Information about Asia and the Pacific Asia y el Pacífico
Journal Issue

Philippines: Report on Observance of Standards and Codes (ROSC)—Response of the Authorities

International Monetary Fund
Published Date:
August 2004
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1. Balance of Payments (BOP)

A. Comments on Detailed DQAF Assessment—BOP

SectionSection HeadingIssue/s RaisedComments
0.2.1Staff, financial, and computing resources are commensurate with statistical programs.Staff, particularly senior officers, are frequently assigned to do non- compilation activities.It is the management’s view that staff working on statistics should be well aware of how the inputs they generate serve as the basis for the formulation of good policy. Statistics and policy form a continuum. Therefore, senior staff members (at the statistics groups) should not be an enclave by themselves. As they assume higher responsibilities, they—like other senior staff—will have to take on other high-profile duties (including attending committee meetings, representing the BSP in various fora, drafting speeches, contributing materials for publication). In these tasks, they should be able to explain not only the numbers but also the policy that accrues from these numbers.
0.2.2Measures to ensure efficient use of resources are implemented.Because of work pressures, staff has not been able to implement recommendations of the BOP technical assistance mission on a timely basis.It should also be recognized that some of the causes in the delay of implementation of recommendations are beyond the control of the BSP. For instance, trade statistics is the responsibility of the NSO. Despite the resources poured by the BSP to assist NSO in improving trade data, there remain institutional bottlenecks that need to be resolved by agencies directly involved in data collection. Since the BSP cannot impose its timetable on these agencies, both the BSP and the NSCB are considering options for a common methodology that would result in a better estimate of trade balance until trade data can be improved.
0.3.3Processes are in place to deal with quality considerations, including tradeoffs within quality, and to guide planning for existing and emerging needs.Consideration is being given to disseminating quarterly rather than monthly BOP.The Monetary Board has approved the shift to quarterly compilation and release of the BOP beginning with the December 2003 BOP report. The quarterly report contains monthly disaggregation. Meanwhile, the change in NIR (BOP position) is still released every month.
2.2.1The scope is broadly consistent with internationally accepted standards, guidelines, or good practices.Treatment of overseas Filipino workers (OFWs) as residents, and their remittances under income account rather than under current transfers.The present treatment of OFW remittances under Income Account is due more to data constraints since it is impossible to determine the residency of the remitter, based on the length of stay of Filipinos abroad, from the bank reports. The BSP has already established alternative estimates (2002–Q1 2004) consistent with internationally-recommended definition. Incorporation into the BOP statistics will be done simultaneously with other recommendations of the peripatetic mission.
2.3.1Classification/sectorization systems used are broadly consistent with internationally accepted standards, guidelines, or good practices.Repairs and goods procured in ports classified as services and not as goods.Beginning January 2004, the ITRS provided a separate item on this. The “new set” of BOP statistics (based on the peripatetic mission’s recommendations), to be released simultaneous with all revisions, has already reclassified this account under goods.
The classification/sectorization of BOP transactions deviates from BPM5 in a few areas.In general, the problems in classification and in the design of methodology are borne out of data limitations. This is particularly true with respect to methodology on trade credit, which, because of unavailability of data on trade between affiliates, does not take into consideration that portion that should be classified under direct investment. In response to this, the CBTS has generated data that show distinction between affiliated and non-affiliated trade credits. However, it should be also noted that trade credit transactions between affiliates are properly classified under direct investment in the IIP compilation.

The “new set” of statistics on trade credits are based on the CBTS and external debt statistics.

With respect to the treatment of OBUs as residents, the BSP has been generating two data sets of Reserves data; the old series that treats OBU as non-residents, and the new series that reclassifies OBUs as residents. The BSP has released in March 2004 a revised series of GIR (as far back as end Dec 2002), taking into consideration the reclassification of OBUs as residents. Similarly, a revised series (1990–2002 annual, 2004 quarterly) of external debt had been released in March.
2.4.2Recording is done on an accrual basis.Income data are reported on a cash basisExcept for interest payment on zero-coupon bond which is recorded on an accrual basis starting 2003.
3.1.1Source data are collected from comprehensive data collection programs that take into account country- specific conditions.Partner country data from the IMF’s Direction of Trade Statistics suggest that exports and imports for 2000–2002 (and earlier years) may be considerably understated.For completeness, the statement should also include a remark on the possible impact of the understatement of trade statistics on current account surplus/deficit (i.e., whether current account surplus is overstated/understated).
Data on financial flows of OBUs are not yet included in BOP.OBUs’ external transactions will be incorporated in the BOP in the release of the revised series.
3.1.2Source data reasonably approximate the definitions, scope, classifications, valuation, and time of recording required.The stock data on the foreign assets and liabilities include some domestic claims and liabilities.For the BOP compilation, banking data on foreign assets and liabilities have already been adjusted to exclude foreign-currency denominated domestic claims and liabilities. Both BOP and Banking groups are now working together for the improvement of coverage and classification of banks’ external transactions.

B. Plans/Status of Implementation of ROSC Recommendations—BOP

I. RecommendationsII. Implementation Status/Plans
A. High Priority
  • Implement organizational changes to ensure that the staff can concentrate on statistical production, and increase computer resources.
In October 2003, the Monetary Board (MB) approved the shift of the periodicity of BOP publication from monthly to quarterly to enable the staff of BOPIRG to have more time to reflect on the quality of data, develop new data sources, reconcile data obtained from different sources and adequately analyze the data being collected.

