Duterte's Ambitious 'Build, Build, Build'

Project To Transform The Philippines Could

Become His Legacy
Asia Insights
Contributor
Stories for expanding horizons.

GUEST POST WRITTEN BY

Richard Javad Heydarian

Mr. Heydarian is a Manila-based academic, policy adviser and columnist. You can reach him @Richeydarian on Facebook/Twitter.

TWEET THIS
 Dutertenomics’ “build, build, build” agenda comes into the picture, hoping to (literally) bridge the
gap in economic policies of past administrations.
 Infrastructure could very well be one of the Filipino president’s defining legacies.
Photographer: Veejay Villafranca/Bloomberg

Under Philippine President Rodrigo Duterte, the Southeast Asian country is experiencing an infrastructure
boom unseen since the time of strongman Ferdinand Marcos.

Over the next decade, the government is set to embark on an ambitious $180 billion infrastructure spending
bonanza, set to transform the Philippines’ economy.

Philippine Department of Finance (DOF) chief economist Karl Chua said in an interview that the government is
looking at 75 flagship projects, which include six airports, nine railways, three bus rapid transits, 32 roads and
bridges, and four seaports that will help bring down the costs of production, improve rural incomes, encourage
countryside investments, make the movement of goods and people more efficient, and create more jobs.

The government is also aiming to construct four energy facilities that will ensure stable power supply at lower
prices; ten water resource projects as well as irrigation systems that will raise agricultural output; five flood
control facilities that will help protect vulnerable communities as well as boost their resilience against the
impact of climate change; and three redevelopment programs that will deliver sustainable solutions to best meet
the needs of urban population.

If successful, Duterte could once and for all extinguish the Southeast Asian country’s reputation as the “sick
man of Asia”–and usher in an unprecedented era of inclusive economic development.

Striking while the iron is hot

To be fair, recent years have seen consistently high economic growth in the country. Since 2011, the Philippines
has broken out of its historically mediocre growth pattern to feature among fastest growing nations in the
region.
The World Bank expects the Philippine Gross Domestic Product (GDP) to grow by 6.7% in 2018 and 2019, the
highest in Southeast Asia. The Duterte administration, however, is hoping to nudge growth to the 7-8%
territory.

But the country’s growth has been shallow and far from comprehensive, leaving high levels of unemployment,
poverty and hunger relatively untouched. And this is where the Dutertenomics’ “build, build, build” agenda
comes into the picture, hoping to (literally) bridge the gap in economic policies of past
administrations. Infrastructure is clearly the country’s Achilles heel.

Poor infrastructure holding Pinoys back

On one hand, infrastructure has been a major source of concern for foreign investors, who have been
discouraged by the country’s weak infrastructure and heavy utility costs. Those investments are crucial to create
well-paying jobs for the millions of poor and unemployed Filipinos.

Photographer: Edwin Tuyay/Bloomberg

According to an authoritative study by the Japan International Cooperation Agency (JICA), traffic congestion in
Manila, caused by poor infrastructure, carried a daily price tag of P2.4 billion ($45 million) in 2012--a figure
that is expected to almost triple by 2030.

According to the 2017 World Economic Forum’s competitiveness report, the Philippines ranked 97th in the
world in terms of infrastructure. In a separate report by the United Nations, the Philippines ranked 5th in
Southeast Asia in terms of access to physical infrastructure.

Duterte’s two immediate predecessors, Gloria Macapagal Arroyo and Benigno Aquino III, oversaw a decade of
sustained macroeconomic reform, anchored by fiscal tightening, moderate inflation, expanding trade surplus
and steady economic growth.

Yet, the cost of their disciplinary economic policies was lack of sufficient investment in basic infrastructure.
Under the Aquino administration, in particular, under-spending was a major concern.

Both the Arroyo and Aquino administrations were also overly dependent on private-public-partnership (PPP)
schemes with local conglomerates, which lacked proper competencies.

Duterte, however, can now build on his predecessors’ legacy by diverting the Philippines’ expanding fiscal pie
to address infrastructure woes. Leveraging his skyrocketing approval ratings (80%), combined with a new
foreign policy direction as well as a super-majority coalition in the legislature, his administration is marshaling
necessary funds to finance and sustain its ambitious economic plan.

Who's footing the bill?

Unlike his predecessors, he is ditching the PPP modality in favor of larger reliance on government revenues as
well as Official Development Assistance (ODA), particularly from Japan and China, as his main sources of
infrastructure funding.

