordinating Committee raised
their concerns over the unexpected public sector obligations that could be brought


about by government guarantees, especially on the delivery of public goods and
services.

The Senate Economic Planning Office underscored the importance of effective
identification, management, and reporting of contingent liabilities and off-budget risks
of government-owned or -controlled corporations (GOCCs), since past fiscal crises in
the Philippines were triggered by extra-budgetary activities. Considering the potentiat
of government guarantees to wreak havoc on public resources, the conferment and
management of such guarantees require exacting deliberations and wide-ranging
public disclosures.

The mechanisms to enable the public and the policymaker to make informed
decisions on public debt, however, remained largely inadequate.

The Commission on Audit has already recommended the disclosure of relevant
information pertaining to the contingent liabilities including the fiscal risks associated
with guarantees on Public-Private Partnership (PPP) projects and on issuances of
GOCCs and government financial institutions (GFls) in its Public Debt Management
Audit for 2004 and 2009-2010. In 2015, the Commission reiterated this position when
it identified the non-disclosure of over one trillion pesos contingent liabilities arising
from government guarantees on PPP projects and liabilities from GOCCs and GFls.

This bill requires the annual public disclosure of government's contingent
liabilities at least a month prior to the submission of the President's annual budget to
Congress. It will provide Members of Congress and other stakeholders with a better
appreciation of the fiscal and monetary impact of the government's contingent
liabilities on future government spending. At the end of the day, prudent fiscal
management warrants the establishment of a stronger legal and institutional
framework in apprising the public about the obligations and risks involved in public-
private partnership in public service delivery.

Itis in this light that the swift approval of this bill is earnestly sought.

/mdg


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NINETEENTH CONGRESS OF THE )

REPUBLIC OF THE PHILIPPINES )
First Regular Session )
HOUSE OF REPRESENTATIVES
3 7
H.B.No.__% 187

Introduced by Representative Ralph G. Recto

AN ACT
MANDATING THE ANNUAL PUBLIC DISCLOSURE OF ALL CONTINGENT
LIABILITIES INCURRED BY ALL NATIONAL GOVERNMENT AGENCIES,
LOCAL GOVERNMENT UNITS, GOVERNMENT-OWNED OR -CONTROLLED
CORPORATIONS, GOVERNMENT FINANCIAL INSTITUTIONS, AND OTHER
GOVERNMENT INSTRUMENTALITIES

Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:

Section 1. Short Title. - This Act shall be known as the “Contingent Liabilities
Disclosure Act.”

Sec. 2. Declaration of Policy and Objectives. ~ It is the declared policy of the
State to recognize the right of the people to information on matters of public concern.
The Philippine Government shall be transparent in all of its financial transactions and
decisions and as such, shall afford the citizens access to official records, documents
and research data that pertains to, or used as basis for, the country’s fiscal and
monetary policy.

Sec. 3. Contingent Liabilities. - Contingent liabilities shall refer to explicit
guarantees extended by the Philippine Government through any of its agencies
including local government units, government-owned or -controlled corporations
(GOCCs) and government financial institutions (GFls) including, but not limited to, the
following:

(a) Guarantees arising from Republic Act No. 6957, as amended by Republic
Act No. 7718;


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(b) Loans contracted and liabilities incurred by GOCCs or by GFIs which were
guaranteed by the National Government;

(©) Guarantee programs implemented by GOCCs and GFIs;

(d) GFl-guaranteed private loans which were subsequently transferred to and
assumed by the National Government by virtue of Proclamation No. 50, Administrative
Order No. 64 s.1988, and other similar statutes or issuances;

(e) Government insurance programs; and

(f) Other potential losses arising from indemnities, pending litigation, and
other circumstances relating to claims and assessments in respect of breach of
contract, damages to persons and property, and similar items.

Sec. 4. Full Disclosure of Contingent Liabilities. - The Department of Finance
(DOF) is hereby mandated to implement full disclosure of all contingent liabilities of
the National Government or any of its agencies including GOCCs and GFls in an annual
basis. All information related to the government contingent liabilities shalt be contained
in an annual report to be submitted to the Chairpersons of the Senate Committee on
Finance and House Committee on Appropriations no later than June 30 of the
succeeding year.

Sec. 5. Content and Publication of the Contingent Liability Report. ~The report
shall indicate, among others, the specific contingent liabilities of government, the
amount involved therein, the purpose and scope of such liabilities, its duration and
conditions, and its intended beneficiaries. Information related to the government
contingent liabilities shall also be published in at least two (2) newspapers of national
circulation and/or in the official websites of the government agencies concerned at
least one (1) month prior to the submission of the President's annual budget to
Congress.

Sec. 6. Implementing Rules and Regulations. - Within thirty (30) days from
effectivity of this Act, the DOF and the National Economic and Development Authority
(NEDA) shall, in consultation with other relevant government agencies, promulgate
the rules and regulations to effectively implement the provisions of this Act.

Sec. 7. Separability Clause. - If any provision, section or part of this Act shall
be declared unconstitutional or invalid, such judgment shall not affect, invalidate or

impair any other provisions, sections or parts hereof.


Sec. 8. Repealing Clause. ~ All laws, decrees, orders, rules and regulations
which are inconsistent with the provisions of this Act are hereby repealed, amended
ot modified accordingly.

Sec. 9. Effectivity. ~ This Act shall take effect fifteen (15) days following its
publication in at least two (2) newspapers of general circulation or in the Official
Gazette.

Approved,