DND

FY2027 DND regular-budget request and NEP allocation: For FY2027, Ejercito compared DND's regular-budget request of PHP 576.922 billion with a PHP 328.78 billion NEP allocation. Earlier, Teodoro presented the NEP regular fund as PHP 324.6 billion, later giving PHP 324.63 billion; Senator Panfilo "Ping" M. Lacson separately put the House version at around PHP 329 billion. The hearing did not reconcile the earlier NEP figure with the later comparison. The presentation gave attached-agency reductions as percentages rather than complete comparable requested and NEP peso totals.

Defense modernization and priorities: Ejercito opened the DND and Armed Forces of the Philippines (AFP) budget deliberations by saying field conditions and soldiers’ experiences should inform Senate decisions. He referred to the committee’s visit that morning to the AFP Southern Luzon Command Headquarters in Lucena City and said Senate support for DND and the AFP should help defend sovereignty, protect territory, and uphold the country’s dignity.

Ejercito recalled support for additional funding for the AFP Modernization Program. He said the combined 2026 allocation for the revised program was ₱90 billion: ₱40 billion in program appropriations and ₱50 billion in unprogrammed appropriations. He asked how much had been released, obligated, and spent; what modernization projects had progressed; which expected equipment and systems had been delivered and put to use; what implementation barriers remained; and which needs should take priority in the FY2027 budget. He reaffirmed support for sustaining AFP modernization within fiscal constraints.

DND proposed budget reduction: Senator Erwin T. Tulfo questioned how the country could protect its sovereignty and territory if the DND budget was cut. He cited an approximately 43.01% reduction, qualifying it as uncertain and without stating the comparison baseline. He asked how defense could meet its responsibilities with a smaller budget and called for strategically allocated, responsibly spent funding in the proposed FY2027 budget.

DND regular-fund allocation and comparison: Teodoro described the FY2027 regular-fund proposal as 10% year-on-year growth against FY2021 as the base. In the direct FY2027-versus-FY2026 comparison, he reported an increase of P18 billion, or 6.13%, concentrated in maintenance and other operating expenses (MOOE).

Department shares, staffing and House budget update: Teodoro said DND proper accounted for 0.49% of the budget and was down 31% from 2021. He reported 268 filled positions against 324 authorized plantilla positions and said a DND reorganization bill was pending in the House.

Lacson then said the House budget version had increased from 324 billion to 329 billion pesos. Teodoro had not received the official House version and said he would seek a copy; Lacson said the Senate had one.

Teodoro put the AFP at about P312-313 billion, or 96% of the budget, and civilian bureaus at 3%.

Automatic appropriations and regular-fund components: Teodoro listed P4.1 billion in automatic personnel appropriations and P132 billion in a special-purpose fund composed of pensions. He said the AFP modernization program was included at P50 billion. After reiterating the FY2026 programmed/unprogrammed split cited in the opening, he described FY2027 as "50-50" without clarifying the two components. He said pensions had increased by 13.15%.

He welcomed the maintenance and other operating expenses increase amid operational tempo and fuel costs, while identifying capital outlay, infrastructure, base access, logistics, munitions and physical petroleum, oil and lubricants stores as major gaps.

NEP reductions across DND and attached agencies: Teodoro reported reductions from submitted amounts of 16% for the Office of the Secretary (OSEC), 23% for the Philippine Army, 24% for the Philippine Air Force, 30% for the Philippine Navy and 82% for General Headquarters (GHQ). GHQ funds the area commands and intelligence, sustainment and strategic commands, so the reduction could constrain operations across those commands.

He also gave reductions of 11% for the Government Arsenal, 6% for the National Defense College of the Philippines (NDCP), 53% for the Office of Civil Defense (OCD), 23% for the Philippine Veterans Affairs Office (PVAO) and 61% for the Veterans Memorial Medical Center (VMMC). He said the VMMC reduction excluded infrastructure funding expected from the Office of the President; VMMC also had trust receipts from the Department of Transportation (DOTr) for the subway. Some 2025 budgets included one-time items. The presentation gave percentage reductions rather than complete requested and NEP peso totals for each attached agency.

AFP modernization funding and unmet requirements: Teodoro cited a P133 billion proposal for revised Horizon 3, then said DND proposed P134 billion while only P50 billion was included. He said Horizon 3 was being recalibrated for increased threats and costs; the P50 billion level had persisted for several years.