To support the new modality, Duterte has normalized relations with China, which has offered $7.3 billion in
infrastructure investments, and Japan, which has been a leading investor in the Philippines for decades.
Duterte also passed a new tax reform package, which is expected to raise sufficient revenues to fund
infrastructure spending. According to Mr. Chua, up to 70% of newly-raised revenues (estimated to raise P786
billion over the next 5 years) are earmarked for supporting the “build, build, build” campaign.

(DONDI TAWATAO/AFP/Getty Images)

Communications Secretary Martin Andanar said that the government hopes the tax reform will “not only solve
our present infrastructure gaps, but also support the country’s future growth.”

Nonetheless, Duterte’s ambitious infrastructure vision could be hobbled by chronic challenges. Experts have
expressed doubts over absorption capacity of government agencies to undertake projects competently and on
time; risk of large-scale corruption and bidding anomalies affecting foreign, especially Chinese-led,
projects; lack of construction workers and skilled labor; as well as growing pressure on Philippine peso and
international reserves due to need for importing intermediate goods and technology for infrastructure boom.

Supporters, however, claim that even if the government fails to achieve half of its ambitious goals, Duterte
could still go down in history as a harbinger of a golden age of infrastructure buildup in the
country. Infrastructure could very well be one of the Filipino president’s defining legacies.

Can Duterte’s “Build! Build! Build!” boost

the Philippines’ economy?
A worker views the city skyline of Manila while on a break from construction work. (AFP Photo/Jes Aznar)

Over the past decade, the Philippines has rapidly developed into one of the region’s economic powerhouses.
Now regarded as one of the Tiger Cub economies in Southeast Asia, along with Indonesia, Malaysia, Thailand
and Vietnam, the Philippines looks set to outpace its ASEAN neighbours in this respect. This is underscored by
a World Bank Global Economic Prospects report released in January, where it ranked the Philippines as one of
the fastest-growing economies regionally.
These positive economic prospects are reflected in near-future projections as well, with the Asian Development
Bank (ADB) upgrading its gross domestic product (GDP) growth forecast for the Philippines to 6.8 percent.
ADB points out that its forecast for 2018 “…assumes that growth in the government's infrastructure program
will accelerate, supported by improvements in budget execution, with more large investment projects
underway.”
DuterteNomics to the fore
The government’s large infrastructure program is a part of “DuterteNomics,” a term coined in reference to
President Rodrigo Duterte’s socioeconomic policies for the country. Part of DuterteNomics is the “Build!
Build! Build!” infrastructure programme which Duterte proclaimed would usher in the Philippines’ “golden age
of infrastructure” while speaking at a DuterteNomics forum last year.
Duterte’s Build! Build! Build! initiative is estimated to cost US$180 billion, with 75 projects planned. These
projects include a new Manila airport terminal, Manila’s first subway system, a 102-kilometre railway in
Mindanao and more. Most of the infrastructure planned relate to transport, which Duterte hopes will help
enhance mobility and connectivity in the country.
The Build! Build! Build! programme has been positively received by economists citing its potential to boost
growth in the country, with the government anticipating up to eight percent growth for the economy this year,
according to Socioeconomic Planning Secretary Ernest M Pernia in a December 2017 press conference.
Pernia added that GDP for the country is expected to increase 1.4 percent annually due to new infrastructure
projects created by the programme. Meanwhile, the Asian Development Bank has supported the project with a
US$100 million loan for the Infrastructure Preparation and Innovation Facility (IPIF). The Asian Development
Bank estimates that projects under the IPIF will add as much as US$10 billion to the country’s GDP between
2019 to 2024.
Philippine Budget Secretary Benjamin Diokno has also reiterated the economic benefits of Duterte’s
infrastructure programme. In a statement, Diokno said that Build! Build! Build! is expected to generate an
average of 1.1 million jobs annually.
Source: Various sources

Funding the future

While Filipinos are optimistic about the prospect of better infrastructure and its associated economic benefits,
some are worried whether the country can afford to take on such an ambitious project. The National Economic
and Development Authority of the Philippines stated that 66% of the project will be funded by the government,
with the remaining funding sourced through public-private partnerships and overseas loans.
Local media reported that the government is slated to borrow US$17 billion in 2018 alone to fund these
projects. This has stirred up fear in some quarters with regard to increasing government debt, which would have
adverse effects on the country in the long run.
In addition, March reports indicate that the Philippines chose to accept Chinese loans, which are up to 100 times
more expensive than equivalent terms offered by Japan, to fund some of its infrastructure plans. This has raised
concerns that the Philippines might borrow its way into a debt trap similar to the one currently being
experienced by Sri Lanka.
In December last year, Sri Lanka formally handed over its strategic port of Hambantota to China on a 99-year
lease after failing to pay its own debts to Chinese firms. China has tried to allay these concerns by stating that
its financing came with no “strings attached”.

