With her clear-cut vision for a united country and a people free from poverty, President Gloria Macapagal-Arroyo took the helm of the nation in 2001. Her twin goals of sustainable economic growth and poverty alleviation, and lasting political stability and peace were anchored on four core values of poverty eradication; new politics based on platforms, programs, issues and consultations; good governance supported by high moral and ethical standards; and leadership by example.

Her first SONA set out tangible actions and programs in pursuit of her anti-poverty campaign. Specific and time-bound targets were identified focused on her priorities to provide jobs, food on every table, homes, education and peace.

In her second SONA, President Arroyo further refined her vision for the Philippines: to build a strong republic, making it independent from narrow class and sectoral interests and building up its institutional capacities - features that would result to faster economic development and social reform.

She reiterated her thrusts in her third SONA, pushing for measures that would realize our country’s vision to alleviate poverty.

The road to her goals was not easy. Her administration was faced with political crisis, divisive animosities, a huge fiscal deficit inherited from the previous administration, criminality, contracting economies of major trading partners, global war on terrorism and corruption.

But she faced these challenges boldly, determined to overcome them, move forward fast and put the country back to the road to recovery.

With the Cabinet, the bureaucracy and allies in Congress and local government units, President Arroyo set out to implement her programs. And in just three and a half years, she showed tangible results in her commitments – delivering government services especially in the areas of housing, education, healthcare; modernizing agriculture to ensure food security, restoring macroeconomic stability and investor confidence in our nation and outperforming the economies of our neighbors; winning the war against illegal drugs and kidnapping.

These and her other solid accomplishments are summed up in the five reform areas of the Arroyo Administration: Reforming the Market, Reforming Agriculture, Reforming Social Assets, Reforming the Bureaucracy, and Reforming Institutions that Uphold Peace and Order

Economy. We sustained economic growth, with GDP increasing from 3% in 2001 to 4.7% in 2003, and GNP from 3.5% to 5.6%, outperforming the economies of Indonesia, Taiwan, Hong Kong, South Korea and Singapore. In the first quarter of 2004, GDP grew 6.4% while GNP increased to 6.2%, the highest quarterly growth posted by the economy since the fourth quarter of 1989.

We maintained inflation and interest rates at single digit levels. From 6.1% in 2001, inflation was reduced to 3.1% in 2003 while interest rates based on the 91-day Treasury bills declined from 9.87% in 2001 to 6.03% in 2003. For the first six months of 2004, interest rates averaged 7.02%. The lower interest rate regime makes credit and loans more affordable and supports economic growth.

The peso-dollar exchange rate was generally stable, depreciating by only 5% from P53.36 per US$1 when she assumed office in January 2001 to P56.18 on 30 June 2004, as compared to the 23.6% depreciation from P42.04 on 30 June 1998 to P55.01 on 18 January 2001.

Revenue collections continued to increase on a year-on-year basis from P563.7 billion in 2001 to P626.6 billion in 2003. In 2004, January to May collections grew to P288.8 billion, up 12.5% from the same period in 2003.

Foreign direct investments of P115.4 billion in the first quarter of 2004 was the highest quarterly FDI turnout since the third quarter of 1997 and surpasses the past years’ annual performance. BOI and PEZA-approved investments of about P130 billion for the first quarter of 2004 was up 1,072% compared to the same quarter last year, and higher than the full-year 2002 and 2003 performance.

With these positive numbers, 3.4 million jobs were created from 2001 to 2003.

We expanded SME access to funds and boosted job creation through the SME Unified Lending Opportunities for National Growth (SULONG) Program, which lent P35.37 billion to 325,123 SMEs. Microfinance, meanwhile, reached some 1.5 million mostly poor women, who borrowed a total of P6 billion.

Visitor arrivals to the Philippines increased from 1.8 million in 2001 to 1.9 million in 2002 and 2003, despite the SARs outbreak, Gulf war and threat of terrorism in pocket areas. From January to May 2004, tourist arrivals reached 954,473, up 36% from the same period last year, translating into US$609.47 million tourism receipts.

