Butch Abad

What Mar Roxas, et al can learn from Jojo Binay

He must get under their skin. A lot. By them I mean the good governance (GG) club comprised of Mar Roxas, the Liberal Party (LP) headed by Senate President Frank Drilon and Budget Secretary Butch Abad, civil society and Big Business. As to why, after four years under an honest leader like President Noynoy Aquino (PNoy), who has been pushing for institutional reforms in the bureaucracy with some modest gains, the Filipinos seem set to throw their lot with someone in 2016 who does not come from their flock?

By ‘someone’ I mean Vice President Jejomar Binay, whom they regard as an apostate to their gospel of GG. He has the highest approval rating of any public official in the land including that of PNoy. The latest nationwide poll conducted by the reputable Pulse Asia shows him way ahead of rival contenders for the presidency. Even if you grouped together the support for Grace Poe, Mar Roxas, Allan Peter Cayetano, et al, Binay would still come out on top.

And nothing seems to be able to slow him down from claiming the presidency in two years’ time. Not the revival of old corruption charges against his wife, the former mayor Dr. Elenita Binay, nor allegations of misuse of PDAF by his daughter who is in Congress, not even allegations of overspending on a public car park by his son, the current mayor of Makati, seem to break his stride. To top it all off, the three siblings of PNoy have all but come out in support of Binay’s candidacy.

Talks of a merger between the LP and Binay’s party UNA as well as possibly extending PNoy’s term are all aimed at one thing: ensuring the survival of the Liberal Party as a fighting force into the next presidential cycle. But these demonstrate just how desperate the GG crowd is at the moment with elections in 2016 on the horizon.

It’s one big conundrum that bedevils them. If PNoy has proven that the GG works, why do/es his heir/s apparent appear/s to be languishing at the bottom of the presidential derby? And corollary to that, why is Mar Roxas, his partner in arms, not able to gain the support of more people?

It is no secret that Big Business supports the candidacy of ABB (Anyone But Binay). They are represented by Bill Luz, the former executive director of the Makati Business Club, who now heads the National Competitiveness Council, which is geared to lift the country’s competitiveness in the World Bank league tables, by reducing redtape as measured in the Doing Business Survey.

It is Big Business, also going by the moniker “civil society” that have been trying to oust the Binays from their perch as rulers of the Central Business District of Makati since the people power revolution ensconced them in city hall back in 1986. It is no secret that it is this group that Secretary Mar Roxas associates with, given his own family’s commercial background as owners of the Araneta Centre in Cubao.

Ironically, the way the Binays have fought off the pressure from the business community has been through an inclusive growth and development agenda in the city, something that the GG club have yet to implement elsewhere. The Binays have made sure that the business community paid their fair dues in the form of city and real property taxes to ensure that the lower income classes benefited from the growth of the city.

The problem for the GG crowd is that the Binays, despite being considered ‘stationary bandits’, have proven to be benign autocrats of Makati, fostering an effective program of human development among the poorest in the city that has become the envy of the rest of the nation, without sacrificing the growth and competitiveness of the city.

Indeed, in Bill Luz’s most recent competitiveness rankings for cities and municipalities in the country, Makati has come out on top. Now how can a city which is supposedly run by a corrupt, dynastic, autocratic family remain on top of competitiveness surveys and produce human development indicators that are the ‘best in class’?

The answer is not good governance, but ‘good enough’ governance.

Wait. Hold-on, you might say. The economic vibrancy of Makati comes from its business community. They are the ones who make Makati great. You would only be half right in thinking that. What makes a city competitive is the regime of taxes and regulations, as well as the quality of services offered to residents and businesses. The economic vibrancy of a city can be attributed to the business sector, and for that Makati only comes in second in Luz’s study.

At the national level, we have seen the limits of GG in formulating what Chalmers Johnson called a “plan rational” for the country to govern and expand the economic spheres of activity through robust, coherent policy and regulation.

If you look at the national economic agencies of government, they are in total disarray. The country is heading for, or perhaps already is in, an energy crisis, with rotating brownouts now a reality in several parts of the country (coming to your neighborhood soon, unless PNoy invokes emergency powers, says Energy Secretary Petilla). Power rates are the highest in the region and yet regular power outages may be in the offing in Metro Manila next year. This will severely impact the country’s competitiveness.

Then there is the so-called “ports crisis” as the logistics industry is up in arms with cargo unable to leave Manila’s ports due to no integrated master plan for Manila and the surrounding regions. The LTFRB has been in conflict with the MMDA, unable to process applications for truckers on time, which has led to the prevalence of unlicensed operators. Provincial buses are another cause of paralysis.

We turn to rail policy and here, it was not too long ago the manager in charge of maintaining the Metro Rail Transit came under fire for favoring bidders with close relations to his family. Frequent breakdowns and accidents have resulted causing the riding public to suffer delays and lower productivity due to inefficient public transport.

The PPPs that came into effect this year were improperly co-ordinated causing great aggravation to the motoring public as roads and elevated skyway projects have simultaneous commenced, almost in a mad rush to leave a physical legacy after PNoy steps down from office.

The airports have notoriously been a source of shame for the country being labelled the worst in the world. With the NAIA-3 becoming fully operational, some of the congestion will be eased, but only slightly. To cope up with increased demand, another runway at Sangley Point needs to be rushed. It took a decade to get NAIA-3 finally running, how long will it take for Sangley to come on stream?

Shifting to telecommunications and internet policy, we have one of the slowest, if not the slowest internet speeds in the region. Congestion experienced by networks has been the subject of much investigation in the senate as complaints of bad service permeate. It seems that the regulatory body in charge has failed to set the proper framework to ensure that services offered by private providers was adequate to meet the needs of an increasingly technology-connected population. The high cost and poor quality of service again affects our global competitiveness.

Transportation, information technology, communications, and energy policies all play a significant part in expanding the economic activity of a nation and are a major input to the cost of basic goods. Without robust regulatory agencies staffed with people who have not worked for the big players or are in cahoots with them, supported by a good attraction and retention policy, the result is what we see.

Secretary Mar Roxas was in charge of the Department of Transport and Communication for a good period of time. The policy frameworks in the areas of air, port, rail, logistics, information and communication were within the scope of his portfolio. The current secretary was apparently hand-picked by him. The GG agenda seems to have stalled if not utterly failed to set the right framework for future growth. Electricity, transport and communications policies are all in shambles.

Yet, PNoy’s presidency has almost solely been devoted to improving the expenditure side of government through reforms in the Department of Budget and Management. For an administration to be so focused on the efficiency of government expenditure means it concerns itself with only one fifth of our economy (which is what the national budget represents). The economic regulations, however, affect the whole economy because of their impact on both the public and private sectors.

