GOCCs

Budget 2013: The Bottomline

If the State of the Nation Address of the president is meant to rally the country behind him, the budget statement is meant to inspire confidence in markets both financial and political.

As far as this year’s budget statement goes, does it draw confidence from its intended audience? Who are the winners and losers? This being an election year (the midterm elections are scheduled for May 2013), are there any red flags or curious things to watch out for?

Let us first examine the figures.

Beginning with the bit aimed at financial markets, the government with its fiscal program for 2013 seeks to spend just over two trillion pesos, a jump of about 160 billion or 9.9% from 1.84 trillion in 2012. This level of expenditure will be financed by revenues that are expected to rise from 1.6 trillion in 2012 to 1.8 trillion in 2013, a growth of 14%, and borrowing or deficit spending that is set to go down from 280 billion to 240 billion in the same period, a decline of about 14%.

Expressed as a share of GDP (the value of all goods produced within the country), expenditures will rise from 16% of GDP in 2011 to 16.9% in 2013. Revenues are also set to rise from 14% of GDP to 14.9%. The deficit is set to go down from 2.6% of GDP in 2011 to 2% in 2013.

Relative to the budget position of rich countries, the fiscal program in the Philippines is sure to inspire confidence in bond markets as the deficit-to-GDP ratio will be less than half that in the OECD whose deficit-to-GDP ratios averaged 6.3% in 2011 and are projected to be 4.2% in 2013.

Given that the government’s total debt-to-GDP ratio went down to just under 51% in the first quarter of 2012, it is likely that it might go down further to below 50%, which would be crucial in gaining the coveted investment grade rating from credit agencies. Compared to the rich countries of the OECD whose debt-to-GDP ratios averaged 97% in 2010, the Philippine public sector looks a lot more solvent indeed.

So now let us turn to political markets and see how next year’s budget seems to fare. It is worth comparing budgeted levels in 2013 to that of previous election cycles. Back in 2010, expenditure levels were exactly at the same level compared to what they are proposed to be in 2013—that is, they were 16.9% of GDP. The same goes for 2007, the last time mid-term elections were held.

Incidentally in that year, the budget was practically balanced. Had the global financial crisis not followed, the government might have been achieving surpluses afterwards. It was the stimulus spending of subsequent years combined with weaker revenues that caused the government to incur deficits which have carried over until today. In 2004, a presidential election year, the expenditure to GDP level was at its highest over the past decade at 17.5%.

So is next year’s budget an election budget? Is it geared to win or buy votes for the administration? On the face of it, it would seem that the spending rate is at par with other election years. The 2004, 2007 and 2010 election spending by the Arroyo government earned the ire of the then opposition for what they said were blatant attempts to divert money into the ruling party’s campaign kitty. So could the same thing happening again?

First let us have a look at where the money is meant to go. The profiles of the 2012 and 2013 budgets are shown below. We can clearly see from this that from year to year, the structure hardly changes although next year’s budget goes up by 240 billion pesos. The shares of spending for defence (14%), debt (17%), and general expenses (17%) are down by one percentage point each from their 2012 ratios. Meanwhile the share received by social services goes up by 1% point to 35% and that of economic services (transport and public works) by 2% points to 26%.

The ‘doughnut’ chart shows how the additional spending is split across portfolios. Social services receive the biggest increase with an additional 85 billion pesos allocated on top of its budget this year of 613 billion pesos. Economic services receive the next biggest share of about 72 billion on top of the 439 billion from 2012. General services get 26 billion more on top of its current 320 billion, while defence gets an additional 3 billion above its current 87 billion. Net lending (currently at 23 billion) and debt repayments (at 333 billion) each go up by 4 billion and 1 billion respectively.

In terms of which departments get the largest growth in their budgets, the Department of Education sees the biggest growth of 54 billion pesos. Public Works follows with 27 billion. Third comes the Department of Interior and Local Government with 21 billion followed by National Defence with 14 billion. The Department of Agriculture comes in fifth with an additional 13 billion followed by the Health with 11 billion. Rounding out the final four are Finance with 9.6 billion, Social Welfare with 7.4 billion, Environment with 6.2 billion and Transport with 2.4 billion.

The president announced in his SONA that his administration would seek to clear the backlog of classrooms to provide sufficient facilities to public school pupils. This was in line with the K-12 reform which increased the years of secondary school by two while providing universal kindergarten classes at the primary level. It appears that his budget delivers on that.

He also announced the completion of repairs for all paved roads nationally. The procurement of guns for police and of modern equipment for the armed forces also featured in the SONA. The same goes for the improvement of irrigation for agriculture and health coverage of the government insurance system. The Pantawid Pamilya continues to be ramped up which is evident in the figures, and the same can be said of community based forest protection. Finally, the task of getting NAIA-1 refitted and NAIA-3 operational was raised.

So in terms of this budget being meant to win votes at the next election, if the president intends to show that his administration’s ticket deserves the support of the electorate on the basis of his government’s delivery of promises, this budget might be seen as a way to address that.

