Vol. 1 March 2017

Rationalizing GOCCs: The Case of the Merger of the Land Bank of the Philippines

and the Development Bank of the Philippines Maria Fe Villamejor-Mendoza, PhD

Reactor’s Note

Locating the LBP-DBP merger in the context of regional financial integration

Lucio Blanco Pitlo III

Assessing fiscal data openness in local governments in the Philippines Erwin A.

Alampay, Pauline Bautista, and Raphael Montes

Reactor’s Note

Learning from the Korean Narrative in Open Governance: A Reaction to

“Harnessing Open Data for Fiscal Transparency in Local Governments in the

Philippines” Jinky Joy dela Cruz

Synergies: Production, Marketing, and Promotion of Philippine and Korean

Television Series

Josefina M. C. Santos

Reactors’ Note

Contemporary Production Processes: Restructuring our Understanding of

Philippine Teleseryes vis-a-vis Koreanovelas

Jose Wendell P. Capili, PhD

The HanPil (한필) Occasional Papers on Korea and the Philippines is published

electronically by the University of the Philippines Korea Research Center. All papers

included in the current volume underwent a single-blind peer review process. The HanPil

will be published annually.

Copyright © 2017 by the UP KRC and authors

All rights reserved, except that authorization is given herewith to academic institutions

and educators to reproduce articles herein for academic use as long as appropriate credit

is given both to the authors and to this publication.

The views expressed in each paper are those of the authors of the paper. They do not

necessarily represent or reflect the views of the UP KRC, its Editorial Committee, or of

the University of the Philippines.

ISSN 2546-0234 (Online)

ISSN 2546-0226 (Print)

The papers were prepared for the research project of the Korea Research Center at

University of the Philippines (UP KRC) supported by the Academy of Korean

Studies Grant (AKS-2015-INC-2230012). Earlier version of the papers was

presented at the 7th Biennial Conference of the Korean Studies Association of

Southeast Asia (KoSASA) held at Novotel, Araneta Center, Cubao, Quezon City on

September 28-30, 2016.

UP Korea Research Center Editorial Committee

Eduardo T. Gonzalez, PhD

Aldrin P. Lee, PhD

Kyungmin Bae

Pamela Jacar

UP Korea Research Center

Address: 3F South Wing Quezon Hall, University Avenue, University of the Philippines,

Diliman, Quezon City, Philippines

Tel : +63 2 981 8500 loc 2543

Email : pkrc@up.edu.ph

Vol. 1 March 2017

TABLE OF CONTENTS

Foreword

Rationalizing GOCCs: The Case of the Merger of the Land Bank 1

of the Philippines and the Development Bank of the Philippines

Maria Fe Villamejor-Mendoza, PhD

Reactor’s Note 35

Locating the LBP-DBP merger in the context of regional financial

integration

Lucio Blanco Pitlo III

Assessing fiscal data openness in local governments in the Philippines 47

Erwin A. Alampay, Pauline Bautista, and Raphael Montes

Reactor’s Note

Learning from the Korean Narrative in Open Governance: 93

A Reaction to “Harnessing Open Data for Fiscal Transparency in Local

Governments in the Philippines”

Jinky Joy dela Cruz

Synergies: Production, Marketing, and Promotion of Philippine and 102

Korean Television Series

Josefina M. C. Santos

Reactors’ Note

Contemporary Production Processes: Restructuring our 137

Understanding of Philippine Teleseryes vis-a-vis Koreanovelas

Jose Wendell P. Capili, PhD

Notes about Contributors 143

Foreword

It is my pleasure to introduce this first edition of the “HanPil (한필):

Occasional Papers on Korea and the Philippines”. Although not a regularly

issued publication, Occasional Papers will be a standard feature of the UP

Korea Research Center to keep the scholarly public in touch with

developments which relate to Philippine-Korean relations.

These Occasional Papers bring together research carried out by academic

authors from the University of the Philippines at Diliman. They are largely

case studies offering fresh perspectives about a diverse set of topics for

which both Korea and the Philippines share common grounds:

organizational reform of financial institutions, the crucial role of unified

communications technology at subnational levels, and the rise of a particular

genre of Filipino drama that takes its lead directly from Korean soap opera.

The papers were the outcome of a research project undertaken under a seed

program grant given by the Korean Studies Promotion Service of the

Academy of Korean Studies centered around two themes: public policy in

Korea and the Philippines, and the social impact of Korean cultural products

in the Philippines. They were initially presented at the 1st UP KRC Workshop

and Roundtable, “Continuity and Progress of Korean Studies in the

Philippines”, and subsequently at the 7th

Korean Studies Association of

Southeast Asia (KoSASA) conference, “Glocalisation of Korean Studies:

Strategic Cooperation in Research and Education between Southeast Asia

and Korea” hosted by UP and held on September 28-30, 2016 at Novotel

Araneta. All three papers went through a single-blind review process.

You may wonder why the main papers are not in the mold of contemporary

comparative research. Instead, the articles on banking and ICT focus solely

on the Philippine situation, while the paper on the drama series happens to

refer to Korean production mainly as the inspiration, if not progenitor, of a

particular Philippine telenovela. The actual comparisons with Korea come

by way of the reactors’ notes. The use of outright comparison was avoided,

not because of hesitation in drawing parallels, but out of respect for the

uniqueness of contexts. Just as looking through a pair of eyeglasses

changes the way we see a thing, so using Korea as a framework for

understanding the Philippines at the very start may unnecessarily alter the

manner we frame the economic, social or cultural circumstances in the

Philippines. Thus the authors went straight to the heart of their “Philippine” arguments, spending no or little time on seeing them from a Korean lens,

which subsequently was supplied by the reactors. In this way, the

comparisons, coming after the fact, serve to provide the contrasts and

similarities between the two countries in a much more analytically forceful

way.

The launch of the Occasional Papers is a major step in the effort of the UP

KRC to broaden interest in and understanding of South Korea in the

economic, social and cultural fields. We believe that publications are an

ideal vehicle to capture the diverse scholarly interests of Korean Studies

enthusiasts in UP and other higher educational institutions. These Occasional

Papers, as well as other forthcoming UP KRC publications, can be openly

accessed online, and will likewise be made available in printed form on

demand. We look forward to your feedback and comments, using our

contact address at pkrc@up.edu.ph.

This inaugural issue owes much to many people. We thank first of all the

authors and reactors for their scholarly contributions. Thanks are due to the

AKS-KSPS program, for its wholehearted support. We likewise

acknowledge the Korea Research Institute of the University of New South

Wales, from whose initial guidance we benefitted immensely. I would also

like to add my thanks to my colleagues, Aldrin Lee and Kyungmin Bae, who

drew up the parameters of these papers. Ms Bae, in particular, was the key

figure behind the demanding collaborative processes which lie behind this

project. We owe much, too, to the anonymous referees who vetted the papers.

Last but not least, I wish to thank Pamela Jacar, our energetic administrative

assistant at the UP KRC office.

Eduardo T. Gonzalez, PhD

Director UP Korea Research Center

１

Rationalizing GOCCs:

The Case of the Merger of the Land Bank of the Philippines

and the Development Bank of the Philippines

Maria Fe Villamejor-Mendoza, PhD*

National College of Public Administration and Governance

University of the Philippines, Diliman

ABSTRACT

One of the recent reform initiatives of the Philippine government on

state-owned enterprises (SOEs) or government owned or controlled

corporations (GOCCs) in local parlance, is the proposed disposition of

two major government financial institutions (GFIs) in the country, e.g.,

the merger of the Development Bank of the Philippines (DBP) and the

Land Bank of the Philippines (LBP).

The merger was predicated on what the Governance Commission for

GOCCs (GCG), the central advisory, monitoring, and oversight body for

GOCCs believed as the duplication or overlapping functions of both

banks. Such consideration is one of the standards for implementing a

merger (Sec. 5) under R.A. 10149 or the “GOCC Governance Act of

2011” mainly in order that the “corporate form of organization through

which government carries out activities is utilized judiciously” (Sec. 2).

This case study thus interrogates the rationale, implications,

challenges and lessons of this GOCC reform initiative. Merging two

giant GFIs in the country is unprecedented in the GOCC sector because

in the past, the preferred dispositive modes were privatization, abolition

and regularization. It also briefly revisits and anchors analyses on

recent (macro) reforms on the GOCC sector, from 2001-present.

KEYWORDS: Dispositive action, merger of GOCCs/GFIs, LBP, DBP,

public enterprise reform

２

OVERVIEW

The Philippine public enterprise sector (PES) or the government owned

and/or controlled corporations (GOCCs) in local parlance, has been

created to be potent tools for development. They are supposed to perform

governmental/development and proprietary/business functions and be in

areas, which are pioneering in nature, where the investment required is

large and the gestation period is long. In the commanding heights of the

State, they have been almost everywhere, e.g., in industries related to

financing, public utilities, agricultural development and trading, even in

agricultural development, social, civic, educational and scientific

endeavors, and gaming and gambling (Mendoza 2007).

These have led to observations that the sector has been crowding

out the private sector, has been financial millstones and venues for

corruption and abuses, and has become irrelevant without any

performance to speak of (Mendoza, 2007).

Over the years, reforms have been in place to rationalize and

reengineer, instill financial discipline, and make GOCCs more

accountable and performing

One of these recent reforms is the proposed disposition of two

major government financial institutions (GFIs) in the country, i.e. the

merger of the Development Bank of the Philippines (DBP) and the Land

Bank of the Philippines (LBP).

The merger was predicated on what the Governance Commission

for GOCCs (GCG), the central advisory, monitoring, and oversight body

for GOCCs believed as the duplication or overlapping functions of both

banks. Such consideration is one of the standards for implementing a

merger (Sec. 5) under R.A. 10149 or the “GOCC Governance Act of

2011” mainly in order that the “corporate form of organization through

which government carries out activities is utilized judiciously” (Sec. 2).

With the perceived duplication seemingly rectified, the intended

merger with the LBP as the surviving entity will create the second largest

universal bank in the country in terms of total assets and deposits, and 4th

in terms of loans and capitalization. The GCG further expects that such

dispositive action will provide a more stable and stronger base for

development financing (GCG 2016 Press Release) in order that LBP will

contribute more significantly to economic development and inclusive

growth in the Philippines.

President Aquino III approved the merger proposal through

Executive Order 198 s. 2016. Procedurally though, the approved merger

３

has to go through the due diligence and other checks by the Bangko

Sentral ng Pilipinas (Central Bank of the Philippines), the country’s

regulator of banks, and the Philippine Deposit Insurance Corporation

(PDIC). In addition, the new administration under President Duterte does

not approve of the merger and would work for the repeal of the said EO.

Against these backdrops, this research will examine the rationale,

implications, challenges and lessons of this GOCC reform initiative.

Merging two giant GFIs in the country is unprecedented in the GOCC

sector because in the past, the preferred dispositive modes were

privatization, abolition and regularization. It will also briefly revisit

and anchor analyses on recent (macro) reforms on the GOCC sector,

from 2001-present.

NATURE, PROBLEMS AND CHALLENGES OF PHILIPPINE

GOCCS

State-owned enterprises (SOEs), public enterprises (PEs) or government-

owned and/or controlled corporations (GOCCs) in Philippine

terminology are defined in PD 2029 (1986) and restated in AO 59 (1988)

as:

…stock or non-stock corporations…performing governmental or

proprietary functions, which is directly chartered by special law or if

organized under the general corporation law is owned or controlled

by government directly or indirectly through a parent or subsidiary

corporation, to the extent of at least a majority of its outstanding

capital stock or its outstanding voting capital stock.

GOCCs perform both developmental (public) and proprietary

(enterprise) functions. Doing both poses problems in its nature,

direction and effects. GOCCs presuppose a mix of conflicting

functions, which regular agencies may not be problematic about.

Thus, they face unique governance challenges that make the path to

reform even more difficult than a regular government agency or the

private sector.

PEs are institutions that presuppose a mix of ‘public’ and ‘enterprise’

dimensions which seek to place within the same organization the

character of a business organization and that of national policy

(Fernandez and Sicherl, 1981). They are bastardized organs of the State

４

which unfortunately can neither optimize self-interest nor fully serve the

public interest (Sherwood, n.d.) because they perform business functions

but at the same time are entrusted with certain socially-relevant goals

(Tabbada and Baylon, 1991).

As such, they have multiple and oftentimes-conflicting objectives

(e.g., proprietary and development, profit and service), are subject to

excessive political interference, and lack transparency, accountability and

productivity (Mendoza, 1995). They also often acquire bad habits:

burdensome bureaucracy; confused objectives; directors owing

responsibility not to the public but to the state or ministry or even to

individuals within government or a political party (Bati, 2005).

They have been organized and operated because of actual or

presumed weaknesses or failures of the market. Particularly during the

“commanding heights” era, they were created to provide certain activities,

which are pioneering in nature, especially where the investment required

is large and the gestation period is long (Tabbada, 1989).

Prior to 1972 (Martial Law period), they were formed to respond to

long-established strategic needs such as the following:

1) Rehabilitation and restructuring after the war;

2) Those requiring large scale indivisible investments;

3) A basic industry that provides high forward linkages;

4) There is public sentiment to keep the industry free from foreign

control because of its impact in the economy; and

5) The private sector is unwilling or unable to put up the capital to

establish the industry (Tabbada, 1989; Alvendia 1991).

Later, GOCCs became “major arenas for the consolidation of

economic and political power” (Dytianquin, 1985). They were also

abused and used as “laundry services and tools to transfer public

resources to the hands of cronies and the private few” (Briones, 1985).

As of 2009-2010, the GOCCs accounted for a significant percentage

of the assets, liabilities and expenses of the government. Expenditures

were some twenty-eight percent (28%) of the national government.

GOCC assets were some P5.557 trillion vis-à-vis the national

government’s P2.879 trillion. They also account for 91 percent of the

total inter-agency receivables of the national government (Drilon, 2011).

The GOCCs are also widely perceived as mismanaged, with salaries

of its top executives higher than their private sector counterparts or of the

President of the Republic, but with less accountability for performance

５

and results (Senate, 2005 as cited in Mendoza, 2007). In recent years,

there have been various reports about high-ranking officers of GOCCs

being charged with graft for misappropriation of government resources,

dispensation of bloated salaries, unauthorized purchase of assets, and

abuse of power (Senate Hearing 2010).

RECENT REFORMS: TRANSFORMATION TO NEW

PARADIGM IN GOCC GOVERNANCE?

Over the years, the Philippine government has pursued reforms in the

GOCC sector. These reforms were to put in place a comprehensive

regulatory framework, implement the privatization, consolidation and

abolition of some GOCCs, as well as strengthen government’s oversight

functions over GOCCs (Department of Budget and Management, 2011).

These were likewise aimed to reshape, redefine, and redirect the sector,

ensure financial discipline, guide the creation/definition of GOCCs,

disposition, compensation, performance evaluation and audit, and

privatization (Mendoza, 2007).

Despite these reforms, the GOCCs and their executives have

remained embroiled in scandals after scandals involving graft for

misappropriation of government resources, dispensation of bloated

salaries, unauthorized purchase of assets, and abuse of power among

others. These seeming unconscionable abuses and the mismanagement of

the PES led to the enactment of RA 10149, otherwise known as the

GOCC Governance Act of 2011.

RA 10149 aims to provide greater transparency, periodic disclosure

and evaluation of operations and finances, creation of appropriate

remuneration schemes, and clear separation between the regulatory and

proprietary activities of GOCCs. It was also intended to promote

financial viability and fiscal discipline in GOCCs and strengthen the role

of the state in its governance and management to make them more

responsive to the needs of public interest (RA 10149).

The Act underscored the need to enhance the ability of GOCCs to

act as stewards of the people’s resources by adhering to the highest

standards of corporate governance and thus put an end to issues such as

weak board governance, lack of transparency and accountability,

incoherent disclosure practices, poor oversight and multiple and

conflicting mandates (Governance Commission for GOCCs 2011). At the

heart of the Act lie structural reforms designed to steer GOCCs towards

６

responsible, transparent and accountable governance as the foundation

for delivering sustainable and breakthrough results (Governance

Commission for GOCCs 2014).

The marked transformative value of the Act is the creation of the

Governance Commission for GOCCs (GCG) within the Office of the

President, to serve as “the central advisory, monitoring, and oversight

body with authority to formulate, implement and coordinate policies”

over the GOCC sector. The GCG is also supposed to evaluate, classify,

streamline the GOCCs, promote merit and fitness and extract

accountability. In the past, these reform initiatives were enshrined in

different statutes, guidelines and oversight bodies. Since 2011, these

were all entrusted in one central body, for better planning, direction and

evaluation.

Among others, the Act also introduced the Fit and Proper Rule in

determining who are qualified to become members of the Board, CEO

and officers of GOCCs with due regard to one’s integrity, experience,

education, training and competence (Sec. 16). GOCC officers are

expected to serve as fiduciaries of the State and always act in the best

interest of the GOCC (Sec. 19 and 21). Thus, they are expected the

highest standard of extraordinary diligence in their fiduciary duties as

officers. They should maintain a term of one year, unless sooner removed

for cause (Sec. 17, RA 10149). These improvements from past reforms

underpin the need for criteria and higher qualification standards for

GOCC officials. They should not only be competent and qualified; they

should also be morally fit and prudent in their spending.

RATIONALIZING THE GFIs: THE CASE OF THE MERGER OF

THE LBP AND DBP

One of the most recent reform initiatives in the GOCC sector is the

proposed dispositioni of two major government financial institutions

(GFIs) in the country, i.e. the merger of the Development Bank of the

Philippines (DBP) and the Land Bank of the Philippines (LBP or

LandBank).

Both banks are performing well so why make such a decision to

merge? What were the precipitating factors or triggers for the reform

measure? Were there other considerations that raised the need for a

review other than the provision of the GCG Act to rationalize, merge, or

privatize GOCCs? What were the complications and challenges of this

７

merger? What lessons may we learn to guide future reform efforts in the

public enterprise sector?

The GFIs Involved: LBP and DBP

A Government Financial Institution (GFI) is defined as:

“a financial institution in which the Government directly or

indirectly owns majority of the capital stock and which are either

registered with or directly supervised by the Bangko Sentral ng

Pilipinas“ (EO 24. Prescribing Rules to Govern the Compensation of

the Board of Directors/Trustees of GOCCs s. 2011)

Within the government financial institutions lay two of the country’s

biggest lending institutions created not only as commercial banks but

also to serve development objectives such as providing services to the

people through loans, investments and insurances. While most banks

perform basic financial services to a clientele that ranges from private

individuals to big corporations, the LBP and the DBP cater to the needs

of those who belong to the agriculture sector as well as small businesses.

Land Bank of the Philippines (LBP)

The Land Bank of the Philippines (LBP) was established through the

Republic Act 3844 or the Agricultural Land Reform Code, under the

administration of President Diosdado Macapagal in 1963. Its mandate

included financing the acquisition and distribution of agricultural estates

for division and resale to small landholders as well as the purchase of the

landholding by the agricultural lessee. In 1988, R.A. No. 6657

designated LBP as the financial intermediary for the Comprehensive

Agrarian Reform Program (CARP), and also mandated it to prioritize its

role in the CARP for its operations (Land Bank of the Philippines, 2014)

At present, LBP performs its mandated dual function in the financial

system. Aside from it being a commercial bank, LBP prioritizes the

development of the country’s rural areas, and caters to the needs of

agriculture-related projects and small and medium enterprises, among

others (Land Bank of the Philippines, 2014).

Development Bank of the Philippines (DBP)

DBP was created pursuant to “The 1986 Revised Charter Of The

Development Bank Of The Philippines” (E.O. No. 81) with the primary

purpose of providing banking services for the medium and long-term

８

needs of small/medium enterprises (SMEs) in the agricultural and

industrial sector, particularly those operating in the countryside.

DBP has experienced several transformations from 1935 to present.

These include from being the coordinator and manager of government

trust funds when it was the National Loan and Investment Board (NLIB)

in 1935; to harnessing of government resources as the Agricultural and

Industrial Bank (AIB) in 1939; to being the distributor of credit facilities

for the development of agriculture, commerce and industry, and focal

unit for the reconstruction of properties damaged by the war when it was

the Rehabilitation Finance Corporation (RFC), created in RA 85 s.1947;

to the present as it caters to the needs of the present generation, centered

on the acceleration of efforts for sustainable national growth and

development (Development Bank of the Philippines, 2010).

At present, DBP is classified as both a development financial

institution and thrift bank which provides for the needs of small and

medium agricultural and industrial infrastructures (Development Bank of

the Philippines, 2015). It also prioritizes the development of several

areas like: production infrastructure, social infrastructure, distribution

infrastructure and environmental management (Development Bank of the

Philippines, 2015).

From 2012 to 2014, both the LBP and DBP have been performing

well financially. As shown in Fig. 1, both GFIs have posted steady

increases in total comprehensive income (TCI) and have topped the

robust financial performers in GOCCs. Fig. 2 meanwhile shows an 80-85%

increase in the loans granted to priority areas by both banks in 2014

compared to 2011. Loans were granted to small farmers and fisherfolk,

micro, small and medium enterprises (MSMEs), manufacturing and

infrastructure projects, etc.

In addition, relative to other (private) banks in the country, both

GFIs rank fairly well in terms of assets, loans, deposits and capital (Table

1). As of 2014, LBP was fourth in the first three criteria (to Banco De

Oro [BDO], Bank of the Philippine Islands [BPI] and Metropolitan Bank

and Trust Company [MetroBank] [www.philippinesplus.org.com]). In

terms of capitalization, LBP ranked fifth. The DBP, meanwhile, is 9th

overall, except for assets where it ranked 6th (Table 1). Thus, in general,

both banks were not losing, nor suffering from bad loans portfolio, nor

being perceived as inefficient. But why merge?

９

Table 1. Financial Highlights of GFIs, 2012-2014

Source: Government Commission for GOCCs, 2014

１０

Figure 1. Loan Portfolio of LBP and DBP, 2014

Source: Government Commission for GOCCs, 2014

Table 2. Pre-merger, Post-merger Data according to Assets, Loans,

Deposits and Capital, 2014

Level and Industry Rank in terms of

Assets, Loans, Deposits and Capital

Pre-Merger Post-Merger

DBP Landbank

P Billion Rank P Billion Rank P Billion Rank

Assets 476.3 6th

1,051.3 4th

1,527.6 3rd

Loans 143.1 9th

405.3 4th

548.4 4th

Deposits 293.8 9th

914.2 4th

1,208.0 2nd

Capital 36.2 10th

75.2 5th

111.4 4th

Source: DBP and LBP

１１

The Need to Merge: Legal and other Bases

Prior to the proposed GCG merger proposal, the House of

Representatives approved House Bill 5755 during its third and final

reading on 25 May 2015 (Cayabyab, 2015). HB 5755 is “An Act

Authorizing the Merger of the Development Bank of the Philippines and

the Land Bank of the Philippines, with the Land Bank of the Philippines

as the Surviving Entity.” Principally authored by Representative Sonny

Collantes, it seeks to rationalize the financial operations of the LBP and

DBP, as well as establish and safeguard their competitiveness in the local

and international business markets. Also, it gives the LBP, as the

surviving entity, the authority to exercise the powers and privileges of

DBP under its 1986 Revised Charter. With regard to the employees and

working personnel who would be affected by the merger, the bill also

provides for a separation and retirement benefit program (Cayabyab,

2015).

The Bill was transmitted and received by the Senate three days after

its approval in the House of Representatives. (Cayabyab, House passes

DBP, LBL merger bill, 2015). However, it was stalled because of the

seeming lack of support and approval from the Senate and the

administration (Delavin, 2015).

Rationale: Duplication/Overlaps

On February 4, 2016, or a semester after, former President Benigno

Aquino III signed Executive Order (EO) No. 198, which authorizes the

merger of the two banks (de Vera B. , 2016). EO 198 was primarily

predicated on the President’s control of the entire executive branch,

wherein GOCCs are part of (Section 17 Article VII, 1987 Philippine

Constitution). It also recognized the role of the Governance

Commission for GOCCs in ascertaining whether GOCCs have to be

merged, abolished, regularized or privatized. It also adopted the GCG’s

recommendation that it is to the best interest of the State to merge LBP

and DBP because

1) The functions of DBP and LBP duplicate and/or unnecessarily

overlap with one another;

2) The merger of LBP and DBP will further enhance the financing

of priority projects and sectors such as infrastructure, public

services, agrarian reform/agriculture and SMEs;

3) It will provide better access and provide quality financial

products and services to more unbanked and underserved areas;

１２

and

4) It will build a stronger and more competitive universal

development bank able to fulfill its mandate of providing

banking services to propel countryside development and to

contribute to sustainable and inclusive growth. (Office of the

President of the Philippines, 2016)

The GCG justified the merger based mainly on the overlaps or

duplication in both banks in terms of their mandate, clientele and

services. Among these are: (1) both provide banking services to

agricultural sectors and other agriculture-related projects, and to promote

rural development; (2) both provide for the needs of small farmers,

fisherfolk, small and medium enterprises; and (3) both provide deposit

products and cash services, trade products and services, trust services,

electronic banking and services for Overseas Filipino Workers

(InterAksyon.com, 2016). Please see Table 3.

Further, the GCG explained, “the merger will consolidate

development banking in the country to more effectively contribute to

sustainable and inclusive growth. It will build a stronger universalii

development bank with a solid resource base, unmatched geographical

reach, inclusive customer base, a loan portfolio catering to priority

sectors, and institutional knowledge and experience in developmental

finance. It will benefit the economy in important ways: (i) by enhancing

the financing of priority projects and sectors, (ii) by widening access to

financial services, and (iii) by building a stronger development bank thus

contributing to the stability of the financial system.” (GCG 2016)

Thus, operationally, the merger would theoretically create the

Philippines’ second largest bank in terms of total assets (Magtulis &

Porcalla, 2016)(Also please See Table 1). The consolidated entity, while

second only to the Banco De Oro (BDO) Unibank, overtakes

Metropolitan Bank and Trust Company (MetroBank) and Bank of the

Philippine Islands (Magtulis & Porcalla, 2016).

Table 3. Overlaps in DBP and LBP

DBP LBP

Mandate

To provide banking services principally to cater to the

medium and long-term needs

of agricultural and

industrial enterprises with

To provide banking service with a social mission of

spurring countryside

development by granting

loans to agricultural,

１３

emphasis on small and

medium-scale industries to

develop the countryside.

industrial, home-building or

home-financing projects and

other productive enterprises,

farmers, cooperatives/

associations to facilitate

production, marketing of

crops and acquisition of

essential commodities, and to

cross-subsidize agrarian land

transfers

Sectors

Served

1. Infrastructure and

Logistics

2. Social Services

3. Environment

4. Micro, Small and Medium

Enterprises (MSMEs)

Small farmers & fisherfolk

Agri and aqua-business

(public and private sector)

MSMEs

Communications

Transportation

Housing

Education

Health care Tourism

Environment-related

projects

Utility-related projects

Services/P

roducts

1. Deposit Products and

Cash Services

2. Trade Products and

Services

3. Center for Global

Filipinos

1. Remittance Products and

Services

2. Reintegration Program

for OFWs / MSME Loans

1. Trust Services

2. Electronic Banking

1. Deposit Products

2. e-Banking Products

3. OFW Remittance Product

4. Fund Transfer

(Remittance) System 5. Loans for Cooperatives

6. Countryside Loan Fund

7. Treasury Products

8. Trust Products & Services

9. Assistance Programs for

Landowners

10. Programs for Countryside

Financial Institutions (CFIs)

11. Technical Assistance &

other Programs for

Cooperatives

Source: GCG Briefing Paper on the Merger of DBP and LBP, 2016

１４

Pres. Aquino added that the merger is necessary “to rationalize the

operations of the LBP and the DBP, strengthen their financial capabilities,

improve the delivery of services, achieve economic efficiency and

support the development thrusts of the government” (Leyco, 2016).

Similarly, Finance Secretary Cesar Purisima observes that the merger

“bodes well for the stability of our banking system” ("Govt says DBP-

LBP", 2016).

According to the 2016 briefing paper provided by the GCG, the

resulting body from the merger will be “more effective, efficient and

sustainable in carrying out the mandates of both banks, particularly in

anticipation of the wave of foreign banks that may enter the Philippine

market upon the occurrence of ASEAN integration of 2015”

(InterAksyon.com, 2016). It is also foreseen to have better retail and

wholesale banking operations compared to that of the LBP and DBP as

separate entities ("Govt says DBP-LBP", 2016).

Assumed Benefits

The benefits of the merger, according to the GCG analysis in 2016 shall

include the production of a stronger government bank, creating the 2nd

largest universal bank in the country in terms of total assets at P 1.6

trillion. The surviving bank will also be 2nd

in terms of deposits at P 1.2

trillion. In terms of loans and capitalization, it will be 4th at P 582 billion

and P 114 billion, respectively.

Further, it shall enhance financing of priority projects and sectors

with a more diversified portfolio that shall support both growth in

agriculture, SMEs, and other priority sectors, as well as investments in

infrastructure and public utilities. It shall also provide a bigger fund base

with its combined capital base and total deposit base thus allowing

greater lending capacity.

1) Enhanced Financing. Among others, the merger hopes to

redound to a more diversified portfolio, greater lending capacity

and access to long term funding (GCG 2016).

a. Diversified Portfolio. DBP and LBP allocate the bulk of their

portfolios to mandated sectors and National Government

priorities. DBP’s lending program is geared to supporting

investments in infrastructure and logistics, social services,

environment, and SMEs. LBP's mandate has focused on

supporting growth in agriculture – providing financing to

１５

individual producers, agri-business, rural banks, and

cooperatives – as well as financing priority projects of the

government. Both banks provide financial services to public

sector agencies. The GCG believes that the merger will result in

a stronger bank with significant exposures in agriculture and

industry, small producers and SMEs and other priority sectors,

as well as priority investments in infrastructure and public

utilities (GCG 2016).

b. Greater Lending Capacity. The combined capital base of P133

Billion and total deposit base of P1.2 Trillion of DBP and LBP

will support higher loan growth by providing a bigger fund base

and by raising single borrower’s limit (SBL). DBP’s current

SBL stands at P9 Billion while that of LBP is at P18 Billion.