The first quarterly publication of BOP came out in December 2003 covering data up to 3rd quarter 2003. Subsequently, publication of BOP has been on a quarterly basis with monthly breakdowns.

The creation of a Department of Economic Statistics (DES) independent of the Department of Economic Research (DER) was considered and approved in principle during the BSP Strategic Management Planning Conference in November 2003. Moreover, in June 2004, the Monetary Board approved in principle a bankwide reorganization plan, including the creation of the DES. Details of the organizational set-up are being worked out.

Meantime, a dedicated group was formed within the Balance of Payments and International Research Group (BOPIRG) tasked to do solely the BOP compilation and initiate improvements in the system of compilation and in the quality of BOP statistics.
  • Improve the coverage of customs trade data and develop estimates of the value of remittances of Overseas Filipino Workers (OFWs) channeled outside banks.
In addition to the Task Force on import statistics, the creation of a task force to address issues on exports is also being recommended to the National Statistical Coordination Board (NSCB). The NSCB Board has recently approved the creation of the IAC on Trade Statistics. One of the functions of the IAC is to review and address issues pertaining to trade statistics with the view to improve the quality of trade data. Initial efforts of the IAC included a series of trainings on the use of a new system, the automated export documentation system (AEDS) for companies in the electronics industry. The AEDS is expected to facilitate the collection and processing of exports data. The IAC will also roll out the training program to non-PEZA exporters/importers. Core members of the IAC, aside from BSP and NSCB, include the National Statistics Office (NSO), Bureau of Customs (BOC), Philippine Economic Zone Authority (PEZA), Export Development Council and the Department of Trade and Industry.

With respect to the estimates of OFW remittances, a review of the NSO’s survey methodology on OFW remittances is being discussed in the newly created Small Technical Working Group on Estimation Methodology for OFW Stock and Flow under the IAC on Overseas Employment and Tourism Statistics. This could provide the parameters to estimate remittances coursed outside banks and generate data that will unify estimation methods on OFW remittances with National Accounts.

The Inter-agency Committee on Labor, Income, and Population Statistics (IAC-LIPS) has approved the adoption of the “one-year rule” in determining residency of OFWs. The recommendation will be elevated to the NSCB Board. The Task Force agreed that data on documented OFWs will be taken from the Philippine Overseas Employment Administration (POEA) while data on undocumented OFWs will be obtained from NSO’s survey.

RoP has received a TA from ADB to conduct a study on OFW remittances. The study is aimed at increasing OFW remittances, promoting flow of remittances to official channels and using OFW remittances as a tool for poverty alleviation. The proposed policies and recommendations that will come out of the study could be used as inputs to address some of the statistical concerns on OFW remittances. The ADB is finalizing the final report of the TA which is expected to come out in August 2004.

There are also plans to include the profile of OFWs in the quarterly Labor Force Survey of the NSO. Information from the survey could be used in setting benchmarks for estimating OFW remittances.
  • Intensify efforts to extend the coverage of enterprise surveys to close gaps with respect to transactions settled through accounts abroad.
Additional available results from the Cross Border Transactions Survey (CBTS), e.g., those pertaining to the electronics and airline industries that are not yet integrated into the present compilation process are now being incorporated in the BOP accounts.

Administrative data pertaining to nonresident airlines that are available from the Civil Aeronautics Board (CAB) are also being incorporated in the revised BOP.

In close coordination with an IMF TA mission, the coverage of the CBTS is being extended to cover major foreign direct investment (FDI) enterprises and major service industry groups.

A list of top corporations with foreign equity has been secured from the Securities and Exchange Commission (SEC). This will constitute the frame of respondents for the proposed survey of FDI enterprises.

A consultative meeting with 50 top corporations with foreign equity was held in February 2004. The pilot survey on foreign direct investment enterprises was launched after the meeting and preliminary results are now available for evaluation. 34 of the 50 target top corporations have submitted their comprehensive responses to the pilot survey. These 34 corporations account for a significant share of total direct investment in the country.

The pilot survey on FDI enterprises was carried out by the BSP but the full-blown FDI survey and the survey for the service-industry establishments are planned to be done in collaboration with the National Statistics Office. Preliminary discussions have already been made with NSO.
  • Improve the recording of direct investment—services, income, flows, and stocks.
The questionnaire that was developed for direct investment enterprises contains not only data on stock of investment, but also all other related data/transactions.
  • Remove the current estimates of trade credit and develop estimates based on surveys.
Estimates of trade credits for the electronics industry based on the CBTS are available from 2001. Meanwhile, annual trade credits from 1990 to present, based on data from the SEC top 5000 corporations, were calculated. The revised estimates of trade credits will be included in the forthcoming overall revision of BOP.
B. Other Recommendations
  • Consider amending bank secrecy legislation to permit data collection for statistical purposes, while strengthening safeguards on confidentiality.
A proposal to amend the BSP charter to include a provision that would give BSP the authority to get BOP-related data from non-financial corporations will be pursued in the next Congress. In the meantime, the MB instructed the DER to link up with NSO, and use the latter’s authority in conducting survey to get additional information for BOP purposes.
  • Modify the residency concept applied to OFWs, with appropriate coverage (i.e., travel) and classification (i.e., workers’ remittances) changes.
The issue has been brought to the attention of the IAC on Overseas Employment and Tourism Statistics. The 1-year criterion was approved by the group but still to be elevated to the NSCB Board for approval.
  • Develop an alternative methodology to record freight and insurance transactions and to eliminate duplication in the estimation of passenger fares and other transportation services.
It is being proposed that all domestic carriers be covered in the CBTS. At present, survey data from the major airline company have already been secured. However, there is difficulty in soliciting responses from other companies.

