APO Production Unit, Inc. (APO), classified as a government instrumentality with corporate powers (GICP) or a government corporate entity (GCP), is one of only three recognized government printers mandated to undertake the printing of accountable forms and sensitive printing requirements of the government. The two others are the National Printing Office (NPO) and the security printing plant of the Bangko Sentral ng Pilipinas (BSP).
The APO Production Unit traces its beginnings to the Asian Productivity Organization (APO), which was organized in Tokyo, Japan in 1961 by a number of Asian governments, to promote economic development through mutual cooperation in the dissemination of modern productivity ideas and techniques.
In 1967, the regional intergovernmental organization established the APO Information Unit, which was replaced in 1971 by the APO Production Unit, created through a memorandum of agreement between APO and the Government of the Philippines and set up in Manila.
The APO Production Unit served as the printing arm of the APO member countries until 1974, when then President Ferdinand Marcos authorized its continued operation as “a self sustaining unit” under the control of the National Economic and Development Authority (NEDA), and to solicit and accept printing jobs from government agencies and government owned and controlled corporations (GOCCs).
Since then, APO was put under the control of various agencies, beginning in 1996 when the Asset Privatization Trust took over in an attempt to transfer its management to the private sector. This was subsequently followed by its transfer to the Office of the Press Secretary (OPS) in 2000; then to the Philippine Information Agency (PIA) in 2004; then back to the OPS in 2006; then back again to the PIA in 2010; and finally back to the OPS (currently known as the Presidential Communications Operations Office) in 2010, where it remains to this day.
When the present Board took office in November 2010, APO was seriously short of operating funds. Cash flow was thin and payables were piling up. It was met not only by a well-entrenched workforce that was at odds with management, but also by external interest groups that wanted to maintain the status quo in the subcontracting of printing of accountable forms.
APO’s Board and management were sued to stop APO from its operations and subjected to a smear campaign to tarnish APO’s reputation. As a result, APO was left with very limited printing contracts (only the National Budget [GAA] and the National Census Reports).
With limited revenue sources and high operating costs (due to high labor costs and obsolete printing machineries), APO was cash strapped and was hanging by a thread.
To avert a shutdown in operations, the Board authorized management to make arrangements for short-term bank loans to bridge the gap between collections and to finance raw materials for on-going printing jobs.
The Board streamlined and computerized operations, while prioritizing the upgrading of work force skills to attain competitiveness with the printing industry.
In order to meet the urgent need for capital projects in the face of financing shortage, the Board approved lease agreements by which the APO was able to immediately acquire new equipment that were eventually paid for with revenue from printing projects.
APO gained the trust and confidence of a growing number of government agencies that have security printing requirements, such as, among others: the Bureau of Internal Revenue (BIR), Department of Foreign Affairs (DFA), Social Security System (SSS), and the Department of Trade and Industry (DTI).
In 2011, its first year of operations under the current management, the company posted a pro-forma net income of P20.7 million – the first profit earned in 11 years. Starting in 2013, APO has also started remitting on a staggered basis to the National Treasury 50% of its net income.
In 2012, the APO Board of Trustees initiated the regular auditing of its expenditures by requesting the Commission on Audit to install a permanent resident auditor.
To date, APO has settled almost all of its long standing accounts payable that go back to previous management like:
- the settlement of 2008 BIR tax deficiencies amounting to P48 million;
- the payment of SSS, Philhealth and HDMF contributions amounting to P2.6 million;
- payment of unsettled city government permits dating back to the 1970s, of P17 million;
- payment of long overdue supplier trade payables amounting to P18 million.
A New Era for APO
In July 2014, APO started operations of a 3-hectare security printing facility at the LIMA Technology Center located between Lipa City and Malvar (hence LIMA), in Batangas.
Today, the APO-Lima Security Plant produces excise stamps for the BIR, as well as supervises the use of Internal Revenue Stamp Information System (IRSIS), a security software that tracks and traces tobacco products.
In 2013 and 2014, the GCG gave outstanding ratings to the APO board of trustees for full compliance with “fit and right” corporate governance standards that manifest commitment to the principles of transparency and accountability.