Other notable things about this coming year’s proposed budget include: an increase of the capital outlays for the compensation of land owners under the Comprehensive Agrarian Reform Program with Reforms by 100% from 2.5 billion pesos in 2012 to 5 billion in 2013; a similar increase of subsidies to government owned and controlled corporations by about 114% from 20 to 42 billion pesos; and a ten billion peso fund to provide performance based bonuses to civil servants.

The increased CARPeR funding is in line with the government’s target of completing land distribution by 2014 when the program ends. The increased subsidies to GOCCs and bonuses to government executives is a curious thing given how the president earlier decried the massive waste incurred by these firms which led to a ballooning of subsidy paid to them and the bonuses executives paid themselves as their firms suffered losses. I could be proven wrong, but it appears that the same could be occurring here.

It would be interesting to see just where these subsidies are going and how successful the bonus scheme is in its first year. Allowing government agencies to take a hit financially could be a way of avoiding the political fallout if fees and other charges were otherwise increased to cover the cost of service delivery adequately. In this sense, one might characterize this increased support to GOCCs as pandering to the electorate.

The question then becomes what the government intends to do after the elections. Will it seek to claw back some of these losses by increasing fees and charges to what they ought to be? In that sense, shouldn’t the administration be up front with the public instead rather than try to deceive them? The budget statement is silent on these matters despite the glaring deterioration that seems apparent among GOCCs.

At the end of the day however budgets do very little to give incumbent governments a boost, at least a lasting one. Previous budgets under the Arroyo presidency prove this point. Despite the massive infrastructure program and social insurance expansion undertaken from 2007 to 2010, very little improvement in its standing with the public occurred.

The fact of the matter is expanding the budget is fine for as long as the economy keeps growing briskly. Both financial and political markets will accept that the government has to do its part in maintaining the country’s growth trajectory. For as long as revenues are able to keep up with the expanded services, that is.

And this will be the biggest challenge moving forward. In the past, government revenues have not kept pace with growth in the economy. This was due to a range of factors, from technical smuggling of petroleum products, to the non-indexation of sin taxes, to the erosion of the revenue base by granting tax exemptions to targeted voter and interest groups.

This is where the administration could break with tradition: if it makes signing up to new tax measures a condition for its support to allied parties in Congress. That way it becomes less a marriage of convenience and one of principled politics. Candidates under the ruling coalition or alliance should be asked to commit, to sign an agreement to that effect.

Although the budget for 2013 won’t depend on new revenue measures like the mining tax, sin tax indexation and rationalization of fiscal incentives, future budgets and the fulfilment of the president’s agenda towards the latter half of his term will. It is incumbent upon the president to now forge a fiscal compact that guarantees his social contract with the Filipino people. How successful he is in doing this in an election year will prove just how skillful a leader he is.

Aquino hard-put to fill 5,000 top gov't posts

Aquino hard-put to fill 5,000 top gov’t posts
By Robert Gonzaga, Inquirer Research, Inquirer Central Luzon
Philippine Daily Inquirer

APPOINTMENTS TO GOVERNMENT POSITIONS are not being made fast enough because President Aquino is hard put to find “good people” to take on public service.

Speaking with reporters at the Subic Bay Freeport Zone, the President said he was giving priority to certain government-owned and -controlled corporations (GOCCs) as well as government financial institutions because of “a sense of urgency as we discover that there are transactions that are still being attempted to be pushed through.”

He said an obstacle that his administration was facing in filling up critical positions was “the difficulty of finding good people.”

As many as 4,301 executive and management appointees, as well as over 50,000 rank-and-file employees, were coterminous with President Gloria Macapagal-Arroyo.

Mr. Aquino has been swamped with applications from persons wishing to join his administration since a month before he was sworn into office.

“We have to find people who will work on our platform and not continue the age-old and wrong platforms,” said Mr. Aquino, whose campaign battle cry was “Kung walang corrupt, walang mahirap (No corruption, no poverty).”

“The problem is, it’s no joke to enter government service. Your salary will go down, while criticisms will multiply. It’s difficult to convince good people to fill up these positions,” he said.

A Commission on Audit report puts the number of GOCCs at 601.

So far, Mr. Aquino has appointed Daniel “Bitay” Lacson and Cristino “Bong” Naguiat as chairs of the Government Service Insurance System and Philippine Amusement and Gaming Corp., respectively, and Jose Honrado as chief of the Manila International Airport Authority.

Among the other GOCCs are the Bases Conversion Development Authority, Clark Development Corp., Cultural Center of the Philippines, Home Development Mutual Fund, John Jay Management Corp., Laguna Lake Development Authority, Land Bank of the Philippines, Light Railway Transit Authority, Lung Center of the Philippines, Manila Waterworks and Sewerage System, National Electrification Administration, Philippine Ports Authority and Social Security System.

The President was in Subic, Zambales, on Friday to inaugurate the Philippine National Police’s School for Values and Leadership.

