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TOWARDS RAPID, INCLUSIVE AND SUSTAINED ECONOMIC GROWTH?

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...To deepen the reforms we are setting in place; to go one notch higher in
our fight against corruption and our pursuit of good governance,
in poverty reduction, and in employment generation from
inclusive and sustained economic growth.
TOWARDS RAPID, INCLUSIVE AND SUSTAINED ECONOMIC GROWTH?

-President Benigno Aquino III, 2012 Budget Message

On the bright side, the national budget appears to be

the product of an earnest Executive with a laden
Legislative attempting to cut up a small pie among
competing stakes in an overburdened bureaucracy.
Assuming such earnestness in the national
leadership, government priorities and reforms as
expressed through the 2012 budget make much sense.
The national leadership is now talking of Rapid,
Inclusive and Sustained Growth in the most recent
Presidents Budget Message. This Budget Message
appears well-crafted and suggests something beyond
mere talk of the Matuwid na Daan. The national
development agenda may be shaping up to be a
bit clearer with the 2012 national budget
having been recently passed.
However, so much public attention is now directed at
the on-going impeachment probe at the Senate, with
talk of national economic development appearing to
be less attended to. With Supreme Court
Chief Justice Corona being tried
after his impeachment by the
House of Representatives for,
among other things, culpable
violation of the Constitution,
these proceedings are also
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taking precious public resources away from other

pressing national issues and concerns. In fact, it
has been reported that at least 10 million pesos
has already been spent for the trial and estimates
see it bloating even further as the sessions push
on towards March 2012. 1
To some, such spending may appear unnecessary
and rather counter-productive. But to the current national administration, the exercise may be
seen as one of leadership cleansing for the promotion of good governance. The proceedings
could be seen in light of the efforts to promote
a better policy and governance framework for
national development. This is suggested by the
way the most recent Presidents budget message,
and the National Budget itself, has been framed.
Bearing in mind key ideas from said budget
message, especially the underscored need for
good governance, a review of the 2012 national
budget shows that measures or mechanisms
deemed as anti-corruption have been allocated
significant monies along with other items which
are identified as gainers budget items
which got bigger shares in this years
budget compared to that of 2011.

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Of Gainers and Losers

P1.9 billion from the budgets of the Departments

of Agrarian Reform, Interior and Local Government,
Social Welfare and Development, and the Office of
the Presidential Adviser of the Peace Process for the
PAMANA program;

In the bicameral conference committees report presented by Senate finance committee chair Franklin Drilon,
as reported in national media, some agencies and branches of governments allocations
were increased. Most notable of these include:2

P351 million for the House of Representatives for personal services;

P96.69 million for the Senate for the operational requirements of the 5th global conference of the

Global Parliamentarians Against Corruption, and for the repair and construction of conference rooms;

Restoration of P500 million to the Department of Agriculture for irrigation projects;

P100 million as initial funding for newly-created Governance Commission for Government-Owned

and -Controlled Corporations;
P36 million for the Philippine National Police for its Anti-Illegal Drug Special Operation Task

Force, which will be sourced from the budget of the Philippine Drug Enforcement Agency;
P30 million for the Department of National Defense for the payment of a property of the

Philippine Navy in Puerto Princesa City, and,
P25 million for the reconstruction and renovation of the Armed Forces of the Philippines

General Headquarters and buildings at the Philippine Military Academy.

On the other hand, certain budgetary allocations were lowered. Budgets for these offices
were notably reduced to the consternation of some sectorsthe numbers mentioned
are the amounts deducted from their 2011 allocation:3

P697.83 million from the Presidents miscellaneous personnel benefit fund;

P138.3 million from the Payapa at Masaganang Pamayanan (PAMANA) fund;

P224 million from the Department of Health, which was deemed an excess in the fund for senior

citizens vaccines;

P100 million from the Philippine Drug Enforcement Agency; and,

P91 million from the Department of Labor and Employment, which was supposed to be for the

operation of Filipino centers abroad.

P700 million from the Department of the Interior

and Local Government to the Local Water Utilities
Administration for potable water supply for third-level
water systems; and,
P440.6 million from the judiciary for unorganized
courts
Certainly, governments prioritizations as suggested by the
selected items above have generated some critique and
opposition. However, the budget process approval in the
House of Representatives and the Senate of the Republic
went on rather smoothly with only Sen. Joker Arroyo
being the lone dissenting vote in the Senate.
Senator Arroyos disapproval stems, in the main, from the
governments underspending in 2011 which has left more
than P200 billion in unspent funds that Malacaang
could use like a blank check next year.5

On the part of the House of Representatives, the House

Minority Leader, Representative Edcel Lagman, cast a
dissenting vote, saying the appropriations for the
Conditional Cash Transfer (CCT) and for Public Private
Partnerships (PPPs) are inordinately overstated and
excessively funded. Further, he has been cited as saying
Of Priorities and Lone Dissenters
that the amount earmarked for CCT and PPPs should
instead augment appropriations for education, state
The budget process has led to certain realignment of allocations. Amounts from certain agencies or from items within colleges and universities, health, and infrastructure.6
agencies were transferred to other items in the budget, including:4
Related to these dissentions, a reported crucial budget

