Core
Business World, 6 November 2013

 

The Disbursement Acceleration Program (DAP) is being trumpeted as quick disbursing — a major boost to economic growth. But when is a fiscal stimulus truly effective? When, through higher government spending, or major tax cuts, aggregate demand is stimulated, preferably through higher consumer spending and temporary job creation.

The important thing is there has to be new, additional spending. When funds are siphoned off from slow-moving projects into fast moving projects, but there is no significant increase in spending, the stimulating effect would be limited.

Assume a P2-trillion budget, with roughly P250 billion for infrastructure projects. If only one half of the infrastructure budget (P125 billion) were sequestered, declared as “savings” then released for new expenditure items, what would be its impact on the economy?

It depends. If spent as a cash grant to the poorest of the poor, it would have maximum impact. Consumer spending could have a multiplier of roughly five. 

The stimulative effect of public works projects would depend on whether the projects are small-scale rather than large-scale, labor-intensive rather than capital intensive, and implementation-ready or not. As part of the DAP, P5.5 billion was released to Department of Public Works and Highways (DPWH). The amount is supposed to be spent for the construction and rehabilitation of roads, bridges, flood control and other projects which have been damaged in the recent typhoons. These projects are supposed to have a completed program of work, and many are quick-disbursing projects below P40 million. Yet by the end of 2011, there was zero disbursement, hence no impact of economic growth. 

P1.1 billion was released to the Technical Education and Skills Development Authority (TESDA). As of end-2011, only P72,000 has been spent. Of the P10.4 billion allocated for peace and development, P9.48 billion remained unspent. 

A large number of the DAP releases went to quick-disbursing but not job creating activities, such as those that went to the Bangko Sentral ng Pilipinas (BSP), National Housing Authority (NHA), the Metro Rail Transit (MRT), and Quezon Province. Special Allotment Release Orders (SARO) released to government corporations and local governments are considered disbursed but they do not necessarily translate into higher outputs until new projects get off the ground.

As part of the DAP, P750 million was released to the province of Quezon which in turn used it to settle the tax liabilities of the National Power Corp. (Napocor). It was quick-disbursing but was it fiscally stimulating? It improved the financial picture of Napocor, but how many new jobs were created? Nada. (None.)

As part of DAP 2011, P10 billion was released to the BSP as equity contribution of the national government. As a result of the transaction, the bottom line of BSP improved. But how many new jobs were created? Nada.

As part of DAP 2011, P4.5 billion has been released to the MRT for the purchase of train cars. Since these cars will be imported, jobs will be created abroad not at home, so how can the deal stimulate the economy? Worse, I think these cars have yet to be purchased. 

All the above examples plus more cast serious doubts on Malacanang’s claim that the DAP contributed to spurring growth in the fourth quarter of 2011. In fact, the Philippine economy grew by a measly 3.7% in the fourth quarter of 2011.

More importantly, have the above-mentioned expenditure items, plus all the other releases from the DAP, passed the litmus test of constitutionality, which is: were the programs, projects and activities funded by DAP part of the 2011 general appropriations law?