The reason why PNoy was so focused on reforming the budget process? He wanted to prove that his GG mantra works. And yet, all that happened was a slowdown of expenditure in the first two years of his presidency, leading to a halving of economic growth. His budget department tried to fix this with the Disbursement Acceleration Program, which has now gone down in flames.

The LP through Sec Abad is now pushing for bottom-up or participatory budgeting through local government units with Mar Roxas, now secretary for the interior and local government in charge of handing out grants to them. Can the GG club redeem itself, following the DAP debacle in the lead up to the elections?

The problem with this scheme is that expenditure is only one side of local government success. You need a proper taxation regime in place. When Jejomar Binay spoke before the influential Centre for Strategic and International Studies in Washington, D. C., he narrated the challenge he faced when he first became mayor of Makati. The city’s finances were in disarray, experiencing chronic deficits. He needed to fix it through proper revenue measures to improve the quality and availability of services.

PNoy entered Malacanang Palace with a “no new taxes” pledge, which has resulted in no new revenue measures being passed except for the sin tax law, which Frank Drilon championed in the senate. Unfortunately, this pledge has limited his ability to fulfill his social contract with the Filipino people.

Meanwhile his acolytes in the senate keep proposing measures to erode the tax base by increasing exemptions, or reducing tax rates. They also want to increase the salaries and benefits of government employees, en masse, thereby putting upward pressure on spending. These senators, who have not had a day of executive experience in their political lives, would not know how to balance a budget if they were to succeed PNoy in 2016. And yet each of them would vie for the mantle of GG.

The social contract came with the age of enlightenment in Europe. The covenant entered into by the state and industry was one whereby taxes would be imposed on businesses; and in return, the state would provide basic public education and sanitation to provide a healthy, literate workforce for the factories being built during the Industrial Revolution. Here we are in the 21st Century and the proponents of our social contract do not understand the essential bargain required to educate masses with the skills needed for the Information/Digital Age.

The GG club’s approach to higher education is to shut down erring schools. PNoy said he charged CHED Chair Licuanan with closing the nursing schools who were producing graduates that did not pass the nursing board exams. She then proceeded to form “commandos” to do just that. Three years later, and according to the government’s own statistical report card, the proportion of board passers has actually declined, not risen. What happened here? Did they really go after erring schools, or just the ones that posed a threat to the big universities?

Meanwhile there is still not an adequate level of financing for higher education in place that would make tertiary education an entitlement, and lift the quality of the sector. Our universities continue to slide down the global league tables.

In each of these policy spheres, the responsible agencies have been susceptible, if not downright captured by large industry players whom they were meant to regulate. Policies are not being developed by independent agencies. As a result, the needs of clients and the nation at large have not been looked after. There is no long-term view to policy. In addition, the technical and leadership capacities of people running these agencies is severely hampered by a lack of proper resourcing.

For the economy to expand rapidly, it requires rational players in economic agencies who come from the best and brightest. These individuals need to be selected on the basis of merit. They need to have the resources to be able to fulfill their mandate. Our competitiveness and future economic vibrancy depend on that happening.

Coming back to Jojo Binay. If you look at the performance of his own housing portfolio through the government’s own statistical scorecard, his agencies look like they are hitting their targets. This is again another feather in his cap—unlike the GG scorecard, which shows PNoy’s government failing in all but one indicator of the World Governance Indicators, the one for political stability, which has come about through his popularity and taking care of the military and police through the budget.

As we come to the final third of PNoy’s presidency, it does not look like the GG goals are going to be met, nor do we find a rational set of policies being laid down to govern the economy’s expansion. For investments and jobs to be created, we need to have a high performing economic bureaucracy taking charge of all these policy areas. Unfortunately, so far we have not built that capacity and the results speak for themselves.

What Mar Roxas, et al from the GG club can learn from Jojo Binay is the following:

  1. Governance is in the doing, not the talking.
  2. Governance is about developing rational, long range policy, independent of vested interests, i.e. the major players in industry.
  3. Governance needs to be felt on the ground for it to be sustainable.

The Binays represent a formula of benign, “good enough” governance that has worked at the local level for over two decades. For Mar and the rest to offer a viable alternative to him, they will need to provide us with concrete evidence that their formula for GG has done what Binay and Makati has been able to achieve. Sans that documentary proof, they might as well throw in the towel.

Our experience with PNoy has exposed the limits of GG. The thesis that kung walap corrupt, walang mahirap. Binay on the other hand has proven the success of “good enough” governance. It has proven to be more appropriate given our stage in development to be content with setting the framework for business to thrive and expand, while ensuring that they pay their fair share to make this growth inclusive.

It doesn’t matter that he has acted like a “stationary bandit” preying on the rich to give to the poor, while ensuring that the rich still get to keep their wealth and build their empires. It doesn’t matter that the Binays have amassed wealth in the process and have turned into a formidable political dynasty. This has allowed them to take a long-term view of development and govern the city without being beholden to the big end of town.

If the GG club want leaders who are honest, yet able to win elections without becoming beholden to vested interests, they need to initiate campaign finance reform and provide state funding for political parties. The only other option is what the Binays are doing in Makati.

Economic agencies are a rich source of campaign finance through the licenses, franchises and policies they craft that can easily be made to favor the big players. The reason they are weak in a developing and emerging country context is precisely to allow political bosses to use them as a source of campaign donations. You see the system is not dysfunctional. It is purposefully built to serve their needs. The only way to fix corruption and incompetence in these agencies is to finance political parties so that they do not have to depend on them as a source of funding. Then invest in their capacity and upkeep.

If we don’t fix this, then we should not complain that our choices come election time are so limited.

Seeds of undoing

greek-tragedy-and-comedy-masks

An essential element of Greek tragedy according to Aristotle is for protagonists to carry with them the seeds of their own undoing. Often it comes in the form of “hubris”, man’s feeling of invincibility, which makes him tempt fate, or contest the will of the gods.

The same sense of mortality that comes at the end of each plot seemed to creep in last week as results of internal polling commissioned by the administration and leaked by a Palace insider showed the president’s popularity taking a nosedive as a result of his response to the controversy involving the release of impounded government savings without congressional approval.

DAP or the disbursement acceleration program was hatched by budget secretary Butch Abad, the chief ideologue of the Liberal Party to deal with the embarrassingly sluggish pace at which the economy was crawling at the time, dragged down by fiscal contraction. This was the result of the administration’s own deliberate attempts at house cleaning by scrutinising projects and contracts which were entered into by its predecessor.

The irony is that in a bid to rid the government of the ghost of Mrs Arroyo, the Aquino administration wound up committing the very same act that it accused her of, namely re-aligning budget items out of expediency. During Mrs Arroyo’s presidency, the opposition blocked passage of her proposed general appropriations for a number of fiscal cycles forcing a re-enactment of the previous year’s budget. This enabled her to reallocate spending across departments at will for budgeted projects that had already been completed the previous year.