The merger will result in a combined SBL of P27 Billion. The

infusion of P30 Billion in equity as proposed in EO 198iii will

boost the LBP’s SBL significantly and enable it to fund big-

ticket infrastructure projects, which private banks had difficulty

serving due to SBL and other regulatory constraints (GCG

2016). See Table 3.

c. Access to Long-term Funding. – Providing long-term financing

is a key mandate of most development banks. DBP and LBP

have built strong relationships with sources of long-term

finance like the WB, ADB, JICA, KfW, JBIC, IFID. Combined

total approved loans reached $3.6 Billion in 2014, of which $1.3

Billion is available for relending in critical areas like

infrastructure, environment, SMEs and social services. On top

of ODA funds, there is a need to develop competitively priced

long-term financing to support infrastructure and other

investment priority projects (GCG 2016; see Table 5).

Table 4. Pre-merger, Post-merger Data according to Deposits,

Capital and Single Borrower’s Limit (SBL)

Pre-Merger Post-Merger

P Billion DBP Landbank Without Capital

Infusion

With P30 B

Infusion

Deposits 303 901 1,204 1,204

Capital 45 88 133 163

SBL 9 18 27 38

Source: DBP and Landbank

１６

Table 5. Official Development Assistance (ODA) and Bilateral Credit

Pre-Merger Post-Merger

USD Million DBP Landbank

Approved 2,240 1,300 3,540

Drawn 1,840 370 2,210

Available 840 936 1,776

Source: DBP and Landbank

2) Wider Access to Financial Services.

The merger is expected to pool resources that would provide

wider access to the different clients of LBP. This is mainly

because there will be:

a. More Branches in Unbanked Areas. The merger presents an

opportunity to rationalize existing branch networks of DBP and

LBP in order to reach more unbanked and underserved areas. At

least 34 branches of DBP and LBP can be relocated in the short-

term. Along with the planned branch openings in 2015, the

relocation of branches will expand the reach of the surviving

bank to 298 cities and municipalities (GCG 2016; see Table 6).

Table 6. Branch Network and Physical Presence in Cities and

Municipalities

Pre-Merger Post-

Merger DBP Landbank

Branches and EOs

Existing (Dec 2014) 96 369 465

New (2015) 28 21 49

Total 124 390 514

Cities and Municipalities

Existing (Dec 2014) 90 234 234

New (2015) 12 19 31

Relocation 20 13 33

Total 102 266 298

Source: DBP and LBP

１７

Upon consolidation, several branches from both institutions may be

closed should they be deemed redundant, which the GCG (2016) argues

will result in an increase in savings that can be used to spur improvement

among the existing branches or open new ones in areas of “inclusive

growth” so that more clients may find it accessible ("Govt says DBP-

LBP", 2016). 103 branches will remain in NCR, 207 in Luzon, 74 in

Visayas, 94 branches in the Mindanao region (GCG 2016).

b. Investing in IT to Reach the Underserved. – Technology offers a

means to reach more municipalities that are either unbanked or

underserved by financial institutions, but requires minimum

volumes to be cost effective. By increasing volumes and

reducing overhead cost, the merger allows cost-effective use of

technology to reach out municipalities that have been

previously marginalized (GCG 2016).

c. Financial Products and Services Catering to Priority Sectors. –

The merger will enhance the delivery of products and services

catering to the agriculture-agrarian reform sector, SMEs and

Overseas Filipino Workers (OFWs). The surviving bank can

leverage its presence in cities and municipalities to offer more

financial services to OFWs and their beneficiaries who are the

natural customers of its branch network. Beneficiaries of the

government’s 4Ps program will gain access to a wider network

of strategically located branches and ATMs as DBP and LBP

integrate networks (GCG 2016).

3) Stronger Government Bank.

Thus in general, the merger hopes to build a stronger

government bank that may take on other tasks it could not do

before, e.g., serving infrastructure needs of the country. In

addition, the GCG assumes that the following will happen:

a. More Solid Financial Base. – The DBP-LBP merger will create

the 3rd largest universal bank in the country in terms of total

assets, 2nd in terms of deposits, and 4th in terms of loans and

capitalization. The consolidated financial resources of the

surviving bank provide a more stable and stronger base for

developmental financing (GCG 2016; see Table 7).

１８

Table 7. Level and Industry Rank in terms of Assets, Loans,

Deposits and Capital, 2014

Pre-Merger Post-Merger

DBP Landbank

P Billion Rank P Billion Rank P Billion Rank

Assets 476.3 6th 1,051.3 4

th 1,527.6 3rd

Loans 143.1 9th 405.3 4

th 548.4 4

th

Deposits 293.8 9th 914.2 4

th 1,208.0 2

nd

Capital 36.2 10th 75.2 5

th 111.4 4

th

Source: DBP and LBP

b. Wider Customer Base, Wider Product Range. – Some 5 million

customers of DBP and LBP will gain from a wider array of

products and services as the merged banks integrate their

product offerings. The surviving bank will realize synergies

from an expanded customer base, wider range of products, and

more product delivery channels. Larger transaction volumes of

both traditional and non-traditional products will raise

operational and cost efficiencies.

Non-traditional financial services like technical advisory for

privatization and variants of public-private partnerships,

investment banking, and trust services will be strengthened by

the merger. DBP and LBP currently provide these services at

different scales, sophistication, market focus, and investment

risk profiles. Consolidation of operations will enhance capacity

to provide these services (GCG 2016; see Table 8).

Table 8. Number of Accounts and Average Daily Balance (ADB) of

Traditional Bank Products

Pre-Merger Post-Merger

DBP LBP

No. of Accounts

Current Account

779,488 779,488

Savings Account 605,533 3,627,255 4,232,788

Time Deposit 12,402 13,094 25,496

Total 617,935 4,419,837 5,037,772

１９

Average Daily Balance (P Billion)

Current Account 65.6 354.0 420

Savings Account 16.9 379.2 396

Time Deposit 174.5 36.1 211

Total 257 769 1,026

Source: DBP and LBP

c. Enhanced IT Platform and Operations. – DBP and LBP have

been investing to upgrade their respective IT systems to widen

access to banking services and improve bank operations. The

merger will add 340 ATMs to LBP's network of 1,330 ATMs,

double the number of Point of Sale (POS) Terminals, and

expand by over half-a-million cardholders LBP's customer base

(GCG 2016; see Tables 9 and 10)

Table 9. Number of Electronic Machines

Source: DBP and LBP

Table 10. Number of Cardholders

Pre-Merger Post-

Merger

DBP LBP

Credit Card - 53,557 53,557

Regular ATM 104,875 3,424,808 3,529,683

International Visa Card 473,471 394,013 867,484

E-card 1,227 123,117 124,344

Radio Frequency ID

Card - 4,967 4,967

Pre-Merger

Post-Merger

DBP LBP

ATMs 340 1,330 1,670

Cash Deposit Machines - 12 12

Bills Payment Machines - 14 14

Mobile ATMs - 8 8

Point of Sale Terminals 153 156 309

２０

Unified Membership ID

Card (GSIS) - 415,630 415,630

Prepaid Cash Card 9,764 4,457,971 4,467,735

All Card Products 589,337 8,874,063 9,463,400

Source: DBP and LBP

d. Optimized Business Policies. – The merger creates an

opportunity to further align business policies and processes to

the mission and business strategy of the surviving bank. Initial

review of these policies revealed areas of similarities where

integration should pose no difficulties, but also opportunities to

optimize policies by choosing the best of both banks (GCG

2016).

The merger will entail the reorganization of LBP and the separation

or retirement of some personnel of both banks. Some 5% of the total

workforce of 10,704 will be affected (Table 11). Thus, EO 198 provided

for a reorganization plan and a compensation package that will ensure

that those who will be retained will “not suffer any break in service or

tenure, or any diminution of salaries and lawful benefits” (Kabiling,

2016). In addition, those who will be forced to retire or resign will be

given Merger Incentive Pay (MIP) under the following rates (EO 198 s.

2016; see Table 12):

Table 11. Affected Employees

Number of Affected Employees, MIP Cost and

Annual PS Cost Savings

DBP Landbank TOTAL

Total Employees 2,264 8,440 10,704

Affected Employees 120 417 537

Percent Affected Employees 5.3% 4.9% 5.0%

Total MIP Cost (P Million) 232 1,035 1,267

Annual PS Cost Savings (P

Million) 321 681 906

Source: GCG estimates based on data from DBP and LBP

２１

Table 12. Merger Incentive Rates for Affected Employees

Years of Service Rate

First 20 years of

service

1.00 x Basic Monthly Pay

(BMP) x No. of years

Next 10 years of

service

1.25 x BMP x No. of years

Remaining years of

service

1.50 x BMP x No. of years

Source: EO 198 s. 2016; GCG 2016

IMPLICATIONS AND COMPLICATIONS OF THE MERGER

Despite President Aquino’s approval of the proposed merger through EO

198, issues are still raised why the merger was decided in the first place.

As earlier explained, both banks have been financially performing well.

In addition, both banks have passed the measure of financial strength.

LBP’s and DBP’s capital adequacy ratios were far beyond the mandated

10% of the BSP (Magtulis & Porcalla, 2016). Also, both have recorded

three years of positive net income or total comprehensive income. Both

were not losing, nor suffering from bad loans portfolio, nor being

perceived as inefficient. But why merge?

Local and international regulators also expressed their concern with

the possibility of the government cornering higher banking assets

(Magtulis & Porcalla, 2016). Bankers Association of the Philippines

President Lorenzo Tan however suggested that this event might be

viewed from two different sides of a coin. He stated that there is benefit

in having economies of scale, wider reach, and higher Single Borrowers

Limit which can spur nationwide development; but if the merger were

not properly managed, it can be a “too big to fail” situation (Magtulis &

Porcalla, 2016).

Former Anakpawis party-list Representative (now Secretary) Rafael

Mariano and former Agriculture Secretary William Dar have both

expressed opinions regarding the unconstitutionality of the merger.

Mariano in particular explains that “Merging LBP and DBP is an

encroachment of legislative functions by the Executive Department,

since both banks have their own charter created by Congress” (Reyes,

2016). This means that only the Congress can amend or repeal the laws,

which created the LBP and the DBP.

２２

Also, speculations regarding cover-ups have arisen with regard to

several issues involving some DBP and GOCC officials in alleged

anomalies and reported illegal banking practices. Last year, the

Commission on Audit has issued Notice of Charge against DBP treasury

officials for alleged losses arising from the sale of millions-worth of

government securities (Factao, 2015).

A. 2011 Behest Loans

During the year 2011, loans granted by the DBP to Delta Ventures

Resources Inc. (DVRI), led by former Trade Minister Roberto Ongpin,

reached legislative investigation (Cruz, 2011). It was reported that loans

amounting to P510-million and P150-million were granted with “undue

haste”, and reflected several violations to the regulation policies of the

Bangko Sentral ng Pilipinas (BSP) (The Philippine Daily Inquirer, 2013).

The case was filed by DBP itself, questioning the grant of large amount

of money to what they considered a “puny company”. DBP stated that

“since it was approved by the RMC credit committee, the executive

credit committee and the board of directors of DBP all in one day makes

the loan transaction doubly suspicious” (The Philippine Daily Inquirer,

2013).

Another incident involved charges against 25 DBP officials and 3

private individuals. During the Arroyo administration, criminal

complaints of graft and violation of banking laws were filed against

Businessmen Roberto Ongpin, former DBP president Reynaldo David,

former DBP chief operating officer Edgardo Garcia, and former DBP

directors Patricia Sto. Tomas, Ramon Durano IV, Alexander Magno,

Floro Oliveros, Joseph Pangilinan, Miguel Romero, Franklin Velarde and

Renato Velasco (The Philippine Daily Inquirer, 2013).

Behest loans granted by DBP were also reported to have amounted

to P1.6 billion, such was given to several institutions owned by the

Lopez group namely: Maynilad Water (P710.86M), Bayantel

(P591.81M), Central CATV Inc. (P207.10M), and Benpres Holdings

(P157.95M) (Cruz, 2011).

In 2012, Ombudsman Conchita Carpio Morales ordered the filing of

criminal charges against the concerned DBP officials, which then

ultimately resulted in the dismissal from service of 13 personalities (The

Philippine Daily Inquirer, 2013). It was stated that they “were

administratively liable for grave misconduct and conduct prejudicial to

the best interest of the service punishable by removal from the service”

(The Philippine Daily Inquirer, 2013).

２３

B. 2015 Trade Anomalies

Last year, the Commission on Audit’s supervising auditor reported a

series of illegal transaction activities conducted by DBP, which resulted

in millions worth of losses from the government. The state-owned

institution was discovered to have participated in a trade-bonding known

as “wash sales” in the period between January 29 and March 3, which

totaled to P717 million (Lucas, DBP hit with P717M loss in ‘wash sales’:

COA scores bank’s ‘unsound trading practices’, 2015). 28 transactions

involving government-issued 20- and 25- year fixed rated treasury notes

(FXTNs) were reported to have been sold by DBP to a single

counterparty, the First Metro Investment Corp. (Lucas, DBP hit with

P717M loss in ‘wash sales’: COA scores bank’s ‘unsound trading

practices’, 2015). These wash sales were characterized by securities

being bought back by DBP on the very same day they were sold, under a

pre-agreed price (Lucas, DBP hit with P717M loss in ‘wash sales’: COA

scores bank’s ‘unsound trading practices’, 2015).

COA stated that, “The same government securities series were

purchased on the same day at the same price under [DBP’s] hold-to-

maturity account when these were sold at a loss, which may give us an

impression of unsound trading practices leading to market manipulation”

(Lucas, DBP hit with P717M loss in ‘wash sales’: COA scores bank’s

‘unsound trading practices’, 2015).

News reports explain such practice involving the fixed-income

securities of banks: either banks book them through a “hold-to-maturity”

account (“to be held until they mature and not subjected to periodic re-

pricing to recognize paper gains or losses”); or through an “available-for-

sale” account (to be used for short-term trading activities and are

required to be revalued regularly to reflect paper gains or losses”) (Lucas,

DBP hit with P717M loss in ‘wash sales’: COA scores bank’s ‘unsound

trading practices’, 2015).

This activity is, of course, subject to the rules and regulations by the

BSP and the Securities and Exchange Commission (SEC), which seem to

be helpless against this widespread practice. “Wash sales” or the

unimpeded shifting of securities holdings from one book to another, are

done in order to manipulate good finances through impressions of bigger

gains or minimal losses (Lucas, DBP hit with P717M loss in ‘wash sales’:

COA scores bank’s ‘unsound trading practices’, 2015). These tend to

mislead auditors because they appear to be new purchases.

This practice is considered illegal in the financial sector because of

the many damages and complications that it provides. Wash sales

２４

misrepresent open market dynamics through an artificial increase of

trading volume, even when there is no actual change in ownership (Lucas,

DBP hit with P717M loss in ‘wash sales’: COA scores bank’s ‘unsound

trading practices’, 2015). They also victimize third-party institutions into

thinking that the large interest rates produced by large transactions are

market-accepted and acknowledged, even when they are actually

manipulated by certain bodies (Lucas, DBP hit with P717M loss in ‘wash

sales’: COA scores bank’s ‘unsound trading practices’, 2015).

DBP was quick to defend the scandalous transactions, to which it

argued that they were “done in good faith” and that such actions were

gravely necessary as they are part of a strategy to avoid even bigger

losses. DBP supported this statement by providing materials which

proved that these were approved by none other than their risk oversight

committee, headed by bank director Alberto Lim along with other top

officials (Lucas, 'Wash sales' had DBP brass' blessing, 2015). A meeting

in 2014 highlighted “Resolution No. 0001”, proposed by DBP senior

vice president Mariquita Agena, suggested that the bank should

“gradually sell our holdings of long-dated ‘available-for-sale’ peso

government securities worth P20 billion and buy for the ‘hold-to-

maturity’ portfolio to avoid increasing the mark-to-market losses and

preserve the accrual income” (Lucas, 'Wash sales' had DBP brass'

blessing, 2015). Such a strategy legitimizes the implementation of wash

sales, which, as DBP officials have deemed, is the ultimate solution to

avoid staggering losses. DBP further argued that had they not taken

action, a bigger loss amounting to P940 million would have been the

consequence.

According to DBP, they just used a strategy to “preserve capital and

strengthen the bank’s long-term viability” (Dumlao-Abadilla, 2015).

They further explained that, “In order not to breach regulatory capital

adequacy ratios, the bank had to cut losses and sold illiquid and out-of-

the-money government securities and booked trading losses on said

securities” (Dumlao-Abadilla, 2015).

The bank suggested that such a case should not be taken in isolation

because as counterbalance, it engages in trading activities, which offsets

the losses, as they have been doing so in similar incidences (Dumlao-

Abadilla, 2015).

However, COA stated that the very concept of selling assets is

unnecessary for DBP, given that they are in a very “liquid cash position”

(Lucas, 'Wash sales' had DBP brass' blessing, 2015). Because DBP

negated the purpose of the need to sell assets, the bank is then held to be

２５

practicing flawed banking practices.

Prompted by the COA, the SEC further engaged in the investigation

primarily because it implemented the Philippine Securities Regulation

Code. Under the Code, banking institutions are prohibited in “engaging

in transactions in which there is no change in actual ownership of a

security, taking into consideration internal control systems adopted by

the firm to prevent manipulative practices” (Dumlao-Abadilla, 2015).

C. 2015 Excessive Bonuses

Not long after the issue with wash sales, DBP was then subjected to

another incident, which involved its top-ranking officials with allegedly

excessive bonuses. DBP Vice President Mario Pagaragan and Atty.

Francis Romulo, both DBP employees, filed a plunder complaint before

the Office of the Ombudsman with regard to officials receiving excessive

performance-based bonuses: Chairman of the DBP Board of Directors,

Jose Nunez Jr., DBP President and CEO Gil Buenaventura, Director

Reynaldo Geronimo, Director Daniel Y. Laogan, Director Lydia Echauz,

Director Alberto A. Lim, Director Raul O. Serrano, Director Vaugn F.

Montes, and Director Cecilio B. Lorenzo (Cayabyab, 2015).

What made the incident graver was that not only did it involve

personalities from DBP but also several officials from the GCG itself:

Cesar L. Villanueva, Ma. Angela E. Ignacio, Ranier B. Butalid and Paolo

E. Salvosa (Cayabyab, 2015). It was reported that the questioned bonuses

were made possible in connivance with the governing body of GOCCs.

Included in the report is the total amount of bonuses reaching

P312.077M, which were in excess of the amount allowed by the law

(Cayabyab, 2015). Under the GCG Memorandum circular only 2.5 times

the basic salary is the maximum allowed bonus that should be received

by an employee. However, the complainants stated that the officials

mentioned received far greater—12 times their basic salaries (Cayabyab,

2015).

This action is a violation of Section 10 of Republic Act 10149,

which mandates the GCG to recommend whatever incentive in

consideration of good performance to the President (Cayabyab, 2015).

In response to this, DBP describes the complainants as “disgruntled”

employees because their performance report denied them the eligibility

to receive fat bonuses (Cayabyab, 2015).

Former and now Budget Secretary Benjamin Diokno stated that, “Is

the outgoing administration trying to sweep under the rug some

questionable deals made by DBP officials? Who benefited from these

２６

deals? What will happen to the questions raised by the Commission on

Audit on DBP’s losses and disallowances involving billions of pesos?”

(Lozada, 2016). With the consolidation of assets and liabilities of the two

banks, this could give a bad impression with regards to faulty procedures

and bad loans under the Aquino administration. Mariano added that,

“anomalies and irregularities…could be concealed or folded in once the

merger gets under way” (Reyes, 2016).

In contrast to this, Dr. Santiago R. Obien, senior technical adviser to

Agriculture Secretary Proceso Alcala, said there is no illegality in the

merger. However, he suggested that the goals of the two banks as

separate entities, once consolidated, may weaken under the merger.

Obien stated that, “LBP was created as a dedicated bank for agriculture,

fisheries and forestry…but if they merge, that objective may not be

achieved anymore. “The problema [sic] is what they are supposed to do.

It might be that the bank becomes only useful to industries and business

people, and the support to farmers may become more and more

negligible” (Reyes, 2016).

Also, with the state of the proposed merger already a pending bill

before the Congress, “why did the President have to beat the lawmakers

to it?,” Mariano asked. (Reyes, 2016). Another party lukewarm to the

merger is the then incoming and now Finance Secretary Carlos G.

Dominguez. He stated that with only a presidential approval and lack of

legislative action, the merger may not survive in the incoming Duterte

administration (de Vera B. O., 2016). He further explained that, “the

GCG’s bids and awards committee for the procurement of advisor was

well aware the next administration may have different priorities, but tried

nevertheless to complete the bidding for advisors right before the

elections” (de Vera B. O., 2016).

The Challenges Ahead

As an official who is in-charge of state-owned companies, Finance

Assistant Secretary Maria Teresa S. Habitan stated that the Aquino

administration wants “substantial progress” before the president steps

down. However, Finance Secretary Cesar Purisima said that the

remaining time is already inadequate, given that the merger was

proposed to be implemented within only a one-year timeline (de Vera B.

O., 2016). With Aquino stepping down as President, the next

administration is given the power to scrap the Executive Order signed by

Aquino (Leyco, 2016).

Even before Davao City Mayor Rodrigo Duterte assumes

２７

presidency, he has already expressed his disdain with the merger. Along

with his running mate Sen. Alan Peter Cayetano, they warned that such

act may hinder the LBP and DBP from providing services to the poor,

and instead make farmers and small business baits and victims of lenders

and loan sharks (Frialde, 2016). Duterte averred that, “Kapag tinuloy ito,

papahirapan na naman ng gobyerno ang mga tao. Diyan ako galit. Ang

gobyerno dapat ay para sa tao. Hindi para lang sa mga mayayaman at

may impluwensiya” (Frialde, 2016).

The two also highlighted the distinct function of LBP and DBP,

stating that the former gives credit to the agriculture sector and the latter

helps small and medium businesses. Cayetano argued that, “These banks

are not meant to compete with private banks. They are meant to grant

financial assistance to ordinary Filipinos, especially farmers and micro,

small and medium enterprises” (Frialde, 2016).

With this in mind, Habitan also called into attention the possibility

of opposing parties to seek the ruling of the Supreme Court. This is

because without Congress approval, the authorization given to the GCG

to merge two state-owned entities may be put into question (Leyco,

2016).

Almost 100 days after the formal inauguration of President Duterte,

the new administration put a stop to the merger. As of the en banc

resolution of the new GCG, it “resolved to cancel the implementation of

EO 198 of the Aquino administration.” (De Vera, 2016). It assessed that

“the merger would not serve the public interest, given their different

functions. LBP serves the agriculture sector while DBP serves the

industry. Both were created for different purposes” (De Vera, 2016).

In addition, the new GCG believes that Congress created the two

GFIs and only Congress could legalize their merger (De Vera, 2016).

LESSONS LEARNED FROM THE RATIONALIZATION

PROCESS

The reform measure highlighted in the case of the failed LBP-DBP

merger speaks of good intentions that were not good enough. It was good

of the Governance Commission for GOCCs to do passionately and

efficiently its function of rationalizing GOCCs. It can legally base its

recommendations on the principle that the “corporate form of

organization through which government carries out activities is utilized

judiciously” (Sec. 2 of RA 10149). However, it seems to have naively

２８

underestimated the politics and dynamics involved in public sector

reform.

Political Dynamics. GOCC reform requires the convergence of law,

rigorous evaluation, change management and the interaction of at least

the Legislature, the Executive, the Regulator (GCG) and the GOCCs

(LBP and DBP) concerned. It is not just a matter of routine. It does not

mean that just because overlaps and duplications are bases for mergers, a

recommendation for merger holds water. A lot of calibration, consultation,

and revisit to the very bases for creating GOCCs have to be done at least.

In addition, even if the GCG is legally the central advisory, monitoring,

and oversight body for GOCCs, it does not mean, that as a super body, it

can do what it deems legally perfect, without consulting with Congress

and the GOCCs themselves. Though the GCG under the Aquino

administration belongs to the great minds of public servants and are legal

luminaries in their own right, it does not mean that their actions will not

be subject to second opinions, more so legal opinions. As in the

alternative perspective during the Aquino administration and now the

mainstream voice of the Duterte administration, the major legal infirmity

it seems, is GCG’s encroachment on the power of Congress to legislate

the reform measure. As the new GCG believes in its latest en banc

resolution, “Congress created the two GFIs and only Congress could

legalize their merger” (De Vera 2016).

In the case of LBP and DBP, it was established that both banks were

not losing. In fact, they have been performing financially well. Though

there may be allegations of corruption, abuses, bad financing practices

(for DBP), these did not matter in the overall equation since in most

mergers, stronger institutions subsume weaker institutions in order that

the resulting entity is far better than any of them separately. The latter

was not the case in the proposed merger initiative, as both are supposed

to be strong. Merging two strong institutions will give the economies of

scale and may pose undue advantage over the competition. The

government as owner of these GFIs should refrain from unfairly

competing in order to earn, at the expense of the other banks.

Revisit the Core Rationale of GOCCs. Merger requires going back to the

basic principles of creating GOCCs. So what if two GFIs have seeming

overlaps in clientele, services or development functions and are in a

privately dominated banking sector? In the country, these overlaps or

redundancy are more needed in order to spur development, serve the

２９

underserved and contribute in the attainment of national development

goals.

Thus, they are the necessary ‘redundants’ in more than 640 banks in

the country (BSP 2015). In addition, if we merge DBP and LBP, there

will be one important GFI less in the banking market that could expand

financial services to the ‘poor’ clients (farmers, fisher folks, SMEs).

Most universal and commercial private banks cater to those who are

relatively richer and with collateral to pawn. DBP and LBP are supposed

to serve these clients as well, but more so, the poorer segments of the

populace who need funding assistance more. Cost-benefit analyses

should give primacy to the development objectives of GOCCs.

Areas for Future Research. This case is only a snapshot of public

enterprise reform in the country. A more comprehensive study of reform

initiatives may be needed in order to better understand the pains and

gains so far instituted in the country with regard to GOCCs. A more

comparative assessment over the quality of GOCCs may also be needed

to ascertain which groups are better serving their avowed functions and

advocacies, and which GOCCs are failing. A country-to-country

comparison may also be done to enrich the discourse on public sector

reform. Though Korea may not have GFIs, reforms in government-

influenced banks may give a semblance of the lessons and moving

forward recommendations to improve the quality of public service

delivery by governments through the corporate form.

GOCCs or SOEs are still needed to propel growth and promote trust

in government through the corporate form. They are still needed to

impress on the nation that they are performing effectively, responsibly

and efficiently, and actually doing service which is value for money for

the taxes paid by citizens. They should be exemplars of good governance,

and of the judicious use of the corporate form. GOCCs should be

reformed for public good and not just because it is legal to do so.

Rationale for reform should be convincingly satisfactory in order to gain

the trust and confidence of the public.

ACKNOWLEDGEMENT

The author acknowledges the very able assistance given her by Vianchi

Arevalo, student intern, 3rd

year AB Political Science from the University

of Santo Tomas.

３０

REFERENCES

Administrative Order 59, 1988 Rationalizing the government corporate sector.

Alvendia, A.M. (1991). The role of government corporations in national

development: Extent and boundaries of strategic industries. Government

Corporate Sector Rationalization Program policy studies1989-1990 (pp.

387-415). Manila: Department of Budget and Management. Sponsored by

the United Nations Development Programme.

Bati, A.(2005). Limitations on effective corporate governance in state-owned

enterprises and how to deal with them. Salans.

Briones, L.M. (1985). The role of government-owned or controlled corporations

in development. Philippine Journal of Public Administration, 29(4), 365-

391.

Cayabyab, M. (2015, May 25). House passes DBP, LBL merger bill. Retrieved

June 29, 2016, fromThe Philippine Daily Inquirer:

http://business.inquirer.net/192501/house-passes-dbp lbp-merger-bill

De Vera, B. O. (2016, May 23). New administration to decide on DBP-

Landbank planned merger. Retrieved June 28, 2016, from Philippine

Daily Inquirer: http://business.inquirer.net/210486/new-administration-to-

decide-on-dbp-landbank-planned-merger

De Vera, B. O. (2016, February 13). Gov’t wants LBP-DBP merger finalized by

June.Retrieved June 29, 2016, from The Philippine Daily Inquirer:

http://business.inquirer.net/207022/govt-wants-lbp-dbp-merger-finalized-

by-june

De Vera, B. O. (2016, June 7). Dominguez bucks DBP-LBP merger. Retrieved

June 30, 2016, from The Philippine Daily Inquirer:

http://business.inquirer.net/210865/dominguez-bucks-dbp-lbp-merger

Delavin, I. C. (2015, August 25). Landbank-DBP merger may fall through.

Retrieved from BusinessWorld Online:

http://www.bworldonline.com/content.php?section=Finance&title=landba

nk-dbpmerger-may-fall-through&id=114106

Development Bank of the Philippines. (2010). History. Retrieved from

Development Bank of the

Philippines :https://www.devbnkphl.com/about.php?cat=9&e7dd75a5860

84ea7be23318056a06380

Development Bank of the Philippines. (2015). DBP Profile 2015. Retrieved

from Development Bank of the

Philippines:https://www.devbnkphl.com/about.php?cat=9&e7dd75a58608

4ea7be23318056a06380

Drilon, Franklin M. “Recent Endeavours of the Philippines on Drafting a New

SOE Act.” A presentation for the 6th

Meeting of the Asia Network on

Corporate Governance of State-Owned Enterprises, Seoul, Korea, 17 May

2011

Dumlao-Abadilla, D. (2015, June 3). SEC looking into DBP trade anomalies.

３１

Retrieved from The Philippine Daily

Inquirer:http://business.inquirer.net/192965/sec-looking-into-dbp-trade-

anomalies

Dytianquin, N.G. (1985, December). The economics of privatization. Central

Bank Review. EO 24. Prescribing Rules to Govern the Compensation of

the Board of Directors/Trustees of GOCCs s. 2011

Factao, G. (2015, August 24). COA issues notice of charge againts DBP treasury

officials. Retrieved from BusinessMirror:

http://www.businessmirror.com.ph/coa-issues-notice of-charge-against-

dbp-treasury-officials/

Fernandez, P., and Sicherl, P. (1981). The identity and character of public

enterprises: A building blocks approach in seeking the personality of

public enterprises. International Center for Public Enterprises, Ljubljana,

Yugoslavia.