There is no more need to conduct another survey for foreign airlines operating in the Philippines, as these airlines submit quarterly reports on their receipts and disbursements to the Civil Aeronautics Board (CAB). Instead, arrangements have been made with CAB for it to provide BSP with the necessary information. However, BSP is still coordinating and working closely with CAB in order to correct some of the data processing flaws it observed in the way these data are processed and tabulated.

The BOP peripatetic mission has also recommended the conduct of a survey on international transactions of freight forwarders and transport operators. The frame to be used for the survey is currently being drafted and the questionnaire is being designed. This will be discussed during the next proposed TA mission.
  • Compile interest on accrual basis.
This is being studied by both DER and IOD, although computation of interest on zero coupon bonds on accrual basis is presently being done by DER.
  • Develop a common dataset on exports and imports of goods and services for use in compiling the BOP and national accounts.
The IAC on Overseas Employment and Tourism Statistics are working on unified data sets and estimation methods.

BSP’s proposed methodology on OFW income was approved by the BOP peripatetic mission. NSCB has yet to comment on the methodology.

The ongoing coordination among concerned agencies has significantly addressed issues on imports. The issue on export valuation is currently being discussed in the IAC on Trade Statistics. BSP has sought the technical guidance of the IMF statistics department on the issue.
  • Incorporate estimates of financial derivatives.
The forthcoming revised 2002–2003 BOP statistics will incorporate estimates of financial derivatives.
  • Improve coverage of private sector debt, including intercompany debt and resident holdings of debt securities issued abroad by residents (e.g., pension funds).
The BOP will be tapping the external debt database for information on the purchase by local pension/insurance sectors of resident debt issues abroad. This will start with the June 2004 BOP to come out in September 2004.
  • For improved recording, consider foreign airlines as nonresident rather than resident.
Implementation of the revised treatment of foreign airlines as non-residents will be incorporated in the revised 2002–2003 BOP statistics.

2. Monetary Statistics

A. Comments on DQAF for the Monetary Statistics

SectionSection HeadingIssue/s RaisedComments
Summary Data Quality Assessment (par. 16).Prerequisites of Quality.There appears to be a need, however, to strengthen the BSP’s legal power to collect data from non-banks. At present, supervisory legislation empowers the BSP to collect bank data, but there is no provision in its charter requiring non-banks to respond to data requests.The proposal for BSP to strengthen its legal power to collect data from non-banks may entail legislative action which may take sometime to pursue. To improve BSP’s collection of data from non-banks, the BSP has already forged agreements with other government agencies such as the PDIC, the SEC and the Insurance Commission to facilitate exchange of information on supervised entities, thus facilitate the compilation of data. For instance, the BSP-SEC Coordinating Committee is conducting a study on the reporting requirements by the BSP and SEC for non-banks which aims to come up with uniform periodic reports to be submitted by non-banks that will serve the purpose of both SEC and BSP.

The second statement may not be accurate as the BSP has supervisory authority over non-banks engaged in allied activities which are subsidiaries or affiliates of banks, as provided under Section 25 of R.A. No. 7653. The above comments of the IMF applies only to stand-alone non-banks without quasi- bank licenses.
Summary Data Quality Assessment (par. 16).Prerequisites of Quality.Recourse to penalty is sometimes necessary to ensure timely delivery of data, but the unindexed fine of P1,200 (about U.S. $22) per day appears low relative to bank’s financial capacity.The fine of P1,200 per day is not based on the bank’s financial capacity. The amount laid down had undergone careful study. Penalties were set depending on the impact of delayed reports based on the category of reports as identified by the BSP. The accumulated amount may also be burdensome on banks having liquidity problems. However, should the penalty be based on the financial capacity of the bank, this may deter the commission of certain bank violations and, therefore, enhance the efficiency of banks as well as their compliance with BSP regulations. Moreover, in case of willful delay in the submission of reports, erring banks and other financial institutions are subject to appropriate administrative sanctions including monetary penalties in amounts as may be determined by the MB but in no case to exceed P30,000 a day for each violation, as provided under Sec. 37 of R.A. No. 7653.
Summary Data Quality Assessment (par. 28).Methodological Soundness.Currently, the definition of money is underestimated because the coverage of the monetary statistics does not include all financial institutions that accept deposits or issue deposit substitutes.Starting 31 March 2004, the Depository Corporations Survey (DCS) covering all deposit-taking institutions has been published in the SDDS and BSP websites. Initial data covered Dec 2001, Dec 2002, Dec 2003, Jan 2004 and February 2004. The objective is to publish a five-year monthly series by end 2005.
Summary Data Quality Assessment (par. 28).Methodological Soundness.Holdings of securities are not valued at market prices.The statement may only be partly accurate since banks and NBQBs are required to mark-to-market their investments in all debt securities and marketable equity securities classified under “Trading Account Securities (TAS)”, “Available for Sale Securities (ASS)” and “Underwriting Accounts (UA)” under Circular No.161 dated March 30, 1998. Circular Letter dated December 29, 2000 establishes the market benchmarks/reference prices as well as computation method used by banks and NBQBs to mark-to-market debt and marketable equity securities.