Infrastructure and ICT. We implemented the Strong Republic Nautical Highway using roll-on/roll-off (Ro-Ro) vessels, which reduced travel time by 10-12 hours and cost by 37-43% for passengers and by 24-34% for cargo from Luzon to Mindanao.

The Metro Manila commuter train loop from Blumentritt to Pasay through LRT 2 and back to Blumentritt through PNR line was completed. This train system, new road projects and traffic management reforms increased travel speed in Metro Manila from 13.5 kph in July 2001 to 26.85 kph in February 2004.

We implemented the Electric Power Industry Reform Act, which resulted in discounts for large energy consumers, savings in Independent Power Producers (IPP) contracts, and reduction in systems losses, thus ensuring reasonable energy prices.

Development of new airports in Iloilo and Laguindingan, Misamis Oriental was initiated while facilities in the airports in Laoag, Vigan, Mactan, Antique and Jolo were completed or improved.

We enhanced access to information and communications technology and reduced internet connectivity cost to one-third of what it used to be. Investments in call centers and back office operations increased, resulting in 68 call centers with well over 25,000 seats, compared to only 2 centers with 2,000 seats in 2000.

REFORMING AGRICULTURE

Growth in agriculture soared to an annual average of 4% in gross value added (GVA) and 8.2% for the first quarter of 2004, the highest in 15 years. We registered a record high 13.5 million metric tons palay harvest in 2003 and expanded hyrid rice cultivation from 12,550 hectares to 132,289 hectares.

We created a total of 1.87 million jobs in the agriculture, fishery and forestry sector, and agricultural services sector.

We implemented the Agriculture and Fisheries Modernization Act (AFMA) by utilizing P83.15 billion in irrigation, post harvest facilities, other infrastructure, credit, and other components.

The mammoth Mal-Mar irrigation dam in North Cotabato, which has dragged for years due to peace and order problems, was completed in September 2001 and generated 6,256 hectares of irrigated areas benefiting 4,549 farmers.

We established 1,207 stationary stores and deployed 61 rolling stores in the most depressed areas nationwide selling low-priced rice and other commodities.

The coconut sector recorded an impressive export performance in 2003 at estimated value of US$757.32 million, 30% higher than in 2002. And at the time when coconut prices at the world market were at an all-time low, we implemented programs to help coconut farmers, through microcredit, upgraded insurance coverage, Cocount Farmers Food Access Program, and new coconut markets.

We also pushed for the resolution of the coconut levy issue in favor of the coconut farmers and on 7 May 2004, the Sandiganbayan ruled that 27% of the shares of SMC may be rightfully taken over by the government in trust for approximately 20 million coconut farmers.

Housing. We provided shelter security to nearly 300,000 informal settlers in urban areas, through Presidential proclamations declaring socialized housing sites and through the Community Mortgage Program. Social protection was enhanced through the issuance of Certificate of Entitlement for Lot Allocation.

Housing and slum upgrading services were provided to 190,787 households belonging to the bottom 30% of the income population, and housing finance for 328,877 low-salaried government and private sector workers.

We instituted financial reforms in the housing sector such as increased loan-to-collateral ratio under the buy-back agreement with developers and reduced interest rates to make housing more affordable

Job Creation. We generated 3.4 million local employment and increased the average nominal minimum wage by 29.2%. We raised the number of families belonging to the bottom 40% whose family head is gainfully employed from 57% in 1999 to 85% in 2002. Technical and vocational training was given to 855,000 workers a year, more than triple the average in past years.

Emergency employment and livelihood opportunities were provided to our out-of-school youths (OSYs) through various programs with government agencies, local government units and the private sector.

We facilitated the deployment of 3.12 million Filipino workers to more than 200 overseas destinations with remittances reaching a total of $22.77 billion. We ensured protection of our OWFs, especially during the Iraq war, through coordinated mechanisms instituted by the Middle East Preparedness Team, and by housing stranded OFWs at the Bahay Pinoy Relocation Center.