Mr Aquino faced an entirely different situation but ended up with the same outcome. He had no problem getting congressional sign-off on his proposed annual expenditures, which sailed through in record time. His problem was getting the approved amounts spent. Having applied the fiscal brakes too harshly in a bid to present a clean break with the past, he wound up revisiting it.

The Department of Budget and Management explains how much was spent under DAP and for what purpose, as follows

For 2011-2012, a total of P142.23 Billion was released for programs and projects identified through the DAP, of which P83.53 Billion is for 2011 and 58.70 Billion is for 2012. In 2011, the amount was used to provide additional funds for programs/projects such as healthcare, public works, housing and resettlement, and agriculture, among others. While in 2012, these were used to augment tourism road infrastructure, school infrastructure, rehabilitation and extension of light rail transit systems, and sitio electrification, among others. […]
Of the total DAP approved by OP (Office of the President) for 2011-2012 amounting to a total of P142.23 Billion only 9 percent was released to programs and projects identified by legislators. These were not released directly to legislators but to implementing agencies.

The sad thing about DAP is that even though less than a tenth of it was directed at legislators, the whole program has become tainted as a result of the scandal that broke out involving the funneling of some of this money into bogus NGOs identified by them.

Not only that, but its release coincided with the impeachment of the Arroyo-appointed chief justice, which the Palace had openly campaigned for. It carried the hint of political back scratching. Add to that the contestable basis on which one branch of government allocated its savings to another (from executive to legislative), and you have the appearance of a government that disregarded the rules in pursuit of its political agenda.

To top it all off, the president appeared on national television denouncing his critics, denying the label “king of pork” that grated his good government sensibilities, claiming that he was “not a thief” in a fashion reminiscent of US president Richard Nixon who left office in disgrace. It is truly tragic that, after cruising at an astronomically high altitude in opinion polls, stratospheric compared to his predecessors, he should come plummeting back to earth and be forced to distinguish himself from common criminals in this manner.

To think that this all happened when the government seemed to be getting into its stride. The past year has been particularly productive with the enactment of several reform measures like reproductive health, sin taxes, and universal health care. In addition, there was the uplift in the country’s credit ratings and ranking in the Doing Business Survey, the resurgence of manufacturing investments, and the signing of the peace deal with Muslim rebels. The growth figures for the first half of the year seemed appealing to most outside investors, as well.

With legal challenges left, right and centre seeking to undermine its legitimacy, the government now appears besieged. Previously, one would have been forgiven for thinking that with its recent string of successes, the regime may be able to manage an orderly succession to its hand-picked nominee. But with the Liberal Party’s important figures, Senate President Frank Drilon and Budget Secretary Butch Abad, in the hot seat for their involvement in the DAP, the party seems like a spent force, having lost its moral authority.

Elite bargain

When Senator Jinggoy Estrada angrily accused the administration of hypocrisy for what he claimed was an unfair targeting of the opposition, I expressed doubts that his tirade would inflict any serious damage on the teflon presidency of Mr Aquino. With hindsight, it now appears to have been an effective ploy. Estrada’s complaint was that there seemed to be “no honor among thieves”, that cosy symbiotic relationship among complicit individuals.

What he was referring to was the political bargain that occurs in multiparty democracies within developing states, in which power is alternately shared among various groups of elites. Corruption is tacitly tolerated because it is assumed that each group will commit it once it is their turn to rule. Allowing a group of oppositionists to be singled out for prosecution, to ruin their political careers, is in effect, reneging on this grand bargain. Mr Estrada’s retaliatory response did nothing to protect him from prosecution, but it nevertheless inflicted damage on the administration for its “unfair” actions.

Time will tell if the damage inflicted is merely a flesh cut, or a mortal wound, but from the perspective of the reformers within the administration, it is a bad omen. Not only has the focus on PDAF and DAP abuse detracted from its policy agenda, it is going to make it difficult to secure votes for what could be unpopular pieces of legislation, particularly in the lead up to the next election when political turncoats will begin sniffing the political winds in search of their new padrino.

The reform constituency often claims that in order to make our political and economic systems more inclusive, we need to eliminate all forms of rent from society. That is we need to generate a clean, accountable and transparent system of governance, and that there will be no trade-offs between pursuing this agenda and pro-poor economic growth. This is in part the fault of the international donor community that has peddled this idea for over a decade on nations with very different institutional foundations.

Reality runs contrary to this notion, particularly if you look at the development experience of the “tiger” economies of East Asia and the “lion” economies of Africa, which are the fastest growing in the world. The tragedy of Daang Matuwid, the good governance agenda of the Aquino administration was that it failed to acknowledge this. It took the economy for granted while hastily conducting a highly charged political prosecution of its predecessor regime.

When the economy started slipping into second gear, it unlocked the floodgates of spending and applied less stringent controls on congressional pork barrel projects than it enforced on its own administrative agencies. It committed an act of “hubris” in thinking that it had succeeded in transforming the political culture of the country. It now finds itself defending a system of rent distribution that its constituents consider anathema to its own brand of government.

It is for this reason that many honest, reform-minded governments get eaten up by the system they seek to change. They often set goals that are too lofty, such as the elimination of corruption within one term of office, or the removal of patronage in favour of a system that observes the rule of law and democratic accountability. In the pursuit of good governance, the perfect often becomes the adversary of the good.

At the end of such a trail is “reform-fatigue”, with a disillusioned electorate turning to corrupt leaders who are able to distribute rents in ways that cater to their local needs. Such leaders are seen to be more competent and effective. This scenario could eventuate in 2016, with many in the reform constituency distrusting the LP and seeking an alternative candidate with a fresh face. This will split their votes and allow a pragmatic populist to gain power.

The scandals that have bedevilled congress and engulfed the president have served only to discourage certain contenders from the opposition to seek higher office, clearing the way for the vice president to consolidate its forces behind him. This means that their votes are less likely to be split along factional lines. And with the vice president’s popularity remaining intact, his lead will simply be unassailable.

The only way for the ruling LP to avoid electoral defeat is for it to deliver rapid, pro-poor growth within the remainder of its term. That won’t be easy, particularly since its formula for producing it, the good governance agenda (captured in its mantra: kung walang kurap, walang mahirap) has already been discredited in different parts of the world where it has been faithfully applied.

5 Things you should know about the #DAP

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  1. Disbursement Acceleration Plan (DAP) is a government economic stimulus package created to increase government spending in 2011.

The World Bank noted in a quarterly report on the Philippines that DAP boosted the economy.

“The government’s Disbursement Acceleration Plan was partially successful and contributed 1.3 percentage points (ppt) to GDP growth in Q4″

(please see: World Bank: Philippines Quarterly Report March 2012)

  1. #DAP is NOT a secret fund or program. Has been in the news as early as October 2011.