As for investments in bonds and other debt instruments (IBODI), these are valued at cost adjusted for discount or premium, less any needed provision for permanent impairment in value.
Sec. 3.1.2 Detailed DQAF.Source data reasonably approximate the definition, scope, classifications, valuations, and time of recording required.Transactions of the BSP and commercial banks with counterparties that cannot be reasonably approximated or allocated to specific instruments or sectors are recorded in “other assets” and “other liabilities.” Supporting schedules of rural banks and nonbank financial institutions with quasi banking functions are not provided to compilers of monetary data by the SRSO.Proper classification to specific instruments or sectors shall be adopted for inclusion in the forthcoming implementation of the Subsidiary Ledger (SL) reporting system for commercial banks which will have staggered parallel testing starting with the Due From and Other Liabilities accounts effective for January 2004 reports for submission fifteen (15) banking days after end of reference month. Each subsidiary ledger shall undergo a two- month parallel testing and shall go live reporting on the third month.

With regard to the reconciled supporting schedules and main report of thrift banks and rural banks, this issue shall also be addressed by the forthcoming implementation of their respective Subsidiary Ledger (SL) reporting systems.
Sec. 3.1.2 Detailed DQAF.Source data reasonably approximate the definition, scope, classifications, valuations, and time of recording required.Data reported by savings and loan associations do not provide needed detail for the proper sectorization and classification of their records.The relevant reporting changes are already incorporated in the SL reporting system for thrift banks. The proposed issuance to implement the needed changes was already extensively exposed to the Chamber of Thrift Banks for comments. Staggered parallel testing by account has started in February 2004 reports and live implementation started with April 2004 reports. Consultation with banks ongoing.
Summary Data Quality Assessment (par. 34).Accuracy and Reliability.Except for commercial banks and thrift banks, accounting data lacks adequate sectorization and classification, and data on financial derivatives are not available.Banks are required to submit monthly report on “Outstanding Derivatives Contract” showing the notional and mark-to-market values of their outstanding derivatives contract as of month-end. We recognize though that said data on derivatives may not be sufficient to serve IMF’s purpose. However, a revised report format on derivative transactions consolidating or covering all the data on contingent foreign exchange (FX) spot and derivative transactions required by the different BSP departments including statistics needed for the IMF reports is under preparation/finalization. A derivatives database within the SES shall be established to provide an electronic means of checking outstanding obligations and double-hedged underlying transactions. The revised report shall be electronically transmitted by the banks to the BSP, for consolidation in the derivatives database that the Information and System Technology Department (ISTD) will develop. Each user department, in coordination with ISTD, will design its own report template so that it can generate its required data/information from the derivatives database.
Detailed Assessment using DQAF (Sec. 0.2.1).Staff, financial, and computing resources are commensurate with statistical programs.Staff, particularly senior officers, are frequently assigned to do non-compilation activities.It is the management’s view that staff working on statistics should be well aware of how the inputs they generate serve as the basis for the formulation of good policy. Statistics and policy form a continuum. Therefore, senior staff members (at the statistics groups) should not be an enclave by themselves. As they assume higher responsibilities, they—like other senior staff—will have to take on other high-profile duties (including attending committee meetings, representing the BSP in various fora, drafting speeches, contributing materials for publication). In these tasks, they should be able to explain not only the numbers but also the policy that accrues from these numbers.
Executive Summary.Accuracy and ReliabilitySource data for the monetary statistics are generally adequate, but there is a long delay in the transmission of the balance sheet of the BSP to compilers.This observation appears to be inconsistent with the statements found under Detailed Assessment using DQAF, which say that “Source data are timely (sec. 3.1.3)” and “timeliness follows dissemination standards (sec. 4.2.1).” If the dissemination of preliminary analytical accounts of the central bank based on operational data from concerned BSP units is already acceptable, then there is no immediate need for the BSP unaudited balance sheet to be submitted to compilers within 10 calendar days after end of reference month. Moreover, the ten-day timeline is presently not feasible because data on BSP’s externally managed funds are received by BSP from custodians only ten days after reference month, providing no time for processing of said data.

B. Plans/Status of Implementation of ROSC Recommendations—Monetary Statistics

III. RecommendationsIV. Implementation Status/Plans
A. High Priority
  • Implement organizational changes to ensure that the staff can concentrate on statistical production, and increase computer resources.
The creation of a Department of Economic Statistics (DES) independent of the Department of Economic Research (DER) was considered and approved in principle during the BSP Strategic Management Planning Conference in November 2003. The Monetary Board is now working on the reorganization of the entire BSP, including Research and Statistics.