Discussing remittances from the Bases Conversion and Development Authority (BCDA), he first said P26 billion, then corrected it to P45 billion over 26 years. He said a minimum of P70 billion was needed for Horizon 3 alone, with Horizon 2 projects still to complete or repurpose; the recalibrated proposal remained to be submitted for presidential approval. He also said the existing P50 billion program would need P20 billion more to cover continuing multi-year obligational authority if all listed projects were contracted. These are separate figures and scopes; the presentation does not reconcile them.

Unfunded infrastructure line items and original request gap: Teodoro said the NEP proposal was P248 billion below DND's original proposal and excluded one-time equipment and capability enhancements. Of 21 submitted line items to complete programs, only three had been approved; he put the unfunded amount at about P87 billion and did not know how much the House version would address. He linked the request to military-use infrastructure needs.

Appropriation execution and acquisition planning: In the financial-accomplishments segment, Teodoro reported 2025 appropriations of 448, allotments of 443, obligations of 414, disbursements of 330, unobligated balances of 29 and unpaid amounts of 83; obligation versus allotment was 93% and payment versus obligation 79%.

For the first semester of 2026, he reported appropriations of 489, allotments of 406, obligations of P191 billion, disbursements of 163, unobligated balances of 214 and unpaid amounts of 28; obligation versus allotment was 47% and disbursement versus obligation about 85%. The unit for most totals and the scope are not restated. Teodoro said he resisted obligating funds for unsuitable or incomplete acquisitions, citing inflation and the need for full sustainment, guaranteed supply chains, interoperability, upgrades and a 30-day munitions reserve.

Foreign borrowing flexibility: Teodoro said a provision allowing foreign loans, grants and other credit facilities for defense had been enacted the prior year, subject to the Secretary of Finance's control and fiscal-space limits, but DND had not used it because of the required mechanism. He asked for the same flexibility to be enacted again, anticipating repeal of the existing US$300 million limit on defense foreign borrowing. He acknowledged the Secretary of Finance's primacy..

Unused appropriations and modernization funding: Lacson asked about unobligated and unreleased appropriations, citing about 32 billion for 2024 and about 31 billion for 2025. Lacson noted that the 2022 amount was no longer available under the two-year continuing-appropriations period and asked why unused appropriations recurred.

Teodoro attributed the amounts to inflation and rising acquisition and material costs, constrained capital outlay, and changing modernization requirements. He cited the ReHorizon 3 revision after requirements were reassessed, procurement ceilings that could no longer meet desired prices, and the policy of fully weaponizing platforms with reserves. He described the reserve level as 30 days of munitions per platform.

In response to Lacson's question about resolving the recurring issue, Teodoro said defense spending needed to increase continuously, with the fiscal effect addressed at the macroeconomic level. He contrasted Singapore spending at least 6% of gross domestic product (GDP) on defense with Philippine core defense spending below 2%, and cited financing as a way to raise resources, while saying repayment remained a problem beyond DND's mandate. He said Japan's official security assistance was US$200 million a year and mentioned United States Foreign Military Financing (FMF) and possible future partners Australia and Canada, while stressing this assistance was not a substitute for domestic funding. He characterized the final funding choice as political and zero-sum.

Foreign and domestic financing terms: Senate President Sherwin "Win" T. Gatchalian asked why the FY2026 special provision for foreign and domestic financing had not been used. He recalled that the provision followed discussion of Philippine Coast Guard (PCG) borrowing for ships and was intended to let the DND consider official development assistance (ODA) or other loans to expand its financing capacity. Teodoro said the DND had not triggered it because fiscal space was tight, proposed financing was too expensive and timing was unfavorable.

Asked about FY2027, Teodoro requested the provision again, saying it would provide flexibility. He said the DND would trigger financing only if the Department of Finance was comfortable with the terms and the DND accepted the item being acquired. Gatchalian said he would propose that the Chair re-include the provision; this was a proposal, not an approval recorded in this exchange.

On alternatives, Teodoro said ordinary defense ODA is not normally available and financing often comes through export-linked special-purpose credit agencies. He said the Philippines had received Japan's official security assistance for the past three years.

