1 FEBRUARY 2009

pcij.org


us your views and comments about this article.

Or discuss it in our blog.

SEE ALSO

RELEVANT DOCUMENTS

RELEVANT LINKS

MINDING MINING

CROSSBORDER

SPECIAL REPORT

PUBLIC EYE

PERSPECTIVE

FIRST PERSON

2015 OR BUST?

HIMIG PINOY

MAD OVER MONEY

2007 FEATURES

PUBLIC EYE

CROSSBORDER

2006 FEATURES


 i    R E P O R T  —  PHILIPPINE BUDGET PROCESS: LESS AND LESS TRANSPARENT


GAPS EVERYWHERE
The Survey does show worldwide transparency gaps:

  • Only five countries of the 85 surveyed—France, New Zealand, South Africa, the United Kingdom, and the United States—make extensive information publicly available as required by generally accepted good public financial management practices. These countries all score above 80 out of a possible 100 points on the Open Budget Index 2008
  • Twenty-five countries surveyed provide scant or no budget information. These include low-income countries like Cambodia, the Democratic Republic of Congo, Nicaragua, and the Kyrgyz Republic, as well as several middle- and high-income countries, such as China, Nigeria, and Saudi Arabia.
  • Less transparent countries share similar characteristics. The least transparent countries are mostly located in the Middle East and North Africa (with an average OBI score of 24 out of 100), and in sub-Saharan Africa. The worst performers tend to be low-income countries and often depend heavily on revenues from foreign aid or oil and gas exports.
  • Many poor performers have weak democratic institutions or are governed by autocratic regimes.
  • Lack of transparency undermines accountability and prevents participation. Almost all countries publish the annual budget after it is approved by the legislature. The exceptions are China, Equatorial Guinea, Saudi Arabia, and Sudan, where the approved budget is not published, completely preventing the public from monitoring its implementation.
  • Most countries provide much less information during the drafting, execution, and auditing stages of the budget process. This prevents the public from having input on overarching policies and priorities, improving value for money and curbing corruption.
  • Weak formal oversight institutions exacerbate the situation. In the majority of countries surveyed, legislatures have very limited powers, time, and capacity to review the Executive’s Budget Proposal and monitor its implementation.
  • In many countries the supreme audit institutions do not have sufficient independence or funding to fulfil their mandate. Often, too, there are no mechanisms in place to track whether the executive follows up on audit recommendations.
  • Immediate improvements are possible. Comparisons between the OBI results for 2006 and those for 2008 show that some countries have started to improve their budget transparency over the past two years. In Croatia, Kenya, Nepal, and Sri Lanka, significant improvements either were influenced by the activities of civil society groups or have created opportunities for greater civil-society interventions. Important improvements in budget transparency were also documented in Bulgaria, Egypt, Georgia, and Papua New Guinea.
  • There is evidence that good performance can occur in challenging contexts: Jordan and South Africa stand out among their regional counterparts. Among lower-income countries, Peru and Sri Lanka both provide their citizens with a significant amount of budget information.
  • Progress could be made elsewhere quickly and at relatively low cost, given sufficient political will. Many countries that perform poorly are already producing much of the budget information required for good practice. By making this information available to the public, these countries would increase their OBI scores and consequently, would encourage effective oversight and improve accountability.

URGENT ACTION
In light of the Survey's findings, the IBP called for urgent action to improve budget transparency and accountability. In particular, it exhorted:

  • Governments to make publicly available the budget information that they already produce. In all those countries where information is produced but withheld from the public, governments should immediately release it.
  • International financial institutions and donors to encourage aid-recipient governments to make publicly available the budget information they produce for their donors or internal purposes.
  • Civil society to publicize and demand explanations for instances in which governments do not make publicly available the budget information they produce for their donors or internal purposes.

SIDEBAR
P50-B 'economic stimulus fund' also 'election stimulus fund'?

WORRY HAS taken over advocates of budget reform in Congress and civil society groups as the recently ratified budget bill for 2009 comes closer to becoming law. As they see it, crafty tricks have marred the preparation of the bill, which could so readily transform into a political tool for the Arroyo administration to influence the May 2010 elections in its favor.

Any time now, President Gloria Macapagal-Arroyo will be signing into law the enrolled bill that provides for P1.4-trillion national budget for 2009, including a P50-billion “economic-stimulus fund” that critics have tagged derisively as an “election-stimulus fund” for her political allies.

For one, the Alternative Budget Initiative (ABI), a consortium of 60 non-governmental organizations into budget reform advocacy, decries the secrecy behind the reconciliation of the Senate and House of Representatives versions of the 2009 budget bill.

