HOUSE °F REPRESENTATIVES

Republic of the Philippines i: a
HOUSE OF REPRESENTATIVGs _*®ECEINWED

Quezon City DATE:
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SEVENTEENTH CONGRES: ev:

First Regular Session REDE ON GT

House Bill No. 1279 BILLS AND JADE X SERVICE

Introduced by HON. ROZZANO RUFINO B. BIAZON

EXPLANATORY NOTE

“The President may contract or guarantee foreign loans on behalf of the Republic
of the Philippines with the prior concurrence of the Monetary Board, and subject 10 such
limitations as may be provided by law. The Monetary Board shall, within thirty days from
the end of every quarter of the calendar year, submit to the Congress a complete report of
its decision on applications for loans to be contracted or guaranteed by the Government or
government-owned and controlled corporations which would have the effect of increasing
the foreign debt, and containing other matters as may be provided by law.” (Article VII,
Section 20)

“Subject 10 reasonable conditions prescribed by law, the State adopts and
implements a policy of full public disclosure of all its transactions involving public
interest.” (Article I, Section 28)

“Foreign loans may only be incurred in accordance with law and the regulation of
the monetary authority. Information on foreign loans obtained or guaranteed by the
Government shall be made available to the public.” (Article X11, Section 21)

‘The 1987 Constitution, while authorizing the executive department through the President to
contract foreign loans on behalf of the Republic, is rich with provisions seeking to protect the
country’s interests against possible abuses. Be that as it may, there is still a need to pass legislation
which shall centralize the myriad of functions and responsibilities distributed among various
agencies concerning foreign loans from negotiation to debt servicing to one single agency. In this
manner, the State will have a clearer picture of its indebtedness procedures and stature.

This new Cabinet level agency, composed of a board as its highest policy-making body,
shall be the primary agency of the government that will integrate and coordinate the country’s debt

management, debt planning; debt service payments: advise on debt negotiations and borrowings,
and formulation of debt policies and strategies.

In view of the foregoing, immediate passage of this bill is iad sought.

ANS byes eka oa

Representative
Lone District, Muntinlupa City


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City
SEVENTEENTH CONGRESS

First Regular Session

House Bill No._12'70

Introduced by HON. ROZZANO RUFINO B. BIAZON

AN ACT
CREATING THE DEBT MANAGEMENT BOARD, APPROPRIATING FUNDS
‘THEREFOR, AND FOR OTHER PURPOSES

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

Section One. Short Title. -- This Act shall be known as the “Debt Management Board
Charter.”

Section 2. Declaration of Policy. -- It is hereby declared the policy of the State,
consistent with the mandate by the Constitution, to implement a sound and effective debt
management system and strategies as an integral part of the country’s overall macroeconomic
management and public administration.

Section 3. Definition of Terms. -- When used in this Act, the following terms or words
and phrases shall mean or be understood as follow:

a. “Debt” refers to the stock of total liabilities or obligations at any given time,
whether of the national government or the consolidated non-financial public sector, or both.

b. “Debt management” refers to the process of establishing and implementing a
strategy for prudently managing the government's debt in order to achieve the government's
risk and cost objectives and any other sovereign debt management goals the government may
have set.

c. “Debt service” refers to the sum of loan repayments, interest payments,
commitment fees and other charges on foreign and domestic borrowings.

d. “Consolidated public sector debt” refers to the total indebtedness, whether foreign
or domestic, of the National Government, Local Government, Government Owned and
Controlled Corporations and Financial institutions.

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¢. “Government Owned and Controlled Corporations (GOCCs)” refer to a stock or
non-stock corporation, whether performing governmental or propriety functions, which is
directly chartered by a special law, or if organized under the general corporation law is
owned or controlled by the government directly or through a parent corporation or subsidiary
corporation, (© the extent of at least a majority of its outstanding capital stock or of its
outstanding voting capital stock.

£, “National Government” refers to the executive, legislative, and judiciary branches
of the government, including the constitutional offices.

g. “National government debt” refers to all security issuances and loans of the
National Government.

Section 4. Creation of the Debt Management Board and its Composition. ~ ‘To catty
out the above-declared policy, there is hereby created, within thirty (30) days after the
cflectivity of this Act, a Debt Management Board, hereinafter referred to as the Board

‘The Board, which shall be a Cabinet level agency, shall be the primary agency of the
government that will integrate and coordinate the country’s debt management system that
includes debt recording and inventory, debt monitoring and analysis, risk’ management, debt
planning; debt service payments; advise on debt negotiations and borrowings, and
formulation of debt policies and strategies.