FY2026 modernization obligations and unprogrammed funds: Teodoro said the DND did not obligate the full 50 billion modernization amount because it would have produced a payable above 50 billion and about 80 billion that year. Gatchalian then asked whether the separate PHP50 billion FY2026 allocation in unprogrammed funds had been triggered. Teodoro said it had not: the combined programmed and unprogrammed amounts would likely be needed just to meet regular modernization-infrastructure obligations.

Gatchalian restated the funds as available but said timing was unfavorable. Teodoro confirmed that 84% had been obligated and that the 12% trigger would exceed a 50 billion threshold. In the same exchange, he described this year's MICA payable as "about 70," corrected it to "50," then said triggering 12% would make it "about 70." The shorthand payable figures were not reconciled with his earlier projection of about 80 billion.

FY2026 locally funded infrastructure and prior transfer: Gatchalian cited P6.9 billion for locally funded infrastructure in the FY2026 budget and recalled a P5.4 billion transfer from the Department of Public Works and Highways (DPWH) to DND the prior year. He said the transfer addressed projects whose end users lacked information or coordination and asked whether it had made project completion more efficient. Teodoro said it had helped completion, but identified the underlying problem as the absence of an AFP infrastructure plan and insufficiently funded capital outlay. Units had made separate requests for local needs; he said DND was moving toward a disciplined, standards-based infrastructure program with planned locations and projects, supported by land titling and better execution. He also identified unresolved AFP-police joint-camp arrangements and cramped facilities in Lucena as planning and execution problems.

FY2027 DPWH amounts, coordination and written recommendation: Gatchalian said the FY2027 DPWH budget still contained P494 million related to DND or the AFP, of which P452 million was for a presidential-security barracks item in Manila. He asked whether DND would recommend repeating the prior-year transfer approach to improve coordination between the implementer and end user. Teodoro said defense infrastructure costings would be higher because projects required hardening and security, and that funding should be downloaded to DND so it could account for it properly. He offered to provide the Committee a written recommendation, including on existing projects. Gatchalian later said he would wait for the official communication and the latest update on the P6.9 billion item. The committee awaited that recommendation.

Unfunded priorities and confidential submission: Ejercito asked which three critical unfunded needs the Senate should prioritize and how readiness would be affected if they were not addressed in FY2027. Teodoro said DND had submitted its priorities to the House and would provide the committee a list without publicly detailing operational needs.

AFP modernization funding and priorities: Ejercito contrasted the amount included for next year with the minimum modernization requirement discussed earlier and asked Teodoro to confirm that target. Teodoro answered yes, explaining that the minimum would provide room to trigger needed commitments and meet repayments without putting the country in difficulty.

Ejercito asked whether a proposed foreign and domestic financing agreement would help pursue programs that limited funding had put out of reach. Teodoro said it would give the department flexibility to obtain funds when needed, but there was no one-to-one correlation. He said domestic financing was included despite purchases usually being dollar-denominated because domestic banks had liquidity and appetite for defense loans, subject to repayment terms that would not harm the balance of payments or revenue.

BCDA remittances and defense funding: Lacson asked about the BCDA's remittance shortfall to DND. Teodoro said DND could not estimate it because BCDA would not disclose the documents. He cited PHP 45 billion remitted to the AFP over 26 years, describing the amount as small relative to the AFP's pension needs. He said subsidiary corporations were developing their own budgets instead of referring them to DND. Lacson said the committee would call BCDA to account during its budget deliberations.

Teodoro said DND needed suitable operating areas for its operations and logistics exercises. He opposed the proposed extension of BCDA's life under a bill that would give it title to properties and allow their sale. He argued that the AFP was already dissatisfied with the outcome while BCDA acted as trustee, and that selling the land would remove control over irreplaceable strategic assets.

AFP repairs and maintenance: Ejercito noted that the AFP repairs-and-maintenance budget had risen to PHP 7.2 billion and asked what measurable readiness gains would follow. Teodoro said the department had entered performance-based logistics arrangements with platform manufacturers, who would assume supply-chain responsibilities, with local labor and future maintenance, repair, and overhaul work. He said reliability and maintenance quality were improving and that the arrangements addressed previous maintenance gaps.