Ben Diokno has argued the same things he did in 2011 as he did in 2013.

  1. The Department of Budget and Management realigned unreleased appropriations from 2010, and 2011 plus windfall revenues from government-owned and controlled corporation dividends to fund #DAP

  2. As of December 2011, Government spent 85% of the PHP72B initial DAP fund of which, 6% were for lawmaker nominated projects, DBM Secretary Abad says in a press conference yesterday afternoon (October 3, 2013).

  3. DBM Abad argues that the realignment was done through Constitutional provision on power of President to realign. On the argument that you can not fund projects not in the GAA, Abad argues that the budget has two aspects: Programmed and unprogrammed. Programmed are those projects or activities of the government with allocated monies. Unprogrammed ones are projects or activities that have no funding source yet, but should monies become available, for example: SC declares 70 billion Coco Levi fund is the government’s so the government can use that monies to fund unprogrammed parts of the budget.

Image Source: WB Philippines Quarterly Update (March 2012)

Editor’s note this is an edit of the Original post: 5 things you need to know about PNoy’s Disbursement Acceleration Plan (DAP). Edited for better readability.

From Erap’s Playbook

Jinggoy

Jinggoy is no stranger to controversy. More than a decade ago, he and his father were jailed for participating in the Jueteng scandal exposed by whistleblower Chavit Singson. He was later released on bail by the Sandiganbayan and acquitted. His father Joseph Erap Estrada however was not so lucky. He was found guilty and sentenced to life imprisonment, although later pardoned by the woman who deposed and prosecuted him, Mrs Arroyo.

The fact that Mr Estrada today enjoys his freedom and greater popularity than Mrs Arroyo is nothing short of a stunning turn of events. It should be recalled that in the lead up to his impeachment, Erap’s popularity was plummeting. He had always denied any involvement in the Jueteng scandal, maintained his innocence throughout the judicial proceedings, refused to recognise the legitimacy of the trial and its verdict, and likened his predicament to that of many famous dissidents like Ninoy Aquino and Nelson Mandela.

In 2010, the rehabilitation of the Estradas was complete as Erap overtook Manny Villar to claim second spot after Noynoy Aquino in the presidential derby. His ability to knock off Alfredo Lim in 2013 to become Manila mayor is testament to the success of his strategy to regain the people’s trust despite having been convicted of a high crime by claiming himself a victim of political persecution by someone he presented as a usurper of his office. The fact that Mrs Arroyo damaged her own credibility by subsequent events fed into this narrative.

But now his son, who has been tagged by whistleblowers to be a principal in the Janet Napoles P10 billion pork barrel scam, is seeking to lift a page from the father’s playbook. In a privilege speech before the Senate, the younger Estrada claimed he was a victim of trial by publicity, of political persecution and of demonisation by his colleagues. He decried the fact that despite the COA’s identification of anomalous transactions by his colleagues, he and two other opposition bloc senators have been singled out by the Senate Blue Ribbon committee investigations.

In an attempt to undermine the legitimacy of proceedings at the senate, he accused its president Sen Franklin Drilon of offering a gratuitous amount of P50 million to reward him and his colleagues for voting to convict Chief Justice Corona with the imprimatur of Budget Secretary Butch Abad. After accusing his fellow senators of dragging his name through the mud, he then proceeded to name a number of them as well and question why the spotlight hasn’t been focused on them.

There are several reason why this ploy by Jinggoy may not work effectively against the current administration as it did against its predecessor. One is the fact that President Aquino enjoys the public’s trust and confidence, maintaining his net satisfaction rating at high levels three years into his presidency, something unheard of since data has been collected on this. Two is the fact that Jinggoy has not denied receiving and using his PDAF allotments. Third is the unpopularity of pork barrel, in the light of the ostentatious display of wealth by one of its fixers Ms Janet Napoles.

PDAF, BUB, August 26 and 2016

President Benigno S. Aquino III calls for the abolition of the Priority Development Assistance Fund at the President’s Hall of Malacanang Palace on Friday, (August 23). The announcement was made in the aftermath of the alleged Php10B pork barrel scam. (Photo by Gil Nartea/ Lauro Montellano Jr./ Malacanang Photo Bureau)

Just as he did with the RH Bill, the president came late to the party and led from behind in the scandal  involving the Priority Development Assistance Fund (PDAF) of Congress by belatedly bowing to public calls for its abolition.  Although as Winnie Monsod noted he did not indicate this meant the abolition of all forms of pork barrel. With nationwide protests slated for August 26, his administration could not afford to be seen on the wrong side of history, not after mouthing anti-corruption slogans like Daang Matuwid and Kung Walang Kurap, Walang Mahirap in the 2010 and 2013 elections.

This is perhaps his only out, after a former treasury chief showed how large his own discretionary funds are, dwarfing that of Congress. His initial tone deaf and dismissive response to public calls for PDAF abolition threatened to turn it into his “Flor Contemplacion moment”. This is a reference to the hanging of a domestic helper in Singapore by that name accused and convicted of killing her ward. The Ramos government’s lethargic response at the time to seek a commutation of her death sentence and vigorously raise a diplomatic protest with the Singaporean government was judged inadequate and subsequently led to virulent protests.

What the angry twittering masses behind the August 26 rally fail to grasp, however, and this I believe should be credited to the president, is that the scale of congressional pork barrel would not have even been known if he had not taken the decision to make it more transparent in the budget. Secondly, the Commission on Audit special report conducted under the tearful eye of Ms Grace Pullido-Tan, its chair, would not have even been possible without President Aquino’s leadership.

The problem was the Palace’s foot-dragging made it seem part of the problem rather than the solution. At first it responded to the concerns of the masses over the alleged Php 10 billion scam involving Janet Napoles’s syndicate of NGOs by window dressing, making the DSWD the accrediting agency for NGOs receiving PDAF allocations. This was wrong since as the COA report revealed, releasing public funds to NGOs without an appropriations law or ordinance violates the government’s own procurement policy.

The COA report, incomplete as it was gave an indication as to the scale and scope of corruption and abuse. About 75 per cent of audited PDAF went to NGOs. Thus, the 192 members of the 14th Congress that were found to have engaged in the practice are in fact liable. The DOJ does not even have to prove that the funds were diverted back to them.

The senators and congressmen who want to wash their hands clean by either saying the money was liquidated appropriately or that monitoring of funds is the sole function of the executive branch don’t have a leg to stand on. The only defence they can mount is that their signatures in authorising the allocation of PDAF to those NGOs were forged as 22 of them have done.