The Board shall be composed of the following:

a. The President as its Chairperson;
b. Director-General of the Board’s Secretariat as its Vice-Chairperson
c. Executive Secretary;
4d. Secretary of Finance;
€. Secretary of Budget and Management;
f. Secretary of Foreign A fairs;
g, Secretary of Trade & Industry;
h. Governor of the Bangko Seniral ng Pilipinas;
i, Director-General of the National Economie and Development Authority (NEDA):
j. One representative trom the academe
k. Two representatives from civil society organizations actively engaged in socio-
economic activities; and
L. One representative from the bu

ness sector;

Provided, that members from the last three groups as stated above shall be appointed
by the President and shall perform the functions of the office for two (2) years.

The Board shall

meet at least once a month or as frequently as is necessary to
discharge its responsibilit

s as determined by the President.

The members of the Board shall not receive additional compensation, allowances ot
emoluments for services rendered thereto except traveling and other necessary expenses to
attain its goals and objectives


Section 5. Powers and Functions of the Board. ~
powers and functions

rhe Board shall have the following

a, Formulate and recommend well-defined and feasible debt management strategies
and policies in order to maintain the country’s debt at a sustainable level in accordance with
the medium-term and long-term Philippine Development Plan;

b. Provide an inventory and audit of all loans acquired by the Philippine government,
government owned and controlled corporations (GOCCs), local government units (LGUs),
government financiat institutions (GFIs), and other public and private entities that constitute
the country’s public sector debt;

c. Develop, recommend and implement policies, guidelines and control mechanisms
and ceilings on foreign and domestic borrowings to ensure debt sustainability:

d. Conduct debt sustainability analyses and risk management to assess optimal
borrowing levels and conduct studies or review and recommend policies and regulations
governing external borrowings, foreign investments and other foreign exchange transactions;

Study and recommend for approval by the Monetary Board different debt
transactions such as negotiations for new borrowings, utilization ‘and monitoring of loan
proceeds, and debt servicing;

; Formulate and recommend policies for the establishment and continuous review of
the legal, administrative and institutional arrangements for centralized and well-coordinated
debt management operations;

Provide adequate resources for an effective debt management such as, but not
limited to, competent and qualified staff, technical experts in the area of debt management,
communication equipment, and others;

h, Prepare proposals for discussion in bilateral, regional and international fora and
promote active and appropriate representation of the country’s interests and concerns;

i. Adopt operational guidelines and internal rules of procedure and cite for contempt
violations thereof;

J. Conduct hearings and a public audit of all loans and receive testimonies, reports and
technical advice;

k. Invite or summon by subpoena any public official, private citizen or any other
person to testify before it or require any person by subpoena duces secum to produce belore it
such records, reports, documents or other materials as it may require; and

1. Perform such other functions which, in the opinion of the Board, are required for the
effective implementation of its functions under this Act.

Section 6. The Debt Management Office. — There is hereby created the Debt
Management Office, hereinatter referred to as the Office, which shall have the following
powers and functions



a. Serve as the research and technical support arm of the Board;

b, Provide technical staff support and assistance, including the coriduct of studies and
development of policy measures and other recommendations, on the various aspects of the
functions of debt management, and coordination, evaluation and monitoring of all foreign and
domestic borrowings.

¢, Serve as the §

-eretariat of the Board; and

d. Regularly publish different debt transactions such as
borrowings, utilization and monitoring of loan proceeds, and debt servi

negotiation for new
ng;

d, Perform such other functions as may be assigned to it by the Board to achieve its
goals and objectives.

Section 7. The Office of the Director General. - The Office shall be headed by a
Director-General who shall be the Vice Chairperson of the Debt Management Board, and
shall be appointed by the President. The Director-General shall be a member of the Cabinet,

hief executive officer of the Board Secretariat, the Director-General shall exercise
general supervision and control over its technical and administrative personnel

Section 8, Duties and Responsibilities of the Director General. - The Director
General shall have the following duties and responsibilities:

a. Advise the President on the promulgation of rules, regulations and other issuances
relative to debt and risk management;

b, Submit regular reports to the President and the Congres

¢, Ensure public transparency on all matters regarding public and private loans, debt
payments and other transactions of the Board;

4d. Establish policies and standards for the eflicient and effective operations of the
Board in accordance with the programs of the Government;

€, Promulgate rules, regulations and other issuances necessary in carrying out the
Board's mandate, objectives, policies, plans, progr:

ident,

h, Perform other functions as may be provided by law or assigned by the Pre:

Section 9, The Deputy Director Generals. ~~ The Board shall have two (2) Deputy
Director Generals who shall be appointed by the President and shall have the rank of
Undersecretary,

Bach Deputy Director General shall directly supervise and manage a unit under the
Board as enumerated under Section 10 hereof.