The Philippine Department of Finance has also tried to play down fears of a debt crisis in the country via a
statement claiming that economic expansion from Duterte’s programme would outpace the growth of debt.
While this might sound well and good, the idea of growth outpacing debt hinges on the Build! Build! Build!
initiative going smoothly. The World Bank warned the Philippines back in October last year that “…the pace of
economic growth could be slower if the government is unable to timely deliver on its planned infrastructure
program.”
As the Philippine government looks to borrow more and spend taxpayer money to fund its infrastructure
projects, it needs to ensure that the implementation of these projects goes through smoothly. Failure to ensure
the swift and efficient running of these projects could impact the people of the Philippines and burden them
with unnecessary hardship.
uild, Build, Build development programme to boost
the Philippines' construction industry and close the
infrastructure gap
PhilippinesConstruction
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Favourable government policies and a growing, increasingly urbanised population have created fertile
ground for the expansion of the Philippines’ construction sector in recent years. Driven by major
investments in transport networks, residential complexes and social housing, the construction
industry grew at an average annual rate of 12% from 2012 until 2016. The annual growth rate more
than halved in 2017, falling from 12.1% to 5.3%, but as of the first quarter of 2018, growth was
registered at 9.3% year-on-year (y-o-y).

Infrastructure
In recent years the peso has come under sustained pressure as capital goods imports have surged to
serve the needs of major infrastructure projects, with the current account deficit swelling to $2.52bn
in 2017 – more than double the 2016 deficit of $1.2bn. This largely stems from the flagship Build,
Build, Build (BBB) campaign of President Rodrigo Duterte’s administration. At an estimated total cost
of $158bn, the scheme has 75 priority projects under its purview, including airports, rail and urban
transport projects, plans for water transport and power plant ventures.

In September 2017 an inter-agency panel chaired by President Duterte approved four major
infrastructure projects worth P386.3bn ($7.6bn), including the country’s first subway, which is being
billed as Southeast Asia’s “project of the century” (see Transport & Infrastructure chapter). For the
most part, these bigticket projects are being driven by official development assistance (ODA) and
state funding, with the subway project receiving P51.4bn ($1bn) in funding from the Japanese
government, for example.

As of January 2018, a total of 60 infrastructure projects were either under construction or in the pre-
construction phase, according to a statement from Gil S Beltran, undersecretary of the Department of
Finance (DoF). Of this total, 15 are big-ticket developments, with eight of these larger projects
confirmed as ODAfunded. In some cases, support also comes from the private sector in the form of
public-private partnerships (PPPs). In terms of contractors, a number of international firms are
already lining-up to participate, or are being encouraged to do so. “Japanese, Chinese and of course
Filipino companies seem to be in prime position to execute the BBB plans,” Romolo V Nati, chairman
and CEO of Italpinas Development Corporation, told OBG. “However, I believe that more European
companies should also look at entering the market, as there are FUNDING: Prior to the current
administration’s massive infrastructure drive, cash-laden developers were the key driving force
behind new construction projects. While private investment saw the industry expand at a rapid rate,
state spending lagged behind until the Duterte administration and an influx of foreign loans ushered
in a wave of public infrastructure development.

Before the BBB programme, foreign and local businesses generally expressed frustration with the
sluggish pace of PPPs under former president Benigno Aquino III. As a result, President Duterte has
opted to fund bigticket projects primarily through state funds and the application of below-market-
rate loans by way of ODA. Room has also been left for unsolicited proposals and hybrid PPPs,
whereby operations and maintenance, or engineering, procurement and construction works are
contracted out to the private sector while the development costs are met by the state and ODA.