In the proposed DES, a separate group for monetary and financial statistics will be formed out of the EFMG, which currently also covers business expectations survey and other leading indicators, to enable staff to focus on compilation of monetary statistics.
  • Expand the coverage to include all financial institutions accepting deposits or issuing deposit substitutes, establish uniform conversion of foreign currency accounts, and incorporate market valuation of bank securities in the compilation.
The expansion in institutional coverage and the uniform conversion of foreign currency accounts have been implemented starting in March 2004 with the publication of the Depository Corporations Survey (DCS) covering all deposit-taking institutions. Initial periods covered were Dec. 2001, Dec. 2002, Dec. 2003, January 2004 and February 2004.

As for market valuation of bank securities holdings, except for investments in bonds and other debt instruments (IBODI), which are valued at cost adjusted for discount or premium and any needed provision for permanent impairment in value, banks and NBQBs are required to mark-to-market their investments in all debt securities and marketable equity securities as required under Circular No. 161 dated March 30, 1998.

Circular letter dated December 29, 2000 establishes the market benchmarks/reference prices as well as the computation method used by banks and NBQBs to mark-to-market debt and equity securities.
B. Other Recommendations
  • Adopt a plan to implement the methodology/terminology of SNA 1993 and MFSM.
Quarterly action plans have been submitted to the Corporate Planning Office for this purpose. Implementation will be part of Phase II (Phase I is expansion in institutional coverage and uniform valuation of foreign currency-denominated accounts) and will start in the second half of 2004. Phase II would be limited basically to classification issues and is not expected to have further significant impact on the level of M3 and other monetary aggregates. A 5-year monthly DCS series (2001–2005) is expected to be completed by 2005.
  • Establish routine updating of sectorization of bank assets and liabilities in line with changes in the composition of the different levels of government.
Sectorization requirements are expected to be addressed by the implementation of the Subsidiary Ledger (SL) Reporting System for commercial banks (parallel testing started in Jan. 2004), thrift banks (parallel testing started in Feb. 2004) and rural banks. In this connection an inter-agency group consisting of representatives from BSP, NSCB, DOF and COA was organized in October 2003 to agree on a common, updated sectorization of GOCCs. The sectorization exercise/agreements will be forwarded to NSCB for endorsement and implementation by early 2005.
  • Provide compilers of monetary data with unaudited BSP balance sheet within 10 calendar days after the end of the reference month.
May not be feasible at this time since data on BSP’s externally-managed funds are received by the BSP from custodians only ten days after reference month, providing no time for further processing of said data.
  • Exclude deposits of banks in liquidation from the monetary aggregates.
Implemented in March 2004, with the publication of the DCS.
  • Incorporate accrued interest in the underlying financial instrument.
For incorporation in the SL Reporting System.
  • Improve coverage of financial instruments by collecting data on financial derivatives.
A revised report format on derivative transactions consolidating or covering all data on contingent foreign exchange spot and derivative transactions required has been prepared and being finalized. A derivatives database within the SES shall be established to provide an electronic means of checking outstanding obligations and double-hedged underlying transactions. The revised report shall be electronically transmitted by the banks to the BSP, for consolidation in the derivatives database that the Information and System Technology Department (ISTD) will develop.
  • Disseminate on a monthly basis the detailed central bank survey, the other depository corporation survey, more components of the key monetary aggregates, and data on financial derivatives.
Being implemented as data become available. A new table on DCS will be included in the April 2004 Monthly Selected Philippine Economic Indicators publication.


National Accounts

1. Data source

-While the annual Philippine System of National Accounts (PSNA) to a certain extent relies on quarterly indicators due to the untimeliness/unreliability of annual establishment data, there was really no switching from an annual to a quarterly compilation. There are industries in the PSNA wherein the annual data is the summation of the quarterly raw data. This is true for agriculture, fishery and forestry, mining and quarrying, electricity, gas and water and private construction. For the other industries, both annual and quarterly approaches are considered since the NSCB also utilizes annual financial statements of key players in the respective industries in the absence of results of the Annual Survey of Philippine Business and Industry (ASPBI).

-Estimates are not based solely on matched establishments.

2. Statistical techniques

-Our national accounts have various data sources other than the NSO’s Quarterly Survey of Philippine Business and Industry (QSPBI).

-We do not estimate taxes in our quarterly national accounts. We estimate taxes on an annual basis.

While the quarterly National Accounts publication does not include taxes as a separate item, the benchmark estimates of GVA by industry include taxes. The annual National Accounts publication, however, shows taxes as a separate item in the tables on Factor Shares by Institution and in a special table on Direct and Indirect Taxes.

3. Classifying Philippine citizens as residents after having worked abroad for more than a year:

-We would like to reiterate that our practice of classifying our Overseas Filipino Workers (OFWs) as residents is still consistent with the 1993 SNA Manual, paragraph 4.15 which states that “an institutional unit is a resident of that country when it has a center of economic interest in the economic territory of that country. In most cases, a long period of time may be interpreted as one year or more, although this is suggested only as a guideline and not as an inflexible rule.”

As such, we consider our OFWs as members of resident households in the Philippines even if their contracts may last up to two years. This criterion of residence we set for the OFWs is based on the nature of their job and uniqueness of this segment of society in the Philippine setting. The center of their economic interest is still in the country as they come back and forth to visit their families. Eventually, they come home for good after the expiration of their contracts. The OFWs also remit a major portion of their compensation to their families.