Frialde, M. (2016, February 10). Duterte-Cayetano slams gov’t for plan to merge

DBP and LBP. Retrieved June 30, 2016, from The Philippine Star:

http://www.philstar.com/headlines/2016/02/10/1551673/duterte-cayetano-

slams-govt-plan-merge-dbp-and-lbp

Governance Commission for GOCCs 2012 “Philippines’ New Paradigm in

Public Corporate Governance”

Governance Commission for GOCCs 2016 “Proposed Land Bank of the

Philippines-Development Bank of the Philippines Merger, A Briefer

InterAksyon.com. (2016, February 9). Govt says DBP-LBP merger to result in

more competitive, more service-oriented bank. Retrieved from

InterAksyon: http://interaksyon.com/article/123864/govt-says-dbp-lbp-

merger-to-result-in-more competitive-more-service-oriented-bank

Kabiling, G. (2016, February 9). Palace assures compensation package for

employees affected by LBP-DBP merger. Retrieved from Manila Bulletin:

http://www.mb.com.ph/palace assures-compensation-package-for-

employees-affected-by-lbp-dbp-merger/

Land Bank of the Philippines. (2014). History. Retrieved from Landbank of the

Philippines: https://www.landbank.com/history

Land Bank of the Philippines. (2014). About Us. Retrieved from Land Bank of

the Philippines: https://www.landbank.com/about

Leyco, C. (2016, February 12). DOF wants LBP-DBP merger implemented

ASAP. Retrieved From Manila Bulletin: http://www.mb.com.ph/dof-

wants-lbp-dbp-merger-implemented-

Lozada, R. (2016, February 28). Cover-up Seen in Rush to Merge DBP, LBP.

Retrieved from The Market Monitor: http://marketmonitor.com.ph/cover-

up-seen-in-rush-to-merge-dbp lbp/

Magtulis, P., & Porcalla, D. (2016, February 10). P-Noy OKs Landbank, DBP

merger. Retrieved June 28, 2016, from The Philippine Star:

http://www.philstar.com/business/2016/02/10/1551379/p-noy-oks-

landbank-dbp-merger

３２

(Villamejor-)Mendoza , M. F. (1992). Towards deepening public enterprise

reforms. Paper presented at the Fourth National Conference on Public

Administration, Quezon City.

(Villamejor-)Mendoza, M. F. (1995). Towards deepening public enterprise

reforms: Alternatives beyond privatization. In P.D. Tapales &N.N. Pilar

(Eds.), Public administration by the year 2000: Looking back into the

future (pp. 347-392). Quezon City: College of Public Administration,

University of the Philippines.

(Villamejor-)Mendoza, M. F. (2007). “Corporate Governance and Reforms in

the Public Sector” Philippine Journal of Public Administration, January-

October Volume LI Nos. 1-4

Office of the President of the Philippines. (2016, February 4). Executive Order

No. 198, s. 2016. Philippine Government 2010, R.A. 10149 An Act to

Promote the Financial Viability and Fiscal Discipline in GOCCs and to

Strengthen the Role of the State in its Governance and Management to

Make them more responsive to the Needs of Public Interest and For Other

Purposes or the GOCC Governance Act of 2011Retrieved from Official

Gazette: http://www.gov.ph/2016/02/04/executive-order-no-198s-2016/

Reyes, E. (2016, March 8). LBP-DBP merger illegal, unconstitutional - agri

experts. Retrieved June 30, 2016, from Interaksyon:

http://interaksyon.com/business/124951/lbp-dbpmerger-illegal-

unconstitutional---agri-experts

Tabbada, J.P. (1989). Explorations on the history of state intervention in the

Philippine economy: The role of public enterprises. In G.U. Iglesias, J.P.

Tabbada, & M.F.V. Mendoza, Review of public sector management

improvement and technical cooperation in the Philippines. A report for

the United Nations Development Programme Management Development

Programme.

Tabbada, J.P., and Baylon, M.S. (1991). Organizational arrangements for

monitoring, coordinating and supervising GOCCs. Government Corporate

Sector Rationalization Program policy studies 1989-1990(pp. 1-35).

Manila: Department of Budget and Management. Sponsored by the United

Nations Development Programme.

The Philippine Daily Inquirer. (2013, August 2). WHAT WENT BEFORE: DBP’s

P660M grant in alleged behest loans. Retrieved from The Philippine

Daily Inquirer: http://newsinfo.inquirer.net/457119/what-went-before-

dbps-p660m-grant-in-alleged-behest-loans

Endnote i Disposition as a reform measure is now anchored on the GCG’s evaluation

criteria as contained in RA 10149 (Section 5). These include among others, a)

possible abolition, or b) privatization, if the functions or purpose for which the

GOCC was created are no longer relevant or no longer consistent with the

３３

national development plan of the State; or if the GOCC is not producing the

desired outcomes, or no longer achieving the objectives and purposes for which

it was originally designed and implemented, and/or not cost-efficient and does

not generate the level of social, physical and economic returns vis-à-vis the

resource inputs; or when the GOCCs are already dormant or non-operational,

and have outlived their purpose; or c) consolidation or merger , if the GOCC’s

functions or purpose duplicate or unnecessarily overlap with functions,

programs, activities or projects already provided by a Government Agency, and

could be subsumed under or undertaken by such agency; or if the functions or

purpose or nature of operations of any group of GOCCs require consolidation

under a holding company.

ii A unibank is a universal bank, which participates in many kinds of banking

activities and is both a commercial bank and an investment bank. These are

also called full-service financial firms, although there can also be full-service

investment banks which provide asset management, trading, and underwriting

(www.philippinesplus.org.com)

iii Included in EO 198 is the increase in the authorized capital stock of LBP

from 25 billion pesos to 200 billion pesos, which according to Pres. Aquino is

“necessary for the surviving entity to absorb the latter” (Magtulis & Porcalla,

2016). It also directed the Departments of Finance (DOF) and of Budget and

Management (DBM) to provide capital infusion to LBP of at least thirty billion

pesos in order to allow LBP to continue supporting the government’s

sustainable and inclusive growth agenda (EO 198 Approving the Merger of the

Development Bank of the Philippines and the Land Bank of the Philippines, 4

February 2016).

３４

３５

Reactor’s Note

Locating the LBP-DBP Merger in the Context of Regional

Financial Integration

Lucio Blanco Pitlo III,

Chinese Studies Program

Ateneo de Manila University

The research is a significant contribution in advancing existing literature

on public enterprise reform and consolidation in the financial sector in

the Philippines. Unlike other fast developing East Asian states, the

Philippines has a smaller share of state enterprise sector, which is further

shrinking because of continuous reform and disposition, although

elsewhere in the region, the trend towards consolidation, as well as

gradual privatization, of state-owned assets is accelerating. Attention to

the country’s financial sector is expected to grow as the country is poised

to usher in a “Golden Age of Infrastructure”, which would put greater

demand for financing and capacity to manage incoming capital flows.

This is especially so in the aftermath of the successful state visits of

President Duterte to China and Japan and the Philippines' ratification of

the Asian Infrastructure Investment Bank—a new multilateral

development bank that could provide a new funding channel for the

country’s burgeoning infrastructure needs. The anticipated boom in

infrastructure, trade and investment—given the economic pragmatism of

the new Philippine leadership— will also attract other sources of long-

term finance like foreign commercial and policy banks, donors and

official development assistance partners like Korea, highlighting the

important intermediary role that the financial sector will play in this

regard.

Taking the LBP-DBP merger as case in point, Dr. Mendoza inquired

into the rationale, implications, challenges and lessons of this state

enterprise reform initiative. The choice of this transaction was very

timely and relevant considering that the same was not the usual mode of

disposing state assets and because of the controversy surrounding the

３６

deal. At this point, it might have helped if the author had cited some

conventional examples of state asset disposal to demonstrate how this

transaction can be considered as an outlier or a norm. Another factor that

added salience to the merger was the variance with which the previous

and present administrations appreciated— the former Aquino

government pushed for it, while the Duterte government opposed it.

Even during the campaign, the Duterte-Cayetano tandem (running as

President and Vice President respectively) challenged the wisdom behind

the transaction. Hence, its fate was sealed with Duterte’s electoral victory.

It remains to be seen whether this position will change or if the proposed

merger would be reconfigured or revived in another form perhaps for the

consideration of the next administration. Both state-owned banks

involved in the deal were created by their respective charter laws so the

failure to involve Congress in the matter was also thrown into light. It

would have helped, in this regard, if the author had been able to cite

previous mergers or acquisitions (M&As) involving state assets

particularly those created by law where legislature intervened or where

their participation was sought by the executive. Also, it may be apt to

inquire into the extent that the management of both state banks or GCG

have consulted or conferred with Congress or relevant Congressional

committees about the proposed merger deal. The possibility of covering

up irregularities in both banks with the consummation of the merger also

added controversy to the transaction.

Various reasons were put forth to account for M&As in the public

enterprise sector. Dr. Mendoza outlined these as they play out in the

merger at hand, while at the same time, offering a critique of each

narrative. Performance deficit was one of the most cited rationale for

consolidation, but the utility of this explanation for the LBP-DBP merger

was put in the spotlight since both banks were doing well pre-proposed

merger. While the author was able to cite the financial health of both

banks and how they measure up with competition, it was not established

whether GCG maintains its own metrics for assessing the performance of

GOCCs and if there are any special set of metrics for state-owned

financial institutions. Are state-owned banks measured against their

private sector peers given their different nature, with the latter having a

public interest (on top of a proprietary) mandate? Overlapping mandates

and the desire to create efficiency and economies of scale was also cited

as another reason behind the deal.

Some studies came out refuting the claim of efficiency post

consolidation. In fact, in a study of the Korean banking consolidation,

３７

Park (2011)1

noted that it even produced the reverse—increased

inefficiency, thus challenging conventional assumptions about the

benefits of mergers in the finance sector. However, Sufian et al (2008)2

noted that bank mergers could result to higher efficiency (especially in

the event of a merger with a more efficient bank), though not necessarily

to higher profitability due to higher costs incurred. Analyzing the Korean

commercial banking market from 1992-2004, Park (2009)3

also

described it as under monopolistic competition before and after the crisis

and that the restructuring and consolidation that took place in the

aftermath of the crisis did not reduced such forces of competition. Hence,

some prevailing assumption that M&As may give rise to entities with

potential monopoly power that can stifle competition may not necessarily

hold. Among the challenges and obstacles to consolidation include

geography which can put strains on the technology infrastructure, weak

regulatory and supervisory capacity, valuation differences, non-public

ownership structures (e.g. private family), concerns about job losses,

working relations with foreign supervisory bodies (e.g. differences in the

legal treatment of certain information), and high acquisition costs. A

second look at these potential impediments and an evaluation of how

they may impact on the LBP-DBP case may be sensible.

Regional trends towards financial consolidation

The financial industry witnessed tremendous changes in the 1990s.

Deregulation, globalization, increasing use of technology and

intensifying competition encouraged domestic, as well as cross-border

consolidation to benefit from spreading risk and economies of scale4. The

Asian financial crisis accelerated such trend. In Southeast Asia, attempts

to consolidate the state-owned banking sector surfaced. Hence, it would

be good to also set a brief regional context behind consolidation of the

state-owned banking sector, the rationales used by the country’s

1 Park, Kang H. (2011) “What Happened to Efficiency and Competition after Bank

Mergers and Consolidation in Korea?”, KDI Journal of Economic Policy 2011, 33 (3) 35-

55. 2 Sufian, Fadzlan, Muhamed Zulkhibri Abdul Majid and Razali Haron (2007)

“Efficiency and Bank Merger in Singapore: A Joint Estimation of Non-Parametric,

Parametric and Financial Ratios Analysis,” MPRA Paper No. 12129 posted December 12,

2008. Retrieved December 18, 2016 from https://mpra.ub.uni-muenchen.de/12129/1/MP

RA_paper_12129.pdf 3 Park, K. (2009) “Has Bank Consolidation in Korea Lessened Competition?” Quarterly

Review of Economics and Finance, 49, pp.651~667. 4 ibid

３８

neighbors in such a move, the catalysts and impediments encountered in

doing so and their progress. As such, one would realize that the LBP-

DBP merger does not stand in isolation.

With the coming of the ASEAN Economic Community (AEC), for

instance, the banking sector of individual Southeast Asian states are

expected to consolidate and strengthen in anticipation of greater

competition given the planned regional financial integration by 2020. As

such, plans and actions to consolidate state-owned banks in Indonesia

and Malaysia, for instance, were rolled out. The Indonesian Financial

Services Authority (OJK) plans to merge four state-owned banks— Bank

Mandiri, Bank Rakyat Indonesia, Bank Negara Indonesia and Bank

Tabungan Negara by the end of 20185. Consolidation may help the post-

merger entity be eligible for the Qualified ASEAN Bank status which

allows for business expansion into other ASEAN member states without

requiring a special permission6. As Southeast Asia’s largest economy and

most populous state, Indonesia has a huge room for improvement in its

financial sector— bank penetration still stands at 30% of GDP and

lending is growing at 20%, turning it to one of the world’s most

profitable lending markets7. Efficiency, better capitalization, and the need

to make the Indonesian banking industry more attractive to investors are

cited as among the rationales behind OJK’s plans to consolidate the

country’s 120 or so banks to about 608.

In Malaysia, early this year, the proposed merger of three banks—

CIMB Group Holdings Bhd, RHB Capital Bhd and Malaysian Building

Society Bhd—eventually fizzled over failure to arrive at a mutually

agreed value added for the three parties and their stakeholders9. Another

reason stated was that the deal could have cost the loss of 8,000 jobs as a

consequence of the rationalization10

. Had the deal pushed through, it

could have created Malaysia’s biggest bank with close to USD200 billion

5 Global Business Guide Indonesia. (2016) “Consolidation of State-Owned Banks in

Indonesia: A Recipe for AEC Success?,” GBG Indonesia, April 29, 2016. Retrieved

December 15, 2016 from http://www.gbgindonesia.com/en/main/business_updates/2016/

consolidation_of_state_owned_banks_in_indonesia_a_recipe_for_aec_success_11536.ph

p 6 ibid 7 ibid 8 ibid 9 The Star Online. (2016) “CIMB-RHB Cap-MBSB merger would have cost 8,000 jobs,”

March 28, 2016. Retrieved December 11, 2016 from http://www.thestar.com.my/business

/business-news/2016/03/28/cimbrhb-capmbsb-merger-would-have-cost-8000-jobs/ 10 ibid

３９

in assets or about 60% of the country’s GDP, making it a domestic

systemically important bank (D-SIFI), a major player in the region and a

potentially big player in the global Islamic banking industry11

. According

to 2012 Basel Committee on Banking Supervision (BCBS) document

titled “A Framework for Dealing with Domestic Systemically Important

Banks”, such entity that could be created out of industry consolidation

should be strictly supervised and should have higher loss absorption

requirement12

. BCBS defers to national regulatory authorities in terms of

deciding the threshold that determines whether a proposed post-merger

entity would constitute a D-SIFI, although some fundamental criteria are

laid out, notably interconnectedness, substitutability/financial

infrastructure and complexity. The “too big to fail” argument was also

cited in relation to the transaction. Accelerating expansion of financial

services in emerging markets is welcome but there are significant

challenges and risks attached to the same that should also be considered,

requiring robust risk management, supervision, cooperation across

jurisdictions (especially for cross-border M&As) and crisis prevention,

the failure of which could result to grave financial and economic

consequences.

In Singapore, Overseas Union Bank (OUB) was acquired by United

Overseas Bank (UOB) for USD10 billion after almost a year of intense

rivalry with another bidder, Development Bank of Singapore (DBS)13

. In

the same year, OCBC acquired Keppel Tat Lee for USD5.21billion, the

latter being a similar product of a merger between Keppel Bank and Tat

Lee Bank14. In Thailand, Krung Thai Bank, the country’s second largest

lender by assets and whose major shareholder is the state, is also

preparing for acquisitions to join the ranks of the region’s biggest banks15

.

The State Bank of Vietnam also encouraged consolidation with 2015

announcements of upcoming transactions e.g. Phuong Nam Bank-

11 Poenisch, Herbert. (2016) “Malaysian bank giants merging?” Penang Monthly,

January, 2016. Retrieved December 11, 2016 from http://penangmonthly.com/malaysian-

bank-giants-merging/ 12 ibid 13

“Singapore’s largest bank M&A deals through the years”, Straits Times Business,

April 7, 2014. Retrieved December 18, 2016 from http://www.straitstimes.com/business/

companies-markets/singapores-largest-bank-ma-deals-through-the-years 14 ibid 15 Chanjaroen, Chanyaporn & Anuchit Nguyen (2016) “Krung Thai Bank Aims to Join

Regional Banking Powers,” Bloomberg, January 29, 2016. Retrieved December 15, 2016

from https://www.bloomberg.com/news/articles/2016-01-28/krung-thai-bank-sets-sights-

on-joining-regional-banking-powers

４０

Sacombank union, merger between Ocean Bank and an undisclosed big

bank and merger of some small banks with Vietcombank and BIDV16

.

Evolving trends towards regional financial integration, particularly

with the formation of AEC, figured well as a rationale behind

consolidation. While the same was mentioned in Dr. Mendoza’s paper, it

may be helpful, for purposes of providing a better regional picture, that

this matter be given more treatment. Across the region, governments

seem involved in encouraging consolidation and from this perspective

the LBP-DBP merger can be set in context. However, it remains to be

established whether the goal for the same was to create a national

champion that can compete with fast-consolidating regional rivals or just

to promote efficiency or economies of scale for domestic operations. Was

readiness to compete in the regional level used by LBP, DBP, GCG or the

government in endorsing the merger? Interestingly, while state-

encouraged consolidation is taking place between already big banks,

consolidation in the largely fragmented Philippine banking industry still

occurs among smaller provincial banks under the Consolidation Program

for Rural Banks, an initiative by the Bangko Sentral ng Pilipinas in

cooperation with the Philippine Deposit Insurance Corporation and

LBP17

. Other reasons cited for consolidation include overbanking or too

much fragmentation (Vietnam), crisis recovery (Indonesia), response to

increasingly sophisticated customer demands and technological advances

(Malaysia), and the need to acquire additional capital and world-class

management and operational expertise, mostly through foreign

investments (Singapore).

Financial industry consolidation in Korea: contrasts and possible

lessons

The Korean banking sector also experienced consolidation especially in

the aftermath of the Asian financial crisis in the late 1990s. Korea

Exchange Bank (KEB) merged with its subsidiary Korea International

Merchants Bank in 1999 increasing KEB’s paid in capital to USD1,280

million. Hana Financial Group acquired Chungchong in 1999, which

previously merged with Seoul Bank in 1992, to become the country’s

16 Techcom Bank. “A snapshot about bank mergers and acquisitions in Vietnam.”

Retrieved December 19, 2016 from https://www.techcombank.com.vn/priority-banking/n

ews/market-news/a-snapshot-about-bank-mergers-and-acquisitions-in-vietnam 17 Torres, Ted (2016) “Consolidation of banking system to persist this year,” Philippine

Star, February 9, 2016. Retrieved December 18, 2016 from http://www.philstar.com/bank

ing/2016/02/09/1551068/consolidation-banking-system-persist-year

４１

third largest bank. In 1999 alone, a flurry of merger deals took place -

Kookmin Bank merged with Korea Long-Term Credit Bank;

Commercial Bank of Korea with Hanil Bank creating Hanvit Bank; Hana

Bank with Boram Bank; Kangwon Bank with Hyundai Merchant Bank;

and Chohung Bank with Kangwon Bank. Consolidation carried on post

crisis. In 2006, Shinhan Financial Group acquired Chohung Bank for

USD 2.8 billion propelling it to become the country’s second largest

bank with combined assets of USD168 billion. In 2012, Hana also

announced acquisition of KEB making it the largest Korean commercial

bank18

.

Foreign banks and private equity (PE) firms have also been

involved in the consolidation of the Korean financial sector post crisis.

PE firm Lone Star acquired KEB in 2003 with the aim of turning it

around, increasing organizational efficiency and contributing to its

recovery before determining the best available investment exit option19

.

In 2002, US investment bank Lehman Brothers Holdings Inc. signed a

deal with state-owned Woori Finance Holding Co. to help the latter shed

its nonperforming loans, the principal loan balance of which stands at

USD8.4 billion20

. The two sides set up a special purpose vehicle, 70%

owned by Lehman and 30% by Woori, to buy Woori’s bad debt in

batches. Lehman also bought a 49% stake in the newly established Woori

Asset Management Co. Ltd. to manage such non-performing loans.

Woori’s substandard (non-performing) loans declined and standard loans

improve as a result of the transaction. German Commerzbank increased

its share in KEB to 32.55% in 200021

. Also in 2000, Goldman Sachs &

Co. bought a 16.8% stake in Kookmin Bank for USD500 million in stock

and USD200 million in convertible bonds22

. In 1999, US investment firm

18 The merger was consummated in September 2015 with the post-merger entity, KEB

Hana Bank, becoming Korea’s biggest bank with a balance sheet of USD254 billion.

KEB Hana Bank “Merger of Hana and KEB Completed” Retrieved December 17, 2016

from https://www.kebhana.de/en/about-us/ir/news/115-01092015.html 19 Menle, Matthias & Dirk Schiereck (2007) “Private Equity Investments in the Banking

Industry – The Case of Lone Star and Korea Exchange Bank”, Bank and Bank Systems,

Vol. 2, Issue 2, pp. 22-34 20 Choi, Hae Won (2002) “Woori Sets Deal with Lehman to Shed Nonperforming Loans,”

The Wall Street Journal, September 6, 2002. Retrieved December 16, 2016 from http://w

ww.wsj.com/articles/SB1031213599848775875 21 Menle & Schiereck (2007) 22 Schuman, Michael (1999) “Goldman Investment to Bolster South Korean Banking

Industry,” The Wall Street Journal, April 12, 1999. Retrieved December 16, 2016 from htt

p://www.wsj.com/articles/SB92385615247975353

４２

Newbridge Capital Ltd acquired a 51% share of Korea First Bank for

USD417 million and in 2000, HSBC Holdings acquired 70% of Seoul

Bank for USD700 million23

. Foreign investments in the country’s

banking sector had been taken as positive signs of the effectiveness of

the reforms undertaken in response to the regional financial contagion.

With such foreign investment flows, the Korean government no longer

has the sole burden of recapitalizing the country’s beleaguered financial

sector. State-owned Korea Asset Management Corporation was put up to

sell the country’s distressed assets, but Korean commercial banks also set

up their own bad loan centers, enabling foreign investors to directly deal

with them24

.

Similar developments also took place in the related insurance sector,

with private funds and foreign investors also actively expanding their

portfolio in Korea. Last year, Chinese insurance conglomerate Anbang

Insurance acquired 63% of Tong Yang Life Insurance’s outstanding stock

for USD 1 billion25

. The year after, Anbang further expanded its reach in

the Korean insurance market by acquiring Allianz Life Insurance Korea

and Allianz Global Investors Korea from its German parent company

Allianz SE for US3 million, making Anbang the second largest insurer in

Korea26

. Consolidation is also taking place in the country’s securities

industry with the country’s Financial Services Commission encouraging

the creation of a national champion that can be globally competitive like

New York’s Goldman Sachs27

.

There were significant contrasts between Philippine and Korean

experiences in banking consolidation where some valuable lessons can

possibly be drawn from. Before the crisis, there were numerous banks

operating in Korea, but after the regional crisis, market concentration

increased and the restructuring that followed paved the way for the

23 ibid 24 Choi (2002) 25 Boey, Darren & Shinhye Kang (2015) “Anbang to Buy Stake in Tongyang Life for $1

Billion,” Bloomberg, February 17, 2015. Retrieved December 15, 2016 from https://www.

bloomberg.com/news/articles/2015-02-17/anbang-insurance-to-buy-stake-in-tongyang-lif

e-for-1-billion 26 Bloomberg News. “Anbang Agrees to Buy Allianz's Operations in South Korea,”

Bloomberg, April 6, 2016. Retrieved December 17, 2016 from https://www.bloomberg.co

m/news/articles/2016-04-06/anbang-agrees-to-buy-allianz-s-operations-in-south-korea 27 Cha, Seonjin (2013) “Woori Sale to Spur Mergers as Korea Builds Own Goldman

Sachs,” Bloomberg, December 16, 2013. Retrieved December 14, 2016 from https://www.bloom

berg.com/news/articles/2013-12-15/woori-sale-may-spur-takeovers-as-korea-builds-own-

goldman-sachs

４３

emergence of financial holding companies and merger between big

banks28

. Like Korea before the 1990s financial crisis, the Philippines has

a fragmented banking system with numerous private commercial banks,

rural banks, cooperative banks and thrift banks. Consolidation began in

the 1990s but proceeded in a slower pace and lesser scale, although there

were major transactions in later years (e.g. 2006 Banco de Oro-Equitable

PCI Bank merger, 2012 Allied Bank-PNB merger). Unlike in Korea,

foreign investors and private funds played a lesser role in Philippine

financial industry M&As. Unlike other countries in the region where the

state is still heavily invested in the finance sector even post Asian

financial crisis, Philippine government started divesting from the

industry early on with the privatization of the once de facto Central Bank,

Philippine National Bank29

, commencing as early as 1989 following the

wave of privatization of state assets under the Cory Aquino

Administration. Whether lesser state involvement meant lesser state role

in consolidation remains to be established, more so whether more robust

state role contributes to faster consolidation or not, although other

countries wherein the state is a major player in the finance industry

experienced faster consolidation. This plays into the question of whether

the consolidation is driven more by market forces or by state dictum. But

at least as far as Korea is concerned, the role of the state is very much

apparent. This could be an interesting angle that the paper can consider

exploring. Aside from creating asset management companies, what other

strategies and policy tools can the Philippines exercise to promote

consolidation and rationalization in the public sector? What factors

impede these goals and what measures can be done to address them? It

may be relevant to revisit the laws governing M&As in the finance

industry or in the public sector to see whether they are being observed in

the LBP-DBP case and if there are provisions which may require

amendments to suit the changing times.

The accumulation of bad debt and several corporate insolvencies

helped trigger reforms in the Korean financial sector. Reflecting on Dr.

Mendoza’s paper, the loans of DBP and LBP were outlined but there was

no mention as to what proportion of these loans are considered as good

or bad (nonperforming). As part of the International Monetary Fund

(IMF) standby credit program it availed to bail itself out of the Asian

financial quagmire, Korea has to restructure its financial industry, clear

28 Park (2011) 29 Privatization was completed in 2005

４４

its bad debts, tighten on prudential regulations, heighten transparency

and disclosure requirements, and reorganize corporate governance of

financial entities30

. As such, consolidation was considered an essential

element in helping the country get past and recover from the crisis. In the

case of the Philippines, crisis recovery did not figure prominently in the

rationale behind M&As in the finance sector. Was the fact that the

Philippines was less affected by the crisis (although economic growth

almost came to a complete halt) compared to say Thailand, Indonesia and

Korea resulted to playing down the crisis as a basis for consolidation can

be debated. Swift and decisive government response demonstrates how

Korea was one of the countries hardest hit by the crisis. Financial

institutions that can no longer be rescued because of too much exposure

to nonperforming loans were closed, while those that remain viable were

bailed out but has to undergo strict measures—five undercapitalized

banks were forced to exit the market by 1998; nine banks merged to

create four surviving banks in 1999; and two banks were merged in 2000

with the end result of reducing the total number of Korean banks from 33

to 22 by end of 200031

. Furthermore, in non-bank financial institutions,

twenty-one merchant banks, six securities firms, eight securities

investment trust companies, and twelve insurance companies had been

shut down by way of exits or mergers by end of August 200032

.

Interestingly, part of the second stage of the Korean financial

restructuring involves merging of healthy banks, which reflects the DBP-

LBP merger case, along with other measures as setting up a financial

holding company (e.g. state-run Woori Financial Holding to manage 4

nationalized banks and their nine subsidiaries and an investment bank

deemed as not self-sustainable) and merging unhealthy provincial banks

with healthy ones33

. Strict turf boundaries in financial business services

was also eased allowing for business diversification, encouraging

commercial banks to set up subsidiaries or cooperative alliances to go

around industry demarcation lines. In 2001, two of the country’s

healthiest banks, Housing & Commercial Bank and Kookmin Bank

merged. Two other healthy banks, Shinhan and Cheju also began

30 Ro, Hyung-Gon. (2001) “Banking industry consolidation in Korea,” The banking

industry in the emerging market economies: competition, consolidation and systemic

stability, vol. 04, pp 93-101. Bank for International Settlements. Retrieved December 18,

2016 from http://www.bis.org/publ/bppdf/bispap04i.pdf 31 ibid 32 ibid 33 ibid

４５

discussions about a potential union. These cases demonstrate that,

contrary to some notion, mergers between viable or sound banks can

happen.

４６

４７

Assessing fiscal data openness in local governments in the

Philippines*

Erwin A. Alampay, Pauline Bautista, and Raphael Montes

Center for Local and Regional Governance

National College of Public Administration and Governance

University of the Philippines

Abstract

This research attempted to transition traditional ways by which CSOs

interrogate, audit and participate in local governance by modelling the

information gathering systems they undertake in ‘following the money’

and actively getting involved in planning and budgeting, into an open

data fiscal transparency model at the local level.

This research was done by documenting four cases of CSOs that

audit or participate actively in budgeting and auditing processes at the

local level. From these cases an open-data ecosystem for local fiscal

transparency was diagrammed. The model was validated against

websites of eight local government units (LGUs)to determine existing

information gaps in ”open-ness” in LGUs that need to be addressed.

Open data refers to the existence of fiscal data that are completeness,

provided on time and is machine processable.

For the local fiscal open-data ecosystem to transition from the

traditional ways of CSO engagement, will require: (1) sustained national

government support to implement responsive open data policies that will

continue to incentivize LGUs to acquire complete, timely and machine-

processable fiscal open data; (2) national laws that will sustain the open

data initiatives of the previous administration; (3) a government-wide

open data capacity-building through the newly established Department

of Information and Communication Technology (DICT) that will

systematize open data requirements across all levels of government while

also providing the needed infrastructure to make it work, and finally (4)

building understanding at the grassroots, starting with the K-12

curricula, of how the local government works, especially the local budget

process, so that fiscal data that are eventually made open can be found,

understood and used by every citizen of the country for whatever purpose

they require.