He said there would yet be no changes in the top positions of the Subic Bay Metropolitan Authority (SBMA), including its board of directors.

“We have not reached the SBMA yet. In truth, I’d like to repeat, there are something close to 5,000 positions [to fill up]. And I have to appoint people up to director level,” he said.

However, Mr. Aquino said he had found someone to take the helm of the Metro Manila Development Authority. But he refused to divulge the appointee’s identity.

Asked to comment on Mr. Aquino’s remarks, SBMA Administrator Armand Arreza said: “Well, we hope that the President allows us to finish our term. But of course we serve at his pleasure. If the President [wants a change in the SBMA leadership], of course we will accede to his request.”

Dick Gordon

Arreza’s term as administrator, like that of SBMA Chair Feliciano Salonga, began on Sept. 23, 2005, and ends on the same date in 2011.

Asked Saturday by text message if he was considering appointing to the SBMA ex-Sen. Richard “Dick” Gordon, one of his defeated rivals to the presidency, Mr. Aquino replied: “Haven’t gotten to it yet.”

Gordon said at a press briefing early in June that he was not selling himself to Mr. Aquino in the hope of getting an appointment.

“I love my country,” he said. “If I can be of assistance, why not? But I will not lobby aggressively. I did not lobby for any position with [then President Arroyo].”

Gordon, who served as tourism secretary in the early years of the Arroyo administration, is covered by the yearlong ban on appointments of defeated candidates in the elections.

When pressed to name a post he would like, Gordon, a native of Zambales, said: “If I am given a chance, I would prefer the SBMA. If Noynoy (Aquino’s nickname) feels I can be of service, fine, I’d think about it. I’d be honored to be given the chance, but I will not lobby for it.”

Gordon is credited with transforming the former US naval base in Subic into a free port and investment hub. With a report from Gil C. Cabacungan Jr.

BSAIII action plan on corruption

A Social Contract with the Filipino People

[scribd id=33543595 key=key-xy1sy29knppf6ju2h99 mode=list]
Action Plan on Corruption

Corruption is the main cause of poverty in the country and the reason why Filipinos have lost trust in government. Noynoy Aquino believes that corruption is not part of our culture and that Filipinos are honest, decent, fair and hardworking. Honest and competent public officers and a professional and accountable civil service supported by active people’s participation will remove corruption and restore trust in government.

As President, Noynoy Aquino will lead the fight against corruption and restore trust in government.

  • Noynoy Aquino will appoint public officials based on their integrity, qualifications and performance record and will hold them accountable to the highest ethical standards of public office.
    • As required by law, all Department Secretaries, Heads of Agencies, and senior officials from Director to Undersecretaries will be required to have their Statement of Assets, Liabilities and Net Worth (SALN) available and accessible to the public.
  • An Aquino Administration will ensure transparency and citizen’s participation in crafting and implementing laws, rules and regulations and in monitoring the programs, projects and transactions of government.
    • Uphold the people’s right to information on matters of public concern and support the enactment of the Freedom of Information Bill in Congress.
    • To enable citizens to help stop corruption, information about the government’s budget shall be organized, packaged and distributed to the media regularly and posted in the internet so the public may know, understand and monitor how their money is spent.
    • Strengthen people’s participation with simple and clear procedures for citizens to monitor all government projects and report their feedback through accessible means.
  • Strengthening the Department of Justice (DOJ) and the Office of the Ombudsman will be a top priority in the campaign against corruption. We will fully implement the recently passed Prosecution Service Act in order to strengthen the national prosecution service, attract qualified lawyers, and institutionalize a more effective witness protection program while improving training and equipment.
  • Ensure the independence of the Office of the Ombudsman by appointing a competent and credible Ombudsman who will be true to the mandate of the office and will pursue unresolved cases of corruption and human rights abuses committed by public officers.
  • An Aquino Administration will put into place a “zero-based” budgeting system to enhance transparency and improve efficiency.
    • Budget allocations for the different agencies of government will be shaped by their performance and their compliance with the reports of the Commission on Audit (COA).
  • Noynoy Aquino respects the professional bureaucracy and will establish ways to motivate and energize the professional bureaucracy.
    • Qualification standards, especially on eligibility, will be strictly followed, and at least half of the positions of Undersecretaries and Assistant Secretaries will be filled by honest and competent career civil servants to ensure continuity and sustainability of effective policies and programs.
    • Government offices will be streamlined and rationalized so that agencies have clear cut and distinct mandates in order to spur greater efficiency and accountability.
    • Performances of government agencies and civil servants will be evaluated rationally and systematically through an effective and measurable performance management system to be approved by the Civil Service Commission (CSC).
    • The Civil Service Commission (CSC) Performance Management System-Office Performance Evaluation System (PMS-OPES) will be linked with the DBM Organizational Performance Indicator Framework (OPIF) to ensure accountability of government agencies and officials.
    • Review the mandates and performance of government agencies and Government Owned or Controlled Corporations (GOCCs).

[Archived from the official campaign web site of President Benigno S. “Noynoy” Aquino III]