Even assuming their signatures were forged, why would it have taken them so long to protest against it? It stands to reason that anyone who had P70 to P200M allocated to them would be adamant in getting it released for their use. Why has it taken them 3-5 years to denounce the siphoning off of their PDAF? If anything, they would be negligible for allowing it to go on for so long.

So any which way you look at it, the legislators in question have something to answer for. True, the DBM’s record-keeping has been found wanting. In fact the COA report only covered a mere 39 per cent of the total P115 billion worth of PDAF released from 2007 to 2009 because DBM could not even identify correctly the legislators who approved the majority of funds amounting to some P70.4 billion.

Even so, the legislators that have been rightly identified need to apologise to the public for allocating their PDAF to NGOs and take leave from their party if they are currently in public office or loose whatever committee chairmanships and privileges they have enjoyed as such.

British and Canadian examples

In the UK parliamentary allowance scandal of 2009, both PM Gordon Brown and Opposition Leader David Cameron issued apologies to the British public for the excesses committed by members of their parties who used housing allowances to invest in the property market. Subsequently, an independent body was set up to determine the compensation and allowances for MPs, and the disbursement of the same was made more available to the public.

In the current scandal in the Canadian senate, PM Harper’s chief of staff resigned after being implicated, a number of senators were suspended from their party and issued public apologies for their abuse of privileges. In both the UK and Canadian cases, a Freedom of Information request led to uncovering the facts and those that had been found to have abused their privileges were ordered to repay every last penny they had unlawfully charged to the public purse.

The amounts in question ran only in the hundreds of thousands of pounds or dollars per representative or senator. In the Philippine case, the amounts run into the billions of pesos (which amounts to millions of dollars!). And yet the legislators in question do not seem to be ashamed in the least. Some of them in fact have the gall to now champion the scrapping of pork, when they in fact have been identified by the COA for certain anomalies in their use of pork, such as Majority Senate Leader Peter Cayetano whose release of P2.7 million to baranggays in Taguig were found to be deficient, and whose wife exceeded her PDAF by P8.5 million.

BUB, another acronym for pork masquerading as reform

The protesters heading for the Rizal Park on August 26 would probably say that there needs to be an investigation and prosecution of those involved in the PDAF scam. The DOJ has said that it will be issuing indictments soon. The case could easily drag on beyond 2016, after the president steps down. The senate and the house seem poised to investigate their use and abuse of PDAF. Senator Cayetano has endorsed former Senator Panfilo Lacson to head an independent body to investigate it, which found support from the President. This was ridiculed by many including Senator Miriam Santiago who questions Lacson’s ability to impartially run the investigation.

The politicisation of the investigations and reform process is becoming a problem. This is precisely what shouldn’t be happening as abuses cut across party-lines. Take the unveiling of a fund associated with the Department of Budget and Management’s Bottom Up Budgeting approach or BUB. This is a fund amounting to P20 billion to be allocated by Interior and Local Government Secretary Mar Roxas to local governments. It is no secret that Mr Roxas is the Liberal Party’s presidential nominee to succeed Pres Aquino in 2016. Budget Secretary Abad is the party’s chief ideologue.

The fund’s existence was apparently leaked by congressmen from within the LP. It was reported that many of them were dissatisfied with the manner in which this fund has been set up: to give Mr Roxas the role of a padrino in handing it out. This charge was denied of course by Messrs Roxas and Abad who do not deny the existence of BUB funds but instead say that legislators were supportive of it.

If we needed a reminder for why PDAF and its predecessor CDF (countrywide development funds) came into being, this is it. Pork barrel has evolved through the years from a means for the executive to control congress and get it on its side, to a means by which the legislators can wrest control of patronage from Malacañang by limiting its ability to withhold pork to congress. BUB seems like an attempt by the Palace to retake control, at a time when congressional pork has been abolished.

Just as an aside, what the reaction of local LP stalwarts shows is that party discipline is weak. These legislators probably do not plan to endorse Mr Roxas in 2016. They are probably planning to jump ship again just like they did in 2010 when President Aquino’s lead in the polls was evident. Given the lead Vice President Binay now has in public polls, it would seem they might be hedging their bets both ways, or in the very least, they want to hand out the BUB funds themselves to local officials, to be the sole padrinos in their districts.

On the other hand, it can be argued that Mr Binay has been receiving pork with the president’s blessing, worth P200 million a year, so that this is simply a way of evening up the playing field for Mr Roxas and the Liberal Party. Given that the president has abolished pork (which presumably includes the vice president’s), shouldn’t his heir apparent refuse to use it too? By politicising the bottom-up budgeting approach, a key reform of President Aquino’s administration, Abad and Roxas could be tarnishing their reformist credentials and weakening the very institutions they seek to build.

To 2016 and beyond

A number of prospective presidential and vice presidential contenders could be ruined by this scandal. Senators Bong Bong Marcos, Bong Revilla and Jinggoy Estrada all have plans to run for higher office. All were tagged as part of the original PDAF scam. Senator Peter Cayetano may also have plans to run for higher office in 2016 and was also given special mention in the COA report for irregular PDAF releases. Mar Roxas could sully himself if BUB is perceived to be used for political motives.

You might think this is the end of the road for pork, but don’t count pork out, just yet. As Manolo Quezon points out, pork has a funny way of resurfacing under a different guise. Winnie Monsod believes it will revert back to the old way of being hidden, inserted in line agency budgets, as was the practice before President Aquino made it more transparent. This could be an unintended consequence of abolishing PDAF.

What the inchoate masses gathering on August 26 fail to understand is that unless PDAF is replaced with something more suited to a modern democracy, it will be reincarnated in some other shape or form even if the current set of PDAF abusers are put behind bars. The real answer in my view is for the state to provide campaign finance to accredited political parties.

Without such state support, congressmen and senators will find a way to access state funds anyway through some form of pork barrel or worse, they could go underground and raise money through illegal means. Of course they may harass legitimate businesses and rich individuals for donations with adverse consequences for policy making if they win. The piso-piso campaign to raise money has very limited impact in a country with very large disparities in income.

Perhaps the president who until now has been so focused on proving he can make government work, as in he wanted to prove that PDAF could be used properly for good, can now lift his gaze towards undertaking real reform that would not only restore systems to the way they were under some imagined golden age, but transform them above and beyond what they are currently capable of becoming.

To use an automotive analogy, which I am sure the motoring enthusiast in him would appreciate, imagine that you have an old 1950s engine which you have worked so hard to restore, but is still leaking fuel and is inefficient. You can choose to keep fiddling with the old system by adding dashboards with indicators that tell you if fuel is leaking (i.e. making expenditure more transparent) or you might decide to overhaul the engine completely with a new up to date model that injects fuel well and does not leak with indicators that tell you what is happening under the hood.