Ensuring projects materialise on time is another important facet in creating strong working
relationships with funding partners. “With all the projects being executed under the BBB programme,
the government may choose to address business disagreements through the faster and less
expensive practice of dispute avoidance as they are about to occur rather than wait for
disagreements to escalate to full blown disputes and resolving such disputes by turning to a more
costly and time consuming dispute resolution mechanism like arbitration or litigation. This will help to
keep building moving forward, especially concerning projects receiving ODA or foreign-funded works
with international contractors and stakeholders,” Salvador P Castro Jr, country representative for the
Philippines of the Dispute Resolution Board Foundation, and president and CEO of construction firm
SPC astro, told OBG REFORM: Despite considerable growth, the construction sector’s economic
contribution is constrained by a cumbersome permit process and a relatively shallow talent pool.
Some lawmakers have been pushing to replace the decades-old Republic Act No. 6957 of 1999, also
known as the Build-Operate-Transfer Law, with Senate Act No. 951, otherwise known as the PPP Act,
in an effort to further accelerate national infrastructure development through more effective
collaboration between government and the private sector.

Among other objectives, the proposed law aims to ensure sufficient competition and a non-
discriminatory tender process by adopting a new framework on unsolicited proposals, creating a risk-
management programme, refining implementation methods and prohibiting regulatory bodies from
implementing deals that they regulate. The proposed law was considered a priority in the final
months of the Aquino III administration, but as of the second quarter of 2018, it was still pending
before both houses of Congress.

Although conventional PPPs fell out of favour early in the Duterte administration, efforts to promote
the use of capital market financing and the proposed PPP Act could simplify and clarify rules for such
joint projects going forward. While high levels of liquidity among developers limited the use of the
domestic capital markets for financing in the past, the recent drive to narrow the national
infrastructure deficit has highlighted the need to diversify financing options. With the support of the
Asian Development Bank and the US Treasury Department’s Office of Technical Assistance, the
domestic PPP Centre has pushed for reforms that will promote the use of capital markets for
infrastructure funding. In addition, in December 2016 the Philippine Stock Exchange issued specific
listing rules for PPP companies. With the primary objective to support the development of well-
structured, bankable projects that attract private investors, the PPP Centre has also been
instrumental in supporting legislation that facilitates right of way for national infrastructure projects.

Notable conventional PPPs that have been awarded or continued under the Duterte administration
include the Mactan-Cebu International Airport passenger terminal building, valued at P17.5bn
($345.7m); phase two of the Ninoy Aquino International Airport Expressway, costing P17.9bn
($353.6m); the P64.9bn ($1.3bn) light rail transit Line 1 Cavite extension; the P35.43bn ($700m)
Cavite-Laguna Expressway; the P62.7bn ($1.2bn) Metro Rail Transit Line 7; and the North Luzon
Expressway-South Luzon Expressway Connector Road Project, estimated to cost P23.2bn ($458.3m).

Budget
In an effort to accelerate the implementation of infrastructure projects, the Department of Public
Works and Highways (DPWH), which is responsible for the planning, design and construction of
national roads, bridges, water resources projects and other public works, received a total budget
allocation of P650.87bn ($12.9bn) for 2018 – a 39% increase over 2017 – of which P613.2bn
($12.1bn) is earmarked for the construction of various infrastructure projects. According to DPWH
data, the two main targets of the department’s infrastructure outlays for the year are the
construction of highways, at P286.22bn ($5.7bn) or 47% of the total, followed by flood control
efforts, at P127.73bn ($2.5bn) or 21% of the total. In terms of geographic spread, Mindanao will
receive the lion’s share of DPWH expenditure, at 36.5%, followed by Northern Luzon at 21.75%;
Southern Luzon (21.08%); Visayas (16.52%); and the National Capital Region (7.46%).

Launched in February 2017, the Philippine Development Plan (PDP) 2017-22 aims to make the
Philippines an upper-middle-income country by 2022. At the same time, the construction industry’s
output in real terms is expected to rise at a compound annual growth rate of 9.79% through to 2021.
According to the Department of Budget and Management, government spending increased by 10% in
the first 10 months of 2017 in comparison to the same period of 2016, reaching a total of P2.24trn
($44.3bn). Spending in October 2017 rose by 28.2% to P226.9bn ($44.3bn), with infrastructure
accounting for P51.5bn ($1bn), up 17.8% y-o-y. Given the PDP targets and BBB initiatives, spending
on public infrastructure is expected to increase for the foreseeable future, from 5.4% of GDP in 2017
to around 7.3% of GDP by 2022, equating to an estimated P8.4trn ($166bn) through to 2022.

