Business World, 6 May 2014


There is near certainty that the executive abuses under the existing budget process that President Benigno Aquino III inherited from his predecessor (Gloria Macapagal-Arroyo) would be passed on to his successor. Paradoxically, these are the same abuses that Mr. Aquino and his Liberal Party mates (Mar Roxas, TG Guingona, Joseph Emilio Abaya, and Riza Hontiveros) lambasted, condemned and tried to correct when they were in Congress. As Senator, Mr. Aquino filed the Budget Impoundment and Control Act (BICA) to curb the abuses of Mrs. Macapagal-Arroyo as she boldly rearranged several budgets after Congress approved them.

Now that Aquino is conveniently installed in Malacañang, he could have pursued his well-intentioned quest for reforming the budget process. But instead of pushing the game-changing BICA, he did exactly what his predecessor did and worse — he rearranged the budget in the form of the Disbursement Acceleration Program (DAP).That makes him a traditional politician rather a reformist.Mr. Aquino has embarked on a number of budget reforms (see list below). Some are serious and worthwhile though not too novel. Others are whimsical and not too worthy. Still, others are politically motivated — makes good politics but does not necessarily lead to better allocation of resources.

An important budget reform that is missing in the list is the proposal to limit the power of the President to impound appropriations, namely: An Act Regulating the Power of the President to Defer, Rescind, or Reserve Expenditure of Appropriations Authorized by Congress. This is true test of Mr. Aquino’s commitment to budget reform in the light of alleged abuses of the power to augment by the Executive Department.Impoundment refers to the refusal of the President to release funds authorized by Congress. Such power is subject to abuses as alleged by complainants in the DAP case.Ironically, when they were Senators, both President Aquino III and Interior and Local Government Secretary Roxas, supported a version of the budget impoundment control act. Then Senator Aquino filed Senate Bill 2995, ‘The Budget Impoundment Control Act” while then Senator Roxas filed Senate Bill 2995, “Budget Impoundment Control Act” and Senate Bill 2996, “Budget Reform Act of 2009.”

Now that both are in a position to push for this game-changing budget reform, they have decided to keep mum. What a difference a change in position makes! The political reality is that for traditional politicians, there is no policy consistency — their stand on key issues changes depending on where they sit.


Based on Mr. Aquino’s Budget Messages, below is the list of his major budget and revenue reform programs.
1. Fiscal Responsibility Act (FRA)
2. Public-Private Partnership (PPP) initiative
3. Zero-Based Budgeting (ZBB)
4. Rationalization of budgetary support to government-owned and controlled corporations
5. Raising revenues
6. Performance Challenge Fund
7. Harmonization of national government performance monitoring, information and reporting systems
8. Performance Budgeting Approach (PBA)
9. Bottom-up Budgeting (BUB)
10. General appropriations act (GAA) as basis for obligational authorityFirst, of the 10 major budget reform proposals, the following needs legislation: FRA and the PBA. While the FRA is an excellent measure that would foster fiscal discipline and public accountability, it has not progressed much in the legislative mill.The PBA is not novel. It has been preceded by many measures in the past: from Synchronized Planning-Programming-Budgeting (SPBB) during the time of Corazon Aquino to the Medium-Term Expenditure Framework (MTEF) during the time of Estrada and Arroyo. The MTEF is complemented by the Organizational Performance Indicators Framework (OPIF) which were introduced in 2000 and in the next successive budget calls (2001 and 2002).

Second, the PBA has been prematurely applied in 2014. A new budget law prescribing a new form and format has to be passed to make the budget reform sustainable. The desire to have multi-year, performance-based budgeting has been in the works during the last 15 years. But it has been purely an executive initiative. For the reform to take root, achieve legitimacy, and be sustained after Mr. Aquino’s term, it requires the approval of a law prescribing the form and content of the budget to incorporate the proposed changes.


The reform was to be reflected in a new budget format for 2014, when Annex A (Volumes 1 and 2) supplemented the 2014 National Expenditure Program (NEP). It was clear that the new budget format was rushed.The agency’s major final outputs (MFOs) and performance indicators were uneven in quality, adequate for some, insufficient for many, and totally absent for some. Congress did not really know what to do with the Annex. In the final analysis, Congress focused on the NEP, and practically abandoned Annex A (Volumes 1 and 2).Since inconsistencies between the NEP and the Annex A cannot be ruled out, the General Provision of the GAA states:

“Section 3. Details of the FY 2014 Budget. The details of the budgetary programs and projects authorized herein, attached as Annex A (Volumes 1 and 2) “Details of the FY 2014 Budget” shall be considered an integral part of this Act. Said amounts and details should be consistent with those indicated herein. In case of discrepancy, the amounts provided herein shall be controlling (italics supplied).

Third, the Public-Private Partnership (PPP) initiative has not taken off in a big way. The PPP modality is not novel — it is an old wine in a new bottle. It was extensively used during the early years of the Fidel Ramos presidency, when he had to address the lack of power in the country.

The huge infrastructure gap for the Philippines is widely recognized by international financial organizations, policymakers, economists and the general public. Among ASEAN-6 countries, the Philippines had the second poorest quality of public infrastructure. Out of 144 countries, the Philippines ranked 98 while Vietnam ranked 119 in overall quality of public infrastructure.

Sadly, Mr. Aquino’s performance in implementing PPP projects has been dismal. After almost four years, only eight PPP projects have been awarded. The first and smallest project (the Daang Hari Highway) is only one-third complete.

Continue to Part 2 here.