Microcredit. More than one million women borrowers were provided some P3.54 billion microcredit. In addition, six microfinance-oriented banks and 115 rural and cooperative rural banks provided P2.9 billion microcredit to half a million borrowers.

Healthcare. We enrolled 30.6 million urban and rural poor beneficiaries under the National Health Insurance Program – more than 20 times the previous administration. Moreover, 42 low-cost frequently bought medicines were made available at 72 government hospitals and 1,700 Botika ng Bayan outlets.

We successfully contained the Severe Acute Respiratory Syndrome or SARS, recording the lowest count of mortality among 30 countries affected by the disease.

Education. We addressed the backlog in education resources by providing more classrooms, teachers and textbooks. A total of 964 school buildings were constructed in far-flung barangays and a 1:1 textbook-pupil ratio was attained in grade school and will be achieved in September in all high school levels. We provided computer access to more than 60% of public high schools nationwide through the distribution of 30,000 personal computers to almost 2,000 public high schools.

Some 50,000 needy 3^rd, 4^th, 5^th and graduating college student were provided P300 million in loans under the Student’s Assistance Fund for Education for a Strong Republic (SAFE-4-SR) and almost 2,000 indigent families were given Certificates of Educational Assistance under the "Iskolar para sa Mahirap na Pamilya" program.

Land Distribution. We distributed 621,137 hectares of public and private lands to 470,901 farmers and placed under leasehold operation 71,698 hectares involving 34,746 farmer-beneficiaries.

More than 100,000 indigenous peoples received 22 Certificate of Ancestral Domain Titles (CADTs) and 44 Certificate of Ancestral Land Title (CALTs) covering 541,047 hectares.

We provided security of tenure to 35,677 households in areas classified as forestlands that cannot be titled.

Power and Water. Electricity was provided to 4,483 barangays bringing the total number of energized barangays to 38,085 out of 41,945 barangays, and attaining a 90.80% barangay-level electrification.

We launched the Patubig ni Pangulong Gloria Macapagal Arroyo Project in December 2003, which provided piped-in water supply to 956,541 waterless households in Metro Manila, Rizal, Cavite, Bulacan and Laguna provinces.

Social Services. We implemented the Kapit Bisig Laban sa Kahirapan (KALAHI) as a poverty alleviation strategy, wherein we provided water systems, footbridges, farm to market roads and other services to various communities.

REFORMING THE BUREAUCRACY

We created the Presidential Anti-Graft Commission (PAGC) to investigate complaints against all Presidential appointees in the Executive Department. Among those meted administrative punishment were 2 former Commissioners, 1 Administrator, 2 Executive Directors, 2 Regional Directors, 5 Directors, 1 Bureau Director, 1 Provincial Prosecutor and 8 Assistant City Prosecutors, 1 Provincial Agrarian Reform Adjudicator.

A Multi-sectoral Lifestyle Check Coalition was created to conduct lifestyle check on government officials. A total of 159 lifestyle checks have been conducted, and more than 100 cases were endorsed to OP and the Ombudsman for appropriate action. Among those recently dismissed were a DPWH undersecretary and a BIR director.

We pursued the investigation and prosecution of persons involved in corruption, smuggling and tax evasion leading to the dismissal from the service of about 45 government officials and personnel, including 5 DPWH officials, PEA officials, LBP personnel, PRC Commissioner and Assistant Commissioner, an Assistant Chief Prosecutor, five judges, 128 Customs officials and personnel.

The Government Procurement Reform Act or RA 9184 was enacted into law to address loopholes in the government procurement system and to speed up bidding, thereby reducing graft and corruption. Savings of P173 million were generated by government agencies for posting bid notices in the Government Electronic Procurement System instead of in newspapers.