Having a modern democracy entails campaign finance and political party reform combined with beefed up integrity measures as well as an adequate level of compensation for elective officials to remove the incentive that lead to the plunder of public funds. That is the reality that neither the president, nor the people massing at Rizal park on Monday, have yet realised needs to be confronted if we are to have a sound democracy in the lead up to 2016 and beyond.

Forget Paris

Sex and politics have been front and center in recent days.

Three controversial events have brought sex and politics to the forefront of the news recently. First, the installation of artist Mideo Cruz of a crucifix and a penis drew the ire of the Catholic faithful, art patron Imelda Marcos and the president himself. Congressmen and Senators have opportunistically gotten on the bandwagon breathing fire into the debating embers of our society.

Second, the inclusion of the RH now RP Bill on reproductive health and responsible parenthood by the president along with a dozen other bills in his proposed legislative agenda for Congress to consider. His willingness to work in a bi-partisan way with the sponsors of the bill and with the clergy is a mark of true statesmanship.

Third, the faux pas committed by a reputable news agency in sewing confusion over whether Hollywood celebrity and hotel heiress Paris Hilton would meet with PNoy during her visit to the Philippines gained much oxygen when Presidential Deputy Spokesperson Abigail Valte deemed it necessary to deny such reports via Twitter.

As the title of this piece suggests, this is all about the third event.

After all the serious debates and theological arguments surrounding art and religion or sex and religion, the light-hearted controversy of such “girly goss” is probably a very welcome distraction. The timing of it could not have been better planned in my opinion. I am not suggesting that it was (planned), but I sense a certain tendency among palace officials to boost the president’s “macho image” every chance they get at times.

Fanning speculation

Remember the photo released of him and a lady having a lively night on the town with some of his communications people in the background? This came after the president had been linked to an image consultant within his own team. The porsche incident also portrayed the president as an avid motoring enthusiast.

This of course back-fired, but initially the president did not mind telling the press that the sportscar brought a large smile to his face. Similarly, the president’s fondness with guns caught some attention, and then back-fired on him (no pun intended) when his shooting gallery buddies whom he had appointed to sensitive posts got caught up in some unflattering situations.

I also recall reading an article a while back (but can’t find the link right now) in which Budget Sec Butch Abad admitted to feeding the press stories about PNoy’s supposed links to certain female celebrities during the election season. This was a bid on his part to boost the president’s own status among voters. Abad was then a ranking member of the president’s campaign team.

In a country where tobacco chomping generals, philandering husbands and strict authoritarians are considered top dog, it wouldn’t hurt to project the image of a swinging bachelor this time around…or would it? I think it sometimes runs counter to the other messages that the palace wants to send. What made PNoy so appealing to the electorate was that his persona gave a strong contrast to the often flambuoyant or charismatic character of other prominent leaders.

He was in effect, in a world full of Pepsis and Cokes, the “uncola”. His simple, mild manner contrasted with the extravagant wining and dining of his predecessor. He was patterned after his mum, a president who rode the same car when she first strode into the palace and when she stepped down from it. His geeky, balding and awkward demeanor were just the sort of antidote the country needed at the time when the field was full of bombastic individuals with sexy dancers and starlets in tow.

It is quite understandable though that given our country’s fascination with Hollywood that the media advisers surrounding him would want to engage with that side of our culture. After all, most people tune out when conversations turn to politics, religion or the economy. It is also quite understandable for the president to want to have a social life despite the heavy demands of his job (or even because of it).

Alpha males and eunuchs

This could all be considered a natural consequence of taking the reins. A study found that certain candidates (and their supporters) seem to experience a sudden boost of testosterone after winning a contest. Behavioral and evolutionary scientists link this to the pattern among animals where males fight over the right to spread their seed among the females in the pack. The rise in testosterone is perhaps a biological response in anticipation of the reproductive demands that come with being alpha male.

So perhaps, the country with its adherence to macho, feudal and primeval culture has not evolved all that much from this primitive state? Perhaps.

But there is one reason why I believe we need to celebrate the “single-blessedness” of the president and some of his men. In his most recent book, The Origins of Political Order: From Prehuman Times to the French Revolution, Francis Fukuyama describes how the Catholic Church’s insistence on priestly celibacy gave European societies an edge in developing the rule of law and how it was vital in the battle against corruption and rent-seeking within the church.

In societies at the lower wrung of political development, kinship is the primary criterion for conferring wealth, status and power. Fukuyama points out the role of celibacy in shielding the state from the patrimonialism and nepotism of tribal clans. From the imperial eunuchs under the Qin dynasty in China to the Mamluk warriors in the Sultanate of Egypt and the Janissaries, elite slaves of the Ottoman Empire, celibate public servants and warriors were used for this purpose.

It is perhaps not coincidental that the political movement that seeks to remove the artefacts of wang-wang culture and replace it with the rule of law should be so influenced by a small band of single brethren, the president himself being chief among them (either they are single or they are married to such wealthy women of substance, freeing them from the need for material accumulation allowing them to focus instead on the interests of the people).

Perhaps it is a mark of our political development as a nation that such a class of individuals has risen to the top. I hope it is an antecedent to our turning a corner on the rule of law. It goes against our political, cultural and biological programming, but I for one am glad that the president is able to refuse to go Hollywood on us by saying to the press corps, “hey, why don’t we just focus on affairs of the state and simply ‘forget Paris’.”

How long is a piece of string?

What yardstick are we using to measure P-Noy’s performance?

The arbitrary, rule of thumb of the first year in office is about to come and go for this administration. The obligatory journalistic pieces assessing the president’s performance have consulted the usual suspects.

Political analysts, polling firms and pundits, the business community and the average man on the street express varying degrees of satisfaction, from impatience on the part of Conrad de Quiros for instance, to a more sanguine position on the part of Mon Casiple. Regardless of their positions, they are essentially in agreement that while one year is too brief a period to expect major change, some demonstrably concrete level of progress or achievement is lacking in the president’s first 365 days in office.

As expected the president’s men were engaged in a charm offensive to address these complaints with Undersecretary Manolo Quezon of the Communications Group appearing on ANC, Deputy Spokesperson Abigail Valte on Twitter, and Budget Secretary Butch Abad polemically addressing the issue of economic management. The to-ing and fro-ing has been at times entertaining as in the case of the Valte-Magsaysay twitterverse exchanges and insightful as in the case of Quezon’s revelations about the president’s love life.

The advocates of the president (both in and out of government) say that much has been accomplished. The emphasis on government frugality and public spending restraint has created domestic private investor confidence and a credit ratings dividend according to Cielito Habito. Plugging the leaks in infrastructure spending has generated fiscal space to expand social spending by the end of the year according to Abad. Public private partnerships are “on track” to be consummated this year according to Finance officials.

That in essence is the shortlist of accomplishments brandished by Malacanang. Judging by his poll numbers, the public seems to give P-Noy the nod of approval with 64% expressing satisfaction with his performance.