As well, the ABI rues the existence of too many lump-sum appropriations and huge increases in budget items that are highly discretionary and typically prone to corruption.

University of the Philippines Professor Leonor Magtolis-Briones, lead convenor of Social Watch Philippines that initiated the ABI, points to a P17-billion increase in the budget for infrastructure under the Department of Public Works and Highways (DPWH), which is perceived to be one of the most corrupt government agencies.

“We’re worried that in place of stimulating the economy, we will be titillating and stimulating the victory, the re-election of favored congressmen,” Briones says.

“Considering the many scandals the DPWH has been involved in, the possibility of funds going to corruption is terrifying,” adds Briones, who had served as national treasurer under the presidency of Joseph Estrada.

Briones views as mind-boggling another item in the 2009 budget: the P10.7-billion additional amount that the Senate approved as part of the “economic stimulus fund.”

“An economic-stimulus fund is supposed to stimulate the economy, but what we see is a listing of projects with no clear details of where these projects are going to be held, like a line on food production,” she says. “You can put anything in food production. There’s a line on Kabataang Pinoy. How many Kabataang Pinoy are there and where they are?”

“A mere listing would really be an open invitation, or it will be like a P10.7-billion blank check to be given to the executive (department) for spending supposedly to stimulate the economy,” says Briones.

Outgoing Senator Pia Cayeteno, previously an Arroyo ally, also cannot help but compare the P50-billion “economic stimulus fund” of the Arroyo administration to the $825-billion package of U.S. President Barack Obama to raise domestic productivity and bail out sectors most vulnerable to the global financial crisis.

Cayetano notes, though, that Obama’s package lays down a comprehensive economic recovery plan with precise targets to create three to four million jobs, invest in clean energy development, education, and improving health care efficiency.

In contrast, the Arroyo government’s bailout plan comes in the form of lump-sum allocations for “nebulous” programs that do not outline specific objectives, she says.

Moreover, Cayetano laments that while Obama has indicated willingness to be fully accountable for every single item under his bailout fund, accountability seems to be farthest in the minds of lawmakers who crafted Arroyo’s economic-stimulus package.

“The (P50-billion) fund did not even provide clear guidelines for spending billions of taxpayers’ money, and is therefore vulnerable to wastage, misuse or worse, corruption, especially with the 2010 elections fast approaching,” she stresses. “My worst fear is that instead of improving the economy, this will actually achieve the reverse.”

For his part, opposition Rep. Teofisto Guingona III finds the P35-billion cut in the interest payments for debts rather anomalous.

The bicameral conference committee of the House and the Senate reduced the executive's debt service proposal by P35.3 billion, or from P287.8 billion to P252.5 billion. The bicameral committee’s reduction is in addition to the P14.77 billion cut in debt service that the House had approved earlier in its version of the general appropriations bill.

The two incidents of reduction effectively reduced the debt service item in the 2009 budget bill by P49.77 billion, an amount that lawmakers promptly realigned to support their pet projects and other lump-sum items.

Under an unrepealed decree (Presidential Decree 1177) of the late strongman Ferdinand Marcos, debt-service payments are classified as automatic appropriations in the national budget that lawmakers can neither reduce nor realign.

Guingona fears even worse results if Arroyo vetoes the realigned amounts from debt service, but still restores the original debt service payment of P302.65 billion in the 2009 budget.

The big question is whether the president would keep the realigned funds amounting to nearly P50 billion, and in the process effectively increase the total budget by as much.

In 2008, when she vetoed the cuts legislators made in the debt service portion of the budget. Arroyo had said: “It has been eight years since a president vetoed any provision for debt service-interest payments. Much as I bemoan this act, I, as president, have to assert the rule of law and hereby veto the entire item of appropriations….indeed the constitutionality of treating debt service as automatically appropriated is both established and unequivocal. Servicing of public debts, whether foreign or domestic is automatically appropriated to ensure that the required amounts are available when they become due.”

At the time, Arroyo also noted “with grave concern” a provision that lawmakers had enrolled “prohibiting disbursement of funds for interest payments on challenged, fraudulent, wasteful and/or useless debts pending renegotiations and/or condonation thereof.”

Nonetheless, she argued, “(While) Congress may have been impelled by the best of intentions, this restriction is a clear encroachment of the constitutional guarantee on non-impairment of contracts.” — Tita Valderama/PCIJ

Email us your comments about this article, or post them in our blog.

Copyright © 2009 All rights reserved.
PHILIPPINE CENTER FOR INVESTIGATIVE JOURNALISM