Press Briefing

Press Briefing of Ms. Daphne Oseña-Paez with Department of Finance Secretary Benjamin Diokno

Event Press Briefing

MS. OSEÑA-PAEZ: Good morning, Malacañang Press Corps, and welcome to our press briefing this morning, March 28.

President Ferdinand R. Marcos Jr. presided over the sectoral meeting this morning. Tinalakay dito ang proposed merger of Landbank of the Philippines and the Development Bank of the Philippines. The proposed merger aims to have a more robust and competitive bank that will provide better and more accessible financial services for Filipinos.

Aside from this, the updates on the proposed military and uniformed personnel pension reform, was also discussed. And to give us more details on this, kasama natin ngayon si Finance Secretary Benjamin Diokno. Good morning, Sec. Diokno.

DOF SEC. DIOKNO: Thank you. As mentioned earlier, two topics were taken up today – both, well, they are considered game-changing ‘no – the first one is the merger of the Development Bank of the Philippines and the Landbank of the Philippines. By merging the two, it will now become the number one bank in the Philippines, okay, ahead of Banco De Oro in terms of asset.

Now, the President expressed the desire to merge the two to make it the biggest bank in the country because of the recent financial developments abroad ‘no. And that’s really the best practice – the biggest bank usually is owned by the state globally.

Now, he expressed concern that in the process of merging, that none of the services provided by either bank will be lost. And we assured him that with the merger, because both the Landbank and DBP are universal banks, they do almost the same, right, except that one is focused on agri and the other one on industrial projects but they do practically the same and that as a result of the merger, there will be savings and the merged banks will be stronger. And in fact, one likely outcome of this is that maybe the interest rate that they will charge will be lower than either of the two at the moment.

Now, in terms of number of branches, right now between the two of them, of course as you know, the Landbank is the bigger bank, right. It has… Landbank has 752 branches at the moment and the Development Bank of the Philippines has 147 branches. Now, we mapped them and maybe as a result of the merger, only 22 branches of DBP will be retained and that the plan is that Landbank will have a branch in all LGUs in the Philippines, okay. It could be a combination of light branches or big branches, ATMs, etcetera.

Now, ang advantage nito talaga is that we will be able to save a lot of money for the national government. We estimate that the savings will be in the neighborhood of—at least for the first year, around… let me be more precise – five billion.

For the projected operating cost savings due to the merger, [it] could reach at least 5.3 billion per year. So for the next four years, at least 20 billion, okay – and this is even understated because this does not include revenues that can be derived from the sale of redundant assets of DBP’s various properties such as its head office in Makati, a property in BGC, various branch properties, equipment and licenses, and income that can be derived from the proceeds of such sale. Okay.

So, any question on the first topic? None? No question? Let me go to the second topic which is, again, this is another game-changing reform. I said this is more complicated than the first topic because I told the President, “Your predecessors have decided to kick the can down the road; they don’t want to address this…” I usually call this the ‘elephant in the room’ – nobody would like to touch it and they simply ignore it. And this is the military and uniformed personnel pension reform, okay.

So we met with DILG Secretary Benhur Abalos and DND Secretary Galvez. And let me describe to you the present pension system ‘no. The pension system covered by this are those from the Armed Forces of the Philippines, the Bureau of Jail Management and Penology, the Bureau of Fire Protection, the PNP, the Philippine Public Safety College, the Philippine Coast Guard and the Bureau of Corrections.

Now the current pension system is like this ‘no, it’s fully funded by the national government. In other words, it’s appropriated annually in the budget but there’s no contribution from the retirees, okay. That’s a unique kind of pension system. Right now, I think it’s in the neighborhood of around 120 to 130 billion pesos in the 2023 budget.

The MUP pension is automatically indexed to the salary of the personnel of the same rank. In other words if you are a retiree [and] if you are a general getting X amount of money, if the salary of the incumbent is doubled, you get your pension doubled also, okay.

Third, when MUPs or military/uniformed personnel retire, then given one rank higher, okay, granted one rank higher. And so, pension can be received after 20 years of service with no minimum pensionable age. So some of them, they get recruited at the age of 20 so they can already retire at the age 40, okay. And you know how long their lives are, right? Military people, they live longer than us, okay, some at the age of 90, okay. So, they retire at 40 to get their pension up to age 90. Isn’t that ridiculous?