Is that it, then? Should we give the president a pass too?

Unfortunately, what is missing is a solid discussion over, well…what sort of yardstick is appropriate for measuring the president’s performance. For instance,

• Shall we judge him on what he said he will do?

Based on the president’s anti-Gloria campaign theme, De Quiros now questions why the former president and her ilk have not been brought before any court to answer for her alleged transgressions. Based on his anti-corruption platform, the Management Association of the Philippines now asks why there have been no measures like the Freedom of Information bill or any meaningful reductions in business redtape progressed.

Civil rights advocates wonder what has happened to Jonas Burgos and many other like him. Women’s groups are still waiting for the RH Bill to be passed. Farmers are wondering what happened to the resolution of Hacienda Luisita. The ordinary man on the street wonders where the jobs are and the relief from the rising cost of living. These were issues PNoy promised to resolve once in office.

• On the other hand, should we judge him based on his ability to prudently modify or alter what he said he would do?

Those with a nationalist agenda like Teddy Casino say P-Noy is delivering more of the same as far as economic policy goes, and hopes he will re-think his developmental economic strategy. The anxiety felt by Casino and others like him (Walden Bello for instance) is that the quality of growth is poor and insufficient to make a dent on unemployment.

Budget analyst Ben Diokno is looking for a two-step tax reform process that will make the system fairer and more effective at raising revenues. Both of these policy prescriptions run counter to the “steady as she goes” pronouncements that PNoy made during the election season.

Measuring up

The answer to the question, what yardstick do we use, depends on whether you are a strict contractualist or not. Some will say, we should evaluate the president plainly on what he said he would do, and nothing more. For me, however, I believe that given the tenor of the campaign, there were promises that were bound to be made in the spur of the moment, which need to be reconsidered.

The problem for the president of course is, whether you adhere to the strict contractual sense or not, he has failed to register meaningful progress on many fronts. So the question then becomes, how much time should we give him before we start downgrading his performance assessment? How long before we start saying that the president has either reneged or foolishly forged ahead down a dead end path?

Should we give him another six months? A full year? Two years? It’s like asking the question, how long is a piece of string?

After all, for the marginalized groups awaiting resolution to decade’s old injustices, their well-being has been put on hold for far too long. The well-healed chattering classes may feel aggrieved that bringing justice to Arroyo has been delayed, but their grief is nothing compared to what farmers and human rights abuse victims have suffered.

Similarly for those denied access to education, healthcare, sanitation and protection from the elements, the experiment to improve tax collection without a root and branch reform process would prove to be the most costly of all, if it fails. Is it therefore worth the gamble?

Perhaps, it is in addressing the needs of the least of our brethren that the president ought to be judged. In his “Back to the Future” moment, the president like his mother in the mid-1980s seemed to have prioritized the needs of rich creditors and bondholders over that of poor and marginalized stakeholders. Private investments have improved the skyline, but public investment failed to raise more out of the poverty line.

How long is a piece of string? Well we will have to wait and see…

Nothing New

Strange but true, the cat calls made by Mrs Arroyo and her allies have goaded the P-Noy administration to return fire.

Over the weekend, as the country suffered from the effects of yet another powerful cyclone, there was a different kind of disturbance inserted into twitterverse with Congresswoman Mitos Magsaysay and Deputy Presidential Spokesperson Abigail Valte quareling over the economic legacy of Mrs Arroyo.

The tempest in a teacup was over whether P-Noy was up to the task of maintaining the momentum. Today, the Cabinet’s chief ideologue, Budget Sec Butch Abad joined the fray. From the government’s official gazette, Abad was quoted as saying

It is amusing at the same time galling for Congresswoman Gloria Macapagal-Arroyo to lecture President Noynoy Aquino about building on the gains of her government. The first question that comes to mind is what gains? The people’s gains, or her gains? …Prudent expenditure took a back seat to political survival and political patronage during the previous administration.

It is worth noting that whenever the opposition bring up Mrs Arroyo’s glowing economic credentials, the administration can only point to the waste and alleged corruption in her government as a counterargument.

The irony is that contrary to their claim that good governance leads to growth, the administration in its first year has proven that actually cleaning up government can have the unintended consequence of lowering growth. The silver lining in all of this is that as Presidential Spokesman Edwin Lacierda claims the administration has completed its housecleaning, spending and growth can resume their normal pace.

Sensitive for a reason

In its second year, having made good on its promise to clean up processes for procurement, the government is now prepared to make good on its promise to bring about better economic outcomes. It is hoping to do this with an 8-12% boost to its budget in 2012 (after a nominal growth of 2% last year) and a re-alignment of physical infrastructure spending to social spending for the remainder of 2011 (having missed the chance to spend on the former during the dry season).

At this point, the administration seems vulnerable on two fronts, the first being that it has not delivered on its clean government completely having fallen victim to potential charges of cronyism, the so called KKK (kaibigan, kaklase, kabarilan). The second one has to do with the less than stellar employment and growth figures in its first year.

The real subtext of the opposition’s attack is that P-Noy’s government has been inept at delivering both good governance AND growth. With stiff economic headwinds from a souring world economy over the next twelve months resulting from austerity measures in Europe and the US, the government’s growth target of 5-6% may be difficult to attain given the weak first half of the year.

Key to the attainment of the government’s growth projections will be its ability to attract foreign direct investments as fund managers look to emerging markets to offset the bleak outlook in the West. The problem is that during the first three quarters of his presidency, investments from abroad have sunk. While the slack may have been made up for by domestic investors, the same cannot be expected to hold true in the future after domestic pent-up demand for new plant and equipment runs out.

Should the public private partnerships fail to gain traction in a timely fashion, it could spell the end for investment prospects in the latter part of the year. Having staked all its eggs in the PPP basket, the big risk is that the absence of an alternative economic strategy or Plan B could lead to a loss of public support for this government. Having refused to look at new taxes, the government’s revenues and spending capacity are totally dependent on the economy growing as expected.

Binary Choices

From psychology we have learnt that the mind can only distinguish things in contrast to others. That is why we can relate to stories that use binary opposites (good versus evil, light versus darkness). Our eyes are not trained to see a black strand when it is set against a black canvass. We need to see things in black and white.

The same goes for the narrative of this government. Its legitimacy came from distinguishing itself from the previous administration in terms of honesty and integrity. Its continuing popularity is based on its ability to make that contrast.

When it was in opposition, it claimed that Arroyo’s economic record was tarnished because it was not able to translate economic growth to the welfare of its citizens. It claimed it alone could do that through a good government agenda. Now that it is in government, it is finding that its own economic management is being called into question.

The nationalist legislator Teddy Casino, an ally of the president has stated that the main reason why the economic performance of the Aquino administration does not differ from the Arroyo regime is not because it has failed to address good governance, but because it has failed to set a different economic agenda. He may not be too far off the mark.