Each Deputy Director General shal! have the following functions;

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a. Advise the Director General in the promulgation of department orders,
administrative orders and other issuance:

b, Exercise supervision over the offices, departments, operating units and officers and
employees under his responsibility;

c. Promulgate rules and regulations, consistent with Office policies that will
efficiently and effectively govern the activities under his/her responsibility;

d. Coordinate the functions and activities of the units under his/her responsibility with
those of other units under the responsibility of other Deputy Director Generals;

¢. Exercise authority on substantive and administrative matters related to the functions
and activities of units under his responsibility as may be delegated by the Director General;
and

f, Perform other functions as may be provided by law or assigned by the Director
General,

Section 10. Support Units. -- There shall be two main support units under the Office
as follows:

a, Debt Monitoring and Analysis Unit. The Debt Monitoring and Analysis Unit shall
be directly responsible for the inventory and audit of all foreign and domestic loans of the
National government and its guarantees to all other corporations, national government
agencies, local government units or any other entitie

The Debt Monitoring and Analysis Unit shall have the following specitic functions:

1. Maintain records/fites of government s
other pertinent documents on public debt;

urities, individual loan agreement and

2. Generate various periodic reports/statements on external and domestic debt such as
monthly consolidated national government debt burden, consolidated public debt, annually or
quarterly status of public debt, yearly and/or medium-term debt service estimates and
monthly actual debt services

3. Submit such reports to higher planning, fiscal, monetary authorities, the Congress
and Commission on Audit for planning purposes, operational decisions und audit
requirements;

4. Generate debt sustainability analyses and debt service forecasts;

5. Provide analysis and explore various debt management options taking into
consideration the economic and market conditions, and future structure of public del

6, Recommend appropriate terms for new borrowings based on debt sustainability and
credit risk exposure analyses: and


7. Perform other functions as may be provided by law or assigned by the Director
General or Deputy Director General.

b. Policy and Risk Management Unit, The Policy and Risk Management Unit shall

have the following specific functions:

1, Develop and update guidelines for Debt Management through conduct of research,
management of information technology systems, and perform administration functions:

2, Develop the methods to reduce the costs of the debt;

3. Propose risk management frameworl

4, Develop debt management strategy;

5. Evaluate the performance and risks of the debt portfolio and its impact on
government resources;

6. Report and manage credit risk exposure to Congress and to higher fiscal and
monetary authorities for planning;
7. Identify possible sources of funds; and

8, Identify the range of instruments that can be used to access possible sources for
borrowings.

ction 11. Appropriations. The initial sum of one hundred million pesos (PhP
100,000,000.00) is hereby allocated to be charged against the current appropriation for the
President’s contingent fund and the savings of the Department of Finance as provided for by
General Appropriations Act for fiscal year 2007, Its regular appropriation shall thereafter be
under that of the Department of Finance.

Section 12. Implementing Rules and Regulations, ~ Within sixty (60) days from the
effectivity of this Act, the Board shall promulgate the necessary rules and regulations for the
proper implementation of the provisions of this Act.

Section 13. Transitory Provision. Any existing government office or program dealing
with or performing the functions as mentioned in this Act shall be integrated with the Board
or Office, as the case may be, pursuant to the power of the President to reorganize the
excoutive offices,

For staffing and hiring purposes, the existing employees ot officials of the
Department of Finance or Bangko Sentral ng Pilipinas performing essentially the same tasks
and functions as enumerated herein shall be prioritized without any diminution in rank,
seniority, salary and other emoluments,

Section 14. Repealing Clause. - All laws, rules, regulations, orders, circulars and
memoranda inconsistent with this Act are hereby repealed or modified accordingly.


Section 15. Separability Clause. - If, for any reason, any portion of provision of this
Act or the application thereof shall be declared invalid or unconstitutional, the validity of
other parts or provisions not affected thereby shall continue to be in full force and effect,

Section 16, Kffectivity. ~ This Act shall take effect fifteen (15) days after its
publication in a newspaper of general circulation,

Appro