So we want to reform them. And right now, the situation is so bleak, for example, that if you compare the current operating expenditures are maintenance and operating expenditures or maintenance and operating expenditures of the whole AFP and the capital outlays so the money they buy for airplanes, etc., etc., it is actually a much less than the amount of pension that we are allocating for the retirees.

So there will come a time when the current budget will only about a third, one-third, or one-fourth of the money that we’re paying for the pensioners. So we have to really address that issue. It’s not sustainable. I said, if this goes on, there will be a fiscal collapse.

So what are the major recommendations? Again, let me compare, you have three groups of people: The military/uniformed personnel; you have the private sector – the SSS, those who retired under SSS; and those who retired under GSIS, government workers. The average monthly pension – this is monthly – of military personnel is 40,000 pesos, compared that to what of SSS retiree gets – it’s 4,528; and what a GSIS personnel get – 13,600. So that the pension that is received by a military pensioner is nine times higher than the average pension of a pensioner under the Social Security System, and three times higher than the average pension under the Government Service Insurance System.

So we have four proposals: Number one is for the reform to apply to all active personnel and new entrance. So once the new system is adopted, all those who are in active service and the new recruits will have to pay their way; no longer free, okay.

Number two, removal of automatic indexation of pension to the salary of active personnel of single ranks. So let me repeat that: Removal of automatic indexation of pension to the salary of active personnel of single rank.

And third, the military/uniformed personnel will receive their pension starting at 56 years old, or now it’s now adjusted to 57 years old.

And number four, mandatory contributions will be required for active personnel and new entrance similar to the GSIS pensioners.

Okay? So, any questions?

MS. OSEÑA-PAEZ: Okay, Job Manahan/ABS-CBN.

JOB MANAHAN/ABS-CBN: Hello po, sir. Good morning po. Sir, doon sa apat na options na binigay ninyo, saan po raw mas leaning si Secretary Galvez?

DOF SEC. DIOKNO: There’s unanimity that—we talked with them, with Secretary Galvez; we talked to Secretary Benhur Abalos, and they are generally agreed with all the four. Siguro mayroon lang siyang question dito sa number three. Kasi right now, I think ang optional retirement is after serving for 20 years. Gusto niya sana siguro ay gawin na raw after na after 25 years iyong optional retirement. But he will consult with the military personnel on this.

But in general, the whole Cabinet or the whole … those who attended the meeting are in agreement with measures one, two, three and four.

JOB MANAHAN/ABS-CBN: Sir, pahabol lang po, sir. Doon naman sa merger, sino po—clarification lang po: Sino iyong surviving entity, LandBank or DBP po?

DOF SEC. DIOKNO: Definitely LandBank ‘no. Kasi LandBank is, I think, at least four times bigger than DBP, and that the existing board of LandBank will survive.

MS. OSEÑA-PAEZ: Okay. Chona Yu/Inquirer Radyo.

CHONA YU/INQUIRER RADYO: Sir, just a quick follow-up on Job’s question: How about the President, is he inclined to approve your recommendations doon sa military retirement?

DOF SEC. DIOKNO: Yeah, he is part of the decision-making, yeah.

CHONA YU/INQUIRER RADYO: Lahat doon, okay sa kaniya iyon?

DOF SEC. DIOKNO: Okay sa kaniya iyon.

MS. OSEÑA-PAEZ: Eden Santos/NET25.

EDEN SANTOS/NET25: Secretary, good morning po. Regarding po doon sa magiging contribution ng mga active military personnel and iyong mga new entry recruits. Magkano po iyong magiging monthly contribution nila if in case?

DOF SEC. DIOKNO: Usually, ang contribution will depend on their salary, okay. Siguro mayroon siya ditong number eh, magiging gradual iyong ano … hindi naman immediate na katulad ng government workers. So for the first three years, magiging ang contribution nila is five percent of the salary and then, ang contribution ng national government will be 16%. That’s the—and for the next three years, it will be increased to seven percent, so from the five to seven. And then iyong NG share naman will decline to 14 kasi ang ano nito is 21 eh, I think that’s the contribution of government workers. And then, years thereafter, the MUP share will be increased to nine, and then NG share to 12. So gradual iyong ano.