48

List of Acronyms Featured in the Research Report

ANSA-EAP- Affiliated Network for Social Accountability in East Asia and

the Pacific

BLGF- Bureau of Local Government Finance

BLGS- Bureau of Local Government Supervision

BUB- Bottom Up Budgeting

CCAGG- Concerned Citizens of Abra for Good Government

CLRG- Center for Local and Regional Governance

CODE-NGO- Caucus of Development NGO Networks

CPA- Citizens Participatory Audit

CSO- Civil Society Organization

DBM- Department of Budget and Management

DILG- Department of Interior and Local Government

DOF- Department of Finance

DOH- Department of Health

DPWH- Department of Public Works and Highways

DSWD- Department of Social Welfare and Development

FDP- Full Disclosure Policy

FDPP- Full Disclosure Policy Portal

GAA- General Appropriations Act

GAD- Gender and Development

IRA- Internal Revenue Allotments

INCITE- Gov-International Center for Innovation, Transformation and

Excellence in Governance

KALSADA- Konkreto at Ayos na Lansangan at Daan Tungo sa

Pangkalahatang Kaunlaran

LCE- Local Chief Executive

LGU- Local Government Unit

LGC – Local Government Code

LDRRMF- Local Disaster Risk Reduction and Management Fund

MC- Memorandum Circular

M&E- Monitoring and Evaluation

NCPAG- National College of Public Administration

NEP- National Expenditure Program

NGO- Non-Government Organization

NGA- National Government Agency

PhilGEPS- Philippine Government Electronic Procurement System

SGLG- Seal of Good Local Governance

SEF- Special Education Fund

SRE- Statement of Receipts and Expenditures

ULAP- Union of Local Authorities of the Philippines

49

Introduction

E-Government, Open Government and Open Data

In the quest for better government services and higher accountability of

government, many are turning towards the use of information and

communication technology (ICTs) to improve governance. Some refer to

this as e-government. This concept has also evolved from the

exploitation of ICTs as a means of enhancing government operations and

services towards the expansion of the democratic space through

transparency, accountability and citizen participation (Velkovic, et.al.,

2014). Through the ever growing use of Internet technologies, e-

government has now given rise to open government where government

agencies open new channels of communication and information

exchange with citizens (Martin & Bonina, 2013; Parycek and Sachs,

2010). This is seen as potentially providing new spaces for openness,

transparency, participation, service provision and accountability (Parycek

and Sachs, 2010; Martin & Bonina, 2013) and is focused on building

trust between the government and the governed and making governance

more responsive (Velkovic, et al., 2014).

Open government is based on the principle that citizens have the

right to access documents, proceedings, information, etc. of the

government in order to allow for effective public oversight. It has five

components: (1) government transparency (clearness in procedures, tasks,

operations, and regulations); (2) data transparency (authenticity,

understandability and reusability), (3) participation through open

dialogue; (4) collaboration (government to government, government to

citizens, and government to business); and (5) open data (Velkovic, et al.,

2014).

Open data are those that are ‘freely and easily accessible, machine

readable, and explicitly unrestricted in use” (World Bank, 2016:270).

Government is an important source of open data on population, public

budgets, infrastructure and other services (Velokovic et.al. 2014). The

subject of open government data would be the disclosure of datasets that

are valuable for re-use and civic engagement (World Bank, 2016). Open

data demand that complete, primary and timely government data be made

accessible, processable and sharable, free from licenses and should be

non-discriminatory (Velkovic, et. al., 2014). Hence, open data are

complementary to the values of transparency and participation that define

good governance, and integral to e-government and open government. At

50

present there is growing exploration on how the publication and use of

open and linked data can impact governance, economic growth and the

delivery of services (Davies & Edwards, 2012)

Open data at the national and local levels

The origins of the open data movement can be traced to the Freedom of

Information (FOI) Act in the United States in 1966. This came about

through the growth of an increasingly non-transparent post-World War II

federal bureaucracy and the idealistic motivations for an informed

citizenry (Tauberer, 2014). The FOI Act set the standards for the opening

of government documents to the public.

Today, many countries are committing to proactively disclosing

information, though the discussions and commitments have largely been

at the national level (Canares and Shekhar, 2015). In the case of the

Philippines, it was one of the eight founding states of the Open

Government Partnership1 (OGP) in 2011. Its official open government

data program is managed by a task force composed of the Department of

Budget and Management (DBM), the Office of the Presidential

Spokesperson, and the Presidential Communications Development and

Strategic Planning Office. There are also national programs in the

Philippines that further encourage greater transparency, such as the

Department of Interior and Local Government’s (DILG) “Seal of Good

Housekeeping” program (Ona, et.al. 2014).

In 2014, the Philippines’ open data portal (data.gov.ph) was

officially launched. It is managed by the government’s Open Data Task

Force and is anchored on access to public sector information, data-driven

governance, public engagement and practical innovation (DBM 2015).

The portal hosts datasets2 from different national government agencies

which are accessible, and sharable. In this respect, a catalogue of

available open government data is already available from a number of

departments and agencies (see http://data.gov.ph/catalogue/dataset/agenc

y-data-inventory). However, while the open government task force is

continuing to collect and access data from national government agencies,

1 Open Government Partnership is a multilteral initiative that aims to secure concrete

commitments from governments to promote transparency, empower citizens, fight

corruption and harness new technologies to strengthen governance 2 Data formats are in CSV, TXT and XLS formats.

51

its hard work has not yet cascaded to local government units (LGUs).

Capacity building is being done on both the demand (users of data such

as CSOs) and the supply side (source of government data such as

national agencies), but most capacity-building efforts are Manila-centric

and interrogate national data (Canares et.al. 2015). As such, attaining the

expected benefits of open data-enabled e-governance may require new

forms of "technological intermediaries” that will bridge the information

gap between the government and its citizens (Alampay, 2002).

Transparency, participation and open data at the local level

The passage of the Local Government Code (LGC) in 1991 was intended

to strengthen LGUs and promote social development through the

decentralization of power. It devolved basic services to each LGU and

empowered it to increase local financing to make it more self-reliant

(Alampay, 2006). This was similar to reforms in other countries that

focused on improving governance by bringing government closer to the

people and making them active participants in development (Brillantes,

2003). It is worth noting that the passage of the LGC came at a time

when the ICT revolution was beginning. Hence, complementary to its

call for reform and better governance was the emergence of electronic

government (Alampay, 2006). This provides the connection between e-

government and people’s participation and its continued evolution in the

local level.

There is great demand for local government data in the Philippines

from various stakeholders. The national government, for instance,

requires regular reporting by LGUs as part of its monitoring of local

governments. Academic researchers and civil society watchdog

organizations also need data for research and independent third-party

assessments. Moreover, the Philippines’ LGC has enshrined the

participation of citizens and civil society through local special bodies (e.g.

local school boards, local poverty reduction teams) which plan each

LGU’s development programs. In such cases, active participation

requires proper access to local data, especially financial data, so that

policies and programs are founded on good evidence.

In relation to open data, the Full Disclosure Policy (FDP) is a

national government initiative by the Department of Interior and Local

Government that provides incentives for the public disclosure of some

LGU financial data (e.g. budget, procurement plans, Special Education

52

Fund, etc.), and is a logical starting point when discussing the state of

openness in local governmental data (Canares, 2014c).

Research Questions

Given the above background, this study investigated the following:

1. What are the needs of CSOs for financial data with respect to

their work in dealing with government?

2. What is the state of "openness” of LGU-related financial data in

government at the national and local levels?

3. How can government financial data at the local level be made

more open, useful and accessible to stakeholders?

In so doing, the research should help in strengthening government

transparency and accountability through the development of open

financial data standards for local governments in the Philippines.

The research investigated financial sector-focused CSOs that require

LGU financial data for their work. The assumption is that workable

models for strengthening government transparency and accountability

through open financial data in the realms of Bottom-Up-Budgeting

(BUB), Participatory Budgeting3 and Citizen Participatory Audit (CPA)

4

can be a springboard for collaborative and complimentary initiatives in

the design of open data initiatives at the local level. This is premised on

the idea that the design of how data are disclosed can limit citizen

participation and use (Canares & Shekhar, 2015).

The methodology is elaborated in the next section.

Methodology

Matching existing data to possible uses or existing users can help in the

data structure design (See Figure 1). It must consider the perspective of

current and potential users of the data to make the data valuable

3 Bottom-up-Budgeting is actually a form of participatory budgeting that was operationalized as a program during the Aquino

Administration, whereby citizens, through CSO representatives participated in the identification of projects that can be enrolled for

additional funding from national agencies. 4 In CPA, citizens independently monitor the implementation of government projects (e.g. roadworks, school buildings, book

procurement) but can also work with official government oversight organizations such as the Commission of Audit.

53

(Zuiderwijk, 2014). For example, open data on funding or disbursements

for development projects have limited use if these could not be analyzed

due to undisclosed local census data. It would be difficult to compute per

capita allocation or proportional allocation corresponding to the size of

particular sectors. Also important is raising awareness of CSOs that such

initiatives exist (Canares, 2014a), whether this be at the national or local

level.

As such, in order to come up with an open data model at the local

level for finance-related use, two phases of research were done: first

was collecting and modeling the data CSOs use; and second was testing

the model in some LGUs vis-à-vis how open these financial data were at

the local level.

Figure 1: Mapping Information Needs, Requirements and Availability

In the first phase, three main sources were documented, compared

and analyzed. First, was the financial information that the national

government agencies have of LGUs; second was the information that

civil society organization (CSOs) need to get from LGUs with respect to

their finances; and last was the information that LGUs already have,

make available and provide in various forms (whether in open format or

not) to the public (see Figure 1).

Organizing these data then involved (1) mapping the requirements

54

for documents to be posted, imposed by national agencies/programs (e.g.

by the Department of Interior and Local Government (DILG); by the

Department of Finance) for local government units to post in connection

with fiscal transparency and reporting. The study put particular focus on

DILG’s FDP requirements, given the FDP’s critical value for bringing

the open data discourse at the local level (Canares, 2014c).

Canares and Shekar (2015:20) argued that if data serve socio-

political or economic ends, it will always be sought by those who need

them regardless of whether they are open or not. As such, the next step

required (2) identification and documentation of CSO ”follow-the-money”

projects and mapping information requirements related to it. Among

these are projects like bottom-up-budgeting (BUB) and citizen’s

participatory audits. The case studies of existing initiatives of follow-the-

money projects that the study covered were the following (see Table 1):

Table 1: List of Follow-the-Money Cases

Follow the Money Project CSO involved

Alternative Budget Preparation Social Watch

Bottom-up Budgeting/Participatory

Budgeting at the local level

CODE-NGO

ULAP

INCITE-GOV

Participatory Audit

BUB Monitoring and Evaluation

Check-my-school

CCAGG

ANSA-EAP

As such, the case analyses were intended towards developing an

integrative model of the data and information needs of the various CSO

initiatives. This is because most CSO initiatives are often stand-alone and

not connected, and reflects the different roles and contexts intermediaries

play with respect to open data (Canares and Shekhar, 2015) and

participation in governance in general.

The CSOs, in these cases, are data intermediaries that can

potentially hasten open data use at the local level. Social Watch is a

network of around 100 civil society organizations and individuals,

advocating citizens’ participation in public finance; CODE-NGO, the

Caucus of Development NGO Networks, is the country’s biggest

network of non-government organizations; ULAP, or the Union of Local

55

Authorities of the Philippines, is the umbrella organization of all the

leagues of local government units and leagues and federations of local

elective and appointive officials; CCAGG, or Concerned Citizens of

Abra for Good Government is the Philippine pioneer in social audits;

ANSA-EAP, short for Affiliated Network for Social Accountability in

East Asia and the Pacific, is linked to the website of the Commission on

Audit for “i-kuwenta”, COA’s Citizen’s Participatory Audit; INCITE-

GOV, or the International Center for Innovation, Transformation and

Excellence in Governance, convenes uniquely positioned reform

advocates for discourse and capacity building in public fiscal

management. Their work is consistent with the rationale for engaging

citizens in accountability and budgeting (Boncodin, 2007).

Lastly, (3) there are local government data that are available which

are not required by DILG under the FDP, but needed by CSOs for their

work, whether in open-format, or not. As noted by Canares et al.

(2015:11), among the challenges for accessing local government

information in the Philippines include approval protocols, duration for

request to be addressed, outdated data, and personnel for retrieving

information among others. Hence, to map these, LGU websites were

studied as a separate phase of the research. This was done to identify

where there is a large overlap in the intersection of the three sources that

would represent the level of fiscal data openness in that LGU.

In this report, eight LGU websites (3 cities and 5 provinces) were

documented. The eight are: Iloilo City, Naga City, Quezon City, Iloilo

Province, Bohol Province, South Cotabato Province, Camarines Sur

Province, and Abra Province. However, these were not purely selected in

random. Quezon City was selected because it was where CLRG-

NCPAG operated; whereas Abra province was chosen because it was the

home base of CCAGG). Bohol and Naga, on the other hand, were LGUs

known for their e-government initiatives.

Operationalization of data openness

Fiscal data openness is not just about granting access to basic data sets. It

can also be viewed in terms of the level of “openness” that the datasets

possess. According to Velokovic et al. (2014), openness pertains to the

quality of the data and the infrastructure on which the data is hosted or

disseminated. The three most sensitive open data principles are

“completeness”, “timeliness” and “machine processability.” Open data

56

are most complete as they progress from availability of description to

being downloadable, to being machine readable, and having linked data.

Timeliness factors in the length of time period covered in the data, the

frequency the dataset is updated and the last time it was updated; while

the degree of being machine processable relies on the format- whether it

is static (PDF, JPG, non-editable), processable proprietary (XLS) or open

source/non-proprietary (CSV), and machine readable and interoperable

(RDF, XML) (Velkovic, et al., 2014). This simply means that the less

encumbrances in the processing of data, the more open it is.

Recommendations for improving the opennesss of fiscal data in

LGUs were then based on this process of looking at the availability of

information in the websites of these LGUs.

FINDINGS

Civil society organizations (CSOs) engage government with respect to

financial matters in various ways. This section discusses findings based

on selected “Follow-the Money” cases involving CSO participation. The

cases present the types of data/information they require from government

in performing their function and how “open” these are.

The discussion of the findings for this paper is structured in three

parts. First is a discussion of open data at the national level. A case of a

CSO interrogating this data is provided through the example of Social

Watch. Second is a discussion of the need for local government financial

data based on cases of local CSOs engaging with government at the local

level. This is illustrated through the case of CSOs participating in

bottom-up-budgeting (BUB).Third, is a discussion of cases that

interrogate both national and local data, thereby illustrating how

information at the two levels interrelate, both in terms of information,

and also in terms of fiscal transfers to the LGU.

Open Data at the National Level and CSO Interactions with open

data

Case 1: Social Watch and the Alternative Budget Initiative

Social Watch Philippines (Social Watch) is a network of NGOs with a

reputation as a budget watchdog. Set-up in 1997, its objective is to

increase the public’s awareness and promote social development

57

concerns in government. Its network has grown to around 100 CSOs

and individuals5. At the national level, it interrogates the national

government with respect to the national budget. It reviews the national

expenditure program (NEP) and the GAA, and even proposes an

‘alternative budget’ that it aggregates through their own consultation with

other CSO members in their network.

National budgets and appropriations are also of interest to other

organizations within government. Departments, agencies, and other units

of government, for instance, need to know the funds appropriated in the

budget. Furthermore, the interface of national and local in terms of

financial information generally revolves around fiscal transfers involving

the internal revenue allotment (IRA), and departmental budgets that get

downloaded to the LGUs such as menu of projects6 allowed in bottom-

up-budgeting (BUB).

5 see http://socialwatchphilippines.weebly.com/about-us.html 6 Each agency offers a prescribed set of programs and projects. In turn, if these align

with development priorities identified by LGUs in consultation with CSOs and identified

in their local plans, they can apply for access to these projects for their communities.

58

Figure 2: Social Watch Alternative Budget Preparation

Its Alternative Budget Initiative (ABI) program uses data from the

national budget to critically engage the national government vis-à-vis an

alternative budget it crafts on behalf of its network of NGOs. Social

59

Watch’s network of other non-governmental organizations work on

different areas or clusters of government. These affiliated NGOs, in turn,

deal with national departments/agencies in the preparation of their

budgets (Figure 3).

Mr. Alce Quitalig of Social Watch says that their “natural ally is the

opposition.” This suggests a natural tension between the administration

that provides data, and Social Watch which "fiscalizes" the

administration. As such it is ironic that they saw their relationship with

the Aquino administration, which espoused "open government", as

somewhat in a lesser quality because “this year (was) the first year that

we could not present out alternative budget with the committee on

appropriations” which they had done previously from 2007 to 2014.

Nonetheless, they engage with whoever wants to engage with them, and

they are “willing to give data.” In fact, according to Mr. Quitalig, some

lawmakers (e.g. Senators) request for briefings from Social Watch.

“Alternative Budget Initiative (ABI) is our engagement and our

method of engagement is partnering with CSOs and also with

government in terms of the budget preparation. We partner with

program officers. But, our engagement in budget preparation is

uneven for different clusters” according to Mr. Quitalig.

He says that their engagement might be affected by the type of

relationship of their network NGOs, with the various agencies of

government, and the agencies’ openness to share data and allow

participation. For instance, they find it easier to get data from the

Department of Health (DOH), whereas, with the DSWD and DepEd,

participation requires a more formal process. DOH, he says, provides

hard copies and on occasion emails some documents. Clusters, then, base

their budget proposals from the proposed agency budgets. This provides

a baseline. The collaboration can then be seen as a partnership (among

CSOs). “Clusters would meet within (sic) themselves and they look at

their own budget proposals. If a budget item is unfunded, they look at the

costing and link it with an existing budget item” added Mr. Quitalig.

In some cases, CSOs may also be knowledgeable of the country’s

United Nations (UN) commitments (e.g. health, climate). They can

interrogate the plans based on these commitments. “We also propose the

financing sources, we know the budget ceilings, those sources of

financing comes from the contestable budget items, like lump sums, that

we see should be re-aligned or re-allocated, reducing the lump sums.”

60

However, proposed items that CSOs successfully include in an agency

budget may still end up being cut in the technical budget hearing, Mr.

Quitalig shared. As such, CSOs complain if these get removed in the

budget. A problem he gave was the issue of how the ‘language’ or

terminologies could change from one stage to another. This makes

tracking budget proposals difficult.

Use of open data

At the national level, there are already some documents that can be

accessed. The GAA/NEP can be downloaded in .pdf, .xls, and .csv form

from the Department of Budget and Management (DBM) website. The

DBM also has data on the Bottom-up Budgeting (BUB)7. There’s also the

FDP portal lodged with the DILG, and the BUB Portal, and the PhilGeps

portal.

Some of the organizations whose cases are discussed in this paper

are also cognizant of the open data initiatives by the government. Social

Watch, for instance, has also been trained by DBM on the use of open

data, according to Mr. Quitalig.

However, he said, downloading these files could be problematic.

Some files, even just 2-3 pages long, could take so long to download

because of how ‘large’ they are. This was echoed by Ms. Czarina Guce

of ULAP, who also added how more difficult it is to download in the

provinces where Internet services are slower.

Hence, Mr. Quitalig still prefers to use ‘print outs’ and hardcopies

which he says are ‘easier to understand.’ He still copies data into Excel,

before transferring charts to PowerPoint. He finds .csv not ‘user-

friendly.’ To check for accuracy of the items he re-encodes, he compares

the computed totals, and if it is incorrect, he manually traces back where

the error occurs.

In 2015, Social Watch was unable to get a hardcopy. However, they

were already able to get it from the website. We noted, however, that the

NEP in pdf could not be searched electronically, and hence one has to get

through the document ‘manually’ to search for items. Social Watch also

uses data on budget expenditures and sources of financing. Since he has

been doing this annually for a number of years, Mr. Quitalig has been

able to develop his own system for visually presenting any changes or

7 For 2016 BUB see: http://www.dbm.gov.ph/wp-content/uploads/Our%20Budget/2016/

BUB/FY2016%20BUB%20Detailed%20Project%20List%20-%20Version%201%20As

%20of%20July%2028%202015.pdf

61

trends from year to year.

Other open data at the national level

Currently available open LGU-related financial data available in national

websites include data from the Department of Finance’s (DOF) Bureau

of Local Government Finance (BLGF), and the Department of Interior

and Local Government’s (DILG) Full Disclosure Policy Portal (FDPP).

In some instances, as a result of the FDP, the provision of local financial

transaction related information in some provincial government websites

has resulted out of it (Canares, 2014b).

DOF-BLGF’s Statement of Receipts and Expenditures and the

DILG’s Full Disclosure Policy Portal

The DOF-BLGF’s data on the State of Receipts and Expenditures

(SRE)—formerly Statement of Income and Expenditures (SIE, 2001 to

2008)—are datasets that contain fiscal data from local governments as

submitted through the BLGF’s eSRE system. The eSRE uses software

where local government treasurers are able to input the amounts directly

into the system. The SRE is done by Provincial/City/Municipal treasurers

and follows the guidelines for financial information needed for economic

forecasts and evaluation of the LGU’s financial performance. In cases

where an LGU’s treasurer does not have online access, they submit a

printed copy of their financial reports to the DOF-BLGF regional office,

who then encodes this into the system.

The SRE is also partially compliant to the International Financial

Reporting Standards which are generally accepted by international

financial institutions. The SRE contains data that can measure the LGU’s

cash position and a snapshot of its annual spending. There is also a

portion of the eSRE which is accomplished by the Assessors—the

Quarterly Report on Real Property Assessments.

On the other hand, the DILG’s Full Disclosure Policy Portal (FDPP)

contains local government documents or reports that include details on

procurement, and fiscal related data. The FDP policy essentially requires

the LGUs to disclose data that they already prepare regularly, whether in

spreadsheet files, budgets, procurement plans or utilization reports

(Canares and Shekhar, 2015:17-18). Most of its financial data are on a

62

micro-level compared to the aggregated data in the SRE (see Table 2).

The FDPP was set-up by the DILG’s Bureau of Local Government

Supervision (BLGS) to facilitate the mandatory posting of local

government financial data as required by law and DILG directives. There

are now sixteen (16) reports that all LGUs are required to post in the

portal (see Table 3). Unlike the SRE—which is done by the local

treasurers, these 16 documents are sourced from a number of local

government offices, particularly those of the accountant, budget officer,

general services officer/bids and awards committee, human resources

officer and treasurer. While the portal provides for templates, reports

posted vary in terms of format (using LGU letterheads or adapted

formats) while some post in different file formats (PDF, word or JPG).

Table 2: Comparison of SRE and FDPP data

SRE Items FDPP reports

Current Operating Income

Local Sources: Tax revenue and

non-tax revenue

External Sources: Internal

Revenue Allotment, Shares from

national tax collections, inter-

local transfers,

grants/donations/aids

Total Current Operating Expenditures

Education, culture, sports &

manpower development

Health, nutrition, population

control

Labor and employment

Housing and community

development

Social services and social

welfare

Economic services

Debt service

Non-income Receipts

Capital investment receipts

Receipts from loans and

borrowings

Report on the utilization of

the 20% component of the

Internal Revenue Allotment

(Development Fund)

Abstract of bids as calculated

Annual budget report

Annual Gender and

Development

Accomplishment Report

Annual Procurement Plan or

procurement List

Bid Results on Civil Works,

Goods and Services and

Consulting Services

Items to Bid

Local Disaster Risk Reduction

and Management Fund

Utilization

Manpower complement

Quarterly statement of cash

flow

Report of Special Education

Fund Utilization

Statement of Debt Service

Statement of Receipts and

63

Non-operating Expenditures

Grant/loan to other entities

Debt service

Other non-operating

expenditures

Expenditures

Supplemental procurement

plan

Trust fund utilization

Unliquidated cash advances

It can be observed that the details on expenditures in the eSRE do

not correspond to individual departments or offices. Services are

clustered into what are considered “planning clusters” and therefore

overly aggregated. Hence, the eSRE does not reflect the expenditures of

each local government department. The expenditures of the individual

departments are clustered under seven expenditure categories. An

example is where the expenditures for the Office of the Municipal

Agriculturist are placed. It is not clear whether it is included in the

category of Economic Services or in the General Public Services. This

makes it difficult to analyze LGU spending patterns (i.e. agriculture), and

hence, the eSRE is not sufficient as an open data set. This is consistent

with other studies which say that full analysis cannot be done when

budget data is described in a generic way or presented in an aggregate

manner (see Canares and Shekar, 2015:21).

On the other hand, the financial reports under the FDPP are focused

on the utilization of specific funds or trust funds. While there is a

Statement of Receipts and Expenditures report, this is a summary of the

more detailed SRE in the possession of the treasurers and the BLGF.

Table 3 shows the sources of the reports under the FDPP.

Table 3: Source for FDPP reports

Sources of Reports FDPP reports

Accountant Local Disaster Risk Reduction

and Management Fund

Utilization

Report of Special Education

Fund Utilization

Trust fund utilization

Unliquidated cash advances

General Services Officer / Bids

and Awards Committee Abstract of bids as calculated

Annual Procurement Plan or

procurement List

Bid Results on Civil Works,

64

Goods and Services and

Consulting Services

Items to Bid

Supplemental procurement

plan

Budget Officer Annual budget report

Report on the utilization of the

20% component of the Internal

Revenue Allotment

(Development Fund)

Even as there are already LGU financial data open at the national-

level, additional policy may have to be developed if there are other local

government data that stakeholders require and that need to be more open.

As such, local governments will also have to adopt local policies, if in

case they would like to host open data in their own websites, separate

from already available open data at the national level which local

community stakeholders may find difficult to access, and assist in

facilitating better participation and transparency.

In addition, capacity building is an issue for any new functional

assignment passed on to local governments. As a matter of policy,

priority for opening data has to be established. However, data

professionals do not immediately gravitate towards working for local

governments, especially in financially-limited local governments (i.e.

third to sixth class municipalities). Provision of open data also has to

compete with service delivery functions that are supported by finite

resources. Slow data release is not necessarily a consequence of

unwillingness, but simply because data release is not part of the regular

work of data professionals (Conradie & Choenni, 2014)—more so local

government personnel who are not data professionals. As such,

mapping existing datasets in local governments may help in defining and

standardizing data that can be opened in LGUs beyond documents

required to be posted presently under the Full Disclosure Policy (FDP).

Use of FDP documents at the local level: DATAGov and BUB

Some of the Full Disclosure Policy (FDP) documents are particularly

useful for local CSOs engaging the LGUs in various capacities, including

for CSOs’ participation in Bottom-up Budeting (BUB). One example is

65

the Data Access Towards Accountable Governance (DATAGov) Project

that the CODE-NGO was implementing at the time of the study. The

DATAGov project aimed to enrich citizen participation in local

governance by assisting civil society organizations (CSOs) to more

effectively use government data towards evidence-based agenda building,

advocacy and planning, including CSO-participation in BUB.

To do this CODE-NGO built capacity in partner CSOs to analyze

six (6) budget documents (wherever available from the FDP Portal or

from the LGUs themselves). They developed guidelines8 or toolkits for

local CSOs engaged in the Grassroots Participatory Budgeting Process,

Budget Advocacy and Monitoring, and participatory governance in

general. Their goals in doing this were to:

1. facilitate familiarity with local government budgets and

spending priorities by their respective local government units;

and

2. standardize basic, easy-to-follow guide in understanding and

analyzing LGU budget documents, primarily the Annual Budget,

Statement of Revenues and Expenditures, Utilization reports on

the LDF, GAD Fund, SEF and the LDRRM Fund.

Note that four of the six documents are part of the FDP, with the

LDF and LDRRM Fund not among those mentioned in the FDP. There is

also specific information that needs to be extracted from the documents,

from which CSOs are expected to base their analysis. Among the

analysis that can be done in interrogating the LGU’s annual budget

include reviewing mandated allocations; reviewing maximum allowable

allocations; analyzing revenues generated; and breaking down indicative

budget priorities (See Figure 8). The gender and development (GAD)

fund, for instance, can be further analyzed to check compliance to

lawfully mandated allocation for gender and development.

In the case of BUB, there are various points in which CSO engage.

This could be from identification of projects, to monitoring its

implementation.

8 From CODE-NGOm CGuidelines in and Standardised Approach to Understanding and

Analysing Local Government Budgetst BWorking Draft as of October 2015)

66

Figure 3: Analyzing the Annual Budget and Statement of Revenues

and Expenditures

Diagram based on CODE-NGO (2015) Guidelines

Case 2: Bottom-up Budgeting – Participation among CSOs (CODE-

NGO)

CODE-NGO’s national conference helped highlight issues with respect

to accessing data from the LGUs based on the field experiences of their

partners who were participating in bottom-up budgeting.

For instance, in Dipolog, one of their CSO partners mentioned the

inconsistencies between LGU data that was posted online and the ones

that came in hard copies. They reported that what they see in the FDP

portal is not the same as the hardcopies they were given. One feedback

from CSOs in CODE-NGO’s national conference meeting mentioned

67

that sometimes submitting on the portal ends up as ‘for compliance only,’

and hence the quality of the information is sometimes compromised. This

was also something we validated from our observations when we looked

through the data available in Quezon City. Conference participants also

mentioned difficulty understanding the terminologies used in the official

documents.

Furthermore, with respect to the physical posting of some of the

documents, CSO representatives in the conference also mentioned that

there were barriers such as the space being not hygienic (e.g. near a

slaughter/meat space), and presence of other physical barriers (e.g. glass

casing such that only the first page can be seen).

As for online posting, the limitations of Internet access were also

apparent in a number of cases we documented from key informant

interviews. This was validated based on the experiences of people from

various CSO representatives9 we interviewed for this research.

Case 3: Bottom-up Budgeting – Intermediation by CSOs (ULAP)

Compliance with the FDP is important for LGUs since this is one of the

requirements for the ‘Good Financial Housekeeping’ core component of

the DILG’s Seal of Good Local Governance (SGLG). Getting this seal

allows LGUs to access or download additional funds from the national

government. Examples of these, according to Ms. Czarina Guce are: the

bottom-up budgeting (BUB) programs that are LGU-implemented, the

KALSADA10

program, and technical assistance with respect to disaster

risk mitigation.

9 In particular from CCAGG, CODE-NGO, ULAP and INCITEGOV. 10 Subsidy to provincial roads management and implementation

68

Figure 4: ULAP’s intermediation between NGAs and LGUs on

financial matters

It is in this area where the Union of Local Authorities of the

Philippines (ULAP) helps mediate between the DILG and LGUs. ULAP

assists DILG inform ULAP members about SGLG components their

respective LGUs are still non-compliant with. ULAP also assists LGUs

69

understand how to access additional funding from the national

government, such as the BUB program. With respect to the FDP, they

also provide guidelines to build capacities of LGUs with respect to their

internal Public Fiscal Management systems. These systems generally

involve the local Treasurer’s Office, Budget Office, Planning and

Development Office, Engineering office, BACs, and the office of the

Local Chief Executive (LCE).