In the end, the tendency of governments to turn to patronage as a form of political survival is not due to their failure to bring about good governance, but because of their failure to make economic growth felt by the broader community. For this reason, the charge that P-Noy is doing nothing new, may be the most damaging of all.

Sticking to the script

Marking the 113th anniversary of the Philippine declaration of independence, President Aquino used the solemn occasion to highlight the fulfillment of his campaign pledge to rid the country of corruption.

Speaking at the ancestral mansion of Emilio Aguinaldo, the revolutionary leader in Kawit, Cavite, who became the first Philippine president, PNoy said that he would end the cycle of corruption that has added to the suffering of Filipinos living below the poverty line. At the shrine of Jose Rizal in Luneta, the president rhetorically asked whether indeed the national artist would still have been willing to lay down his life to free his country if he were alive today.

At the Vin d’honneur in Malacanang Palace, PNoy affirmed to everyone there that just as his parents dedicated their lives to the restoration of freedom and the rebuilding of democracy, he would dedicate his to bring about a more prosperous and progressive country.

In all these speeches, the president appeared to be “sticking to the script” that was laid down during his election campaign of fighting poverty by eradicating corruption. The president was indeed most presidential when he stuck to the high road in this way pointing to modest achievements in his first year of having stopped questionable contracts and compensation practices in government agencies and companies.

It was through his spokeswoman Abigail Valte that we learned that this involved some $23 million or over P1 billion in spending at the public works department and from Budget Sec Butch Abad we found out that GOCC’s were able to produce $686 million or P29.5 billion worth of savings this year. Part of these savings went to housing of soldiers in Bulacan province.

It appears therefore that the president seems fully convinced that the path he has chosen of reducing waste in government will lead to greater capacity on the government’s part to raise social spending and bring down the incidence of poverty. The example he cites was the reduction of rice importation to less than half of the previous year’s 2.5 million tons and the funding of the conditional cash transfers program benefiting indigent families.

Perhaps where PNoy appeared less presidential and deviated from the script somewhat was when he addressed criticisms from the opposition accusing him of living the “high life” by his enjoyment of “wine, women and song” or “fast cars and girls”. The president’s response that he had done nothing illegal seemed to mimic the former US president Bill Clinton during the Monica Lewinsky affair or the more contemporary case of New York Cong Weiner who admitted to flirting with several women via Twitter.

Aside from this, one other possible inaccuracy in his speeches was when he pointed out that the savings made by his government through the close scrutiny of its infrastructure and loan contracts were re-allocated to social programs. The first year of his presidency has indeed seen a slowdown of government capital expenditure and interest payments, but the growth in its spending for social programs resulting from this has yet to be seen.

Indeed the first few months of this year saw the rise of hunger, unemployment and poverty along with a rapid slowdown in growth. Perhaps this inconvenient truth was what was left out in all the speeches. However, PNoy did admit that the challenges of improving living conditions still remained, and that he was committed to address them during the remainder of his presidency.

The more important question however is whether the formula he has set out to follow will indeed produce the sort of growth and jobs that it promises to deliver or whether the script needs to change at some point.

The Surplus Fetish

Both the economics and the politics of current fiscal policy seem flawed.

Yesterday the Department of Finance trumpeted the news that the government in April posted the largest fiscal surplus in 25 years. The PDI reports today that

The Aquino administration posted a budget surplus of P26.26 billion in April… more than 10 times the P2.6-billion surplus a year ago, Finance Secretary Cesar V. Purisima announced Monday.

The fiscal performance for the month of April brought the record for the first four months to a surplus of P61 million, documents from the Bureau of the Treasury showed.

Good news, right? To use a popular phrase, the government seems to be “living within its means.” This is certainly the impression DoF wants to create. After last year’s poor fiscal performance led to a 6.3% of GDP blowout, Finance officials seem fixated on reining in the budget once again this year. So this should come as a bit of a respite from the constant talk about deficits for them.

Unfortunately when one digs deeper into the figures, a very unappealing picture emerges. Let us start off with the January to March figures for 2011. According to the department’s official website, expenditures for the first quarter declined by 12.7% compared to the same period in 2010 (Php349 B in 2011 v Php400 B in 2010).

You might argue that this Php 50 billion “underspend” was due to the elections last year and so you might be excused for thinking that costs would recede to normal levels in a non-election year. So what were the programmed expenditures for the first quarter of 2011? The answer is Php431 billion. That means that the real underspend amounts to Php82 billion!

Now why should that be shocking, you might ask. Well, consider it from the point of view of program recipients not receiving their promised benefits or public infrastructure projects that did not get funded in the first quarter. Budget experts will tell you that the non-rainy months in the first semester are critical for infrastructure projects. This is especially true this year with the early rains coming in May.

If a government is unable to spend its budget in a timely manner, it speaks unfavorably of its abilities in fiscal management. This government credited itself with getting its first budget approved by Congress early prior to the start of the year. It had plenty of room to get its ducks lined up to see spending out the door. One would expect a new administration to be quite anxious to see this happen to differentiate itself from the previous one.

Unfortunately, that didn’t happen.

From reform budget to deformed budget

The government got itself “back in the black” by contracting expenditures (experiencing “strong yet below-target revenues”). The government under-spent 18.8% of its programmed budget and incurred a much smaller deficit in the first quarter amounting to a mere Php26.2 billion down from the expected Php112 billion (note: that is why it’s January to April surplus was 61 million after posting a surplus of 26.26 billion during the fourth month).

Was this to paint a rosy picture for:

  • the bond market?
  • credit rating agencies?
  • the public at large?
  • all of the above?

One wonders at this point, what has happened to the “reform” budget? Has it turned into the “de-formed” budget? This lies at the heart of its “credible commitment” problem.

Indeed for the so-called economic managers in charge of steering the course not only of the budget but the economy at large, does this approach seem rational? Or have they been overtaken by their passions, influenced by the fetish for surpluses?

This not only makes for bad policy, it consists of poor politics as well. Not only will the government not contribute to the economic and social infrastructure needed for a thriving economy, if it seeks to pass new revenue measures next year, it will be undermined by the false impression created that these new measures are not urgently needed.

The public once accustomed to hearing that the government is in surplus will find it hard to accept the need for new taxes. Indeed, it wouldn’t make sense to the ordinary man on the street reading these news reports.

Once again, the story the government intends to weave will somehow get it entangled down the track because it does not portray the true picture. This is not what you might call “strategic communication”. If it wants the public to become apprised of the real situation concerning the structural deficit in our budget, it needs to allow spending to commence as it should.

By accepting poor policy and misreading the politics, the benign one’s fetish with surpluses could prove detrimental to the country in the end.