EDEN SANTOS/NET25: Secretary, alam naman po natin na marami na ring mga ganiyang recommendations before, pero ito bang mga ganitong reforms ay kailangan pang dumaan sa Kongreso?

DOF SEC. DIOKNO: Kailangan, kailangan dumaan sa Kongreso. So in-approve ni Presidente ito, and we will push this to Congress. And we are already talking to some people in Congress who will push this.

EDEN SANTOS/NET 25: Iyon po kasi ang nagiging problema before kaya hindi po natutuloy iyong…

DOF SEC. DIOKNO: Minsan nga hindi na nakakarating sa Kongreso, they get—na-stall sa administration pa lang. But the President is recognizing the need for this; talagang ipu-push niya. Okay.

EDEN SANTOS/NET 25: Hindi po kaya maging ano ito, reason para iyong mga military personnel natin, iyong mga sundalo ay ma-demoralize or umalma, mag-aklas?

DOF SEC. DIOKNO: Hindi naman kasi as you know recently noong 2018 ay dinoble iyong suweldo nila ‘di ba, and kaya nga gradual iyong contribution nila from five to seven to nine ‘di ba? And so I think naiintindihan din nila that they have to again, mag-cooperate with the rest of society, otherwise magbu-blowup—magba-balloon talaga iyong deficit natin. Okay.

MS. OSEÑA-PAEZ: Haydee Sampang, FEBC.

HAYDEE SAMPANG/FEBC: Good morning, sir. Doon lang po sa merger ng LandBank at DBP, mayroon po bang mawawalan ng trabaho at may estimate po ba tayo kung ilan ito ay kung mayroon pong package na iu-offer po sa kanila? Thank you, sir.

DOF SEC. DIOKNO: Definitely, may mawawalan kasi there’s a redundancy ‘no and then mari-reduce iyong number of branches but there’s usually a package naman [unclear]. Voluntary and then they can choose to retire…Sine they are government official they can retire under GSIS or we will offer an attractive package for those who will be separated. Okay?

HAYDEE SAMPANG/FEBC: May estimate tayo, sir?

DOF SEC. DIOKNO: Wala pa tayong estimate at the moment.

HAYDEE SAMPANG/FEBC: Okay. Sir, mga kailan po kaya iyong parang full effectivity noong merger?

DOF SEC. DIOKNO: It’s too early to say, but I would think before the end of the year. Okay.

HAYDEE SAMPANG/FEBC: Thank you, sir.

MS. OSEÑA-PAEZ: Mariz Umali-Tima, GMA 7.

MARIZ UMALI-TIMA/GMA 7: Sir, just a follow-up on the merger. Correct me if I’m wrong, this proposal has been approved in the previous administrations but for those administrations it has not been implemented and there are anxieties raised over this merger. So, what made you finally make a President approved this and what are the reasons exactly to be able to or what are your responses to the anxieties that are being raised over this merger?

DOF SEC. DIOKNO: As you know this merger has been approved during the time of PNoy, [former] President [Noynoy] Aquino through the government, GCG ‘no through GCG, it was not implemented; it was taken up during Duterte’s term, it was also not implemented. So, but given what’s happening now globally, we have banks which are now being closed, right? For example Credit Suisse – who would have thought that Credit Suisse will go under? So, there’s really a strong need for solidifying the government bank. We’re not saying that DBP or LandBank have problems, okay. Sinasabi nga noong argument ng DBP, “Why fix if there‘s no problem, hindi naman broken?

We’re not saying that the current system is broken, but as policymakers we have to constantly seek better ways of doing things especially if we want to improve the performance of particular government agency. So iyon lang naman, and this is also consistent with our rightsizing ‘no; that’s the focus also of the President, rightsizing the bureaucracy because if we are able to do that successfully, then we’ll have more money for really essential projects like healthcare, education for our people and infrastructure, so iyon. Okay?