In terms of specific data ULAP uses with respect to Bottom-up

budgeting (BUB), many of these come from national agencies, which

they then inform or feedback to the leagues and LGUs. Specific data on

the BUB is also available in the BUB Portal11

. The data there however,

has limited usefulness for ULAP. Executive Director Czarina Guce of

ULAP says that it (BUB Portal), the portal was designed with a national

government perspective. “Initially the purpose of the Open BUB portal is

for the NGA to track the LGUs gastos (expenses) of the na-download na

pera (downloaded funds).” As such, she says what you find there is not

so useful (for LGUs and communities). “The BUB portal only had

budget allocations versus release; it doesn’t actually show you actual

expenditure.” She adds that “the magnitude and scale of the data there is

not CSO- nor municipal officer- friendly.” Among others, they’ve found

that accessing it requires good Internet speed. Second, the amount of data

is really meant for the national implementer. She further adds that “they

(the Portal administrators) try to have a feedback and response protocol

but only national can give feedback.” Hence, ULAP wishes that the BUB

portal becomes friendlier to the users in the communities.

As of March 15, 2016 there was already a number of downloadable

data in the portal. These include downloadable quarterly BUB reports

from 4th quarter of 2014 to end of 2015. The joint memorandum circulars

(JMC 1 to JMC 7) provided the annual guidelines for BUB

implementation (including menu of projects) and specific BUB Project

lists in the GAA from 2013 to 2016. Both the BUB reports and the BUB

GAA project lists are already in open format (csv or xls) and searchable.

The BUB project list has the region, province, city/municipality, program

name, project name, targets, agency and amount. The BUB reports are

actually more comprehensive, including project quarterly status (e.g.

complete, dropped), project reference for the report, if it is a replacement

project, a merged project, quarterly disbursements, status of reports of

quarterly accomplishments, and whether reports have been published,

11 See http://openbub.gov.ph/data

70

among others. The BUB projects are also searchable in the portal itself

by agency, location, year, status, budget type and budget.

Other Cases: using both national and local data

In other cases, CSOs require looking through data from national agencies

and from local government. Some of these pertain to the monitoring and

audit work of CSOs with respect to how projects are implemented at the

local level (see Cases 4 and 5).

Case 4: Social Audit- ANSA-EAP’s Check my School Project

Some organizations, such as Affiliated Network for Social

Accountability in East Asia and the Pacific (ANSA–EAP) and the

Concerned Citizens of Abra for Good Government (CCAGG) do

nationwide auditing and use various sources of data at the national and

local level. This is in line with the process of ‘social accountability’

which Ms. Selosa of ANSA-EAP defined as the “constructive

engagement between citizens and government in monitoring

government’s use of public funds to improve service delivery, protect

rights and improve citizen welfare.”

Figure 5: ANSA-EAP Check my School Program

In their Check my school program, for instance, they monitor over

44,000 schools (see Figure 4). This requires cross validating information

from different sources, some of which are already available online, with

71

some in open data format.

Case 5: Citizen’s Participatory Audit - CCAGG

The Concerned Citizens of Abra for Good Government (CCAGG)

engages in community organizing, participatory monitoring & auditing,

social audit, concerns for the indigenous cultural communities,

development programs, conservation and protection of biodiversity, and

peace building.12

Among its current ongoing and completed projects in

Following the Money are: the pilot Citizens Participatory Audit (CPA) of

road works; monitoring of planning and implementation of Bottom Up

Budgeting (BUB) of water systems in Abra; and the Monitoring and

Evaluation (M&E) of Conditional Cash Transfers of Project i-Pantawid.13

12 from Key Informant Interview with Pura Sumangil, December 9, 2015 13 See http://www.ccagg.org

72

Figure 6: CCAG Citizen’s Participatory Audit of Road works

73

CCAGG pioneered the citizen’s participatory audit (CPA),

particularly on road projects (see Figure 5). In their case much of the

information they collect and cross-validate are from national agencies

such as the Department of Budget and Management (DBM), and

agencies that have roadwork in their budget. Examples of these are farm-

to-market roads implemented by the Department of Agriculture and

school buildings, national roads, and bridges constructed by the

Department of Public Works and Highways (DPWH). It is also possible

that there are some budgeted infrastructure projects by the LGU. It is

their strong presence on the ground that allows them to systematically

monitor implementation of these public works and their validation feeds

into the audit report that they submit to the Commission on Audit.

CCAGG gets documents and information from various agencies and

levels of government (e.g. DBM, DA, DPWH). They also get

information from the local governments with respect to data about

projects that are in their budget. However, CCAGG’s approach is

largely done ‘offline’ requiring hardcopy printouts of documents. This is

partly because the digital data infrastructure in Abra is problematic in

terms of access and quality of local content available. For instance, the

website of the Provincial Government of Abra’s status is “suspended.”14

Based on the DILG Regional website for the Cordillera Autonomous

Region15

, of the 27 municipalities in Abra, only two have websites:

Dolores16

and Malibcong17

. However, documents entitled Program of

Works could not be found on either website.

The data that CCAGG needs from National Government Agencies is

relatively more accessible in comparison. First, the website of the

Department of Public Works and Highways (DPWH)18

has an icon on

Program of Works which leads to a search engine19

. Scanned Program of

Work documents are downloadable in PDF format. It provides filters for

Calendar Year (from 2012-2015), Region, Project Name and Cost.

However, there is no Program of Work under Abra listed. Second, the

website of the Department of Budget and Management20

has an icon

“DBM Publications” which leads to a page that presents a listing of

14 http://abra.gov.ph/cgi-sys/suspendedpage.cgi 15 http://www.dilgcar.com/index.php/2015-07-10-04-38-51/province-of-abra 16 http://doloresonline.gov.ph 17 http://www.malibcong.gov.ph 18 http://www.dpwh.gov.ph/infrastructure/index.htm 19 http://www.dpwh.gov.ph/infrastructure/program_of_work/index.asp 20 http://www.dbm.gov.ph/

74

Content Pages. Clicking on “General Appropriations Act of 2015 with

UACS” leads to a listing of National Government Agencies21

. Clicking

on Department of Public words and Highways leads to a 918-page pdf

file listing of the allocated amounts for operating costs of DPWH and for

DPWH programs and projects classified by region (see Figure 5).

CCAGG then cross-validates the data they collect in order to come

up with an Audit Memo (see Figure 5). The audit memo is then inputted

into their social validation process. In the social validation process,

they interview government officials and beneficiaries to determine the

true status of implementation. As Pura Sumangil explained, “CPA is

more technical and (sic) Social Audit engages the community. As such,

CPA requires an engagement with the Open Data Ecosystem while social

or participatory audit requires an engagement with the physical and

social processes of auditing.”22

In other words, there are some things in

their work that cannot be captured by open data.

CCAGG Chair Pura Sumangil also stressed the importance of

“proper data curation” in the innovation towards government’s

transparency and delivery of public information. She emphasized the

need for simplification of terminologies and basic illustrations. She

observed that some of the language being used is “hardly understood by

laymen”23

. She said that CCAGG intends to learn and be familiarized

with the Unified Accounting Code System (UACS) of the government to

heighten understanding on government transactions (e.g. funds,

disbursements, receipts, financial reporting)24

. She emphasizes that the

“government should strictly mandate the disclosure of public documents

up to the offices on the ground,” for the reason that “computer and

Internet is not accessible to all Filipinos”25

.

State of Openness of FDP in LGUs: A Walk-Through of Some LGU

Websites

The requirements for documents that are to be disclosed by LGUs under

the Full Disclosure Policy is listed in DILG MC Memorandum Circular

21 http://www.dbm.gov.ph/?page_id=11744 22 from Roundtable Discussion of the CPA Capacity Building Workshop held on

November 29, 2015. 23 Key Informant Interview with Pura Sumangil, December 9, 2015. 24 SuriDiwa, 9 December 2015 25 Key Informant Interview, 9 December 2015.

75

(MC) 2010-83 and the quarter of posting is specified in DILG MC 2011-

134, an amendment DILG MC 2010-83. The policy, at present, does not

require this to be posted in the LGU website. But, in assessing the state

of open data at the local level, the availability of these was done for a

few websites.

A scan of local government websites revealed various states and

styles of compliance with DILG’s Full Disclosure Policy (see Table 4).

Table 4 presents the compliance status of eight focal LGUs vis-à-vis

the amended FDP. The eight are: Iloilo City, Iloilo Province, Naga City,

Quezon City, Bohol Province, South Cotabato Province, Camarines Sur

Province, and Abra Province. The first column lists the FDP Documents

required. The second column specifies the requirement as of the 4th

quarter of the current year. LGU website walk-through findings are

indicated by green (when required data is available) or red (when

required data is not available). When current data is not available, the

date of the most recent data is available is indicated in red. It was noted

that the timeliness of the FDP Documents in LGU websites were

sometimes one to two years behind.

Further to the compliance to the amended FDP, it was observed that

the LGUs had varying ways for presenting the FDP Documents. The

variations could be in locating them in the websites, in how the files are

labeled or named, and in how the formats for the reports/documents are

presented. It was observed that the non-standard ways by which LGUs

website were designed made it difficult to easily locate FDP Documents.

For example, the FDP Documents were put under different headings, and

were not always consistent with the FDP Document Name. In some cases,

some downloadable PDF files were not decipherable due to the size of

the font or the quality of the scanning.

Often cited as a model of e-governance has been Naga City and it

does provide a large amount of information that is current and is

downloadable. However, many of these are only in pdf form, and

therefore are non-machine readable. In this regard, Bohol Province,

provides a better benchmark of openness, since they already provide data

in excel format, albeit this is a proprietary format. In majority of the

LGU websites, the data is not available, or not current, and if made

available are in pdf.

76

Table 4: Open Data status of FDP documents in 7 LGUs

(as of 15 June 2016)

Legend:

Green : Required Data is Available

Red : Current Data is unavailable. Date of most recent data

is identified.

FDP

Docum

ents

(DILG

MC

2010-

83)

Dat

e

(DIL

G M

C

20

11

-13

4)

ILO

ILO

CIT

Y

ILO

ILO

PR

OV

INC

E

NA

GA

QU

EZ

ON

CIT

Y

BO

HO

L

PR

OV

INC

E

SO

UT

H

CO

TA

BA

TO

CA

M.

SU

R

(Nag

a)

AB

RA

(CC

AG

G)

An

nu

al B

udg

et

Rep

ort

Curre

nt

Year

20

15

XL

S

2016

XLS

Link

ed to

FDP

P

201

6

PD

F

2016-

PDF

2016

XLS

2014

PDF

2013

PDF None

An

nu

al P

rocu

rem

ent

Pla

n o

r P

rocu

rem

ent

Curre

nt

Year

20

15

XL

S,

2016

XLS

Link

ed to

FDP

P

201

6

XL

S

IN

FD

PP

2014

None

as of

06151

6

2016

XLS

2013

PDF None None

Sp

ecia

l E

du

cati

on

Fu

nd

In

com

e &

Ex

pen

dit

ure

Est

imat

es

Curre

nt

Year

20

15

XL

S,

2016

XLS

Link

ed to

FDP

P

201

6

Q1

PD

F

2015

None

As of

06151

6

2015

Q3

XLS

2013

PDF

2013

PDF None

77

FDP

Docum

ents

(DILG

MC

2010-

83)

Dat

e

(DIL

G M

C

20

11

-13

4)

ILO

ILO

CIT

Y

ILO

ILO

PR

OV

INC

E

NA

GA

QU

EZ

ON

CIT

Y

BO

HO

L

PR

OV

INC

E

SO

UT

H

CO

TA

BA

TO

CA

M.

SU

R

(Nag

a)

AB

RA

(CC

AG

G)

Sta

tem

ent

of

Deb

t S

erv

ice

Curre

nt

Year

20

14

XL

S

2014

201

6

Q1

PD

F

Certif

icate

of No

Debt

Servi

ce

2016

XLS

2014

PDF

2013

PDF, None

An

nu

al G

end

er &

Dev

t A

cco

mp

Rep

ort

Curre

nt

Year

20

15

XL

S,

2015

XLS

,

Link

ed to

FDP

P

Not

fou

nd

as

of

061

516

2013 2016

XLS

2014

PDF

2013

PDF None

Sta

tem

ent

of

Rec

eip

ts &

Ex

pen

dit

ure

s

Curre

nt

Year

20

15

XL

S

2015

XLS

Link

ed to

FDP

P

201

6

Q1

PD

F

None 2016

XLS

2014

PDF

2013

PDF None

Sta

tem

ent

of

Cas

hfl

ow

1st

Qtr

Curre

nt

Year

20

16

Q1

XL

S

2015

XLS

,

Link

ed to

FDP

P

201

6

Q1

PD

F

Feb

Jun

Sept

Dec

2015

PDF

2015

Q1-

Q4

XLS,

2013

PDF

2013

PDF, None

78

FDP

Docum

ents

(DILG

MC

2010-

83)

Dat

e

(DIL

G M

C

20

11

-13

4)

ILO

ILO

CIT

Y

ILO

ILO

PR

OV

INC

E

NA

GA

QU

EZ

ON

CIT

Y

BO

HO

L

PR

OV

INC

E

SO

UT

H

CO

TA

BA

TO

CA

M.

SU

R

(Nag

a)

AB

RA

(CC

AG

G)

Rep

ort

of

SE

F

Uti

liza

tio

n 1

st

Qtr

Curre

nt

Year

20

16

Q1

XL

S,

2015

XLS

Link

ed to

FDP

P

201

6

Q1

PD

F

2015

Q3

XLS,

2015

Q4

XLS

2013

PDF

2013

PDF None

Tru

st F

un

d (

PD

AF

)

Uti

liza

tio

n 1

st

Qtr

Curre

nt

Year

20

16

Q1

XL

S

2015

XLS

,

Link

ed to

FDP

P

Not

fou

nd

as

of

061

516

2014

2015

Q3

XLS

2013

PDF

2013

PDF None

Bid

Res

ult

s on

Civ

il

Wo

rks

and

Go

ods

and

Ser

vic

es 1

st

Qtr

Curre

nt

Year

20

16

Q1

XL

S

2015

XLS

Link

ed to

FDP

P

201

5

2016

Q1

PDF

2013

PDF

2013

PDF

2013

PDF None

Ab

stra

ct o

f

Bid

s as

Cal

cula

ted

1st

Qtr

Curre

nt

Year

20

14 2012

Non

e None

NON

E

FOU

ND

2015

PDF,

2013

PDF None

79

FDP

Docum

ents

(DILG

MC

2010-

83)

Dat

e

(DIL

G M

C

20

11

-13

4)

ILO

ILO

CIT

Y

ILO

ILO

PR

OV

INC

E

NA

GA

QU

EZ

ON

CIT

Y

BO

HO

L

PR

OV

INC

E

SO

UT

H

CO

TA

BA

TO

CA

M.

SU

R

(Nag

a)

AB

RA

(CC

AG

G)

20

% C

om

po

nen

t o

f

the

Inte

rnal

Rev

enu

e

All

otm

ent

Uti

liza

tio

n

1st

Qtr

Curre

nt

Year

20

16

Q1

XL

S

2015

XLS

Link

ed to

FDP

P

Non

e None

2015

Q4

XLS,

None 2013

PDF None

Su

pp

lem

enta

l

Pro

cure

men

t P

lan

, if

an

y

Curre

nt

Year

20

16

Q1

XL

S

2015

XLS

,

Link

ed to

FDP

P

Non

e None

2015

Q4

XLS,

None None None

LD

RR

M*

20

16

Q1

XL

S

LI

N

K

TO

FD

PP

2015

Q4

201

6

Q1

PD

F

2013

PDF

2015

Q4

XLS

2014

PDF

2013

PDF None

*LDRRM was not part of the FDP

80

DISCUSSION

Needs and Nature of CSO engagement

CSOs from the private and public spheres are agents that act in the

political-economic sphere in pursuit of their conception of the public

good (Holmes, 2012: 143-144). The public goods that they are expected

to push for include, among others: accountability of public officials;

inclusive representation; equitable development; and, its own autonomy.

Towards these ends, they engage the state to secure democratic and

redistributive reform. More specific to the budgeting and public

accountability process, Boncodin argues that the rationale for engaging

with citizens (and CSOs) is to (1) demystify the budget process; (2)

respond to basic needs; (3) improve budget allocation and facilitate fund

distribution procedures; and (4) prevent financial corruption and enhance

accountability (Boncodin, 2007).

It is in line with this, that the cases discussed in this study engaged

government in fiscal transparency for different reasons; be it for

advocating budgetary reforms; participating in planning; act as service

providers; or for social audit. As such, if CSOs’ goals vary, so does the

data they require of government. It is also for this reason that there has

long been a demand for freedom of information (FOI), in order to

facilitate the varied objectives of CSOs. In turn, how government views

CSOs (as a partner, as a critique, etc.) can then lead to varied

relationships and levels of trust with government, which can also be a

factor with respect to accessing data, especially if the data is not open,

and there is no compelling FOI law.

Advocating for budgetary reforms, or allocations for specific

advocacies, for instance, requires access to the national budget.

Participation in the budgetary process requires participation in agency

level deliberations and sector specific information. At the local level, this

also requires specific information and evidence needed in the crafting of

local poverty reduction plans.

For those with a monitoring and audit role, data from the national,

especially from agencies, and agency implementation at the local level is

needed to be cross-validated with funds at the local level. Hence, data is

not limited to data required of LGUs from the FDP.

On the other hand, those who are directly involved in service

delivery, often require information on how to participate, access, and

track funds. This might also require CSO intermediation, especially when

81

the information and data is difficult to navigate, especially for new

programs that the government is initiating (e.g. BUB).

Open Financial Data at the local government level

This investigation has seen more data and information about local

government finance being opened in the Philippines, especially at the

national level (see Table 5). For instance, The DOF has aggregated

financial data provided by LGU treasurers on LGU statements of receipts

and expenditures (eSRE). While the data is machine-processable in excel

format, the data is not complete. The e-SRE does not provide access to

bulk raw data because the method of input to the system follows the

prescribed templates of the BLGF-DOF. Data has already been

aggregated particularly for sectoral expenditure items (i.e. general public

services, economic services etc.) These sectoral expenditure items have

primary sources that reflect the expenditures of individual local

government departments (i.e. office of the municipal agriculturist, local

economic enterprises office etc.). These primary sources are not available

at the eSRE system and are generally not open at the LGU level as well.

Data in the eSRE is also not timely since the eSRE system only provides

access to aggregated data for each year, the latest being 2014 eSRE.

The DILG has a full disclosure policy (FDP) portal where LGUs

can post the financial documents it requires of LGUs under the FDP.

However, data in the portal is also incomplete. There is no access to the

“entire data set.” The data is not primary and have been aggregated or

modified. In some cases, the reports posted do not follow the same

format, which would also complicate aggregation in the future26

. Other

postings on the various LGU trust funds are very simple but still have

varied formats in presenting the data. Others reflect just the amounts

released while others include other details such as % of completion of

project and the amount released so far. In terms of timeliness, many

LGUs do not post on time. It should be recalled that there are documents

in the FDP Portal that are required to be submitted quarterly, not only to

the portal but also to the Sanggunian or local council for accountability

purposes. Assuming regularity in LGU operations, each LGU must

already have such documents ready for posting every quarter, which may

26 For example the 2014 SRE of Batangas City follows the prescribed format of the

BLGF-DOF, while Quezon City’s SRE posting follows the PS-MOOE-Capital Outlay

format with trial balance.

82

be difficult for some LGUs to do. Furthermore, most of the documents in

the FDP Portal are in pdf format. There are documents that were

converted through “Print to pdf” function while others are photos or

scanned documents converted to pdf. The previous being considered

“searchable” while the latter is not “searchable.” But, both are not

machine processable. In other cases, documents are in JPG format—

these being photographs of the documents. One reason for this is that

many LGUs want to present a fully authenticated document that shows

the signature of the reporting officer (i.e. treasurer, accountant etc.). This

happens in spite of the fact that DILG has provided templates for each

document subjected for required posting.

In addition, the 2016 General Appropriations Act (GAA) is open,

accessible, and more detailed27

. The level of detail even includes

information on some allotments that go down to LGU levels, and some

even down to the barangay-level for some infrastructure projects (like in

evacuation centers). The Bottom-up-Budgeting (BUB) portal also now

provide more detailed quarterly reports of BUB project, distilled from the

GAA, and does go down to the municipality/city level on a per project

basis. As the detail go down to the LGU-level, this provides

opportunities for stakeholders (e.g. CSOs, citizens) to interact with their

LGUs in various stages, whether it be in project planning,

implementation or monitoring.

Table 5: Open Government Financial Data at the National Level

Case/Doc Completeness Timely Machine

Processed

National

National

Budget/NEP

Yes

Downloadable

But no meta

data on the data

Size of file may

make it difficult

to download

Linked to DBM

Yes

But only for this

year; not

comparable

from year to

year

Yes

Available in

pdf (but not

searchable

electronically)

,.xls, and .csv

BLGF’s

eSRE

No

No meta-data

on the file

No, Late

(2014 latest)

Annually

Yes

in .xls, .xlsx

manuals and

27 The 2016 GAA is also thicker and has more volumes.

83

Not

disaggregated

Reported by

treasurers

reported

Not quartely

procedures

are available

in pdf

FDPP No

Quality is

suspect

But more

detailed than

BLGF, no

aggregation

No (not on

time),

Not quartely

Only as far as

2012

Varies

Some files are

jpg, most are

pdf

BUB Portal Incomplete

Not useful for

LGUs

More internal

tracking

Quarterly

reports from

2014- end of

Partial/Limited

difficult to

compare from

year to year

Yes

In .csv

and .xls

At the local level, the state of open data remains spotty at best. The

posting of FDP documents on websites are not yet the norm, and if they

are posted, they are not complete, current or on-time with documents

mostly non-machine processable, or use proprietary format.

84

Table 6: Open Data at the Local Level

Case/Doc Completeness Timely Machine

Processable

LGU Data (based on Table 4 and feedback from CODE-NGO

conference)

FDP in

LGUs

Varies

Submission in

FDPP only for

compliance

incomplete

access

information

quality varies

Internet

access varies

Varies/Inconsist

ent

Varies

mostly pdf

if open

access, is

proprietary

(.xls)

some are

hardcopies

presentation

varies; not

standard

LDRRM Low number of

posting

Varies/ Most

Not timely

- mostly pdf

National Agency Data in Local or Regional offices

Per Agency:

BUB Menu

of

Projects/req

uirements

Requires

intermediation (see

openbub.gov.ph)

-call center

operations are

requested

templates per

agency is needed

on process; partly

because of the

newness of

program

-key implementors

not linked (DBM,

DILG, NAPC)

(policy

coordinating and

monitoring)

No,

incomplete;

requires queries

to agencies; no

FAQs

generated

No

DILG: compliance

with SGLG

No -requires

intermediation

No No

85

Agencies:

DPWH

(Kalsada)

No

Hardcopy from

regional offices or

national office

No No

Hardcopy only

It should also be noted that Internet access would be necessary for

posting and accessing financial data that is available online, whether this

is by national agencies or by LGUs. Unfortunately, the quality of Internet

access varies, especially as one goes farther from socio-political and

socio-economic centers in the country. Hence, some CSOs are still

heavily reliant on getting information the traditional way. In other words,

getting hard copies of the needed data from LGU offices or local and

regional offices of national agencies that implement projects in their

communities is still quite common.

Furthermore, citizens’ and in some cases the LGU’s access to

information requires more than having an Internet access. There are a

number of pre-conditions and contexts necessary to make this happen.

Work is still needed on the “analog complements” which includes

developing workers’ skills to the demands of the new economy, and by

ensuring that institutions are accountable (WDR 2016).

To some extent this study has shown some of the analog

complements that need to be worked on, such as: policies on freedom of

information and human resource capacity. According to Canares &

Shekhar, context extends beyond the description of national situation or

local idiosyncrasies and becomes a description of relations between

different actors across various level of state governance (2015:28). This

was supported in some of the cases, as it was shown that ‘relationships’

can be both an enabler and a barrier to accessing information. INCITE-

Gov for instance gave the example of establishing good relationships

with LGUs as this helps them gain access to data. CODE-NGO said they

sit down with LGUs, to have a better understanding of the financial data

they provide. Our own experience also required interacting with an

LGU’s webmaster, to help navigate websites and locate needed

information. But even gaining access to that information required

assistance from other people to better understand the content. On the

other hand, Social Watch, found their ‘relationship’ with government as a

hindrance since they were not allowed to present their Alternative Budget

Initiative, to the current Congress. The absence of these (policies and

capacity), in turn, also create spaces that CSOs fill-in, whereby they end

up as ‘intermediaries’ in understanding the budget process, in processing

86

available information, and in facilitating compliance of LGUs with

national government agencies.

CONCLUSIONS

One of the digital dividends brought about by the Internet is the ease of

access to information given how it helps overcome information barriers

(WDR, 2016) . In connection to this, the objective of this research was to

encourage more fiscal transparency at the local level by making LGU

financial data openly accessible to citizens.

Openness in government is a culture and philosophy that still needs

to be developed and nurtured. By culture we refer to mindsets, values

and behaviours that will support and enhance the supply, demand and use

of open data beyond policies and legislation. Notwithstanding the fact

that it requires laws to make compliance mandatory. By philosophy we

refer to the essential understanding and practical consciousness of

deliberately embracing, and engaging with, open data regardless. It

requires laws to make compliance mandatory. However, a freedom of

information bill has yet to be passed in Congress. Despite this, the

Aquino administration has had made inroads in making more data

available through open government and open data initiatives, and

incentives through the full-disclosure policy (FDP). The FDP at present,

however, does not require web-posting nor providing documents in an

open data form. Requiring LGUs to post these online and in an open data

format can enhance its accessibility and usefulness for CSOs. In fact,

there was a pending bill in the last Congress that proposed amendments

to Sec 352 of the local government code28

. The main points of the

proposal require OTHER INFORMATION, and making this an

accountability of LCEs (Governors, Mayors and Vice-Mayors) and

posting these in websites. The same basic documents in the FDP are

mentioned but no longer limited to a calendar year, the spirit of which

assumes that previous years are also provided as a basis for comparison

and trending, and in more detail (not just summaries). Better

information, would then lead to better decisions. This, though has not

been passed, but should be re-considered in the next Congress to make

open data a sustained institutional policy in future administrations.

There is also room to expand the idea of openness not only to

28 HB 19 and HB 186 by Rep Leni Robredo and Rep Winnie Castelo.

87

government, but also other non-government actors, consistent with how

society ascribes to a concept of governance that is more inclusive. In

relation to this, some non-governmental actors openly said that they can

share data (e.g. Social Watch; CODE NGO). Some stakeholders however

were cautious because the data might have been given in confidence or

with restrictions (e.g. ULAP), while others also had to consider legal

protocols (e.g. audit finding, non-disclosure agreements).

From this research, there were three perspectives highlighted in how

data is reported: (1) National Government templates; (2) Local

Government operations; (3) CSO interests29

. It echoes the multiple ways

in which data and information is appreciated. As Brown and Duguid

(2000: 18) says: “it is people, in their communities, organizations and

institutions, who ultimately decide what it all means and why it matters.”

However, if data is reported in different ways, this then becomes as

barrier for people’s capacity to understand them. This means that what is

found online should be the same as the official document. How these are

reported, named, or referred to should be consistent all throughout (and

in all levels of government). As such, to build capacity to understand

financial data at the national and local level, data quality must be

prescribed. In the Philippines, compliance by local government units

with the FDP was high at more than 80% when it was first implemented

– made possible by the fact that data required to be disclosed under the

policy come from financial systems with clear data collection,

aggregation, and reporting procedures (Canares & Shekhar, 2015: 17).

However, upon examination in this study, format and quality of

compliance varied.

Hence, compliance to the FDP must be refined to make sure the data

that is opened and posted is useful. Current initiatives can be improved

by putting in place more specific regulations and rules that help

standardize how data is reported (data architecture), how files are named,

and where in LGU websites they can be found (even standardizing the

look of LGU websites). This would make it easier for stakeholders to

find needed data, develop applications for processing data into more

understandable figures, and allow aggregation of data in higher levels

of government, perhaps even without human intermediation. Hopefully,

this is something that would be addressed by the recently created

Department of Information and Communication Technology (DICT), as

part of their mandate is developing a coherent e-government framework

29 Example of which is the CODE-NGO guideline.

88

for all levels of government to follow.

In making refinements in these fiscal reports, it is essential not only

to have LGU representatives, but also CSO representatives to align

expectations, planning, aspirations of the community, and how LGU

performance will be assessed. This means agreeing on a common metric

for performance evaluation, putting common fields in the financial

templates and agreeing on where these are found in all LGU and related

national agency websites. These will help in developing numeracy

capacity among stakeholders to understand data. It can also assist in

easily developing applications for processing data in LGUs and

aggregating them in provincial, regional and national reports.

Also, for non-governmental stakeholders, the challenges also

requires better understanding of the processes involved, whether this be

in budgeting in general, or bottom-up budgeting processes in particular.

It also requires understanding some of the terminologies used in

government budgeting and finance (e.g. UACs), which is also made more

complicated by the fact that LGUs are not consistent in using the same

templates and terms. This process of understanding how local

government work should ideally be known to all citizens could be

incorporated in current initiatives to revise basic education through the

K-12 curriculum.

In summary, there is still much to do in the Philippines to have

documents become more open, and accessible. At present, there is

limited local fiscal documents that are accessible, timely, and in open-

access form. This is why the proposed revisions to the FDP that

provides open data should be supported. This can be done by making it

standard, and having a template that can then be easily taught. Capacity

building can be done by larger CSO networks, as exemplified by the

work done by CODE-NGO and to a certain extent by ULAP. CSOs

become intermediaries in this undertaking. However, this should also be

cognizant of the reality that certain CSO roles are by design supposed to

be independent of government. This means that if they are service

providers, they are necessarily separate from the ones that

monitor/evaluate, even as there might be overlaps in the information they

require (e.g. budgets). As such, the irony is that even as ‘Follow-the

money’ CSOs may share a common interest in the budget and planning

process, their objectives require some independence from each other.

What remains critical is that data, to which keeping everyone linked,

regardless of affiliation, relations, etc. be made open.