Room for Improvement

While the sector has witnessed steady growth in recent years, applying for construction permits
remains unnecessarily cumbersome, causing considerable delays that sometimes stall investment and
restrict development. According to the World Bank’s “Doing Business 2018” report, construction
permits take around four months to acquire, entailing 23 procedures and costing some 2.6% of the
warehouse value. This ranks the Philippines 101st out of 190 countries for dealing with construction
permits. Property registration ranked even lower, at 114th, with nine procedures taking up to 35 days
to complete and costing approximately 4.3% of the property value.

Given the commitment to tackling the infrastructure deficit, major steps are being taken to expedite
projects. “The PPP Centre has been vocal about making the procurement process more agile so that
it better meets the needs of companies involved,” Patrick N David, president of AlloyMTD Philippines,
told OBG. “Risk-sharing measures, as well as the removal of ambiguity in parts of the legislation, will
also be necessary steps to enhance the ease of doing business.”

In addition to permit delays, identifying suitable land, particularly outside urban centres, can be
troublesome. “The Department of Agriculture has imposed a twoyear delay on land conversion that is
affecting land not being used for agriculture,” Telesforo E Peña, founder of T&D Design Consultancy,
told OBG. “This is affecting investment and companies’ ability to execute projects.”

Efforts to narrow the infrastructure gap is evidenced by the signing of Executive Order 30 in mid-
2017 and the creation of the Energy Investment Coordinating Council (EICC), an inter-agency group
overseen by the Department of Energy aimed at simplifying the approval process of permits related
to big-ticket projects in the sector (see Energy chapter). Expected to accelerate major energy
projects – particularly the construction of coal-fired power plants – Executive Order 30 should act as
a major driver of infrastructure development. Previously the permit process for energy projects could
take as long as four years, with more than 300 signatures needed from around 70 different agencies.
Under the new ruling, an application for any energy project of national significance should receive a
decision within 30 days. The new guidelines state that each agency involved in the permit process
must act on presumption of prior approvals. While moves to close existing gaps have been
welcomed, some scepticism remains due to the fact that many planned infrastructure projects failed
to come to fruition under previous governments. “Continuity is necessary to avoid pet projects being
dropped by the next administration,” Dan Simeon, country head of PEB Steel, told OBG. “Concerted,
long-term plans will benefit the Philippines, as it seeks to maximise the favourable economic situation
it is currently experiencing.”

Cement
Alongside the expansion of infrastructure works, demand for construction materials has steadily risen,
with cement sales reaching 24.4m tonnes in 2015, according to the latest available data from the
Cement Manufacturers’ Association of the Philippines (see analysis). The Philippines imported 6m
tonnes of cement in 2016 alone, with similar volumes of imports expected for 2017, according to
international media reports. With the gap between local production and market demand increasing, a
deficit in cement production is expected through to 2020, after which point local capacity-expansion
projects will come on-line.

In late 2017 Holcim Philippines invested a reported P1.5bn ($29.6m) in a mechanised ship unloading
and loading facility, as well as a grinding facility to increase annual capacity from 1.4m tonnes to
2.2m tonnes. For its part, Taiheyo Cement Philippines invested P30m ($592,700) in mid-2017 in a
new cement plant in Panacan, Davao City, which was set to open in early 2018. Meanwhile, Semen
Indonesia International, an Indonesian cement company, is looking to expand into Mindanao, where
it is already exporting around 20,000 tonnes of cement. In the interim, however, imports from China,
Vietnam and other ASEAN members will be needed to satisfy rising domestic demand.

With higher volumes of imports expected, local cement importers have been lobbying the
Department of Trade and Industry (DTI) to allow pre-shipment inspection and certification of
cement, which has been met with opposition by local producers who prefer inspection after shipment.

To level the playing field, the DTI announced in October 2017 that a department administrative order
will include an import commodity clearance and product safety mark process to ensure product
standard compliance. The DTI also aims to remove the requirement that shipments be held at a
warehouse while samples are tested. Under the new process, pre-shipment testing shall be
conducted by a testing laboratory recognised by the Bureau of Philippine Standards (BPS). The
identified laboratory is then required to submit the original copy of test reports – after three, seven
and 28 days – directly to the BPS. If the subsequent three- or seven-day compressive strength
testing meets the 28-day strength and chemical composition requirements for cement, a certificate of
conditional release shall be issued. Once the cement arrives at the port of entry, the importer is
required to notify the BPS or the closest DTI office in writing that the shipment is ready for
inspection. The shipment will then be transferred to the warehouse and shall not be used or offered
for sale until results of testing are verified.