Naval transfer, maintenance, and basing: Ejercito asked whether training, maintenance, and operating costs for a possible transfer of Japanese destroyers were included in DND's budget. Teodoro said training was included, but the transfer agreement was not firm when the budget was prepared, so the additional maintenance and operating costs were not included and DND would pursue them. He said an inspection was planned for the end of November and DND hoped to finalize the transfer. Teodoro also said the Navy needed a new dockyard and strategic bases because the Sangley facility was too shallow and small for its platforms.

Ejercito asked about the cost of using the temporary former Hanjin base, phrasing it as about PHP 1 billion a year, and whether there were other plans. Teodoro did not confirm that amount. He said the President had declared Subic areas outside Hanjin, Chiquita, and Grande Island a naval reservation, and that DND was waiting for initial funding. He said Hanjin was willing to take over the space for additional production, including a co-produced Navy logistics ship, and said he had requested that the Philippine government hold 50% of the rights so it could receive dividends from foreign sales. Negotiations with the area's operator remained necessary.

Off-budget receipts and expense matching: Lacson cited projected FY2027 off-budget revenue of about PHP2.5 billion against about PHP2.9 billion in expenditures and asked for the revenue sources. Teodoro said these were trust receipts from land use, golf-course fees and concession fees, normally used for infrastructure where the receipts are generated.

Lacson described a PHP401 million gap between revenues and maintenance and asked whether the facilities were operating at a loss. Teodoro first said he would check, then clarified that the trust account also pays variable liabilities such as electricity; he described it as a matching exercise and said the department should not lose money if the treasury matched receipts and costs properly. Lacson called operating at a loss a false economy. They discussed raising fees as electricity rates increase; Teodoro said that would be difficult and expected complaints, and later said retired personnel deserved to complain because they had served.

Teodoro said base-tourism plans, including golf-course tourism, had been stopped because of base-security concerns. He said operations needed to be scaled appropriately toward a sustainable, at least zero-outflow match.

Philippine Army request and NEP gap: Lacson said the Philippine Army's FY2027 proposal was PHP46 billion above the amount adopted in the NEP. He said the House had restored only "190 plus" and asked which Army programs, activities and projects (PAPs) had been sacrificed. The unit does not state the unit for "190 plus"; no specific sacrificed program is identified in this exchange.

Government Arsenal NEP reduction and House additions: Lacson said the Government Arsenal's FY2027 request was reduced by PHP278 million in the NEP. He contrasted that with House additions of PHP285 million for a water-supply project and PHP60 million for a metallic-link machine, which he described as PHP345 million in total. Asked how water supported production, Government Arsenal Director Florante M. Amano said it was needed to process metallic products. He said a separate water source would add one million gallons of capacity. Amano said water scarcity was not the reason production fell short of target.

Arsenal infrastructure and additional production line: Teodoro said the Government Arsenal's electrical system remained unfunded; its transformers dated to 1960 and had been donated by the Japanese government. He also described a fire in primary production and the absence of an emergency hospital inside the facility, which he said was needed under labor regulations. He said the site needed infrastructure development, but could not simply be privatized because the Arsenal had to retain capacity for reserves.

Teodoro said the additional line Lacson had raised was included in FMF for 7.62 mm ammunition and links, including an upgraded link for reloading new helicopter miniguns with a high expenditure rate.

House provision and notice to Congress: Lacson said he thought the House had already included the requested financing Special Provision No. 2 in the General Appropriations Bill. He asked Teodoro to notify Congress before making a commitment and to monitor contingent liabilities.

Locally developed drones and funding support: Ejercito asked about Army drone development after visiting Camp Capinpin, where he saw drones being locally manufactured. He said the work was worth supporting and asked Teodoro to explain what he could disclose.

Teodoro said Philippine developers could handle concept development, but scaling production was difficult: some assembled parts came from unreliable countries, and precision processing, tolerances and raw-material supply chains were constraints. He said the GHQ was developing multi-level, multi-unit operational doctrines for unmanned systems. Uses differed among services, but more lethal systems required GHQ accountability and stronger command and control as deployment expanded.

Ejercito again urged support. Teodoro said DND was implementing drone development on a scalable basis.