APO as Printer of ‘Sin Tax’ Stamps
Two major institutional reforms paved the way for APO’s role as a printer of revenue stamps. First, the adoption by the Philippine Senate in 2009 of the Framework Convention on Tobacco Control (FCTC), a World Health Organization treaty that identifies the elimination of illicit trade in tobacco products as a key element of global tobacco control. And second, the enactment of a Sin Tax law that earmarked funds for the Universal Health Care Program.
Previously, the Bureau of Internal Revenue (BIR) did not have a system for determining the actual quantity of cigarettes manufactured and sold by the tobacco companies. The FCTC treaty adopted by the Senate required the development of a “practical tracking and tracing regime that would further secure the (tobacco) distribution system and assist in the investigation of illicit trade.”
Hence, the BIR began implementing a new system whereby it assumed full control and supervision over the production and issuance of excise stamps – with the aid of the Internal Revenue Stamp Information System (IRSIS), a security software that tracks and traces tobacco products – and tapped APO to serve as authorized printer of such stamps.
Previously, tobacco manufacturers were allowed to produce their own stamps without any system to track production and trace distribution. With APO serving as the sole official printer, the BIR is able to ensure that all taxes due to tobacco products are accurately and fully paid.
The system follows the FCTC standards on (1) the use of the evolving coding technology including barcodes, radio frequency identification (RFID), invisible ink, physical fingerprints, and code verification system; and (2) the specific coding technology in the tobacco sector that enables government to immediately verify if the product is genuine or not, the use of digital stamps to improve tax collection efficiency, and a tracking and tracing system to monitor the movement of tobacco products particularly when these were diverted to illegal channels.
The passage of the Sin Tax Law (Republic Act 10351) in December 2012 resulted in a significant increase in government revenues, which in turn provided the needed funds for various components of the Universal Health Care Program of the Aquino administration. The incremental increase in sin tax collection in 2014 reached P50.18 billion, significantly higher than the P42.86 billion projected for that year. The implementation of the tax stamp system is expected to drive the sin tax collections even higher than the projected amount of P50.63 billion in 2015.
One of the benefits of the more efficient collection of sin taxes has been the increase in the number of PhilHealth members as well as payments made to claimants. As of December 31, 2014, PhilHealth’s coverage of members and beneficiaries reached 86,224,256, a 12% increase from the 76.9 million members and beneficiaries for 2013. At the start of the Aquino administration in 2010, PhilHealth had only 69.98 million members and beneficiaries.
With the passage of the Kasambahay Law, Senior Citizens Act, and the utilization of the National Household Targeting System, PhilHealth hastened the implementation of the Universal Health Care goal of the Aquino administration. Kasambahays, indigents, sponsored members, and senior citizens comprise the 50.28 million subsidized members and beneficiaries or 58.32% of the total members and beneficiaries of PhilHealth.
APO as ePassport Printer
In keeping with internationally adopted protocols on travel between countries and in accordance with the Philippine Passport Law, the Philippines is obliged to issue either machine readable passports or electronic passports (e-Passports), with the latter preferred due to the superior security it offers.
In 2010, the DFA started issuing e-Passports through the BSP, which had awarded the passport printing project to French firm Oberthur Technologies (OT).
In 2015, the BSP turned over to the DFA control of the entire passport enrolment process. Prior to the turnover, however, the DFA had taken note of red flags and major operational issues concerning the BSP-Oberthur contract, as follows:
- Interoperability issues – The current system means the DFA has no choice but to use software from OT. The global trend, however, is to use the “open standard’ system. As is, the DFA cannot shift to other suppliers without the cooperation of OT. For obvious reasons, this is deemed unacceptable.
- Viability of hardware, software of current system – The equipment used by OT had been breaking down with increasing frequency, due to regular wear and tear. These equipment are not easily replaced and are at their end of their life cycles.
- Process flow issues – The DFA was using a disjointed system with many manual processes that are vulnerable to errors, omissions and inefficiencies.