The Bureau of Internal Revenue and the Bureau of Customs pursued structural and institutional reforms, which enhanced revenue collection and reduced graft and corruption. These reforms include the Voluntary Assessment and Abatement Program (VAAP), a computerized system which uncovered value added tax evasion, leading to P7 billion in delinquent taxes collected, and the Tax Compliance Verification Drive which collected P248 million in deficiency taxes from establishments violating tax laws and regulations.

The processing systems for frontline services were simplified, which reduced signatories and processing time. These areas include tax payments, professional IDs and licensure examinations, OFW documents processing, civil registry documents, business documentation, veterans pension, NBI clearance, drivers licenses, ECC and mining applications.

To immediately respond to complaints, direct feedback mechanisms on government services were established through short message service (SMS), such as Text GMA, DETxt (complaints against the Department of Education), TxtUsok (on smoke-belching vehicles), Text CSC (on government’s frontline services) GAWIN 1345 (for queries on government processes and services), and PRC Text (licensure exam and other PRC concerns).

Strengthened local-national government partnership for development by releasing the Internal Revenue Allotment of local government units, establishing Gabay ng Mamamayan Action Centers in barangays, and enlisting the active participation of LGU officials in the effective management of concerns affecting national development

We intensified anti-kidnapping operations and neutralized the most wanted kidnap-for-ransom masterminds and their followers.

We pursued an all-out war against illegal drugs and neutralized 8 international and 191 local drug syndicates, arrested more than 100,000 big and small-time financiers, pushers and users, seized about P35 billion of illegal drugs and paraphernalia, dismantled 37 shabu laboratories, and cleared some 5,140 drug-affected barangays. This cut the supply of illegal drugs as shown by the rise in shabu price from P800 a gram to P3,000 to P5,000.

Crime incidents were reduced by 15% and a monthly average of 87.3% street crime solution efficiency rate was achieved.

We broke the back of the Abu Sayyaf Group, cutting its strength by 65% and neutralizing its leaders, including Abu Sabaya and Kumander Robot.

We intensified operations against the Communist Party of the Philippines-New People’s Army, decreasing its strength by 27%. We also reduced the threat posed by operatives of international terrorist groups by strengthening our soldiers’ capabilities and enhancing cooperation and participation in various counter-terrorism efforts with other countries.

More than P10.8 billion was allocated for AFP modernization, of which P1.15 billion was utilized for procurement of new and modern fighting equipment.

We enhanced the welfare of our soldiers and police through salary increases, which are now at par with the salary grade level of public school teachers, housing and scholarship programs. Legitimate grievances of military personnel were also addressed.

We put back on track peace negotiations with armed rebel groups, as we continued to undertake development projects for Mindanao conflict areas.

We supported the modernization of the electoral process through P3 billion funding releases.

CHALLENGES AHEAD

The past three and a half years saw the Arroyo Administration laying the foundations for a Strong Republic and gaining headway in the delivery of essential services, stabilizing peace and order and in the fight against terrorism. All of these were a mere downpayment, but more has to be done.

With a clear and resounding mandate from the Filipino people to bring about progress to our nation and attain poverty reduction, the Arroyo Administration has set out to accomplish more under a 10-point agenda of governance:

• Creation of six to ten million new jobs by tripling loans to micro, small and medium enterprises and developing two million hectares of agri-business land;

• Education for all children of school-age, computers for our schools and scholarship for the poor;

• Balanced budget by collecting the right revenues and spending on the right things;

• Decentralized development by linking the entire country through a network of transport and modern digital infrastructure;

• Electricity and water for all barangays nationwide;

• Decongestion of Metro Manila, with new centers of government and business and community in Luzon, Visayas and Mindanao;

• Development of Clark and Subic as international service and logistics center in the Southeast Asian region;

• Full computerization of the electoral process;

• Just conclusion of the government’s peace process and an end to armed insurgencies; and,

• A just closure of the divisive issues of EDSA 1, 2 and 3.

It will take a firm resolve and a strong leadership to fulfill this legacy to the Filipino people. The Arroyo Administration challenges itself to live up to the highest standards of honesty and competence in the service of the public.

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