4. Recent developments and plans for statistical improvement:

With the advent of the 1993 SNA, NSCB faces the challenge of carrying on the adoption of the new SNA to its annual accounts and to update our base year to 2000. The program of revision is comprehensive since it involves the improvements in the current estimation methodologies and at the same time will incorporate the recommendations of the 1993 SNA to the extent possible. We are revising 1991–2001 PSNA series, to incorporate the annual establishment data results of 1991–1998, with 1999 to 2001 estimates based on annual/quarterly indicators. The annual series will be reconciled with the new quarterly accounts series. The new series that will be produced from this activity will have to be linked with the old link series, 1946–1999, which was published in 2002.

As we shift to the new base year, and given our plans to use chain volume measures or update the base year every five years, extrapolation will definitely be shortened. Double-deflation may not be feasible given the existing data sources but there will be significant improvements in the methodologies using the single deflation approach. It will be useful if Mr. Rosales can inform us which countries (developing, if possible) are doing double-deflation.

On Overseas Filipino Workers (OFWs), a Technical Working Group (TWG) was formed to address various issues on the OFWs and both the NSCB and the BSP are members of the TWG.

The TWG on OFWs under the Inter-Agency Committee on Labor, Income and Productivity Statistics (IACLIPS) of the NSCB has already been meeting on a regular basis. Similarly, NSCB has convened the Inter-Agency on Trade Statistics and has been meeting regularly to address emerging issues/concerns on foreign and domestic trade statistics.

In line with the revision program, a computerized compilation system is currently in place and in the process of further refinement, for the quarterly PSNA that will make the accounts more transparent and will minimize, if not totally eliminate estimation errors. Likewise, we are also assessing the feasibility of an earlier release of the quarterly national accounts in 2005.


Producer Price Index

1. Transaction specific characteristics of commodities are not included.

This concept is difficult to operationalize for the producer’s price survey. What are included in defining the commodity in the market basket are the unit of measure, detailed product specification and brand name.

2. Revision Policy

The NSO sets revision policies which are internally recorded, and not published in its website nor at IMF’s. Technical Notes of the MISSI which are published at NSO website will be updated to include statement of these policies, sectoral weights, dissemination practice, etc. Likewise, metadata provided to IMF will be updated.

3. Imputation of missing data

The method used for imputing missing price data is to use the latest price data reported, with about three (3) months lag. This is the most acceptable method since prices do not fluctuate very much on a monthly basis. Generally for most industries, there is no significant difference between the preliminary and revised indices as the response rate is fairly high on the release date of the index (close to 90%).

4. Methodology of PPI computation

At the 4-digit PSIC, the PPI is simply the average price relatives of the commodities. No weights are available at the commodity level for the PPI if the entire 4-digit PSIC is considered.

For another survey conducted which collects data at the commodity level, there is a recommendation to use commodity weights based on the proportion of the value of production of a particular sample commodity to total production reported by all sample commodities of the sub-industry. Total production of these commodities are collected in the said survey.

If this same weight determination will be used for the PPI, the use of a new methodology will have to be presented to the NSCB Technical Committee on Survey Design for evaluation.

5. Availability of Weights

The PPI’s latest weight is from the 1998 annual survey of manufactures. Starting the January 2004 PPI, the weights will hopefully be updated with the forthcoming release of the 2000 Census of Philippine Business and Industry for manufacturing (reference year is 1999). There is still a lag, however, since the 2002 annual survey (reference year 2001) is yet at the processing stage. Since the weights are based on the industries production data there is not much yearly variation on the industries’ contribution to total manufacturing. The 2003 annual survey is scheduled to be conducted in mid-2004.

Consumer Price Index

6. A study on the imputation of missing items shall be undertaken this year.


Government Finance Statistics

1. Authority of DOF to compile GFS data (Sec. 0.1.1)—The legal mandates of the DOF (Department of Finance) and the Bureau of the Treasury (BTr) do not have any specific provision about the function of data compilation. However, as the IMF report also recognizes the DOF, through the FPPO and the BTr, “collects, complies, and disseminates fiscal data for the public sector.” The IMF also recognizes that significant dissemination of fiscal data occurs as a public service.

2. Data sharing and coordination in conformity with GFSM 1986 and GFSM 2001, and submission in a reasonable time frame is not yet accomplished through an authorized and documented set of procedures, (Secs. 0.1.2 and 0.1.4)—Ad hoc arrangements are in place to document data sharing and coordination. To strengthen coordination, we propose that a DOF order be issued instructing compliance with the timely submission of data requirements for GFS. The BTr has been tasked to draft the order.

3. Existing computer system has not been authorized to, or been able to, automatically generate GFS from existing records. (Sec. 0.2.1)—Automation will follow as soon as the New Government Accounting System (NGAS) is fully operationalized. Pilot tests on automation are being undertaken by BTr to thresh out bugs in the system.

4. Compiling in the most efficient manner (Sec. 0.2.2)—We agree with the report’s observation that the existing automated system can be improved in order to more efficiently compile GFS, than the present manual system. In this instance we may find the need to request technical assistance from the IMF.

5. Undocumented processes to ensure quality of data collection, existence of plans for emerging GFS needs (Sec. 0.3.1 to Sec. 0.3.3)—The proposed DOF order can substantially mitigate these concern. Current compilation practices have been followed for several years as without being documented into a standard manual of procedures. The proposed DOF order will document procedures and specify reportorial requirements.