As such, for the local fiscal open-data ecosystem to transition from

89

the traditional ways of CSO engagement requires: (1) continued national

government support to implement responsive open data policies that will

continue to incentivize complete, timely and machine-processable fiscal

open data in LGUs; (2) congressional laws that will sustain the Open

Data initiatives of the Aquino administration; (3) a government-wide

open data capacity-building through the Department of Information and

Communication Technology (DICT) that will systematize open data

requirements across all levels of government while also providing the

needed infrastructure to make it work. This though, should also be

complemented by (4) building understanding at the grassroots, starting

with the K-12 curricula, of how the local government works, especially

the local budget process, so that fiscal data that is eventually made open

can be found, understood and used by every citizen of the country for

whatever purpose they require.

* This project was made possible through funding support from the World Wide

Web Foundation.

90

References

Alampay, E. (2006). ‘Incorporating Participation in the Philippines’ e-LGU

project,’ Regional Development Dialogue, Vol. 27, No. 2, Autumn 2006,

United Nations Centre for Regional Development, Nagoya, Japan, 189-

199.

Alampay, E. (2002). ‘People’s participation, consensus building and

transparency through ICTs: issues and challenges for governance in the

Philippines’ KASARINLAN Vol. 17 No. 2: 273-292.

Boncodin, E. (2007). ‘Citizen Engagement in Budgeting and Public

Accountability’ (slides) presented at the 6th

Session, Committee of Experts

in Public Administration, April 10-17, 2007. United Nations. New York.

Brillantes, A. B. Jr. (2003). Innovations and Excellence. Understanding Local

Governments in the Philippines. Center for Local and Regional

Governance. National College of Public Administration and Governance.

University of the Philippines.

Canares, M. and Shekhar, S. (2015). “Open Data and Sub-national Governments:

Lessons from Developing Countries”. Step Up Consulting: Tagbilaran

City

Canares, M., Marcia, D. and Narca, M. (2015). “Enhancing Citizen Engagement

with Open Government Data” Step Up Consulting: Tagbilaran City.

Canares, M. (2014a). ‘Assessing Open Governance Data in Bohol,’ in Insights

into Open Local Governance, February 2014 , Vol. 1, Issue 1. A Product of

the Open LGU Research Project.

Canares, M. (2014b) ‘Why Local Governments are Apprehensive to “Open Data”

in Insights into Open Local Governance, February 2014 , Vol. 1, Issue 3. A

Product of the Open LGU Research Project.

Canares, M. (2014c) ‘Opening the Gates: Will Open Data Initiatives Make Local

Governments more Transparent?’ This case study research was done under

the Exploring the Emerging Impacts of Open Data in Developing

Countries (ODDC) research project, funded by the World Wide Web

Foundation supported by grant 107075 from Canada’s International

Development Research Centre, 2014.

Davies, T. and Edwards, D. (2012) 'Emerging Implications of Open and Linked

Data for Knowledge Sharing in Development', IDS Bulletin 43 (5) 117-

127

Department of Budget and Management (DBM) (2015) Reference for Open Data

and Fiscal Transparency Practices in the Asia-Pacific. APEC Fiscal

Openness Working Group.

Holmes, R. D. (2012) ‘The Curious Cases of Philippine Society and

Decentralizaton’ in Miranda, et. al (Eds.) Chasing the Wind: Assessing

Philippine Democracy. Commission on Human Rights. Quezon City, pp.

139-181.

Martin, A.K and Bonina, C.M. (2013) Open Government and Citizen Identities:

91

Promise, Peril and Policy. Open Development. Smith, M.L. and Reilly,

K.M. (Ed.) Networked Innovations in International Development. MIT

Press and IDRC.

Ona, S., Hecita, I., Ulit, E. (2014). Exploring the Role and Opportunities for

Open Government Data and New Technologies in MHCC and MSME:

The Case of the Philippines. De la Salle University.

Parycek, P. and Sachs (2010). Open government-information flow in Web 2.0.

European Journal of ePractice, 9(1), 1-70.

Veljkovic, N, Sanja, B.-D. and Leonid, S. (2014). “Benchmarking open

government: An open data perspective.” Government Information

Quarterly 31, 278-290.

World Bank (2016) World Development Report 2016: Digital Dividends: 2016

International Bank for Reconstruction and Development. The World Bank.

Zuiderwijk, A. (2014). “Open data policies, their implementation and impact: A

framework for comparison.” Government Information Quarterly 31, 278-

290.

92

93

Reactor’s Note

LEARNING FROM THE KOREAN NARRATIVE

IN OPEN GOVERNANCE:

A Reaction to “Assessing fiscal data openness in local

governments in the Philippines”

Jinky Joy dela Cruz

Oversight Officer

Professional Regulation Commission

A renowned scientist and award-winning author, Mr. David Brin, once

remarked that liberty flourishes not when the government is weak but

when government is accountable. Indeed, history teaches us that the

narrative of true democracy and development of nation-states reaches

climax as governments disrobe themselves of the secrecy cloak. And

what could be the best way to do so but by initiating an open data

program that would make as much government documents as publicly

available as possible.

The Philippines, being one of those countries whose liberty and

democracy were in peril, threatened, and put into test throughout its

written history, has warranted its independence and sovereignty by

providing for a right to information provision in its Highest Law of the

Land—the 1987 Constitution. This right is particularly important to

matters of public concern.

Therefore, this paper by Dr. Erwin Alampay et al. is yet another

important piece of literature in the review of transparency and

accountability in Philippine governance. It most especially presents not

only the full disclosure policy but also the importance of standardizing

the formats of full disclosure for all LGUs. Furthermore, through this

study, we realize not the lack thereof but rather the need to push more

and exert extra effort so that what the past administration has initiated in

terms of the openness and accessibility to data may develop, considering

that the Philippines is one of the first few to be part of the OGP.

With this, yours truly thank the organizers and the authors of this

paper for giving yours truly this rare opportunity to read, learn, and take

part in this noble project. I have truly acquired an in-depth knowledge on

94

subjects that have always been my areas of interest—local governance,

public consultation, and e-participation—since I have personally

experienced this difficulty in data accessibility. Moreover, this open data,

as part of the pro-active disclosure policy, is somehow personal to yours

truly as this, with the Freedom of Information (FOI) program, is one of

the major projects by the Policy and Legislative Unit of the Presidential

Communications Operations Office (PCOO), where yours truly is

currently affiliated with.

At this point, however, I shall veer away from the traditional

commentary format as this would be more of sharing than actually

critiquing. At least, this glimpse of how they do the open data program in

Korea would become a matter of cross socio-cultural exchange; part of

this is also to observe Korea’s best practices on its engagement and

commitment in the open government partnership. The lessons drawn

from the Korean experience which may be applicable to the Philippines

could be utilized to enhance open governance in our country, as also

asserted by the paper.

Despite the wars that made Korea hit rock bottom, in less than five (5)

decades, Korea is now one of the leading developed countries in Asia,

particularly in East Asia. In fact, it has one of the world’s best

information and communications technology (ICT), particularly the

broadband internet. Furthermore, ICT became a tool in Korea to actively

pursue e-Government to make its country more competitive (National

Information Agency [NIA] 2015, p.5).

It was solely a concept at first, which was formulated and developed

into a plan; this plan pay heed of Korea’s “빨리 빨리” (hurry hurry)

culture in its contents. After the groundwork for e-Government, laws

were enacted and institutions were established. These activities

influenced the laying of the National Basic Information System (NBIS)

computer networks in the 1980s; streamlining all applicable laws and

institutions in the 1990s, including but not limited to Administrative

Appeals and the Civil Petition Treatment Act; and most importantly,

making e-Government the major national agenda for the 2000s that

included 11 major tasks in 2001~2002 and 31 major tasks for a roadmap

in 2003 to 2007, which resulted to having e-Government as becoming

firmly established in all areas of the Korean government (NIA 2015).

Consequently, of course, the Korean bureaucracy has become efficient

and effective in upholding the pillars of good governance. Its being

transparent, accountable, strictly following the rule of law, and engaging

95

citizens in decision-making made Korea ranked first in Online Service

Index and e-Participation Index, among all UN-member countries.

Now, Korea focuses on seamless digital cooperation system to

enhance connectivity of all departments and bureaus with and amongst

each other to improve convenience for the citizenry.

The Ministry of Public Administration and Security and National

Information Society Agency listed Korea’s best e-Government Practices,

to wit:

1. Electronic Procurement Service

2. Electronic Customs Clearance Service

3. Comprehensive Tax Services

4. Internet Civil Services

5. Patent Service

6. e-People : Online Petition & Discussion Portal

7. Single Window for Business Support Services

8. On-nara Business Process System (BPS)

9. Shared Use of Administrative Information

10. National Computing & Information Agency (NCIA)

These portals facilitate people’s participation in policy-making by

processing people’s complaints and suggestions via a single window.

Now, people can voice out opinions on almost all matters of the national

and local significance. They can complain about unfair administrative

handling, infringements of their rights and interests, improvement of

institutions, and various policies. In addition, at the same time people can

check the results of what they ordered or transacted online.

These facilities also “manage all information systems of the

government by integrating them into two data centers and provide non-

interruptible administrative services by the best information technology

and expertise.” (NIA 2015: 8). The contents of services are as follows:

1. Back-up systems of the major infrastructure, state-of-the-art

security facilities, and top-notch human resources ensure

uninterrupted availability of e-Government services 24/7; and

2. Advanced information security and reliability are ensured by

real-time monitoring of system errors and security, disaster

recovery system, and real-time back-up system.

96

This system of open government has also been implemented in local

governments of Korea. In particular, Seoul Metropolitan Government

(SMG) implements various policies and initiatives to communicate with

its people. SMG has realized that open government is a significant

instrument to communicate with people. As one of the most prominent

cities in the world, it is particularly important to mention the efforts that

SMG has been doing regarding open data government.

It was July of 2015 that, in order to help citizens understand the

status of fiscal payment of the city and to improve transparency of

budget, the city started a service changing data on daily public

expenditure into image formats or infographics and provided them to the

citizens. This made Seoul as the first local government to disclose all

non-confidential data on administration.

What lessons can be drawn on the discussion of Korean Open

Governance System then? There are actually three important lessons

herein:

1. Strengthening the Institutional Framework

The Korean government strengthened its institutional

framework in order that all de facto undertakings in relation to

open governance are de jure. In lieu of this, even local

governments, particularly SMG, were able to apply the

principles and system of open governance especially in local

fiscal area.

2. Standardization of Processes and Forms

The system of standardization means that what is found online

should be consistent with the actual and/or official document.

Korea’s system of standardization could actually be a paradigm

for governments in their infant-stage disclosure policies

implementation. The citizens may apply online but having

been secured that applying the document online would be the

same with that of the actual would not only be a relief to the

people but would have the government gain the trust and

confidence of its stakeholders.

3. Establishing a Unified Framework

Both are important for data to be more accessible so that we

would be able to better evaluate projects and programs and to

97

uphold the pillars of good governance (transparency,

accountability, rule of law, and participation).

Korea (Seoul in particular) makes good plans, come up with better

decisions, and undertakes best implementation strategy due to the

accessibility of the stakeholders to data thru their Government 3.0 or

ubiquitous (smart) city concept. Their approach may not be perfect (as

they are almost extremely top-down) but the lessons we may observe

from their approach may be explored in order to address the issues on

open data governance, as presented on the paper discussed a while back.

In the case of the Philippines, both in the national and local levels,

open data governance meant the use of Information and Communications

Technology (ICT) to make data and information available to the public.

In fact, even before the Philippines’ membership to the Open

Government Partnership in 2011, itsconstitution and all ICT-related laws

provides for two (2) major recognitions, namely: (a) that the State

acknowledges the necessity for it to be cognizant of the need for a decent

information and communication technology to improve the procedures

and transactions, and; (b) that the State adapts its policies with the fast

paced technological advancements, yet, remains to be aware of the need

to regulate the actions of the ICT provider and the ICT consumer. Even

for Local Government Units (LGU), for instance, the Local Government

Code of 1991 had been explicit in its mandate for LGUs to be equipped

with the proper research and information-based management system of

every province, municipalities, cities and barangays.

Thus, ICT has always been recognized to play a pertinent role so that

the citizenry and different organized groups would become aware of the

updates about government actions and may actively participate in policy-

making process. Non-governmental Organizations (NGOs) and People’s

Organizations (POs) even used the Internet to campaign the anti-pork

barrel call and summon more citizens to join the mobilization for the

scrapping of PDAF before.

ICT has become a tool and catalyst of change according to its

functionality and to the silhouette of its various forms. It is a key tool in

redefining boundaries and delimitations amongst nation-states and within

National and Local Government. Accordingly, ICT is used as an

empowering instrument for the public – that includes the civil societies

and the businesses - to participate and interact with their government, as

well as, be well informed on how their government undertakes

bureaucratic and administrative responsibilities. It (ICT) is said to aid

98

LGUs in their Knowledge Management schemes so that learning

concepts would be easier; easier learning means fast acquisition of the

wisdom; fast acquisition of wisdom ensues good management of the

knowledge acquired that would result to sound decision making for

economic advantage.1

The Use of ICT in Freedom of Information

The signing of EO No. 2 on 23 July 2016 that sought to operationalize

the People’s Constitutional Right to Information and to ensure the State

Policy to full public disclosure and transparency in the public service is

considered a milestone in Open Data Partnership. This is a historic event

indeed as this affirms the government’s thrust for transparency, openness,

and fairness as the centerpiece of its platform of good governance.

Learning from Korea and other countries such as the UK, Australia,

US, India and New Zealand taught the Philippines to embrace pro-active

disclosure to complement Freedom of Information (FOI). In pro-active

disclosure, government makes as much of its documents available to the

public. This has been seen to reduce the burden on public administration

of having to process standard paper requests. Open Data reduced FOI

requests by 31% for the period covering 2014-2015 in Australia, for one.

The Philippines and Korea in Open Data Program

This paper of Dr. Alampay et al. gives both a macro and micro

perspective on how the Philippines implements its obligation in Open

Government Partnership. It shows how the previous administration might

have failed to enact a Freedom of Information law but initiated openness

in government via the full disclosure policy that includes open data

initiatives. However, since posting on websites of all information and

data are not required under this program, there has been less accessibility

and participation by the citizens and organized groups with the LGUs.

Thus, the conclusion is that the Philippines still has a long way to go in

terms of full disclosure policy.

This is where the Korean experience comes in. With its adept

knowledge and use of ICT to implement its open government initiative

both in the national and the local, efficiency and transparency in public

administration would improve; administrative services in the bureaucracy

would now be people-centered and CSO-focused; communications with

the people by the government about its policies would be strengthened;

1 Romero et.al. (eds), 2006, p. ix

99

and, an increased efficiency in information resource management would

ensue.

As Korea ranked first in the 2010 UN Global E-Government Survey

and evaluated to be one of the world’s best by the international

community, perhaps the Philippines may be able to receive awards and

citations for its best practices in e-government from international

organizations as well, soon.

REFERENCES

Fenton, H. N. and Anderson, B. D. (2013). “Internet Enhancement of the Role of

Civil Society in Promoting the Rule of Law in Transitional Studies.” In

ojs.law.cornell.edu index.php joal article download 21 20

Mathiason, J. (2013). “Information and Communication Technologies and e-

Participation for the Empowerment of People and e-Governance.” In

www.un.org/esa/socdev/egms/docs/2013/ict/BackgroundPaper.pdf

McNutt, K. (2007). “Will e-Governance and e-Democracy Lead to e-

Empowerment?” in library.queensu.ca/ojs/index.php/fedgov/article/down

load/4408/4421

NIA and Ministry of Public Administration and Information (2013). “E-

Government of Korea (Best Practices)

Pollit, C. (1993). Managerialsism and the Public Services. Oxford, UK:

Blackwell

Romero, S. et. al (eds). (2006). Forging Local e-Government Ventures:

Exemplars, Lessons and Opportunities. Manila: Development Academy of

the Philippines

Salao, E. C. (ed). (2005). The 1987 Constitution of the Republic of the

Philippines (including, The Local Government code, The Omnibus

Election code, The Initiative and Referendum Act, The Partylist System

Act, The Civil Service Law, and Anti-Graft Laws). Manila: Rex Bookstore,

Inc.

United Nations Development Programme. (2007). Democratization and Civil

Society Empowerment Programme. in www.undp.org.af/publications/.../dc

se/DCSE_Fact_Sheet_July08.pd

Internet Sources

Comprehensive Tax Services (www.hometax.go.kr)

Electronic Procurement Service (www.g2b.go.kr)

Electronic Customs Clearance Service (portal.customs.go.kr)

e-People : Online Petition & Discussion Portal (www.epeople.go.kr)

100

Internet Civil Services (www.egov.go.kr)

Patent Service (www.kiporo.go.kr)

Shared Use of Administrative Information (www.share.go.kr)

Single Window for Business Support Services (www.g4b.go.kr)

101

102

Synergies: Production, Marketing, and Promotion of

Philippine and Korean Television Series

Josefina M. C. Santos

Assistant Professor

Broadcast Communication Department

College of Mass Communication

University of the Philippines-Diliman

ABSTRACT

Synergies are found both within and outside of the production

processes, marketing, and promotion of television series both in Korea

and the Philippines. Synergy is first found in the conceptualization of

stories to produce. Choices are made based on many elements that once

put together can increase the chances of the program to be a primetime

hit.

Scripting is dependent on many factors affecting the process while

the production itself has the star as primary consideration.

Marketing and promotions follow similar patterns and avenues

among networks except for ABS-CBN’s marketing strategy of further

synergizing the marketing of television products with other products and

services.

What is missing in the production processes, marketing and

promotion in the Philippines is the government support and funding that

pushed the Korean cultural industry to better position itself in the

international market. What is needed is a will on the part of the

Philippine government and the Filipino people to use the culture industry

to promote nationalism and introduce the Filipino culture to the world.

Keywords: synergies, television drama, drama series, drama

production, marketing

103

The last decade before the end of the twentieth century saw great

changes in the television landscape in Korea and in the Philippines.

Korea, in its bid to overturn the onslaught of American films in the

Korean market, set up a culture industry bureau that sought to develop

the entertainment industry and provide incentives to investors in film and

television1. The Philippines opened its doors to other foreign drama

series for television. Drama became primetime television fare2. By 2003,

Hallyu3 has become a global phenomenon and Philippine television

networks started buying Korean television series for local airing. This

paper seeks to trace some parallelisms and differences in the production

processes, marketing, and promotion of Philippine and Korean television

series beginning 20034. It aims to 1) identify what elements serve as

prime determinants in the success or failure of television drama

productions; 2) pinpoint how maximization of profit affect the decision

making processes of producers and promoters of Korean and Philippine

television series; and 3) determine how political economic processes in

the production, marketing and promotion of cultural products affect the

culture and social life in the two countries.

To answer the above stated objectives, this researcher mainly used

interviews and observations in the production and consumption of

television series in the Philippines. Articles from the Internet, books, and

unpublished theses were also consulted.

History of Philippine and Korean Television

Television in Korea and the Philippines were born in the same decade.

The Philippines was the first to have a television station in Southeast

Asia and one of the first to put up one in Asia. While a temporary permit

1 https://en.wikipedia.org/wiki/Korean_Wave 2 The Mexican television drama series became a big hit in the Philippines in 1997. This

started a series of importation of television drama series from Central and South America.

Source: https://en.wikipedia.org/wiki/Philippine_television_drama 3 Hallyu is a combination of two Korean words “Han” and “Ryu” which literally

translates to “Korean wave or flow”. The word applies to Korean drama or Kpop music

that has gained popularity in the global market. https://en.wikipedia.org/wiki/Korean_Wa

ve 4 2003 was the year the first Korean drama series was aired on Philippine television.

https://en.wikipedia.org/wiki/Korean_television_dramas_in_the_Philippines

104

was obtained by American James Lindenberg in 1950, it was in 1953 that

the first telecast was aired with the launching of DZAQ-TV.5

In 1958, the Lopez family bought DZAQ-TV from Judge Antonio

Quirino and renamed it Bolinao Electronic Corporation (BEC) and later

again to Alto Broadcasting System or ABS6. In that same year, television

operations were entered into by the Chronicle Broadcasting Network

(CBN), put up initially by the Lopez family as an FM radio station in

1956. This makes CBN the second television network while the third

station, GMA, was established in 1961 when ABS was already starting to

put up provincial television stations.

This has rendered ABS-CBN a bigger network in a two-tiered

monopoly in Philippine Broadcasting. ABS and CBN merged in 1969 to

become ABS-CBN Broadcasting Corporation that Filipinos know today.

By that time, the corporation was already broadcasting in full color.

The company, however, was to cease operations from 1972 to 1986 when

broadcasting companies were closed because Martial Law was declared

in the Philippines. The government sequestered the company properties

when it started to operate its state-run television network NTV4 (later to

become PTV-4).

Martial Law also inspired some Filipinos to start operating a cable

station in the Philippines to counter the state controlled media. The

beginnings of cable operations started in Baguio City (near the northern

tip of the Philippines) in 1969. In the late 1970s, the government’s

Ministry of Public Information launched the country’s major cable

company called Sining Makulay (Colorful Art) that operated in several

parts of Metro Manila. Its operations later expanded to cover other major

cities in the country7.

In 1986, immediately after the EDSA revolution in the Philippines,

the Lopez family regained their ownership of ABS-CBN as a merged

station and bounced back to topnotch position as a major media

monopoly in the Philippines8.

5 James Lindenberg first got athe permit to operate but financial difficulties delayed the

operations of a televison station. Judge Antonio Quirino, brother of then Philippine

President Elpidio Quirino bought majority shares of stocks from Lindenberg and named it

Alto Broadcasting System (ABS) or DZAQ-TV. Source: Pinoy Television: The Story of

ABS-CBN. (1999) Quezon City: ABS-CBN Broadcasting Corporation. 6 Pinoy Television 7 https://en.wikipedia.org/wiki/television_in_the_Philippines#cite_note-pinoytv-3 8 Santos, Josefina C. (2000) Ang Pampulitikang Ekonomiya ng ABS-CBN at Ang

Globalisasyon [The Political Economy of ABS-CBN and Globalization]. An unpubliched

master’s thesis. University of the Philippines

105

While there are seven major networks in the Philippines today –

ABS-CBN, GMA, ABC5, RPN, IBC, and PTV49, this paper will mainly

focus on the 3 major companies since in her unpublished master’s thesis,

this author presented that there were only 2 networks dominating

Philippine television – ABS-CBN and GMA.

While television in the Philippines is dominated by commercial

networks, Korea’s television is largely influenced by government.

Korea’s first television program was aired in 1956 but the experimental

station HLKZ-TV ceased operations after a few years because of fire. It

was only in 1961 that a national television station, the Korean

Broadcasting Corporation (KBC), under the Ministry of Culture and

Public Information, started to broadcast programs. By its second year of

operations, KBC aired its first television drama series10

. KBC was to

become Korean Broadcasting System (KBS 1TV) in 1973 with its

transformation into a public broadcasting corporation11

.

The second major television station, Tongyang Broadcasting

Corporation (TBC-TV), owned by the Samsung Group, was launched in

1964 as part of the private sector’s response to the government’s

campaign to encourage local capitalists to be competitive in the

international market12

. It was the first commercially operated television

network in South Korea13

. TBC merged with KBS and became KBS 2TV

in 1980 as a result of the passage of the Basic Press Law in 1973 that

placed all broadcasting companies under the umbrella of public

broadcasting.

The third television company to operate in South Korea was the

Munwha Broadcasting Company (MBC). It was put up by a daily

newspaper in 1969. While MBC has become a public broadcast station

in 1973, it was able to maintain advertising as its primary source of

revenue14

.

Today there are four major television stations operating nationwide

in South Korea – EBS (an educational public broadcasting network),

KBS (another public television corporation), MBC (commercial network

9 PTV4 is the only network operated by the government of the Philippines 10 https://en.wikipedia.org/wiki/Korean_drama 11 Kwak, Ki-Sung. (2003) Civil Society as the Fifth Estate: Civil Society, media reform,

and democracy in Korea. In Kitley, Philip. (editor) Television, Regulation, and Civil

Society in Asia. London: Routledge-Curson. P. 233 12 Kwak, Ki-Sung. P. 233 13 https://en.wikipedia.org/wiki/Television_in_South_Korea 14 Kwak, Ki-Sung. P. 233

106

owned by a foundation) and SBS (a commercially operated network

owned by a private corporation). Cable television and local commercial

television were launched in 199515

.

Television Drama in the Philippines

Today, almost every household in the Philippines owns a television set.

In 2014, 92% of Filipino households in the urban area and 70% of rural

households have at least one television set in their homes16

. They tune in

to television everyday making television the number one source of

information and entertainment in the Philippines.

Of the many genres/program formats aired in Philippine television,

drama and soap operas stand out as favorites. Proof of this is the number

of drama programs occupying the daytime and primetime slots in

television programming. The two biggest networks in the Philippines –

ABS-CBN and GMA - devote the whole three hours of primetime

programming to television serials that are aired daily from Mondays to

Fridays. Three more hours are devoted to afternoon drama series and

usually one drama program precedes the noontime variety show17

.

A television series is a drama made for television that is narrated

part by part through the production of episodes aired from twice a week

to daily programming18

. The audience of an effective entertainment

drama is stimulated by its emotional impact and identifies with its

characters and their social relationships. Viewers are inclined to make

changes in their own beliefs, values, and behavior from exposure to an

effective drama. This is one reason why producing a drama program for

television in the Philippines is a major undertaking for broadcasting

networks.

15 Kwak, Ki-Sung. P. 234 16 http://www.manilatimes.net/tv-ownership-on-the-rise-while-filipinos-still-read-

newspapers/77179/ 17 These are separate from drama anthologies and weekly series aired in the two

networks. Observations from the listing of programs enumberated in

https://en.wikipedia.org/wiki/List_of_programs_broadcast_by_GMA_Network and

https://en.wikipedia.org/wiki/List_of_programs_broadcast_by_ABS-CBN 18 https://en.wikipedia.org/wiki/List_of_serial_drama_television_series

107

Television Drama in Korea

Broadcasters in Korea started to air television drama series in the 1960s19

.

It was, however in the 1990s that Korean soap opera gained world

attention with the Internet as its main conduit for the popularization of its

drama series. Scholar Seongbin Hwang (Professor, College of Sociology,

Rikkyo University) in his Internet article titled “The Current State of

Korean TV Drama,” traced the growth of exports of broadcast products

from Korea from 199520

as listed in the table21

below:

Table 1. Changes in Exports and Imports of Broadcast Programs in

the Republic of Korea

19 https://research.omicsgroup.org/insex.php/Koreandrama 20 http://www.jamco.or.jp/en/symposium/19/5/. Retrieved on November 28, 2016. 21 Changes in Exports and Imports of Broadcast Programs in the Republic of Korea (in

thousand USD as sourced from “Broadcast Program Export Import Statistics,” Ministry

of Culture, Sports and Tourism, Republic of Korea by Professor Seongbin Hwang in his

article” “The Current State of Korean TV Drama” for the 19th JAMCO Online

International Symposium on February 1-28, 2010.

http://www.jamco.or.jp/en/symposium/19/5/ Retrieved on November 28, 2016.

108

According to Professor Hwang, majority of these exports are drama

production. Although there were slowdowns in the growth rate, Professor

Hwang traced these to increases in the price of products and the growing

popularity of Taiwanese dramas. Sales recovered as soon as the selling

price of Korean drama was slashed down to half its price in 2008. This

was coupled by the introduction of the so-called “fusion historical

dramas” or historical accounts infused with modern interpretations and

plot narratives.

Television dramas produced in Korea are divided in 2 ways: those

produced for the foreign market or as part of the Korean Wave (Hallyu)

and those produced for local consumption. Another way for classifying

them, especially the Hallyu, is contemporary and historical22

. With the

popularity of Hallyu and mainly because a drama series have to be out in

the market at the soonest possible time, A Korean drama meant for

foreign audience is produced within a short span of time and is released

to the foreign market immediately after or even simultaneously during its

run in Korea. Hence the series is meant to follow a planned script that

run from 12 to 24 episodes.

One way to increase consumption of Korean television drama series

is its openness to audience feedback in the local market. Hence scripts

originally written for 12 -16 episodes can run for half a year or more.

Scripts, length and complexity of production are adjusted based on many

factors including audience feedback, ratings and sponsorships.

Synergy In The Production Of Korean And Philippine Television

Series

One word that can be used to describe each stage in the production,

marketing, and promotion of Korean and Philippine television series is

synergy. Synergy as defined by the Cambridge Dictionary is “the

combined power of a group of things when they are working together

that is greater than the total power achieved by each working separately.” 23

.

Elements and forces in the production, distribution, and consumption

of television series actively interact with one another to fit together or

22 https://research.omicsgroup.org/insex.php/Koreandrama. Retrieved on November 20,

2016. 23 http://dictionary.cambridge.org/us/dictionary/english/synergy

109

complement each other such that the end result greatly affect the business,

politics and culture both within and outside the medium (television)24

.

This paper studies the different elements and forces in the processes

involved in production, marketing, and promotion of television series

made in Korea and the Philippines by their corresponding broadcast

networks. These elements include ratings, regulations, technology,

financing, advertising, and star system.

Television is a capital-intensive industry. High investments are

needed in order to buy equipment, put up facilities and hire human

resources to run a station. Permits have to be secured at every stage in the

development of the enterprise and programs have to be produced for

twelve to sixteen hours of programming in order to reach maximum

efficiency. This is one reason why big companies or institutions are the

ones who mainly invest in broadcasting. Private investors in Korean and

Philippine broadcasting were big companies who already have

businesses in communication and are including television as part of their

vertical integration – Samsung (appliance and telecommunications

company) in Korea and Chronicle (newspaper and radio company) in the

Philippines. The case of Korea is different from the Philippines since

political exigencies resulted in the high intervention of the state in the

media such that its first television station was put up by the government.

Ownership of television stations in Korea and the Philippines are

limited to citizens of their respective country. Except for the Martial Law

years, the freedom to operate a station was never curtailed in the

Philippines. Business investors saw broadcasting (starting with radio)

as a lucrative business and a source of influence. This is one reason why

despite the introduction of a government run public affairs television in

the 1970s, commercial stations are the ones dominating the industry.

In Korea, the freedom to operate television stations, until the

liberalization of government policies in the 1990s, was highly regulated.

