EIGHTEENTH CONGRESS OF THE )

REPUBLIC OF THE PHILIPPINES )
First Regular Session )
HOUSE OF REPRESENTATIVES
H.B.No, 4337

Introduced by Rep. Vilma Santos-Recto
6" District of Batangas

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

* reside, R (1999). Estimating the Philpine Governments Exposure to and Risk from Contingent abilities nd infosructure Projects. Quezon iy:
‘Univers ofthe Philpines School of Economics


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 concems over the unexpected
public sector obligations that could be brought about by government guarantees, especially
on the delivery of public goods and services.

Senate Economic Planning Office underscored the importance of effective
identification, management, and reporting of contingent liabilities and off-budget risks of
GOCCs, since past fiscal crises in the Philippines were triggered by extra-budgetary
activities‘. Considering the potential 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.

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 government-
owned or -controlled corporations (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 the Commission identified the non-disclosure of over one trillion
pesos contingent liabilities arising from government guarantees on PPP projects and
liabilities from GOCCs and GFIs*.

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

*pnippine Intute for Development Studles. (2005). Contingent Lottie: dng upto the fico burden. Maka: Repub ofthe Philippines.
: ‘Budget Coordinating Contes (2012) 2012 Fla iks Statement. Quezon Gty: Republi ofthe Philippines.
+ Senate Economie Planing Office (2008) Five Pllors of Growth: An Economic and Social Development Fromework. Pasay Cty: United Nations

‘evelopment Programme:
+ ‘Commusion on Audit (204). Public Debt Management vera Report. Quezon Gy: Republic ofthe Pilppnes: nd
‘Commision on Aut. (200). Annual Aut Report on the Publ Deb Reporting (A Public Debt Management Aut) For the Yer Ended December
"2009 and une 302010. Quezon City: Republic ofthe Philippines.
* swirl, A (2015, he 8). iclnure Rules in Charter Breached: CoA Nags P.3-T hidden Noy debts. Daly Tbune 2.


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.



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EIGHTEENTH CONGRESS OF THE )

REPUBLIC OF THE PHILIPPINES )
First Regular Session )
HOUSE OF REPRESENTATIVES
ILBNo. 4337

Introduced by Rep. Vilma Santos-Recto
6" District of Batangas

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;

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

(c) Guarantee programs implemented by GOCCs and GFls;


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(@) 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

() 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 shall 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 liabi
ies, its duration and conditions, and its intended

ities of government, the amount involved

therein, the purpose and scope of such liabi
beneficiaries. Information related to the government contingent liabilities shall also be
n and/or in the official websites of

published in at least two newspapers of national circul
the government agencies concerned at least a month prior to the submission of the President's
annual budget to Congress.

Sec. 6. Implementing Rules and Regulations. — Within ninety (90) days from
effectivity of this Act, the DOF and the National Economic and Development Authority
(NEDA), in consultation with other relevant government agencies shall 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 or 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 the Official Gazette.

Approved,