Calamity Fund and regional logistics: In discussing the FY2027 budget and the expected El Nino, Ejercito asked whether removing PHP 9.4 billion from the Calamity Fund allocated to DND would affect preparedness. Teodoro said it would not affect DND's coordinating role because he favored downloading the fund to line agencies while DND coordinated response. He said DND still needed funding for integrated logistics centers serving the Department of Social Welfare and Development (DSWD) and Department of Health (DOH), and for ideal logistics locations on military bases to support air and sea transport.

Teodoro said DSWD's two repacking areas in Region III had flooded, so he offered an area at Fort Magsaysay beside the runway. For augmentation in the Visayas and Mindanao, he said existing agency supplies could be supplemented to fill gaps; he said response had previously originated in Metro Manila, which was not logistically ideal. He also identified the OCD as a potential beneficiary of funding for logistics locations.

DND budget submitted for plenary consideration: With the consent of Gatchalian and Lacson, Ejercito said the DND budget was submitted for plenary consideration, subject to discussion and possible budgetary adjustments. Ejercito thanked the participants and suspended the briefing.

Defense priorities and force posture: Teodoro described the DND and AFP as focused on deterring aggression in the West Philippine Sea and other areas, sustaining internal-security gains, and improving presence and logistics across the country's 7,600 islands.

The Army was assessing operational areas and strategic basing; the Philippine Navy needed platforms, dockyards and berthing facilities; the Philippine Air Force needed to sustain and upgrade systems; and the Philippine Marine Corps was assessing force structure, equipment, mobility and deployability. Teodoro linked territorial defense with internal security and cooperation with civilian law-enforcement agencies. He said cyber resilience depended on secure foundational information technology and critical infrastructure, because one compromise could spread across systems; resilience would be incorporated into new infrastructure.

Operational tempo, infrastructure and readiness: Teodoro said operational tempo exceeded 100% of design across internal security, humanitarian assistance and disaster response (HADR), joint exercises and retraining. The approximately 80:20 operating-to-support personnel ratio was unsustainable and limited rest and retraining. He identified insufficient infrastructure on the eastern seaboard, Palawan, Mindoro and northern Luzon; bases need hubs, durable roads and bridges able to carry military platforms, secure facilities and physical fuel and munitions reserves.

Disaster response and evacuation-center planning: Teodoro said the OCD was concentrating on rapid coordinated disaster response while leaving resilience work to other agencies. He argued readiness should assess coordination and leadership rather than a "more than compliant" standard, and first-responder training should be clustered because multiple municipalities may be affected at once. On the Ligtas Pinoy Act, he said an initial list of evacuation-center areas was approved but suitable locations and capacity remained a challenge, including sites outside town boundaries. He cited ashfall affecting several municipalities in Negros and a six-kilometer exclusion zone in Bicol; DND would report results to Congress for possible refinements.

Veterans' health access, VMMC rebuilding and hospice care: Teodoro said PVAO achieved all regular-pension payment targets, while veterans' affairs management reached 57% because bona fide veterans and dependents were difficult to identify. He said the United States gave the VMMC a grant related to tuberculosis among veterans and described an approximate tracking gap of 2,000. PVAO was to expand field identification and health tracking and work with VMMC on hospices for veterans needing geriatric or social care.

Teodoro said the aging VMMC design was associated with infection risks and the President had approved phase one of rebuilding: an annex to receive patients during major reconstruction, with outpatient services near a subway exit. The longer-term aim was a specialized hospital for cases that outreach clinics or the AFP Medical Center could not handle. He described 9,000 patients treated as only 6% of veterans reached under the Manila-centered model. Three Valor Clinics were operating; staffing constrained expansion. Hospices and social homes would provide geriatric care and social contact for veterans otherwise remaining in hospital without acute medical need.

Government Arsenal production and technology transfer: Teodoro said the Government Arsenal should shift from functioning mainly as a small-arms ammunition factory toward higher-technology munitions and indirect-fire weapons. Government-to-government technology transfer with like-minded partners would support that work.

Defense partnerships: Teodoro thanked the Senate for ratifying the visiting-forces agreement with France and said two more agreements with partners were under negotiation.