In the 1970s, all television stations were public affairs television. In the

1990s, however, with a change in government policies, introduction of

new technologies (color and cable television), and globalization, the

Korean government liberalized the ownership of stations and provided

incentives to boost the industry. Milim Kim, in her 2011 study cited the

following reforms in Korean regulatory policies for broadcasting: 1)

ownership was opened to commercial broadcasters; 2) outsourcing of

24 Television is defined here to include terrestrial and cable television as well as the

internet as platforms for television drama program

110

production of programs became obligatory; 3) a system of training for

broadcasting professionals was institutionalized and 4) a policy

supporting participation in trade fairs was enacted.25

This researcher will now discuss the different synergies that take

place in television dramas based on the aforementioned regulatory set

ups.

Commercial Broadcasting

With the relaxation on TV ownership, SBS, a commercial station,

became a primary player in the Korean television industry. Cable

companies also became part of the broadcast landscape. At the same time,

the 1980s gave rise to a fully globalized media market. New technologies

allowed for global consumption of media products. Television drama

series became a primary product in the international market. Soap opera,

a genre that first came out in England and the United States, was

developed and exported by nations like the Latin American countries

using their language, local artists and setting, Joseph Straubhaar said:

Latin American radio and television producers

adapted the genre to their cultures and needs, moving it

into prime time, aiming it at both men and women,

changing the form of storytelling, and using local motifs,

characters, humour, etc…. In a sense, then, a global form

is being localized, both for purposes of global capitalist

development and for expression of local identity. The

soap opera genre is still used to sell and, even more

basically, to show people an ethic or goal of

consumption… While cultural forms, particularly those

related to consumption, within capitalist societies, diffuse,

globally, they tend to be adopted locally.26

25 http://www.mediacom.keio.ac.jp/publication/pdf2011/10KIM.pdf 26 Joseph D. Straubhaar. “Distinguishing the global, regional , ans national levels of

world television”, in Annabelle Sreberny-Mohammad, et.al. (1997) Media in Global

Context. London: Arnold p. 288 as cited in Santos, Josefina. Ang Pampulitikang

Ekonomiya ng ABS-CBN at ang Globalisasyon [The Political Economy of ABS-CBN

and Globalization,” unpublished graduate thesis in M.A. Communication, University of

the Philippines Diliman.

111

During this period, since Philippine television had been commercial

in nature from the outset, the introduction of soaps in primetime

programming inspired networks to not just import Latin American

telenovelas but also produce local television series as primetime

television fare.

By the beginning of 2000, because of its tendency to score high in

the ratings charts27

, all television networks in the Philippines produce or

import drama programs with the top two networks airing an average of

seven drama programs per day during weekdays.

Almost all drama produced for television have the local audiences

first and foremost in the producers’ and network managers’ minds. The

length, complexity, stars and other elements are determined primarily by

its potential to get higher ratings and sponsorship.

Like Korean drama, there are two types of Philippine television

drama based on how they are sourced – the adaptation and the originally

written scripts for television. Production goes through similar stages –

conceptualization, pre-production, production and post-production.

The differences lie in the sub-stages and the processes involved in each

sub-stage.

Adaptation in Philippine television can take two forms – adaptation

from a foreign television series and adaptation from another medium.

Adaptations from foreign television series are further subdivided into

Tagalog dubbed adaptations, remakes and adaptations written to respond

to several cultural, social and economic factors.

One example of an adaptation from a foreign television series is King

of Baking or King of Baking Kim Tak Gu, also known internationally as

Bread, Love, and Dreams. It is a Korean Television series about a boy

who actually is the heir to a business tycoon who owns a bread factory.

Kim Tak Gu grew up poor, alone and uncultured because he lost his

mother (the tycoon’s mistress who constantly was fleeing from the hired

killers of the tycoon’s wife) at a young age. Fate led him to regain his

dignified self through the help of a master baker/ teacher who taught him

how to bake. In the end, the boy not only regained his position as heir but

found and felt the love of his parents, and found a loving wife.

27 Based on the author’s observations. On the November 24, 2016 report of Kantar

media (an organization measuring television popularity ratings), 8 out of the 15 top rating

programs in Philippine television are drama series with “Ang Probinsyano” consistently

occupying the first slot.

112

Kim Tak Gu became a popular television series in Korea in 2010.

The AGB Nielsen Media Research data ranks it as the 25th highest rating

Korean drama of all times.28

The series also received citations including

an award from state-run Korean Creative Content Agency for its

contribution to the overseas popularization of Korean pop culture.29

In

September 2010, immediately after its run in Korea, the series was aired

worldwide with English subtitles through KBS World.

Rights to air the series were sold to many countries including Japan,

Vietnam, Cambodia, Hong Kong, Taiwan and the Philippines. The

series first aired in January 2011 in GMA Channel 7 as a Tagalog dubbed

adaptation under the title “The Baker King”30

. Most of the time, the show

enjoyed the highest rating and considered one of the most watched

programs in the first quarter of 201131

.

The success of the series in the Philippines and its continuing

success in other countries as Kim Tak Gu continued to be re-aired in

several networks in Asia including the Philippines in 2011 and 2012 may

have inspired the management of another Philippine television network

ABC TV 5 to acquire the rights to remake The Baker King.32

The

remake’s rating was relatively high --higher than most programs aired in

that channel. However, it ranked third in the number of audiences

watching at that particular timeslot during the whole run of the series.

Several factors may have contributed to the weak ratings

performance of the remake. First, it was not as widely promoted

compared to programs aired by networks with bigger reach. Second,

the remake was produced by a network that ranks third in an industry

ruled by a two-tiered monopoly. Third, it has a relatively unknown actor

for its lead performer and the actor looked completely different from the

original Kim Tak Gu and therefore did not inspire a following from Kim

Tak Gu fans. Fourth, it did not give much attention to promotion and

marketing. Lastly, critics say that The Baker King remake was too close

to the original with no new flavors put in such that the Baker King fans

28 https://en.wikipedia.org/wiki/Korean_drama retrieved on November 20, 2016 29 https://en.wikipedia.org/wiki/King_of_Baking,_Kim_Takgu 30 http://www.gmanetwork.com/news/story/219093/showbiz/top-rating-koreanovela-the-

baker-king-bids-goodbye 31 PEP Magazine (January 2011). GMA7’s The Baker King earns high ratings during

its pilot week. Philippine Entertainment Portal, Inc., www.pep.ph. Published with an

excerpt from a GMA Network press release. Retrieved from http://

www.pep.ph/guide/tv/7651/gma-739s-the-baker-king-warns-high-ratings-during-its-pilot-

week. 32 https://en.wikipedia.org/wiki/Baker_King_(Philippine_TV_series)

113

will prefer to follow the original adaptation dubbed in Tagalog. Even

when the producers introduced changes to the storyline in the later stages

of the remake, it has already lost a sizable number of audiences who lost

interest when they saw that the remake was too much of a retelling of the

same story.

Other networks have done remakes of Korean Television series

before but some changes were made to suit the taste of Filipino

audiences. An example of this was My Girl. My Girl is the story of a

young fruit vendor in Korea who was commissioned by a wealthy

business leader to pretend as his long lost cousin in order to make his

grandfather happy. The two, however, fell in love and complications

followed. In the end the lovers got accepted by the man’s family and they

ended up happily married.

A remake was made by ABS-CBN starring popular Philippine

actress Kim Chiu and her equally popular love team partner Gerald

Anderson.33

While the main story remains the same, several changes

were made. The original character in the story was a fruit vendor. Kim

Chiu in the remake was a tourist guide who spoke Chinese and Cebuano

maximizing Kim Chiu’s Chinese background and her being a native of

Cebu, an island in Southern Philippines. This endeared her more to her

fanatic following so that much of the promotion for the remake was

already done. The remake increased the number of episodes and

therefore more characters were introduced and subplots were added to

the story. Some complications in the plot were also incorporated.

Comedic dialogues were inserted. While the original was also meant to

be funny, the comedic dialogue in the adaptation was more suited to the

Filipino culture and more scenes were made to tickle the imagination of

fans.

Synergy in the Production of Korean Drama Series

Kim Tak Gu and My Girl were handled by two big Korean broadcast

companies – KBS and SBS respectively. Since by regulation Korean

broadcast stations have to outsource program productions, a great

majority of Korean drama are produced by independent producers34

.

These entrepreneurs would choose carefully the material that they are to

invest on. While it has a democratizing effect in the sense that broadcast

networks do not have the monopoly in the production of dramas and it

33 http://en.wikipilipinas.org/index.php/My_Girl_(Philippine_TV_series) 34 https://en.wikipedia.org/wiki/Korean.drama retrieved on November 1, 2016

114

sets higher standards since competition among producers is high, the

practice of subcontracting independent producers for drama series is

precarious. Producers have to secure broadcast time slots first before

investors, sponsors, and actors engage in the project. Securing an airtime

and possible pilot airing date, however, brings pressure to the producer to

shoot the drama at the soonest and shortest possible time35

. This practice

often results in overworked actors, creative and production teams.

The system works in the following manner: independent producers

present their project proposal to the big broadcast company. Sometimes,

a producer already has one to several episodes of a series canned before

the producer shows the proposal to the television company. This may

happen when a producer is able to get the attention of investors or

acquired a loan for the project. The participation of bankable or known

actors in the project most of the time allows for more attractive

investment packages on the part of the producer. Once the producer’s

proposal gets approved by the broadcasting company and airing is

scheduled, the broadcasting company shoulders half of the production

cost. The share of the broadcasting station is increased if the independent

producer is able to contract the services of a bankable actor or an actor

who has starred in a recent blockbuster series.

The independent producer may apply for a loan from the Korea

Creative Content Agency (KOCCA), a government agency affiliated

with the Ministry of Culture, Sports and Tourism. The agency has

partnered with the Export-Import Bank of Korea to provide loans to

small companies producing cultural products like television shows36

.

The creation of culture industry departments in schools in Korea in

the 1990s helped tremendously in the sourcing of directors, writers,

actors and other production team members. These contributed greatly to

the creation of the Korean Wave and its popular reception in many parts

of the world.

The set up of broadcasters subcontracting small independent

producers of drama series, however, has its weaknesses. Aside from the

already mentioned high pressure on both the producer and the production

team, including the actors, to produce their episodes through live shoots

that barely make it to the deadlines, small producers shoulder the greater

risks in the production of Korean television drama series. Broadcast

35 https://koreancultureblog.com/2016/10/03/k-drama-series-live-shoot-system/ 36 https://en.wikipedia.org/wiki/Korea_Creative_Content_Agency retrieved on

November 21, 2016

115

stations share half of the revenues from the productions while they enjoy

one hundred percent of the income from the sale of airtime to

commercial advertisers. Meanwhile, the small independent producers get

sponsors and advertisers who get their products displayed through

product placement within the television series. The practice can get the

independent producer to darker alternatives should the production fail to

deliver in the market.

The third biggest network in the Philippines, ABC TV5, one of two

bigger networks that loan out airtime to independent drama producers

has a similar production set up for independent producers in Korea. In

this set up, the independent producer, Viva Entertainment has complete

control over the production processes involved in the making of a

television series37

. Marketing and promotions are shared by the network

and the independent producer.

Adaptations

The first stage by which a produced material is sold is in the local market.

The Philippine and Korean production companies produce their materials

for the local market and are sensitive to the market trends that shooting

of episodes is done on short periods of time during the week to make it to

the airtime schedule during the same week. Audience feedback and

situations prevailing in the country affect the developments of plots in

contemporary narratives.

The second level to generate income is the international market.

Small teasers are sent to potential buyers or are promoted through many

means. Broadcasters from buyer countries get to know the existing

production and they either broadcast the material whose copyright they

bought immediately after it was shown in the source country or they are

aired simultaneously as they are being aired in the source country. This

was the case of Korean television drama series Descendants of the Sun

which was shown simultaneously in China while it was being shown in

Korea.

To adapt to the local market, the distributors of the series (VIKI,

Dramafever) provide subtitles to the series. Since VIKI and Dramafever

have Internet sites for international subscriptions, they show the subtitled

37 Interview with Amor Olaguer, Creative Director, Head writer for Ang Panday, April

10, 2016

116

drama series without advertisements to paying subscribers. There are

also free sites for these series which allow fans to enjoy the series but

with advertisements popping in at certain points in the series.

When a broadcaster in another country (Philippines for example)

choose to broadcast a Korean television series for airing in terrestrial

television in that country, copyright is bought and adjustments are made

to suit the cultural requirements of the host country. In the two cases of

adaptations of Korean television series Kim Tak Gu and My Girl, the

simpler process, dubbing of Korean soap opera, was first adopted by

Philippine broadcast networks. Dubbing originated from the rise of

movies with dialogue in the early 20th century

38. With the understanding

of the fact that not all people speak English, dubbing was adopted as a

way to increase the audiences of materials first produced in another

language.

Rights to air the television series were first secured. The material

with two separate audio tracks comes with a full script which is initially

translated faithfully. Then the series is run to adjust the translations to the

opening of the mouths of characters. Recording follows.

The moment a material is given to a translator, the translator first

looks at the storyline. The characters are studied and the nuances of their

language taken into consideration. Then the translator works on a per

episode basis. The translator looks at the general overarching plotline of

the episode being translated. Visuals are also taken into consideration.

Because of differences between the Korean language (source language)

and the Filipino language (target language) some changes have to be

done during the translation. What is most important is that the translation

of the episode is faithful to the story and the story flows smoothly from

one plot point to another39

.

Voice casting is done after an initial decision by the director on

what kinds of voices suit the characters in the series. The music and

sound effects are usually retained from the original but sometimes the

38 Tveit, J.E. (2009) Dubbing versus Subtitling: Old Battleground Revisited. In J.D.

Cintas and G. Anderman (Eds.). Audiovisual Translations (pp.65-96). Great Britain:

Palgrave Macmillan 39 Manalili, P. (2004)Pagsasalin at Komunikasyon: Pagsasa-Filipino ng mga

Banyagang Programa sa Telebisyon sa Kaso ng Telenovelang “Ctistina” [Translation and

Communication: How Foreign Programs are Translated to Filipino in the Case of the

Television Series”Cristina”]University Library University Archives, University of the

Philippines Diliman.

117

adaptation will also feature certain songs to promote recorded original

Pilipino music (OPM).

The receiving country of translated/dubbed productions maximizes

income through the re-airing of the dubbed material in other timeslots

and in other stations (cable, provincial station, internet, and mobile

phones).

If the source material, despite the several rebroadcasts still remain a

favorite among viewers in the receiving country, copyright are again

negotiated --this time for remakes. The remake becomes the third level

by which an original production is able to deliver returns to the producer

and the broadcaster of a television series.

The remake has more processes to follow for the producer or the

buyer of copyright or the target country. The production processes that it

follows are similar to production of original stories. A talent (usually

someone who provides creative work to a network but who is paid based

on output) pitches or suggests to the heads of unit that a material is good

for an adaptation/remake. If the suggestion is accepted, a team headed by

a director is formed and brainstorming on the plot and subplots are done.

Either a head writer is assigned to hire a pool of writers, or only one or

two writers are tasked to write for the whole series. This part is

dependent on network policies.

The decision on who to cast in the series is dependent on many

factors. Is the material a vehicle to keep up the energy and enthusiasm of

fans of a star or a couple of stars? Is the material part of a strategy to

outpace competition? Or are there politics involved in the decision?

After stars are cast, locations are identified based on a specific

budget allocation. In ABS-CBN, decision-making on these aspects will

require the presence of the head of the audience research department.

Ratings, Internet statistics, audience reactions were carefully studied

before decisions are made. Scripts were then adjusted to suit the

additional requirements set by stars and locations.

The same processes apply to the other two bigger television

networks in the Philippines. In the case of GMA network, the casting of

singer Regine Velasquez in the lead role of the remake of Kim Sam Soon

has made it even more cost effective for the network since the actress

was also hired to sing the program’s theme song.

118

Synergy in Pre-production of Adaptations

Synergy works in the different stages of pre-production. Several

elements are considered before an original material (movie, book, comic-

magazine, or television series) is accepted for adaptation. The first

element is the popularity of the original material. The several adaptations

of the comic magazine narrative of the local hero “Darna” by GMA

network is based on the knowledge that Darna is a character that almost

every Filipino has knowledge of. Even its fan following has gone to the

extent of critically examining if the network sticks to the characteristics

associated with the character Darna40

.

The second element is the narrative. Is the story something most

people can identify with? Most roles essayed by stars are composite

characters so that a majority of the audience can identify with the

character. In the conceptualization phase, some of the head writers

employed by the network sit through the pitching process and bank on

their knowledge of what the audience tastes are. A freelance writer or

director with a record of writing for or directing a drama series that

has/had high rating will most likely get his/her story accepted compared

to a neophyte with no work previously done. This leads to a common

practice among networks to hire writers who migrate from one medium

to another (from film to television or from writing romance novels or

books in the Internet to television). It has also become a common

practice to adapt a material that has gained popularity in another medium

to television.

Casting is already decided on even before an idea is presented to

higher management.41

There are however cases when stars are primary

considerations in the pitching of stories or materials for adaptation. Star

writers from other media can be one primary consideration. Examples of

these are television adaptations from movie series or movies with sequels

that gained fanatic following.

More often than not, adaptations from another medium are

adaptations from popular movies although Philippine drama can also be

adaptations from books, comic magazines, or stories from the Internet.

40 Interview with Professor Amor Olaguer, instructor at the University of the

Philippines College of Mass Communication Broadcast Communication Department and

Creative Director/Producer for Viva Entertainment (an independent film and television

drama production studio, April 10, 2016. 41 Interview with Amor Olaguer, creative director and head writer for Viva

Entertainment, Inc,, Apri; 10, 2016

119

While in adaptations of foreign drama series makers are generally given

freedom to make adjustments in the narrative, many adaptations from

movies are strictly monitored by their authors. Many requirements were

set in order to maintain the integrity of their characters and narratives.

This is the case of Ang Panday, a teleserye adopted by Viva

Entertainment for ABC TV5 from the movie series of the same title

written and directed by Carlo J, Caparas. Mr. Caparas strictly monitors

the scripting and production of the television series aired in ABC TV5. 42

The above is not the case in Ang Probinsyano, a teleserye of the

same title as the blockbuster hit of a late action star hero in Philippine

movies Fernando Poe Jr. in the 1990s. The original movie is part of the

FPJ collection that ABS-CBN bought from FPJ productions, now headed

by Fernando Poe Jr’s widow, Susan Roces. Since copyright was ceded to

ABS-CBN, the network enjoys the liberty of making changes without

having to ask permission from anyone.43

Ang Probinsyano, the television series stars Philippine popular

actor Coco Martin and was made as a comeback vehicle for the actor

after the success of an earlier produced television drama series by ABS-

CBN Juan De la Cruz. It airs on the ABS-CBN primetime slot from

Mondays to Fridays and tells the story of twin brothers Ador and Cardo

who got separated from each other while they were still young. Fate

however led them both to become law enforcers—one in the city and the

other in the province.

Ador, however dies early due to the tyranny of his colleagues. When

their grandfather (who happens to be the head of CIDG) found Cardo he

orchestrated an investigation on the death of Ador by making Cardo take

the identity of Ador.

The story would have ended with the killers being found and justice

was done. But the continued support of loyal followers prompted ABS-

CBN to decide not to end the series after one season and instead created

several mini-series within the series44

. The series has moved forward to

include subplots that resemble current events in Philippine politics

almost at the same time that the events are being reported on Philippine

television and in the Internet.

42 Interview with Amor Olaguer, April 19, 2016. 43 Interview with Toto Natividad, one of the director of ABS-CBN’s “Ang Probinsyano”,

April 16, 2016. 44 Based in the author’s observations on the series and comparing the material with the

original movie that was shown in the networks sister cable company, Cinema 1.

120

Synergy in this adaptation worked effectively as several elements

were taken into consideration one by one. The original movie Ang

Probinsyano was a blockbuster hit in the 1990s. It was not too old such

that there were segments of the audience who can still recall their

experience of lining up at the theater just to see the movie. To increase

the number of audiences recalling the movie, Ang Probinsyano was

shown on Cable television through ABS-CBN’s sister channel, Cinema

One. The vehicle was a good one for actor Coco Martin since he has

been resting after a long running primetime topnotcher Juan dela Cruz.

Juan dela Cruz was an action television series.

To add to audience recall, some of Coco Martin’s old photos

wearing police uniform were featured in magazines and in the Internet.

His hairstyle for a while was made to resemble that of the former action

star, Fernando Poe, Jr.

An old song “Kung Wala Ka Nang Maintindihan” was revived and

played over the radio and performed in television variety programs

several months before the showing of “Ang Probinsyano”. The song was

to become the theme for the whole series. Copyright was secured by

another unit to make sure that the songs used in the drama series will not

have problems in ownership. The songs are bundled together and sold in

the market as another product and they become handy in events

organized to further promote the drama series.

The same synergistic elements are also present in Korean drama.

What is different is the way narratives are created or adopted. A good

number of Korean dramas that enjoyed global following are also

adaptations from other media. Boys Over Flowers is an adaptation from

the manga Hana Yori Dango45

. To the Beautiful You is an adaptation

from the Japanese shojo manga series Hanazakari No Kimitachi e written

by Hisaya Nakajo46

.

The manga and anime followers among the young population

became interested not just in reliving their enjoyment in the stories again

but also in identifying the many differences in the ways the stories are

told in each remake. These practices, based on the author’s observation

are now hardly done by Korean producers.

45 Based on the writer’s own observations since she followed the manga series, the anime,

and the 4 television series, Meteor Garden 1 and 2, Boys Over Flowers, and Hana Yori

Dango. 46 https://en.wikipedia.org/wiki/To_the_Beautiful_You retrieved on November 13,

2016

121

What is unique is that the news and current affairs department of

GMA News Network (a sister company of GMA channel 7) has twice

conceptualized, pitched and produced two historical drama series,

Katipunan based on the declaration of war for independence against

Spain by a revolutionary organization of Filipinos known as Katipunan,

and Ang Ilustrado, based on the life of Philippine National Hero Jose

Rizal.

Concepts can also come from stars that regularly come out in

productions of the same network. This was the case of the popular

primetime television series in the Philippines, Ang Probinsyano.

Dreamscape Entertainment Television, one of ABS-CBN’s creative arms,

picked up Philippine star Coco Martin’s suggestion to do a remake of

Ang Probinsyano and immediately started to hold brainstorming sessions

with the pool of writers to develop the story. Dreamscape Entertainment

Television consists of creative writers headed by Roldeo Endrinal.

Dreamscape Entertainment Television changed the plot of the original

story in order to prevent the predictability of the story and to adjust it to

current happenings in the Philippines. These are factors that affect the

audience share of the program.

Heeding the decision of top-level management headed by Mr.

Eugenio Lopez III, Filipino values were injected in the story to inspire

Filipino children to be upright and dignified. The character of Susan

Roces as Ador and Cardo’s grandmother was added in the television

series to honor her late husband, Fernando Poe, Jr. and to attract the

loyalty of older viewers who may be Susan Roces’s fans since the lady

was a superstar in her younger days. Also, Cardo’s role in the television

series is as a SAF trooper since the program is marketed as one made to

honor the fallen SAF troopers in Mamasapano (a town in the Southern

part of the Philippines). Cardo in the original story is a police chief in an

unknown town of San Marcela.

The Scripting Process

Korean television series have one writer and one director all throughout

the series. Although the script may change during production in response

to audience feedback and other factors, authorship of the drama series is

clear.

In the Philippines, even if there are drama series with only one or

two writers writing the scripts of the program, their script goes through

122

brainstorming sessions where a pool of brainstormers would comment on

the script and the scriptwriter rewrites the script based on the changes

agreed upon by the writer, director and brainstormers.

In the case of the Philippines’ biggest network, ABS-CBN,

positions for creative consultants were given to star writers or well-

known writers of drama in different media and platforms. They oversee

and comment on the work of the scriptwriting team. The scriptwriting

team is composed of head writers and writers. Since, unlike Korean

drama series that airs only twice weekly, Philippine teleseryes air daily

from Mondays to Fridays, several writers have to work on several plots

and subplots in the story. The head writers agree on the plot and pivotal

points of the story where they identify main slants. They then coordinate

with their own set of writers who are assigned which part of the material

they will work on. Individual writers submit their work to their head

writers who work together in improving the plot, usually on the weekend

before the first shooting day of the next week, add more excitement

(action or romance), and insert hypertexts with trending topics. The

writers made the pace of the story faster in order to make the story more

interesting.

Production and Post-Production Processes

It is usual for Philippine teleseryes to have two or three directors, each

working on their field of expertise. One director may be good at action

scenes. Another director is good at romance while another is on family

drama. Templates are not uncommon such that members of the

production team are already given instructions on how a particular scene

will be shot even as the writers are still writing the script. This is called

"hand-to-mouth shooting" in the Philippines while Koreans call the

practice “live shooting”. In each case, shooting is done within a hectic

schedule such that there were cases when shooting was still happening

while parts of the television series are being edited for airing that night.

There are two ways by which scenes are shot. One is three (3)

separate cameras recording a scene separately and the editor choosing

which ones to use in the finished product. The other is taping as live or

editing and recording are done using three cameras to shoot a scene.

Actors, especially the bigger ones are allowed to give comments or

suggestion on the scripting or execution of scenes. Adjustments are also

made when actors find the lines or scenes difficult to execute.

123

Mr. Toto Natividad, one of the directors of Ang Probinsyano,

revealed,

“Most of the time, we shoot parts of an episode on the day that you

will watch that episode later that night. That is very crucial because

we have to follow the 5 o’clock pm deadline. Editing follows after

the shoot.”47

This revelation partly explains why additional special effects are not

done despite ABS-CBN’s technical capacity to make such effects.

Celebrities from other programs are also invited to essay some

character roles in teleserye to boost the popularity of the program. This is

called stunting technique. At the same time, the star acting out a role is

tested for possible casting in subsequent teleseryes. The celebrity also

gets to promote projects in the series through hypertexts.

The effectiveness of the technique was proven by an earlier drama

shown in ABS-CBN such that FPJ’s Ang Probinsyano is currently

maximizing the benefits of the stunting technique and continues to soar

high not only in television ratings, but also in attracting a greater number

of advertisers investing in the show.

While Ang Probinsyano enjoys a large following both within the

Philippines and abroad the impressiveness of its production techniques

and effects cannot match the greatness of production values infused to a

Korean action drama that has finished airing in a competing network in

the Philippines, GMA. The Tagalog-dubbed Korean telenovela

Descendants of the Sun used sets, camera works and effects that

Philippines Ang Probinsyano can only match with occasional explosions

and cars flying from buildings. Korean productions have the capacity to

construct sets, create costumes and hire more supporting characters

compared to its Philippine counterpart. While Descendants of the Sun

spent approximately six hundred sixty eight thousand US dollars in

producing an episode, the Philippines’ GMA fantasy series Encantadia

spends around twenty thousand US dollars per episode. This is already

considered high by Philippine standards. GMA’s historical series Ang

Ilustrado had a budget of four thousand US dollars per episode.

What is even more impressive is how Korean networks are able to

capitalize on building impressive sets by not dismantling these sets and

making these sites for tours for Koreanovela fanatics. The MBC Dramia

47 Interview with Mr, Toto Natividad, ABS-CBN drama director, April 16, 2016

124

for instance is not only a set maximized in the making of many Korean

historical drama productions. It is now a famous tourist destination for

Korean drama fans and a location for Hallyu performances of K-pop

bands.

Integration and promotional materials

The greater part of the success of Hallyu (Korean Wave) is the infusion

of government support to its culture industry. Reacting to South Korean

movies’ losing out to Hollywood films entering the country, the Ministry

of Culture created its cultural industry bureau designed to boost the

media industry. Investors were encouraged to put in capital into the

culture industry, purchase new and high-end equipment and set up

facilities for cultural presentations. At the same time, cultural industry

departments were set up in schools nationwide.

The use of new and emerging media was encouraged and Korean

media products flowed freely through the net. Even meetings by K-pop

artists with their fans were funded by cultural offices in countries outside

Korea. These K-pop singers were casted in Korean drama series that

almost spelled success in the ratings chart for Korean drama series.

Korean actors are also made to sing songs featured in drama series such

that these became major segments of promotional events for their drama.

Actor Lee Min Ho sang a song in Boys Over Flowers while Jang Keun

Suk sang songs in You’re Beautiful.

Similar promotional events are mounted by networks in the

Philippines but while Korean Hallyu targeted the foreign audiences,

Filipino producers targeted mainly Filipino audiences living abroad.

Philippine broadcasters did export materials mainly for consumption of

audiences from other nationalities – as was the case of Mula Sa Puso.

GMA also produced materials that were eventually sold abroad. This was

the case of Boys Next Door which was exported to countries in Asia

including South Korea.48

The sustenance of such initiative may have not

have been discussed freely as a synergistic endeavor not because the

networks did not earn from the initiatives but more because the returns

may not be as immediate as when they target mainly their Filipino

market abroad.

48 https://en.wikipedia.org/wiki/Boys_Nxt_Door

125

ABS-CBN, GMA and ABC TV5 are media conglomerates in the

Philippines. The three networks control the creation and production of

television dramas, as well as other programs they air, their promotional

materials, publicity, and distribution.

The advantage of being a vertically-integrated broadcast company is

that it saves the money or capital it would allocate if a project is

outsourced. Thus, it equates to more profit for the company. The

broadcast network does not need to worry about its market access for the

promotion of its products because it has a lot of channels that can

showcase all produced materials.

While its Korean counterpart networks would cooperate with

independent producers in the creation of television series, ABS-CBN has

two independent creative arms: Dreamscape Entertainment Television

and Star Creatives49

. These two creative units independently choose

projects that they pitch to the network’s management. They also vie for

placements within the network’s programming. While they work

independently in the conceptualization and even to some extent

production process, management always can decide on matters like

content, choice of stars, locations, etc. depending on many factors like

rating, feedback from fans, sponsorships, advertising and upcoming

shows.

There are also two stables of stars and while contracting stars from

other networks or media is not discouraged, getting from the pool is

highly recommended. Most of the members of one unit are winners of

reality TV programs while the other unit has sons and daughters of top

celebrities as their mainstays. Usually one or two major stars are hired in

a television series and they are supported by a combination of new stars

testing the waters and reliable veterans in the field. Stars in the

Philippines, like their Korean counterpart in Hallyu, get a big slice of the

production budget.

The inclusion of theme music as major part of the production boosts

not only the creation of a big fanatic following but also creates good

bankable segments for the promotion of the drama series in the provinces

as well as in major cities abroad.

