Crossroads (Toward Philippine economic and social progress)
Philippine Star, 15 January 2014


Last week , my business column colleague, Boo Chanco, wrote that a local expert familiar with DOTC (Department of Transportation and Communication) operations told him, not surprisingly, “Boo, not only is the DOTC full of lawyers trying to believe they understand the technical concerns, it is also full of incompetent technical personnel.”

A development problem. The problem described above is not confined to one department of government. It is true for a greater number of government agencies as well .

The comment might also be descriptive of the country’s development problem. There is circularity in the way events unfold. Bad service is caused by poorly qualified employees. And unqualified employees produce bad service because they make bad decisions.

In the particular case of infrastructure agencies where competence is wanting, poor service results in the form of imperfect contracts with third parties; delays in implementations of the work; poor specifications or poor supervision during implementation of otherwise good specifications; and, in general, mismanagement of resources.

There is a further aggravation. When skills are inadequate, it is but a short bridge to corruption and other malicious outcomes. Worse could be the aftermath if the agency were likewise is headed by an ill-equipped person in authority.

Two constraints. Paying market-based salaries for highly skilled personnel is hampered by the size of the government payroll and the limited amount of tax revenues. This budgetary arithmetic asserts that innovative approaches to single out specific agencies or personnel would ruin budgetary discipline. This is an excuse that the budget authorities use to control expenditure.

A second constraint is based on rules of “fairness.” Job classification and wage standardization have been put to use so as to make sure that all government workers are rewarded according to the dictum, “equal pay for equal work.” The civil service authorities assert this principle: the need for standardization and the improvement of the treatment of all government servants through position classification.

Despite all these demands for equity and budgetary discipline, it is a fact that the failure to have properly qualified personnel in the right amount for some agencies could undermine their achievements. Sometimes, these agencies could have a major impact on the success or failure not only of their own internal operations, but they also undermine the work of other agencies as well.

This is a fact that should be borne in mind when blanket principles are invoked to create uniform rules for the hiring of government employees. The problem of retaining highly scarce personnel among government officers is a persistent one.

This problem should be considered as serious for as long as the structure of government salaries remains hampered by budgetary limitations. If streamlining government pay and civil service cannot be given an integral solution, recognition of the specialized approach to critical personnel and agencies is necessary

Solving the constraints: examples of the BIR and the BSP. Two outstanding examples of creative solutions to the improvement of pay in very specialized and important government agencies are discussed below.

The first case which is with reference to information technology personnel is almost four decades old. The second case is that of the central bank (BSP) is almost as old as our independent republic. The BSP is the only institution of government that has without question more absolute control over personnel policy.

The BIR’s computer system and personnel. In the case of the computer personnel at the Department of Finance, then Finance Secretary Cesar Virata organized a corporation to stabilize the pay for information technology personnel working on the computerization needs of the Bureau of Internal Revenue (BIR).

The new corporation acquired assets to undertake continuous computerization work in tax collection. The salaries of personnel were made competitive with those in the private sector. The end result of the effort made it possible for the computer experts of the BIR to build a career within the agency.

The reason for having this corporation, owned and operated by the government, through the officers of the BIR and the Department of Finance, was to avoid the exodus of workers from the corporation and also to attract new, well-trained computer experts.

When Bienvenido Tan was appointed to the post of BIR commissioner under Cory Aquino, he initially suspected that this corporation was up to something wicked and threatened to close it. When he consulted Cesar Virata, the latter explained that the corporation was set up to stabilize the supply of competent personnel to operate the agency’s computer system and to assure that strong internal controls were in place concerning the confidentiality of tax returns.

As a result of this, Tan decided to keep the corporation to run the BIR’s computerization of the tax system as well as assure the presence of competent personnel to manage the computers of the bureau.

Bangko Sentral in the human resources market. From the very beginning, the government gave the central bank wide-ranging powers to set its own human resources personnel policy. When the central bank was restructured in the 1990s, this same principle was involved.

The Bangko Sentral has a wide need for all types of skills – lawyers, banking supervisors, economists, accountants, and so on. When the BSP’s new charter was adopted after the economic crisis of that period, the same principle of independence in human resources matters were kept. The BSP could continue to devise its own personnel policies.

Under the old charter of the central bank, the institution could set the pay and salary system of personnel. This exceptionalism in favor of this institution concerning salary and incentives system for personnel of the central bank was continued.

The restructuring of the central bank under the BSP follows the same principle of control over the human resources policies affecting personnel in the bank. The pay of its personnel is competitive with those found in the private sector. The management of the bank has control of its budget and can undertake changes in salaries and wages of its personnel.

(Next week: How the government solved the problem for critical agencies and backslid again.)