Steel
The steel segment, similar to cement, is expanding alongside the BBB initiative. For the most part,
domestically produced steel has been limited almost exclusively to rebar, used in the construction of
everything from bridges to high-rise towers. According to March 2017 reports from the US
International Trade Administration, steel plates and other products are mostly imported, with China,
Japan, South Korea and Taiwan accounting for 96% of all steel imports in 2016. The Philippines is
the world’s 16th-largest steel importer, accounting for 1% of all steel imported globally in 2015. In
2016 the country imported 8.1m tonnes of steel, a 152% increase over 2015. In terms of current
account contribution, steel represented 3.8% of all imports in 2016, and as of March 2018 iron and
steel was the second-fastest-growing import category after mineral fuels and lubricants, rising by
14.5% y-o-y.

Despite these positive trends, there are recurring security and import challenges for construction
materials. In some cases, projects requiring grade-A materials end up utilising grade B supplies to cut
costs. To address this problem, the Construction Industry Authority of the Philippines – a division of
the DTI – is spearheading the creation of a construction road map.
With the support of international development agencies, a number of anti-dumping duties and
countervailing duties, as well as associated suspension agreements, are set to be created to serve as
safeguards for the industry. However, as of the first quarter of 2018, the Philippines imposed no anti-
dumping duties or countervailing duties on steel, although it does have one safeguard on imports of
steel angle bars from all countries.

Talent Pool
The availability of skilled and unskilled labour for construction projects in the Philippines remains a
major concern for the future. “ASEAN integration has not had the desired effects in terms of human
capital mobility,” Daniel Terence Yu, president of Philippine architectural firm Visionarch, told OBG.
“For an architect to work in another ASEAN country, they still need accreditation and to adjust to the
different regulations and liability criteria.” The rollout of big-ticket projects has resulted in the sector
growing faster than the supply of labour. In response, free government training programmes are
being offered in an effort to bolster the construction sector’s talent pool. According to data from the
Philippine Statistics Authority, in January 2018 the industry’s workforce grew by 424,000 staff y-o-y
to a total of 3.64m workers, accounting for 8.3% of employment across the country. The sector is
expected to employ around 5.8m workers by 2022.

Outlook
With the Duterte administration intent on addressing infrastructure needs, the outlook for the
construction industry is positive. In the short to medium term, building will be largely concentrated in
Mindanao, Metro Manila and Luzon, with transportation and energy projects leading the charge.

To support long-term progress, however, policymakers will work to further reduce the high number
of approvals necessary for construction projects, which create timing and cost constraints for firms,
and protect the industry from the importation of sub-par materials.
 Perhaps, the only country in Southeast Asia that hasn’t imposed a national ID system yet is the
Philippines. Neighboring countries such as Indonesia, Malaysia, and Singapore have had one in
place for a long time now, which is not just used for their identification but also for keeping track of
their a citizen’s information deemed as necessary.

What is the National ID system all about?

The bill that was recently passed states that the national ID system of the country will be called the
“Filipino Identification System” or “FilSys.” It’s a single ID card that can be used as a proof of
identification for all transactions in the country, whether it’s by a government agency or a private
institution. Once this is implemented, Filipinos both here and abroad will be required to register.

How does it work?

In this national ID system or the FilSys, the person should declare his or her name according to his or
her birth certificate, photograph, gender, blood type, and signature. The ID will come with its own
unique serial number, which will be called the Common Reference Number (CRN). The reference
number will be issued by the Philippines Statistics Authority (PSA).

What information will be stored here?

This tamper-proof ID will be housing a smart chip that contains unique information associated to a
person like his biometrics, iris scan, facial image reception code, and many other distinguishing
features.

Other government-issued identification numbers such as the following will also be associated with the
person’s designated CRN:

 SSS
 Pag-ibig
 PhilHealth
 Passport number
 Voter’s registration
 Tax Identification Number (TIN)
 Driver’s license number

Data privacy and confidentiality

Legislators who opposed this move by the government were concerned about the safety of
everyone’s personal information from data leaks and other security attacks. However, Sol Aragones,
the committee chairperson assured the public that the only agency that will have access to the
information will be the PSA.

The bill made it clear that the information in the FilSys, despite being in the safekeeping of the PSA,
cannot be disclosed to any requesting agencies without the consent of the ID holder, unless it falls
under the following situations:

 In cases of accidents or disasters, where the ID holder’s medical history is needed by medical workers
 When the interest of public health or safety requires the data
 A court orders the data to be divulged

The bill also states that PSA, the Department of Information and Communications Technology, and
the National Privacy Commission must implement measures that will guarantee the safekeeping of
the information.