It should be pointed out that APO has been servicing other various printing needs of the DFA since 2013. It has also been providing technical support for the Document Management System of the Authentication Department under the DFA’s Office for Consular Affairs.
In February 2014, the DFA was already experiencing major delays in delivering passports to applicants as a result of a deteriorating system, and thus decided to develop a new e-Passport.
The DFA decided to seek the assistance of Recognized Government Printers (RGP) to outsource the passport booklet production and personalization of the passport with increased security features. Thus, pursuant to the requirements of the General Appropriations Act and the procedure in Government Procurement Policy Board, the DFA resorted to an Agency-to-Agency agreement for the printing of the new e-Passport and delivery of a new e-Passport system.
The production of a new e-Passport with upgraded security features can only be achieved using machines and software that are built by a few select specialist manufacturers whose operations are monitored by international police organizations.
Producing a secure e-Passport
There are three major processes in producing a secure e-Passport:
- Enrollment – The process by which the biographical and biometric information of the passport holder are captured, verified and coded into a database.
- Personalization – The printing of the passport holder’s information on the passport data page, application of security features that protect the data page and encoding data on the RFID chip on the booklet.
- Booklet Printing – The printing of the booklet visa pages, the assembly of the eCover containing the chip and secure booklet binding using security threads completes the production of a blank e-Passport booklet.
The integration of all these processes under one roof greatly enhances security of production, hence, the passport itself. Under the present system, eCovers are assembled in Europe, booklet printing is done by the BSP, and Personalization is undertaken by the DFA. This makes inventories difficult to track and production planning is uncoordinated, resulting in repeated delays in delivery.
Meantime, in order to address the continuous demand for the issuance of passports, the DFA entered into a Memorandum of Agreement with APO in January this year for the maintenance and repair of the Old System, which was handled by OT.
There is a growing number of Filipinos traveling abroad for business or for pleasure, as well as overseas Filipino workers. The DFA cannot afford a break in the supply of passports, whether locally or in its embassies and consular offices abroad.
Security and integrity will not be an issue as these can be secured at all times when everything is under government control, which cannot be said if a foreign supplier were to print Philippine passports. Providing passports is too sensitive a task to be outsourced, especially when it can be done locally.
The APO Production Unit stands ready to print the new Philippine ePassport at the present time. It has a secure facility that can house the entire production process and hold enough inventory to avert any shortages due to raw material supply or finished booklets. It has disaster recovery sites that protect the data and software in case an untoward event stops production at the plant. It has partnered with the world’s top passport machine manufacturers, embracing a collective experience in high security printing to ensure a state-of-the-art facility that will remain globally competitive for many years to come.
In the just concluded Security Document World (SDW) conference held in London, UK, last June 9, 2015, APO was accorded the honor to present at the Opening Plenary Session a joint paper entitled “Sustainable Citizen Management Solutions: Getting Identity Infrastructure Right.” More than 1,750 attendees from 65+ countries representing national governments, manufacturers and top industry experts attend this annual event, which is proof of the global recognition that APO has received in the world of security printing.
The DFA is fully aware of the latest International Civil Aviation Organization (ICAO) guidelines and the needs of our Filipino travelers and has imparted to APO what it envisions to be the specifications for a new ePassport. APO for its part has built a secure facility and is ready to provide the machinery and systems needed to deliver a steady and reliable supply of this most important identification document.
In 2013 and 2014, the GCG gave outstanding ratings to the APO Board of Trustees for full compliance with “fit and right” corporate governance standards that manifest commitment to the principles of transparency and accountability.
Today, APO is responsible for two security plant operations: one in Lima and the other in Quezon City. The Quezon City Offices and Plant were situated in the NHA-owned property along EDSA. Due to the unexpected property sale to SMDC, the APO Quezon City office and plant operations transferred to its new home in the PIA Office Bldg in an unexpected and unbudgeted move. Secretary Coloma helped provide the new office and plant site.
The SGS conducted an ISO audit in the Lima Plant in Batangas. On December 11, 2015 the SGS submitted their recommendation for the issuance of an ISO 9001-2008 certification of the Lima Plant operations.