6. Evidence of analytical work or staff publications of methodological papers (Sec. 1.1.1)—This will have to form part of future programs. We propose that technical assistance be requested from the IMF to guide the technical staff.

7. Notice of change in series not indicated (Sec. 1.2.4)—The staff agrees with this observation and will henceforth change reportorial procedures for future statistical updates.

8. Not being aware of Act Establishing Code of Conduct and Ethical Standards for Public Officials and Employees (Sec. 1.3.1)—The IMF report stated very specifically at the beginning of this section that “The staff behavior is consistent with high ethical standards.” It ended with the observation that … “there is evidence that the experienced staff compiling fiscal data has high ethical standards.”

9. Non-compliance with GFSM 2001 (Sec. 2.3.1, Sec. 2.4.2, Sec. 3.1.1, Sec. 3.1.2)—The GOP is still not fully compliant with GFSM 2001. The implementation of the NGAS will be critical in ensuring compliance with the data compilation requirements of GFSM 2001, specially in the shift of reporting from cash transactions to accrual system.

10. Reporting of annual data of LGUs (Sec. 3.2.1)—The reporting of data for LGUs will be enhanced with the implementation of the Manual on the Statement of Income and Expenditures for Local Government Units. The manual took effect in 2003.

11. Assessment and validation of source data (Sec. 3.3.1)—The main source for the questions on the validity of source data stems from the cash reporting of transactions by the BTr and the accrual system of the COA. These problems will be resolved when the NGAS is implemented by all government entities.

12. Reconciliation of data between fiscal sector and other macroeconomic statistical areas (Sec. 3.4.1)—In the final meeting between the IMF and GOP, the Neda and the BSP clarified that they use BTr data for NG fiscal transactions.

13. Reconciliation of GFS financing data and corresponding data with financial institutions (Sec. 3.4.3)—BTr is scheduling a meeting with BSP so that there will be a reconciled report.

14. Documentation for data revisions (Sec. 3.5.1)—The GOP technical staff resolved to do this much more consistently in future reports. Future updates of the DOF Statistical Bulletin will indicate data series revisions in the explanatory notes.

15. Available statistical reporting of annual data, while good in certain areas, is not comprehensive and consolidated for transactions or stocks of the central government, the general government, or the public sector. (Sec. 4.1.1)—This concern will be addressed by the implementation of NGAS.

16. Data on main aggregates of annual data do not fully conform to fully aggregated or consolidated data for on public sector operations. The fiscal data on the public sector include deficit and financing data that were not consistent. (Sec. 4.2.1) and Sec. 4.3.1)—The fiscal sector agencies informed the IMF that they intend to improve the coverage of institutions as transactions of the public sector.

17. Explanation of statistical breaks not evident (Sec. 4.3.2)—This recommendation will be implemented in subsequent updates of statistical reports.

18. Harmonization of fiscal accounts with related national income accounts (Sec. 4.3.3)—The authorities during the final meeting have indicated that steps are to be taken to help ensure that fiscal data are consistent and reconcilable with national account, monetary and financial, and balance of payment statistics.

19. No routine focus on coherence between preliminary and final data to ascertain if preliminary data can be used with confidence for policy determination and analysis. (Sec 4.4.2) and Sec. 4.4.3)—This is intended to be part of future improvements of the reportorial system.

20. The aggregates and details of accounts of the National Government are not in full conformity with either GFSM 1986 or GFSM 2001. (Sec. 5.1.1)—As mentioned earlier, the implementation of the NGAS and the shift to accrual accounting will enable GFS accounts to conform to GFSM 2001.

21. Cash Operations Report not publicly disseminated (Sec. 5.1.2)—On the contrary, the Cash Operations Report is disseminated via the BTr website and also through hard copies.

22. Concepts, sources, methods (C, S, & M) are not significantly documented in reports. The information provided is not sufficient to allow users to understand fully the framework under which the statistics are produced (Sec. 5.2.1) and Sec. 5.2.2)—We intend to request the IMF for technical assistance in order for the technical staff to improve the reporting of C, S, & M information.

23. Contact persons and catalogue of statistical products and services are not provided in publications. (Sec. 5.3.2)— The 2003 DOF Annual Report as well as the Statistical Bulletin will include contact persons and a list of statistical products


Government Finance Statistics

A. On differences of view with the assessments

1. Observation: The use of the NGAS chart of accounts does not permit the compilation of complete detailed data on holding gains and other changes in volume

The NGAS Chart of accounts provides Gain/Loss Accounts to be used in recording holding gains. However, these are recognized on transactions involving assets and liabilities expressed in foreign currency and upon disposal of assets and payment of liabilities. Rules and regulations in government accounting are being updated to conform with the international accounting standards on the subject.

2. Observation: General government consumption is estimated as the sum of cost of components both at current and at constant prices. These estimates include estimated consumption of fixed assets, based on the perpetual inventory method, as part of the cost of production of government.

The estimated consumption of fixed asset or property, plant and equipment or depreciation is based on the acquisition cost using the straight line method of computation after providing for an estimated salvage value. However, inventories or consumables are recorded using the perpetual inventory method and expenses are recorded upon issuance/consumption using the moving average method of computing the cost.