Months before a drama series is launched, a professional singer will

sing the song on radio, in television and in promotional events. The song

is also promoted and sold as ringtones for mobile phones for audience

recall. If the actor of the upcoming teleserye happens to have the

49 All other broadcast stations in the Philippines do not have these structures.

126

capacity to sing a tune, he/she will either record a version of the song or

launch a single that will be sung during the airing of the drama series.

This was the case of Enrique Gil in Dolce Amore and Daniel Padilla in

Pangako sa Iyo.

Aside from being vertically-integrated, the three big networks in the

Philippines are also horizontally-integrated. They own different types of

media products. They use diverse holdings to promote products. A

television drama promotion can be done for multiple media and

platforms to further expose the television drama to audiences. For

example, a promotional material shoot of the main stars of the television

drama is executed to fulfill different needs. This promotional material

shoot will be used to supply video materials for television spots, news

and entertainment features, press releases, social media, print

advertisements, radio programs, brochures, posters, and other print

requirements.

Promotions on Television

Some of the synergistic endeavors of Philippine and Korean television

networks to promote their drama series are the following: teaser, the full

plug, the character spots, spots with time and date, the rider, brand bugs,

behind-the-scenes, music videos, television appearances as guests, and

news features.

The teaser is also called a “soon plug” because it gives the audience

a hint that a new show is soon to air. Usually a 15-minute teaser is aired

during the commercial break of a soon-to-end drama series. The audience

is enticed to look forward to a new show that is about to start in a few

weeks.

Teaser trailers were also used to inform and create a buzz for the

upcoming airing of the program, complete with a few scenes of what to

expect and the characters from the television series.

The teaser may be followed by a 30-45-seconder advertisement that

gives the audience an idea on what the story is all about. Interspersed

with these spots are those advertisements that give the audience

information on the date and time of airing or premiere showing of the

program. The date and time of airing is usually announced so as to

preempt possible switching of channels because the series before it has

ended. The plug announcing the date and time of the program is followed

by a rider that reminds viewers of when the premiere will be.

127

Sometimes, actors and actresses of the primetime drama that is about to

end are the ones that remind viewers of the day and time of the new

series. Brand bugs are the logos of programs that are about to begin that

are displayed on the screen while another program is airing or about to

end.

Behind the scenes are video materials that show how certain scenes

are done or how certain chemistry is seen or how relationships are

developed between actors so that excitement is stirred among fans.

Exciting scenes are also shown in music videos especially in teleseryes

that feature star couples created for fanatics’ consumption.

Filipino stars, like their Korean counterpart, tour the different

television programs while promoting their drama series. They become

contestants of live game shows and guest artists in variety programs.

They also talk about their new show in talk programs and are featured in

the news as well. Sometimes these news features are about the content or

what happens next in the story of the character in the teleserye.

Aside from television promotions, there are also ways on how to use

synergy as strategy for radio promotions.

A. Announcement-on-Board (AOB)

AOB are done by disc jockeys. They announce informally,

make mention of or straightforwardly read promotional

materials about the launching of the new television drama.

B. Airplay

The disc jockey promotes the television drama by playing its

theme song.

C. Stars visit radio personalities as they guest in radio programs

The actors of the television drama are given a feature segment

on a radio show.

D. Radio Spots

The audio of the video plug for television is played on the radio

program.

Print promotion is one of the most effective ways to promote the

television program.

A. Posters

These are produced to be displayed inside shopping malls and

other establishments, which the stars of the television drama

visit for promotional activities.

128

B. Print Advertisements

These are released a day before the airing of the new program

through broadsheets or tabloids.

C. Press Kits

It is composed of brochure and functional promotional material

items distributed to the members of the press during the press

conference of the television drama.

D. Billboards

These are tarpaulins printed in huge sizes and are displayed

along public places.

E. Banners

These are displayed along the ABS-CBN building and nearby

establishments.

The next type of promotion in this synergy is public relations.

A. Press Conferences

This is attended by the members of the press, the stars, and

members of the production of the new television drama.

B. Write-ups

These are feature articles about the show, the highlights,

prepared by the public relations writer.

Public relations promotion is followed by this type of promotion

which involves going to different places to promote the program, the

Non-Traditional way.

A. Mall Shows

These are held for the launching of new television drama with

the cast. The younger members of the cast also show their

talents by performing for the audience. A new trend now is the

holding of mall tours in provinces as conceptualized and

executed by provincial and regional stations.

B. Tours in marketplaces

It has the same purpose as mall shows. The only difference is

that it promotes the show in the marketplace or similar places to

appeal to members of the C-D-E bracket of audience.

C. Electronic Billboard

These are big screens with played videos mounted on strategic

locations, where there are a lot of people.

129

The social media is now being used as one of the platforms to

promote the television shows.

A. Social Networking Sites

Social media accounts owned by the network are created to

promote the new television drama to netizens. ABS-CBN, GMA

and TV5 are present in Facebook, Twitter and Instagram,

popular social network sites in the Philippines. Korean networks,

producers, actors and actresses also use the social media

networking sites to promote new drama series, new projects and

events and themselves.

B. Interactive Chat

Stars of the upcoming show are instructed to participate in an

online chat with their fans to promote the show. In Korea,

even chats between actors in a soap opera are made public to

increase the interests of fans on actors in the telenovela.

C. Websites

The upcoming television drama is promoted to different

websites of ABS-CBN, GMA and TV5.

In events organized for the provinces, region, and countries abroad,

merchandize bearing the television series logo or the images of lead

actors and actresses or even copies of past episodes in DVD format were

sold by another independent unit, the ABS-CBN Studios. These

synergistic tactics not only ensure additional income to the network, it

seals fan loyalty and feed into the constant need of fanatics for

memorabilia from the events.

Uploading of Episodes in the Internet

The uploading of episodes in the internet, especially in outube has

greatly helped the Korean Hallyu to penetrate the international market.

Episodes are uploaded and re-uploaded by fans that eventually a niche

market for Korean drama is created especially among young audiences of

the series. Many women, especially Asians fancied Korean actors or

the characters they play since most of these characters are loyal and

completely dedicated to the subject of their love.

130

Popular Korean drama series, however, cannot be seen in the

Internet in the Philippines once the show is bought by a local network

from the market. Unlike its competitor networks that use the internet to

upload recent episodes of the Korean drama dubbed in Tagalog, ABS-

CBN (the only network in the Philippines with these observed

characteristics) with its robust website, iwantv.com.ph, controls the

exposure of episodes in the Internet by allowing regular subscribers to

watch only up to three (3) most recent episodes of the series or any other

ABS-CBN program. When regular subscribers buy the TV Plus, a black

box that allows analogue reception of digitally transmitted programs,

they receive a bonus of being able to watch episodes of a favorite drama

series from the beginning to the end. Even old Korean drama series aired

from as early as 2003 can be accessed with the use of the black box or

through the use of the ABS-CBN mobile SIM. The ABS-CBN mobile is

operated by an ABS-CBN subsidiary, the ABS-CBN Convergence, Inc.

ItsSIM card can be bought for 50 pesos ($1.07) and it makes available

for viewing several megabytes of drama and programs made or

distributed by ABS-CBN. A viewer can enjoy these services for 24 hours

and will again enjoy the services through a reload of ten pesos for

another 24 hours of downloaded or streamed entertainment. If a fan has a

black box or an ABS-CBN mobile SIM or both, one also gets to view

behind-the-scenes videos of one's favorite teleserye. The subscriber also

gets to view full drama series and mini-series made for the Internet

consumption. These drama and mini-series, while giving privileged

status to fans and loyal followers, provide alternative platform for

materials no longer accommodated in the regular programming grid of

ABS-CBN terrestrial broadcasts and become hooks for advertisements in

the platform. The Korean drama series Faith starring Lee Min Ho was

placed in the ABS-CBN mobile platform. Unfortunately, the platform

is not yet well-subscribed and the Lee Min Ho starrer did not fly.

How successful this ABS-CBN strategy compared to the Korean

Hallyu makers’ policy of continuously feeding the world market of

Korean made products can be seen and assessed after a few years of

implementation.

Meanwhile, the world has witnessed the growth in popularity of

Korean products through the use of the Internet and by riding on the

popularity of Korean made media products from the late 1990s to the

present. These products include food, cosmetics, clothing and fashion

styles, accessories, electronic products and many more.

131

Included in the list of the more popular tourist sites in Korea are the

sets constructed by broadcasting studios for the production of Korean

historical drama series called sageuk. Two of the more popular sites are

the MBC Dramia where Koreanovela fans can recall scenes from well-

received dramas by Filipinos fans like Jumong, Queen Seong-dok, and

Empress Ki are shot, and a reconstructed traditional Korean village.

These sites together with areas that fanatics recall as locations for the

unforgettable scenes in contemporary Korean television series like the

Nami Island for Winter Sonata and the Myeongdong shopping area and

cathedral for You’re Beautiful makes Korea among the top choices for

tourist destinations in recent years.

Television Drama Series Content

Aside from the aesthetically beautiful sceneries, camera shots and color

of Koreanovelas exported to the global market, the popularity of Korean

drama series also rests in the stories they tell. Most of the time, the

narratives center around the stories of love and sacrifice and these are

told in idealistic manner – a man coming from well-off family falls in

love with a woman from a poor background but who possesses a golden

heart and who is willing to undergo sacrifices for the sake of her family.

They encounter many hardships, trials and difficulty but in the end fate

will bring them together and they will start a happy union.

Many television series from the two countries are made with a

conscious effort from their makers to infuse universal values into their

stories. In most Korean television series, highlighted are Confucian

values of loyalty, filial piety, integrity and a sense of shame. Many

Korean dramas would have scenes where the protagonist is hurt –

emotionally or physically –by the parent but the protagonist will endure

the pain and not hurt back. A man will stay loyal to the object of his love.

Go Jun Pyo of the famous Boys Over Flowers loved Geum Jan Di until

the very end and that endeared him to his fans who watch the series in

the Internet and on terrestrial television in the Philippines several times

over.

The older generation enjoys the Koreanovelas for the reason that it

features the right way to treat and take care of parents. While some

Philippine teleserye center on revenge and retribution, many

Koreanovelas end with forgiveness and acceptance.

132

Young women fantasize about finding their ideal man who acts and

decides similarly as the character in their favorite drama program.

Adding to the magic is the fact that the male protagonist is not only

wealthy, kind and sweet but is also a one-woman man. Despite trials and

temptations, he will remain loyal and loving to the woman he loves.

This kind of magic is also found in Filipino teleserye like On the

Wings of Love. While the series tackles the plight of Overseas Filipino

Workers in the United States dispelling the myth of America as a land of

promise, a greater part of the program’s popularity is attributable to the

loyal and caring attitude displayed by the character played by mestizo

actor James Reid. The lost boy who has a not-so-happy home

environment finds happiness in the arms of a lotus woman in a cramped

tenement area.

Most of the stories in the television series of both countries center on

this kind of love even in harsh environments. It does not matter whether

the material is a historical piece or a contemporary one. An attempt by

some news and current affairs personnel in one network in the

Philippines to produce drama series that center on nationalism through

period pieces was thwarted by instructions from the management to

highlight love and romance in the script and avoid expensive scenes.

While stories mainly are variations of the same theme, the many

backdrops of the narratives created boosts to other industries. Like its

Korean counterpart that encouraged tourists to visit sites like Jeju island

and Yongi mentioned in Koreanovelas, television series in the

Philippines sometimes also showcase tourist areas like Boracay, Davao,

Palawan and Bohol. What remains to be seen is whether such feature will

increase the number of tourists visiting these sites the way visitors go to

Busan, Gyeonggi and Nami Island or even the relatively unknown non-

Korean site New Caledonia before Boys Over Flowers featured it in one

or two episodes.

Aspects of Korean culture are also featured in Korean television

series—Kimchi, fish sticks, the rainbow fountain bridge and others in

Boys Over Flowers; seaweed soup, pog and Korean cars in You’re

Beautiful, Korean bread in Kim Tak Gu, Korean costumes, dances and

music in the sageuk. All these created a wide market for Korean products

and an increase in the growth of Korean establishments in many areas in

the Philippines.

133

Conclusion

Synergies are found both within and outside of the production processes,

marketing and promotion of television series both in Korea and the

Philippines. Synergy is first found in the conceptualization of stories to

produce – whether they are adaptations or original stories penned by

writers for television. A story never goes into the scriptwriting and

production phases unless several factors are considered – timing,

thematic significance, ratings potential, celebrities and stars, locations

and budget. Additional considerations are the country and business

financial stability, current events and political climate; and social

activities of the community and the country.

Scripting may be done individually or collectively depending on

how big the production is as defined by its capacity to bring in sales and

sponsorships. Production can be made with a full-blown script while

others depend on how the shooting environment changes.

In both countries, however, shooting schedules, budgets and other

decisions are done with the stars as primary consideration. A script may

be changed anytime and new materials are essayed on the set. The

addition of music and special effects also suffers since a greater time is

spent on shooting such that there are instances when the editing is still

being done while the program has already started airing.

Marketing and promotions follow similar patterns and avenues

among networks except for ABS-CBN’s marketing strategy of further

synergizing the television products with other products and services like

The Filipino Channel, TV Plus, satellite broadcasting in the rural

Philippines and the use of mobile phone for marketing and promotions.

What is missing in the production processes, marketing and

promotion in the Philippines is the government support and funding that

pushed the Korean cultural industry to an aggressive position in the

international market. What is needed is a will on the part of the

Philippine government and the Filipino people to use the culture industry

to promote nationalism and promote the Filipino culture and social life to

the world.

134

REFERENCES

Interviews

Amor Olaguer, Creative Consultant and Head Writer of Ang Panday, Viva

Entertainment, March 31, April 10, and April 17, 2016, UP College of

Mass Communication, Broadcast Communication Department Office.

Herbert Samonte, Creative consultant of ABS-CBN Global. May 15, 2016.

ABS-CBN Compound

Nowell Cuanang, Production Manager of Ang Ilustrado, GMA News Network.

April 11, 2016, UP College of Mass Communication Faculty Lounge

Susan Doctolero, Head writer of Encantadia, GMA Channel 7, May 15, 2016,

GMA compound

Toto Natividad, Director of Ang Probinsyano, ABS-CBN Corporation. April

16, 2016. ABS-CBN Compound.

Books

Herman, Edward S. and Robert W. McChesney (1997). The Global Media: The

New Missionaries of Global Capitalism. London, England: Cassel

Wellington House

Kwak, K-S. (2003) Civil Society as the Fifth Estate: Civil Society, media

reform, and democracy in Korea. In Kitley, Philip. (ed.) Television,

Regulation, and Civil Society in Asia. London: Routledge-Curson

Mosco, Vincent (2009) the Political Economy of Communication. London,

England: Sage Publications, Ltd.

Pinoy Television: The Story of ABS-CBN. (1999) Quezon City: ABS-CBN

Broadcasting Corporation.

Santos, J. C. (2003) Out of Reach: Television Regulation, Public Sphere and

Civil Society in the Philippines. In Kitley, Philip. (ed.) Television,

Regulation, and Civil Society in Asia. London: Routledge-Curson

Tveit, J.E. (2009) Dubbing versus Subtitling: Old Battleground Revisited. In

J.D. Cintas and G. Anderman (Eds.). Audiovisual Translations. Great

Britain: Palgrave Macmillan

Theses and Dissertation

Lacap, L. I. (April, 2014) More Than A Background: The Political Economy of

Music in Selected Kapamilya Drama Programs from 2011 to 2013.

Undergraduate Thesis. University of the Philippines College of Mass

Communication.

Manalili, P. (2004) Pagsasalin at Komunikasyon: Pagsasa-Filipino ng mga

Banyagang Programa sa Telebisyon sa Kaso ng Telenovelang “Ctistina”

[Translation and Communication: How Foreign Programs are Translated

to Filipino in the Case of the Television Series”Cristina”] University

Library University Archives, University of the Philippines Diliman.

135

Santos, J. C. (2000) Ang Pampulitikang Ekonomiya ng ABS-CBN at Ang

Globalisasyon [The Political Economy of ABS-CBN and Globalization].

An unpubliched master’s thesis. University of the Philippines

Internet Sources

Kim. M.L. (2011) The Role of the Government in the Cultural Industry: Some

Observations from Korea’s Experoience. Kaio Communication

Review Number 33, 171-180 retrieved from

http://www.mediacom.keio.ac.jp/publication/pdf2011/10KIM.pdf

Hwang, S. B. (2010, February 1-28) The Current State of Korean TV Drama;

19th

JAMCO International Symposium retrieved from

http://www.jamco.or.jp/en/symposium/19/5/

Korean Drama. Open Access Journal by Omics International retrieved from

https://research.omicsgroup.org/insex.php/Koreandrama

PEP Magazine (January 2011). GMA7’s The Baker King earns high ratings

during its pilot week. Philippine Entertainment Portal, Inc.,

www.pep.ph. Published with an excerpt from a GMA Network press

release. Retrieved from http://www.pep.ph/guide/tv/7651/gma-739s-

the-baker-king-warns-high-ratings-during-its-pilot-week

TV Ownership on the Rise While Filipinos Still Read Newspapers (2014,

February 20) The Manila Times Online retrieved from http: //

www.manilatimes.net.

136

137

Reactors’ Note

Contemporary Production Processes: Restructuring our

Understanding of Philippine Teleseryes vis-à-vis Koreanovelas

Jose Wendell P. Capili, PhD

College of Arts and Letters

University of the Philippines

“Synergies: Production, Marketing, and Promotion of Philippine and

Korean Television Series” by Josefina C. Santos attempts to articulate

similarities and differences between the popular Korean television drama

The Baker King, Kim Takgu (제빵왕 김탁구) vis-à-vis three successful

primetime Philippine television dramas, GMA 7’s Ilustrado and My

Husband’s Lover, and ABS-CBN’s Ang Probinsiyano.

Santos’s attempts are commendable, largely because her work hinges

on the tremendous popularity of Hallyu (Korean Wave) in the

Philippines. Her study also echoes the need for more studies that will

zero in on Philippine television dramas, a tradition that dates back to the

late 1950s, long before many Asian countries embraced and mastered the

medium.

However, the paper needs to focus on certain vital points to flesh out

the author’s problematique and heighten the gaps that needed some

filling in.

Firstly, the author needs to contextualize her choices—Out of many

successful television dramas in Korea, why The Baker King?

Furthermore, from the Philippine side, why Ilustrado, My Husband’s

Lover, and Ang Probinsiyano? In the process of presenting her findings,

the author may have to discuss the process by which she has narrowed

down her choices.

There has to be an articulation of Hallyu and how it emerged to

connote “The Korean Cultural Wave”, a term coined by Mainland

Chinese journalists who observed the rising popularity of Korean pop

culture outside Korea during the late 1990s. According to the Korea

Creative Contents Agency, the export of Korean dramas is on a rising

curve from USD 105 million in 2008 to USD 133 million in 2010.

138

Korean television dramas have become increasingly popular all over

Asia and the popularity is fast encroaching many other parts of the world.

In many ways, the author may also discuss how Korean television

dramas drew inspiration initially from the popularity of J-drama

(Japanese trendy dramas) and how Korean television dramas creatively

imitated, appropriated and transformed J-dramas. Eventually, Korean

television dramas took off after the Asian financial crunch of 1997 with

the support of Korean’s entertainment industry and eventually, by

Korean government agencies.

A historical context (The Philippines vis-à-vis Korea) may be in

order to trace the origins of the television drama in both countries. South

Korea started to broadcast television series in the 1960s. Today's mini

drama format of 12–24 episodes started in the 1990s, inspired partly by

the format adopted by many J-dramas.

It may also be interesting to note that that Philippines started

developing radio dramas even earlier, during the 1950s and the 1960s.

Many of these radio dramas became hugely successful, after which,

adaptations were developed for television audiences. These dramas

include Sta. Zita and Mary Rose, Ilaw ng Tahanan and Gulong ng Palad.

The development of Ilustrado, on the other hand, may be inspired by

Korean historical dramas, transforming the traditional historical series to

this format and creating the notion of "fusion sageuks" on Philippine

television.

Korean dramas are usually shot within a very tight schedule, often a

few hours before actual broadcast. Screenplays are flexible and may

change anytime during production, depending on viewers' feedback,

putting actors in a difficult position. Production companies often face

financial issues. And dramas had to work within these limitations while

tension builds up towards the development of a much-anticipated finale.

Philippine dramas face many of these obstacles, but the local variety

tends to stretch the plot too much, much to the chagrin of discerning

viewers who prefer compression over quantity.

Without question, Korean dramas are popular worldwide, partially

due to the spread of the Korean Wave, with streaming services that offer

multiple language subtitles. Some of the most famous dramas have been

broadcast via traditional television channels. For example, Dae Jang

Geum (2003) was sold to 91 countries. Philippine dramas are catching up.

ABS-CBN’s Pangako Sa'Yo, for instance, was sold to a number of Asian

and African countries.

139

The author may have to strongly justify her objects of inquiry, since

Ilustrado, My Husband’s Lover and Ang Probinsiyano, as locally

successful productions, have yet to approximate The Baker King’s

international success. Personally I would have preferred the selection of

Filipino dramas that had been popular overseas, as in the case of

Pangako Sa'Yo.

The author should also take note of vast differences between

structures of Filipino vis-à-vis Korean television drama productions.

Korean dramas are usually helmed by one director and written by one

screenwriter. In contrast, many Philippine television dramas have 2nd

, 3rd

and 4th unit directors, with various individual styles and syndromes to

further complicate renditions of scripts on the small screen.

At this point, I wish to reiterate that Korean television series are

likely to have only one season, with 12–24 episodes. Historical series

(sageuk) may be longer, with 50 to 200 episodes, but they also run for

only one season. These are vital points that Philippine networks may

need to adopt to further the cause of locally-produced television dramas.

Another vital point: Philippine television dramas are usually aired

daily during weekdays, morning, noon and nighttime. The broadcast time

for flagship Korean television dramas is 10:00-11:00 p.m. , with episodes

on two consecutive nights: Mondays and Tuesdays, Wednesdays and

Thursdays, and weekends.

Music also plays a rather crucial role in Korean dramas. Original

soundtracks (OST) are explicitly made for each series, and in contrast to

their Philippine counterparts, fans feel more urgency to purchase the

soundtrack album of Korean television dramas. This trend started in the

1990s, when producers swapped purely instrumental soundtracks for

songs performed by popular K-pop singers. These circumstances are not

necessarily imperative to many Philippine television dramas.

The emergence of international Filipino cable channels such as TFC

and GMA Pinoy TV is a recent phenomenon. The author may attribute

the rising popularity of Philippine television dramas to these two

channels. But the author may have to discuss whether these channels are

being patronized not only by Filipino communities overseas. The author

may have to discuss the contexts and nature of non-Filipino consumers of

these channels.

The global community of non-Korean-speaking fans, on the other

hand, is more involved in the consumption aspects: Fans share their

opinions through tweets and comments on newsgroups (for example, the

140

Soompi discussion forum) as well as reviews and recaps on websites and

blogs.

Other than being top rated, and as I had mentioned earlier, the author

may feel the need to justify even further the selection of GMA 7’s

Ilustrado and My Husband’s Lover, and ABS-CBN’s Ang Probinsiyano

vis-à-vis The Baker King.

These choices are so disparate in terms of plot, target audience, local

and global success and so on. But then, there may be similarities between

these differences. The challenge is for the author to identify these

similarities to contextualize her choices a bit further. Otherwise, the

study may have to be restructured to articulate television dramas from

similar genres and shown within the same period.

In terms of proportion, the author may have to justify why there was

so much discussion on Ang Probinsiyano vis-à-vis Ilustrado and My

Husband’s Lover. In addition, could there be more appropriate choices

from the Korean side, other than The Baker King?

It may be more ideal for the author to beef up her study by way of

extensive archival and field research. It may be ideal to interview key

figures (both performers and creative people behind the production) to

make her study more substantial and to highlight the unique features of

each creative production process.

Subsequently, the author may also wish to cite groundbreaking

studies on the subject of Korean and Philippine television dramas to

illustrate her unique insight and contribution to studies being done in the

field of television dramas, broadcasting, and pop culture.

Finally, the author may choose to even out her study by focusing not

just on the Philippine aspects of the research project but also the Korean

potentials in it, in order to make the project hugely Philippine-Korean

and less of Philippine Studies.

141

References

Beng Huat Chua and Koichi Iwabuchi. East Asian Pop Culture: Analysing the

Korean Wave. Hong Kong: Hong Kong University Press, 2008.

Fuhr, Michael. Globalization and Popular Music in South Korea: Sounding Out

K-Pop. London: Routledge, 2016.

Kim, Jeongmee. Reading Asian Television Drama: Crossing Borders and

Breaking Boundaries. London and New York: I.B. Tauris & Co. Ltd..

2014

Kim, Youna. The Korean Wave: Korean Media Go Global. New York:

Routledge, 2013.

Len-Rios, Maria E. and Earnest L. Perry. Cross-Cultural Journalism:

Communicating Strategically About Diversity. London: Routledge, 2015.

Marinescu, Valentina. The Global Impact of South Korean Popular Culture:

Hallyu Unbound. London: Lexington Books, 2014.

McPhail, Thomas L. Global Communication: Theories, Stakeholders, and

Trends. Hoboken, NJ: Wiley-Blackwell, 2014.

Roll, M. Asian Brand Strategy: How Asia Builds Strong Brands. New York:

Palgrave Macmillan 2005

142

143

NOTES ABOUT CONTRIBUTORS

Maria Fe Villamejor-Mendoza, PhD is Professor of Public Administration

and Public Policy and the current Dean of NCPAG, University of the

Philippines Diliman. She teaches courses both at the undergraduate and

graduate programs (e.g., Bachelor, Master and Doctor of Public

Administration), in the fields of public policy, public enterprise management,

development models, administrative theories and governance. Her areas of

expertise include regulatory governance, public enterprise reform and

privatization, anti-corruption, accountability, good governance and

development. Email: fevmendo@yahoo.com

Erwin Alampay, PhD is Associate Professor and former Director of the

Center for Leadership, Citizenship and Democracy (CLCD) at the National

College of Public Administration & Governance (NCPAG). He teaches

courses in research methods, organizational studies and management,

administration of social development, and citizenship and governance. He

does extensive research on information and communication technologies for

development, telecommunication policy and e-governance. In line with this,

he has worked with various ICTD networks such as LirneAsia, Technology

and Social Change (TASCHA)-University of Washington, Strengthening

Information Society Research Capacity Alliance (SIRCA), OpenNet

Initiative, etc. Recent articles he has published include: Harmonizing e-

Government initiatives in the Philippines: a collaborative institutional

framework and Social Media and Citizen-engagement: Two Cases from the Philippines. He is currently a Research Fellow with the Institute for Money,

Technology and Financial Inclusion (IMTFI), University of California-

Irvine doing research on the use of mobile money for conditional cash

transfers to the poor. Email: erwin_alampay@yahoo.com

Josefina Santos is Assistant Professor, Broadcast Communication

Department, College of Mass Communication, University of the Philippines-

Diliman. She holds BA Broadcast Communication (1996) and MA

Communication in Broadcast Communication (2000) at the same college.

She handles undergraduate and graduate courses including Political

Economy and Broadcasting; Media and Communication Theory; Broadcast

Audience Studies; Television Production and Procedures; Broadcast

Criticism; Educational Broadcasting; Broadcast Writing and Production,

Media Theory, Media Research; Media Ethics and many others. She has

presented papers in various international and national conferences. She has

been serving as a College Coordinator since 2007. Email:

pusongpayapa@gmail.com

144

Lucio Blanco Pitlo III (Master of Laws, Peking University) is an Assistant

Professorial Lecturer for International Studies at De La Salle University and

Lecturer for Chinese Studies at Ateneo de Manila University. He is also a

Contributing Editor (Reviews) for Asian Politics & Policy and a Project

Consultant for Asia-Pacific Pathways for Progress Foundation Inc. Email:

lucio3.pitlo@gmail.com

Jose Wendell Capili, PhD is Professor of English, Creative Writing and

Comparative Literature at the College of Arts and Letters, UP Diliman, and

the Assistant Vice President for Public Affairs and Director, Office of

Alumni Relations (OAR), UP System. He was previously educated at the

University of Santo Tomas (BA), University of the Philippines (MA),

University of Tokyo (Diploma), the University of Cambridge (MPhil), and

Australian National University (PhD). He has published 7 books and over

300 articles. Aside from creative writing and comparative migration studies,

Capili also discusses aspects of popular culture in the Philippines. Email:

jpcapili@up.edu.ph

Ms. Jinky Joy L. dela Cruz obtained her Master’s Degree in Urban

Administration and Planning at the University of Seoul in Seoul, South

Korea with the highest honours. Her thesis entitled “IDENTIFYING THE

CRITICAL SUCCESS FACTORS (CSFs) OF PUBLIC-PRIVATE

PARTNERSHIPS (PPPs): Case of Public Market Redevelopment Projects in

the Philippines” obtained the ‘Most Distinguised Thesis’ Award. She used to

work at the local government units of Imus and Kawit and thereafter, at the

Public-Private Partnership Center - an attached agency of the National

Economic and Development Authority. Her strong background in policy and

development planning as well as, substantive work experiences in local and

regional governance are what she employs to deliver her duties and

responsibilities as an oversight officer at the Officer at the Office of the

Chairman of the Professional Regulation Commission presently. Email:

jinkyjoy_1209@yahoo.com

145

On April 27th 2016, the University of the Philippines has launched the Korea Research Center, with the support of the Academy of Korean Studies (AKS) Korean Studies Promotion Service, aiming to provide Filipino scholars and researchers with opportunities to widen their interest in Korean studies. The Center hopes to be a venue for students and professionals to produce meaningful comparative researches and also to promote collaborative partnerships among Korean and Philippine institutions.

The Center will serve as a university-wide hub that will help promote and develop Korean Studies in the University and the country. It will sponsor interdisciplinary and inter-college research and education activities on Korean studies, as well as facilitate the training of the next generation of Koreanists in the country.

The activities of UP KRC are supported by the Academy of Korean Studies – Korean Studies Promotion Service (KSPS) Grant funded by the Korean Government (AKS-2015-INC-2230012).

146

UP Korea Research Center

UP Korea Research Center

Address: 3F South Wing Quezon Hall, University Avenue, University of the Philippines,

Diliman, Quezon City, Philippines

Tel : +63 2 981 8500 loc 2543

Email : pkrc@up.edu.ph

ISSN 2546-0234 (Online)

ISSN 2546-0226 (Print)