A RUBBER STAMP
Felipe Medalla, former dean of the UP School of Economics who also served as NEDA head, commented later at a forum: “What he (Neri) said about the NEDA process was very disappointing. His statement that NEDA was not looking at the financing side was a total distortion of what it should be doing. Although I admired him for testifying against Abalos, he did present NEDA as a rubber stamp.”

	AHI partner Jose de Venecia III names First Gentleman Jose Miguel Arroyo as the ‘mystery man’ who told him to back off from the NBN-ZTE project, at the Senate hearing in September 2007. [photo courtesy of Senate website]

Medalla could be in for more disappointment. According to Lozada, the information technology expert who helped Neri evaluate the NBN deal, Neri was aware of, and even abetted demands for, bribery in the project. Lozada says bribes amounting to $130 million accounted for half the project’s original cost of $262 million. The project cost has since risen to $329 million.

“His instruction to me was very clear. Sabi niya, ‘Jun, you moderate their greed,’” Lozada said in a press conference conducted in the wee hours of Thursday last week. “I was naive to accept that order. I do not know what moderating greed means, but I followed Secretary Neri.”

From evaluating government projects to “moderating greed,” the role of NEDA and the economic planning secretary has evolved in ways that may shock its former officials. Among them is Ruperto Alonzo, a former NEDA deputy director-general, who says that until the 1990s, NEDA staff refused to entertain phone calls from officials of implementing agencies, instructing them instead to communicate in writing. He himself “was hiding every so often from consultants of implementing agencies.”

The transformation in NEDA’s role was not sudden. Long before the NBN project, the Arroyo administration had been moving to give implementing agencies more power to approve big state projects, without going through the strict but often time-consuming evaluation process of NEDA and the Investment Coordinating Committee (ICC).

CLIPPED POWERS
Early last year, Arroyo proposed new BOT law implementing rules that would diminish NEDA-ICC’s powers in approving infrastructure projects funded and implemented by the private sector. Under these rules, which ostensibly aim to hasten the BOT evaluation process, implementing agencies such as government departments, state-owned firms, and local government units would have the authority to approve the projects.

The new BOT rules followed previous moves by Arroyo “to authorize agencies to approve contracts (worth) less than P500 million, except BOT, without going through the NEDA-ICC process, as long as the DBM (Department of Budget and Management) can certify the availability of funds,” according to a March 2005 ICC policy directive.

Malacañang has put off issuing the new BOT rules after multilateral lenders and the foreign chambers of commerce objected to clipping the powers of the NEDA-ICC.

But the erosion of NEDA’s powers and independence continues, with the creation of new Cabinet groupings with powers that overstep those of existing NEDA bodies.

In May 2007, Arroyo issued an administrative order creating the so-called NEDA Cabinet Group that makes major economic decisions, including the approval of proposed projects, in between the monthly meetings of the NEDA Board.

She also set up the Pro-Performance System Steering Committee that would monitor and evaluate “all increases in project cost, whether local or foreign funded.” Until then, it was the NEDA-ICC that approved cost increases in foreign-assisted projects, without which the Department of Budget and Management could not release additional funding.

LAX, RELAXED
Tough standards for project approval are being relaxed. In a memorandum issued after the October 9 meeting of the NEDA Cabinet group, Cabinet Secretary Ricardo Saludo told NEDA to review the 15-percent minimum economic internal rate of return (EIRR) required for ICC approval of proposed projects “with the end in view of reducing it.”

Alonzo, who notes that other administrations also had ad hoc economic policy groups, nonetheless warns they create opportunities for “forum shopping” for officials and agencies pushing for projects that do not pass muster with the ICC or NEDA staff.

The erosion of NEDA’s power and independence diminishes the gains made by the agency in recent years to improve the project evaluation system.

Jonathan Uy, public investment staff head, recounts that NEDA has adopted tougher standards in the way the agency approves projects. He says, “Before we were looking at projects as projects. We were looking at the trees. Now, we’re looking at the forest. When you submit a proposal you don’t just justify it as a good project alone. You have to show why it’s a good project in the whole program of things.”

PRESSURE, FUDGED NUMBERS
NEDA personnel tell of being subjected to varying degrees of pressure to tweak project evaluation numbers toward improving projected returns of favored projects.

For instance, members of NEDA’s project monitoring staff working on a Japanese-funded irrigation project in Bohol recall receiving “a suggestion” to count the dam’s beneficial impact on counter-insurgency efforts to boost the project’s returns, which fell below the 15-percent hurdle rate after costs soared by half. (See sidebar)

Roderick Planta, head of the NEDA project monitoring staff, recalls being told by a Cabinet member, “Kargahan n’yo na lang. Ilagay n’yo na lang ang benefits sa counter-insurgency (Just boost the numbers. Include the benefits to the counter-insurgency program).”

The NEDA economist says he refused, since no data or econometric model exists that would help them decide how much monetary value to put on quelling the communist insurgency.

Recounting the incident months later, Planta explains his refusal to fudge the numbers: “We are not blind to that. You can still pass the project even if EIRR is only 12 percent. That’s okay but don’t prostitute the process. It will hurt everybody’s credibility.”