Program targets and reported accomplishments: Teodoro reported that the DND Office of the Secretary (OSEC) achieved 100% of its physical targets, and that the President and Cabinet accepted 80% of OSEC policies and strategies. He cautioned that 100% force-employer targets for the Philippine Air Force and Navy could signal capacity limits. The Joint Force Planning Program completed 234 plans in the prior year and 117 in the current-year first half; the operations program completed 159 of 182 plans, with calamities diverting resources to HADR. DND reported 54% of current-year operational targets complete by midyear and expected 100% by year-end; about 5,900 security activities in the prior year and 3,000 in the current year; 11,000 patients treated against a 12,000 target in 2025, with the 2026 target lowered to 10,000; and six of ten signed AFP modernization projects completed in the current year. The Government Arsenal reached 63% of its prior-year target amid shortages of propellants and components and set a 98% target for this year.

Teodoro also described NDCP curriculum reform for multidimensional security, inclusion of enlisted personnel in the national-security graduate program, faculty development and a push for peer-reviewed research.

Sovereignty and national interest: Ejercito urged a firm response when the Philippine flag or citizens are pressured in the country's own waters. He called for national interest and the shared commitment to security, sovereignty, and the Filipino people to guide the deliberations above politics.

Diplomatic protest and sovereignty: Ejercito asked how the DND would respond to a Chinese ambassador's public statement conveying a threat to use force. He cited the Department of Foreign Affairs' summons of the ambassador on October 19 over an October 15 statement and asked about the DND's treatment of such remarks. He clarified that his criticism was directed at the expansionist stance of Xi Jinping's government, not the Chinese people. He recalled that he and Teodoro had studied at Xavier School and valued their Chinese classmates.

Teodoro said the DND refuted the ambassador's allegations that the Philippines was provoking events and reaffirmed its support for the United Nations Convention on the Law of the Sea (UNCLOS) and the UN Charter. He said the DND had objected to repeated statements threatening force or saying China would prevail, including a remark about cutting military communications, and characterized them as threats. The ambassador had been summoned by the DFA; Teodoro said they would await further public direction from the President or DFA. He also objected to what he called false narratives about the nine-dash line, jurisdiction and Batanes, including claims of a right to operate in surrounding waters, and said the DND opposed and sought to deter such conduct.

Ejercito said the Philippines believed in diplomacy, good relations with neighbors and mutual respect, while calling the ambassador's actions and words threatening, hostile and undiplomatic. He supported Teodoro's firm position on protecting Philippine sovereignty and territorial integrity.

Japan platform and security cooperation: In a separate discussion, Ejercito raised the possibility of Japan supplying F-2 fighter aircraft as an alternative to more expensive multirole fighters and said he had discussed the idea with Japan's defense minister. Teodoro said DND was exploring the F-2, but it involved a US-licensed platform and would require tripartite negotiations, enabling legislation, and other agreements before the Philippines could receive the equipment. He described Japan and other partners as favored sources of advanced equipment in the pipeline.

Propaganda allegations and party activity: Ejercito described backlash after raising the West Philippine Sea with the Chinese ambassador, saying he received 500 comments within seven minutes. He asked whether Chinese propaganda activity was intended to create division among Filipinos.

Teodoro answered that it was, and characterized United Front Work as party activity rather than state activity. He distinguished the People's Liberation Army (PLA) from the state armed forces, describing the PLA as an arm of the Communist Party of China. He further characterized propaganda and political actions as directed by party leadership and described regime-legitimacy support operations as part of China's foreign policy. He argued that the Philippines needed to contest unsupported territorial narratives to prevent silence from being treated as acceptance.

Commendation for defending the Philippine position: Ejercito commended Teodoro for standing up to a question he characterized as planted. Lacson attributed troll attacks to Teodoro's defense of the Philippines in international forums and seconded the commendation. Teodoro thanked Lacson, recalling him as one of his advisers during bar review.

Respect for Chinese people and defense of Philippine sovereignty: Ejercito clarified that the committee was not attacking Chinese people or ordinary citizens. He cited shared school and personal friendships and said Filipinos could respect Chinese people without overlooking their government's actions in the West Philippine Sea, including toward Philippine territory, fishers, the Coast Guard and the Navy.

Ejercito said the Philippines stood for mutual respect while firmly defending its sovereignty and the dignity of its people, and reiterated support for the DND and the AFP in carrying out their mandate.