The benefits of a national ID system

The main goal of this ID system is to streamline transactions, lower the cost of government-related ID
application, and ease and convenience for all transactions. How does it work?

1. Streamlined information

With a single ID for everything, all the information about a citizen are associated to his or her national
ID number or CRN. From the basic personal information like birthday, address, phone number to your
driving records, criminal records, and loans, a national ID system will provide access to these
information to relevant agencies authorized by the person. This will not only streamline information,
but also transactions be it with the government or private organizations.

2. No need for other “valid IDs”

Currently, we have separate IDs for SSS, Philhealth, Pag-ibig, and even for our tax and voter
registration. While it makes sense to have a separate ID for each because they are after all different
agencies of the government, it would be practical and more efficient if they’re all associated to a
single ID.

Once a national ID system is in place, government and private agencies will no longer need other IDs
to verify a person’s identity. Verification can already be done easily through the automated system
which will come together with the implementation of the FilSys. From airports to banks, there’s no
need for you to stress about bringing a number of valid IDs just to get your transactions going (which
is a typical scenario in the country).

3. Faster ID verification

The provision of the FilSys will guarantee a fool-proof and highly secured process of identification
according to Arnie A Teves Jr, a congressman. This will be made possible with the government’s
initiative to gradually install biometric machines in all of its relevant agencies. Your trip to SSS,
Philhealth, Pag-ibig, or whatever government agency will be less of a hassle once the national ID
system is in place.

How will it impact your banking experience?

Identification plays an important role in managing your finances through your bank account. When
you pay using your credit card, establishments will ask for a valid ID before running your card to
charge you. When you do a transaction in a bank, you’ll need various IDs to verify your identity. With
a more streamlined process of verifying a person’s identity through the FilSys, the experience will be
more seamless.

1. Prevention against identity theft and fraud

It has been made clear that together with the national ID system, biometric machines will be installed
in relevant government agencies. Also, state of the art technology is used for the national ID to make
sure that it cannot be replicated or used by others.

The smart chip embedded in the ID will contain unique information associated to a person like his
biometrics, iris scan, facial image reception code, and many other distinguishing features.

This will reduce identity theft, especially when it comes to availing banking or credit products, which
can have dire consequences for the victims.

This security measure may not happen immediately once the FilSys is implemented, but once the
system, its infrastructure, and the technology have been fully established, people will surely reap the
security benefits that come with it.

2. Financial inclusion for everyone

During the summit on Financial Inclusion in the Digital Economy hosted by the ADB, according to
Rochelle Tomas, the Inclusive Finance Advocacy officer of Bangko Sentral ng Pilipinas (BSP), “One
of the key barriers to financial inclusion in the country is the lack of a universal national ID and private
industry has also identified it as one of the major costs in getting people on-board the financial
system”

Currently, BSP has a very strict policy when it comes to opening a bank account in the country. It
requires at least one photo ID together with other proofs of identification. While employed individuals
could easily obtain valid photo IDs such as an SSS ID or UMID, and other official documents to verify
their identity; the unemployed population on the other hand does not have access to those. With a
national ID system coming close to its implementation, it will be a lot easier for the unemployed and
unbanked Filipino to start banking.

As the country’s ID system heads towards a streamlined and automated process, everyone
will benefit from it in a number of ways. Not only will it cut the unnecessary bureaucratic process in
many public and private agencies short, it will also make many services from the private sector more
inclusive to more Filipinos. At the end of the day, FilSys will make day-to-day transactions of Filipinos
less of headache.
National ID System in the Philippines: The Good
and the Bad
Are you in favor of the national ID law? The latest SWS survey results show that majority of Filipinos
(73%) support the national ID system. However, there are fears about the system’s implications,
particularly in terms of data security and privacy.
How will the new law affect Filipinos? Should you be worried? MoneyMax.ph explores the pros and
cons of the new national ID system in the Philippines.

What is the National ID System?

Photo from Freepik.com

On August 6, 2018, President Rodrigo Duterte approved the Philippine Identification System
Act (Republic Act 11055) that creates a national ID system, which is a centralized database for all
personal information of citizens and foreign residents in the Philippines.
The Philippine Identification System or PhilSys will provide each registered person a unique and
permanent PhilSys number and a physical ID card called the PhilID for use in transactions that
require proof of identity.
Most countries worldwide issue national identity cards to their own citizens, such as Singapore,
Thailand, China, South Korea, France, Italy, and Spain, among many others. Before the signing of
the new law, the Philippines was one of only nine countries in the world without a national ID system.