B. Recent developments

3. Observation: National source data on expenditures are recorded at the time the expenditure is authorized and funds are allocated to various agency accounts, rather than after the agencies have taken the funds from its government accounts (for cash basis of recording or actually received the purchased goods and services for the accrual basis of recording)

That practice is being done by National Government Agencies (NGAs) and Local Government Units (LGUs) before the adoption of NGAS in fiscal year 2002.

The COA Annual Financial Reports for NGAs and LGUs for the fiscal year 2002 and onwards reflect assets and expenses recorded upon receipt/purchase of goods and services rendered and not upon allocation of funds.

Government-Owned and/or Controlled Corporations (GOCCs) are already adopting the accrual method of accounting where expenditures are recorded in the books of accounts upon receipt of the goods and rendition of services.

C. Plans for statistical development.

4. Observation: The national chart of accounts under NGAS does not follow statistical guidelines provided under the Government Finance Statistics Manual (GFSM) for 1986 and 2001.

The NGAS chart of accounts may consider modification to include those accounting information/transactions which are aligned with international accounting standards. The financial transactions being defined in the report on the observance of standards and codes are specifically GOCCs transactions and these are covered under COA Circular No. 2004-002 dated April 29, 2004 re:the adoption of the NGAS chart of accounts by GOCCs effective January 1, 2005.

5. Observation: The use of the NGAS chart of accounts does not permit the compilation of complete detailed data on net acquisition of financial assets and complete liability data by instrument or by sector of creditor

Although the Commission on Audit (COA) is coming up with a standard accounts for use by the three (3) sectors in government, differences among the three still have to be considered. The NGAS Chart of Accounts when properly applied permits compilation of complete detailed data on net acquisition of assets and complete liability data by instrument, by sector or by creditor.

Compilation of detailed data by sector can also be done thru the adoption of the Responsibility Center Accounting when the electronic New Government Accounting System (e-NGAS) is in place in all government agencies.

6. Observation: Substantial source data (on public sector stocks and flows) are available, but not sufficiently used for compiling the Government Financial Statistics(GFS). While conforming to the 2003 chart of accounts, however, some of these data are not fully consistent with the GFSM 1986 or GFSM 2001.

The chart of accounts prepared under the NGAS for adoption in government accounting may not be aligned to the GFSM but to International Accounting Standards.

7. Observation: The basis of recording transactions are at market prices and conversions of foreign-currency transactions into US dollar—the unit of account—is made at exchange rates prevailing on the day of the transactions, or, when appropriate, by taking the exchange in two outstanding balances, sometimes adjusted for valuation changes (e.g. reserve assets). Transactions are generally recorded on a cash basis rather than on an accrual basis. (On Introduction No. 27, last 2 sentences )

Appropriate accounting guidelines and procedures on the proper recording of financial transactions involving foreign currency is being updated under the NGAS to conform with the International Accounting Standards.

8. Observation: compilation/consolidation problems involving several agencies. There are also differences in net bank credit according to Treasury and bank data, and budgetary arrears are poorly defined. More generally, reconciliation of fiscal data disseminated by various agencies (DOF, BTr and Commission on Audit) is hampered by difference in coverage, concepts and definitions, and the insufficient use of explanatory notes. No revision studies are made public. (On Introduction No. 37, last 3 sentences)

The agency compiling the national accounts, the NSCB, does not correct source data for the national accounts. Thus, it depends completely on the data collected by other government statistical agencies. The main agency providing source data for national accounts are the …NSO, DA, BSP and DBM. The DBM is the source for the data referred to the general government. (On page 14, 3.1.1, first paragraph).

Government finance statistics are available annually from the “Commission on Audit of the Republic” and quarterly from the DBM. The latter data are based on cash flows registered by the Bureau of the Treasury. No data on government’s capital stock are available. (On page 14, 3.1.1, last paragraphs)

A recommendation which is considered a high priority is the grant to one DOF entity the authority to coordinate data collection in accordance with international statistical guidelines. This Office conforms with the recommendation that an entity be authorized to coordinate for the proper compilation and consolidation of accounts in government (three sectors). Since COA, particularly GAFMIS, is one of the compilers and providers of statistical/financial data, inclusion of that Office in the orientation as well as development of effective and efficient methodology of statistical data consolidation is with utmost importance. In the future, an integrated financial management system (IFMS) involving the above-mentioned agencies, may be established to ensure accurate, timely and complete compilation of national accounts.

9. Observation: No other statistical techniques have been reported for adjusting reporting fiscal data (and such absence is reflected in the mismatch between data on deficits and financing for the public sector, as reported by DOF). In light of new procedures being undertaken by the DOF officials, no need for dramatic adjustments was perceived. However, some adjustments are expected in view of the absence of certain details in the chart of accounts that would permit the accurate consolidation of quarterly stock and flow statistics on the central government, and consolidation of annual stock and flow statistics on the general government and the public sector.

The absence of details in the Chart of Accounts will be addressed by requiring agencies to maintain subsidiary ledgers.

Inasmuch as the NGA, LGUs, and GOCCs adopt the NGAS Chart of Accounts, consolidation of their financial transactions may be done although separate Annual Financial Reports for each sector shall be prepared by the Commission on Audit.

There is need, however, for clarification on the definition of public sector since the written definition/discussion implies that public sector pertains to public corporation but the Figure 2.2 presented implies that it consists of the general government and the public corporation.

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