Modernization, cyber readiness and disaster response: Gatchalian said changing geopolitical conditions and conflicts abroad made preparedness and continued AFP modernization important. He pointed to cyber warfare and the need for equipment to prepare for such conflicts. He also emphasized the AFP's disaster-response role and the need for multi-role capacity during typhoons and other major calamities. He supported additional AFP capacity and sustained support until the force reached the capability the country sought. Ejercito thanked him for his support the previous year and described that year's AFP modernization budget as probably the biggest ever.

Procurement costs and defense-industrial capacity: Teodoro said defense equipment and its inputs, including critical minerals, semiconductors, electronics, steel and copper, were becoming more expensive as demand rose. He distinguished ammunition from modernization, noting that 105 mm and 155 mm rounds were being sourced on secondary markets when countries had stocks to sell. He attributed equipment shortages to limited production lines after defense manufacturing had contracted, especially in Europe. He said Germany had a modernization amount of 500 billion euro, qualifying the figure with "if I'm not mistaken," but had not spent it because it lacked production capacity. He described Korea as a remaining producer with industrial capacity and said the Philippines had a strategic partnership and joint development with it. He also described ASEAN countries expanding their capabilities and Singapore as a long-standing exception with sustained defense investment.

Strategic resilience and deterrence: Gatchalian observed that countries were stocking up and modernizing while the Philippines had limited resources and was affected by global conflicts. He asked whether global defense priorities were shifting as volatility increased in the region and elsewhere. Teodoro said countries needed long-term resilience and enough basic capability to deter threats rather than rely entirely on outside help that might be delayed. He argued that a more robust defense posture deters aggression and conflict; Gatchalian summarized the idea as "peace through strength," which Teodoro endorsed.

Visiting-forces agreements and alliance pipeline: Gatchalian noted Senate approval of visiting-forces agreements with New Zealand, France and Canada and asked whether more arrangements were expected. Teodoro initially said two were in the pipeline. He later described negotiations with the United Kingdom and Germany and a third country whose identity he would not disclose while talks continued; in a count exchange, he described the total as five plus three, eight. Gatchalian said such arrangements could strengthen training and interoperability even where modernization resources were limited.

Joint exercises, interoperability and deployment scale: Teodoro described Philippine Army participation in an Australian exercise, the Philippine Navy joining the U.S.-led RIMPAC exercise with the Philippine Coast Guard for the first time, and the Philippine Air Force joining Exercise Pitch Black in Australia. After upgrades to the FA-50, the Air Force interoperated with 21 countries and led a strike package; DND had graduated and certified its first battle managers to coordinate international air operations from the ground. Teodoro said continued exercises build proficiency and test logistics; the Philippines deployed about 200 personnel to Australia.

He contrasted this scale with a U.S. Marine expeditionary unit, whose pre-deployment for an exercise in the Philippines he estimated at almost US$1 billion. He said the Philippines could not approximate that deployment and instead needed to scope an appropriate fit with partners.

Public messaging on the West Philippine Sea: Gatchalian praised Teodoro's remarks at international defense forums as clear, sober, and respectful. Teodoro credited the President's guidance and the collective support of the DND and AFP, saying their agencies were cohesive in their position on the West Philippine Sea. Ejercito also commended Teodoro for standing up for Philippine sovereignty before criticizing Filipinos who defended China's position.

Defense priorities and public responsibilities: Tulfo said national defense should protect sovereignty and territorial integrity and ensure public safety. He argued that allocations should improve defense posture, operational readiness, and the ability to respond to traditional and emerging security challenges. He contrasted reduced internal threats with increasing external threats. He also included commitments to soldiers and their families, communities affected by conflict and disasters, and a peaceful, secure, resilient Philippines.

Deterrence and public reassurance: Tulfo asked what the AFP was preparing to protect Philippine territory, service members, and the public amid tension in the West Philippine Sea and statements by China's ambassador. He said past warnings had left people afraid that standing up to China would lead to invasion or bombing, and asked how the government could counter that fear.

Teodoro said the Philippines was working with allies to deter further aggressive military action and argued for collective deterrence. He said territorial-defense accomplishment was at 100%, but that level was not sustainable without reserve capacity; he said actions were calibrated to remain sustainable. Tulfo then asked whether officials who blamed the Philippines and groups spreading that message could embolden China. Teodoro said internal dissension could be a reason an adversary gains confidence, describing it as a way to weaken or co-opt a society, and criticized defending statements he considered unreasonable.