MARIZ UMALI-TIMA/GMA 7: Sir, one last, regarding naman the issue on the pension. Because you mentioned that it still has to go through the Congress and in the past talagang hindi rin talaga umaabot halos sa Kongreso. So, mayroon po ba tayong ibang plano kung sakaling hindi na naman ito ma-approve because you mentioned a while ago na talagang malaki ang ikakalugi na kung hindi ito maipatupad pa?

DOF SEC. DIOKNO: I think President Marcos Jr. is in the best position to push through with this reform. As I mentioned, his predecessors simply kick the can forward, right, without success. Why did I say that? Remember that he’s I think the first president who was elected by a significant majority, right, 60%. Iyong ibang president, they were only elected by 25% because of the number of candidates ‘di ba? So, he really has this very strong support and he’s willing to spend his political capital for this because nakikita niya na kapag hindi niya ginawa ito there will fiscal collapse in the future; secondly, Mr. Marcos also has very strong control of both Houses of Congress – so it’s going to be less problematic for him to push forward such a major reform.

MS. OSEÑA-PAEZ: Harley Valbuena, DZME.

HARLEY VALBUENA/DZME: Hi! Good morning. Sir, the Congress already ratified the bill amending the fixed term of military officers. So, if this bill becomes a law, do you believe, sir, that this will become a hindrance or a factor for the implementation of the military pension reform, if this pushes through, sir?

DOF SEC. DIOKNO: No, absolutely not. That’s separate. That’s a separate issue.


MS. OSEÑA-PAEZ: Okay. Alvin Baltazar, PBS.

ALVIN BALTAZAR/PBS: Secretary, magandang umaga po. Secretary, doon sa mga mawawalan ng trabaho doon sa merging, paano ba iyong magiging proseso doon sa notification para doon sa mga hindi papalarin; at will you go over the records kung sino iyong mga malapit nang mag-retire para at least medyo magaan sa loob nila iyong ano?

DOF SEC. DIOKNO: This as in any merger etc., there are some who will be affected, for example, in any reorganization there are people who will be affected and that’s why we provide a very liberal separation package – so, they are going to use that, they can invest it in new business if they want to or they can live on it; but we are doing this for the greater good. Baka kasi ayaw mo naman na to employ people who are not doing anything, right? And if for example if there are branches that you need to collapse, why not collapse them, right? So, there are efficiency gains to be made and this will benefit the whole country.

ALVIN BALTAZAR/PBS: Secretary, follow-up lang po, sabi ninyo po, i-implement iyon before the end of the year, so kailan po tayo magsisimulang magbigay ng notification?

DOF SEC. DIOKNO: I say that the merger will take effect before the end of the year, so mayroon namang transition period iyan. So, I don’t know when kung kailan sila magbibigay ng notification siguro mga X number of days after the merger is formalized and you will be notified. Okay.

MS. OSEÑA-PAEZ: Okay. I believe that’s the last question or do you still have time for more?
Okay, one more. Chona Yu, Inquirer Radyo.

CHONA YU/INQUIRER RADYO: Sir, in 2016 the president opposed the merger of DBP and LandBank …

DOF SEC. DIOKNO: 2016? Who’s the president at that time?

CHONA YU/INQUIRER RADYO: President Marcos said na opposed siya dito kasi it will deprive farmers sa access sa agricultural bank. Why a sudden change?

DOF SEC. DIOKNO: Magchi-change talaga iyong ano niya kasi sabi ko nga iyong international developments – big banks are folding, etc. plus…no, no he hasn’t changed his mind since he was elected president, I know that he was for this proposal. Okay.

CHONA YU/INQUIRER RADYO: Isa na lang, sir. Sa water crisis, sir, magkano ang budget allotted for El Niño preparations ng government?

DOF SEC. DIOKNO: Siguro si Secretary Pangandaman ang kausapin natin diyan.

MS. OSEÑA-PAEZ: Okay. Thank you so much, Secretary Diokno, for briefing us on the proposed merger of Land Bank of the Philippines and Development Bank of the Philippines as well as the proposed military and uniformed pension reform program. Thank you very much. Have a good afternoon everyone.



SOURCE: News and Information Bureau – Transcription Section