Why the National ID is Good for Us

One ID for All Transactions

Isn’t it frustrating when your transaction can’t be processed just because you lack the required IDs?
That will be a thing of the past, as the national ID will be honored in all transactions that require
verification of identity.
With a PhilID card, you no longer need to present multiple valid IDs just to prove your identity when
transacting with government and private offices.
Under the PhilSys law, the national ID can be used for transactions such as the following:

 Availing of government services from SSS or GSIS, Pag-IBIG, PhilHealth, and other agencies
  Passport and driver’s license applications
 Tax-related transactions
 Job applications
 Opening bank accounts and other financial transactions
 Voter’s registration and identification
 Application for social welfare and benefits
 Criminal record verification and clearances
 Application for schools, colleges, and universities

Compared to other government-issued IDs, a PhilID is much simpler to obtain. Registration in the
PhilSys requires only a birth certificate for Filipino citizens or proof of Philippine residence for resident
aliens. Initial application and renewal of PhilID are free for citizens.

Easier Access to Financial Services

Based on the Bangko Sentral ng Pilipinas’ 2017 Financial Inclusion Survey, more than a third of
Filipino adults (34%) said that the lack of required IDs kept them from applying for bank loans.
Now that the national ID system is in place, it will be easier for millions of unbanked Filipinos to open
a bank account, apply for credit cards and loans, invest, and avail themselves of other banking
services.

More Efficient Government Transactions

Instagram photo by @elishagift

The national ID system is expected to improve the efficiency of government services, resulting in
shorter lines and transaction times.
In a series of tweets, Senator Panfilo Lacson explains how the national ID system can help cut red
tape. For instance, if you’re applying for an SSS benefit, simply present your PhilSys number or
PhilID for faster identity verification and release of your benefit. Even if you forget to bring your
physical ID, the government agency will accept your PhilSys number and process your request.
In the past, if someone happens to share a name with another SSS member, it would take months to
process the claim and release the benefit because the SSS would need to verify that person’s identity
first.
Likewise, beneficiaries of unconditional cash transfers will receive their benefits faster because the
government can easily identify them through their national ID cards.
Easier to Get a Senior Citizen Discount

Senior citizens will benefit a lot from the national ID system, according to Atty. Romulo Macalintal in
his opinion piece on the Philippine Daily Inquirer. This will resolve the confusion about the kind of ID
that the elderly can present to avail of a senior citizen discount. Even if the senior citizen law is clear
about using any government-issued ID for the discount, some businesses honor only the senior
citizen ID.
Seniors won’t even need to apply for a senior citizen ID once they hit 60 because their national ID
shows their birthdate, which means they can immediately enjoy their senior citizen discount and
benefits.

Protection from Fraud

Sample PhilID design from the PSA. Twitter photo from @wengsalvacion

The PhilID card will have the same security features used in passports, banknotes, and other
government IDs worldwide. Fraudsters will find it difficult to copy the card and produce fake ID cards.
As a consumer, having a national ID means you’re protected against identity theft and other types of
fraud.

Why the National ID System is a Cause for Concern

Possible Data Breaches

Photo by Rawpixel.com via Freepik.com

In recent years, several government websites have been prone to hacking. The biggest and most
infamous data breach in Philippine history is the “Comeleak” that exposed the personal data of about
55 million voters in 2016.
How can we be sure it won’t happen with the national ID system? A lot of confidential information will
be collected for the national ID, including name, address, birthdate, birthplace, and biometrics (facial
image, fingerprints, iris scan, etc.). Experts doubt the government’s ability to secure personal data
against hackers.
To allay such fear, the government assures that it will observe the Data Privacy Act (RA 10173).
News reports also quote several government officials as saying that the data in the national ID
system are the same ones in the existing databases of PhilHealth, Pag-IBIG Fund, and Philippine
Statistics Authority.

Possible Privacy Rights Violations

The PhilSys will provide the government with access to massive personal data of residents in the
Philippines. Data privacy advocates specifically question the “record history” provision in the national
ID law. This means the government can track every transaction made using the PhilID. When abused
or misused, this could lead to privacy violations.

Final Thoughts

Data security and privacy issues aside, everyone benefits from having a national ID. Let’s just hope
that the government would protect the security and privacy of ID holders.