Spending disparity and resilience: In a separate interjection, Lacson said China's defense expenditure was 52 times the Philippines' and stated it as US$335 billion, or roughly PHP 2.1 trillion. He asked how the country could compensate for the disparity and improvise. The spoken peso conversion was not reconciled with the US-dollar figure.

Answering Lacson's question about compensating for the capability disparity, Teodoro said the Philippines should become a less inviting target by building resilience across its land and maritime domains. He described land as 20% of the country's territory, then gave a 20-to-30% range, and contrasted it with an 80% maritime domain; he said maritime development was needed for land resilience. He said the reported Chinese figure understated spending because some resources went to the maritime militia and Coast Guard, and offered to discuss options in executive session.

Lacson said the Philippines could not match China's warships and missiles and urged a less costly but effective program inspired by Ukraine, alongside alliances rather than reliance on allies alone. Teodoro said such a program was already under way and that the department was refocusing on higher capabilities informed by Ukraine. He said the strategy was deterrence rather than retaliation: the Philippines would not match China pound for pound but would seek to make the decision to act as unfavorable as possible.

Defense-industry investment and drone use: Returning to his round, Tulfo asked whether the Secretary had spoken with diplomats whose countries were interested in investing in defense production. Tulfo said Ukraine was willing to establish a factory and maintenance capability in Cavite to support drones, and that other European countries were interested in investing if the Philippines bought their equipment. Teodoro said several engagements were under way, some at final scoping, with secure access, location, and supply chains as priorities.

Tulfo asked whether donated drones from the United States and other countries were being used. Teodoro said drones were used tactically, while some older purchased systems did not fit the newer command-and-control and secure-communications structures. As operations shifted from tactical to strategic needs, he said interoperability and more multipurpose drones were needed, along with quality raw materials and precision tooling. He cited South Korea's modernization beginning in 1976 and said its defense industry grew from an existing base of basic industry. He warned that without stronger domestic industry, including raw materials and power, the Philippines would remain an assembly location reliant on imports.

Procurement delivery documentation: Lacson asked the Commission on Audit (COA) about major procurement issues, recalling an item reported for years as still in transit and not delivered to the end user. COA Supervising Auditor Norina Rose L. Yao said the issue concerned documentation and retrieval of records rather than a question about actual delivery, and that coordination was ongoing. Lacson asked whether there were other specific concerns, but no additional specific finding was identified in this exchange.

Foreign interference and security investigations: Lacson asked what substantiated information existed about malign foreign interference and how authorities could respond. Teodoro said DND could act when a predicate crime had been committed or was being committed; he cited economic sabotage, money laundering, human trafficking, environmental violations, and false citizenship, while saying evidence linking influence to its sources was difficult to substantiate.

On a disrupted Philippine offshore gaming operator (POGO) operation, Teodoro said the hub had been closed and about a hundred people were in Bureau of Immigration custody awaiting deportation proceedings; he described deportation as effective for those who were not principals. Lacson asked about surveillance arrests near Camp Aguinaldo and the Commission on Elections (COMELEC), and pressed for coordination with Armed Forces intelligence. Teodoro said the connection to espionage had not been validated, said exploiting devices could require a data warrant, and promised to check the status of the arrests and equipment. He said he would investigate Lacson's concerns about people suspected of foreign-agent activity and report back. Lacson also raised late birth registrations; Teodoro said he was unsure of the number and agreed to look into the matter and report.

Internal and external force allocation: Teodoro said internal operations still required sustained presence to preserve gains, including during Bangsamoro elections and humanitarian assistance and disaster response. He estimated the Army's internal-to-external allocation at about 70-30, with 70 percent still internal; for the Air Force and Navy he gave a 50-50 split.

Arsenal output and production roadmap: Amano said the Government Arsenal produced only small-arms ammunition. Lacson cited 38.37 million rounds against a 60 million-round 2025 target and 870,000 rounds in the first semester. Amano attributed the shortfall to raw-material availability, propellants and chemicals for primer production, not to water. Teodoro described a roadmap to work with allies to increase technological capacity, initially for indirect fire and hybrid weaponry with a technical advantage. He said the Arsenal's role and residual capacity remained important for reserves.