P1 billion from the Department of Educations capital outlay to the maintenance and other operating policy change came with the Senate and the House

expenses of the kindergarten program and for hiring additional teachers;
agreeing to remove the restrictions on the use of funds
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for unfilled positions by Congress, the judiciary, and

constitutional agencies, which all enjoy fiscal autonomy.
These institutions are, however, required to submit to the
President a quarterly report on how the funds are spent...
Funds for vacant positions were placed in the miscellaneous
personnel benefit fund in the original version of the budget,
but various agencies objected to it.7

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Packaged Priorities: Sectors and Significant Slices

Education and social services are packaged as getting the biggest slices of the national budget
pie. The Department of Education is reportedly P238.8 billion or 15.2% higher than the
previous budget of P207.3 billion. Social Services will get the bulk of the spending pie with
P575.8 billion or 31.7% of the entire General Appropriations Act for 2012. 8
Also included under the rubric of social services, the Public Works Department is
second priority with P125.5 billion, followed by the National Defense with P107.9
billion, the Interior and Local Government with P101.4 billion, and the
Department of Agriculture with P54.1 billion.9

Economic services is at second with P438.9 billion (24.2% of GAA) which shows the
largest growth of 21.3%. Debt service comes third with P356.1 billion, general
public services with P332.1 billion, and defense at P113.1 billion.10
In analyzing these allocations and priorities, it should be noted, however, that the budget for
2012 represents only about 16 percent of the countrys GDP and, furthermore, assumes
allocation for debt servicing and Internal Revenue Allotment (IRA). Net of the IRA and
debt servicing, this budget for 2012 is higher by 20.8 percent over the
equivalent portion of the 2011 national budget.
In other words, the perennial Automatic Appropriations could be seen as the real budget
priority item and it now amounts to P723.6 billion the biggest single slice of the
total 2012 National Budget, net of the Unprogrammed Fund.

Education and social

services are packaged
as getting the
biggest slices of the
national budget pie.

The Presidents budget message points out however that the Sectoral Distribution of our
proposed Budget reflects this administrations priorities. Indeed this sector receives the lions
share of 31.7 percent or P575.8 billion of the National Budget as the Economic Services
sector receives the second biggest share at 24 or about P438.9 billion.
The Debt Burden is supposed to only follows and its share has been reduced by 3.0
percentage points to 19.6 percent or P356.1 billion from 22.6 percent or P372.1 billion.

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Priorities by Expense Classes

By Expense Class, Capital Outlays (CO) is reported to have
increased by 25 percent to about P328 billion, as compared to
its previous budgetary allocation of P262.0 billion. In particular,
Infrastructure and Other Capital Outlays has increased significantly by 33 percent to about P255 billion from about P192
billion. In relation to these, the President has stressed that his
administration will not spend on infrastructure randomly and
with much leakage: rather, in an efficient and targeted manner
that supports our priority economic growth drivers.11

Current Operating Expenditures (COE)

has been increased but with less
magnitude by 7 percent to P1.464
trillion from the previous years P1.368
trillion. In particular, Maintenance and
Other Operating Expenditures (MOOE)
has increased by 24 percent to about P268
billion in 2012, primarily for the expansion
of operating programs for social and
economic services. Personal Services has reportedly
increased by almost 10 percent to about P593 billion. This is
supposed to support the final tranche of the Salary
Standardization Law III and the requirements for new
teachers and uniformed personnel, and other civil servants.
Meanwhile, Interest Payments allocation has decreased
by almost 7 percent to P333.1 billion.
In addition of the total Personal Services, P53.6 billion is
included to provide for the pension requirements of the
military, uniformed and civilian personnel which are
indexed by law to current base pay and salaries.
Notably, the Presidents budget message also indicated that
support for GOCCs in the form of Subsidy (under COE) and
Equity (under CO) increased substantially by 85.9 percent
it increased to P18.2 billion and by 106.8 percent to P2.1

billion, respectively. This is mainly due to increases in the

support for GOCCs in the agriculture sector, in support
of this administrations rice self-sufficiency program.
Meanwhile, the Internal Revenue Allotment (IRA) shares
of LGUs decreased from P287 billion in 2011 to P273.3
billion in 2012, as the legally-mandated base year for
computing the IRA is 2009 when revenue collections
slumped due to the global financial crisis. On the other
hand, the Special Shares of LGUs from the utilization
of national wealth increased from P11.9 billion
in 2011 to P16.8 billion in 2012.

Priority Departments
The Top 5 Departments in terms of budgetary
allocation have reportedly remained the same with
some key changes in their program composition
and relative rankings.
(1) DepEd, as already pointed out, remains at the top,
with another significant budgetary increase of 15.2
percent to P238.8 billion from its previous budget of
P207.3 billion. Most significantly, it has been claimed
that from the 12.6 percent increase in 2011, the
largest in over a decade, the increase [education]
for 2012 is even larger.
(2) DPWH remains in second position with another
significant increase of 13.5 percent to P125.5 billion,
from P110.6 billion in 2011.
(3) The DND, again at third, receives almost P108
billion, slightly higher by 3.1 percent than its 2011
allocation. To fund unfilled positions, at least P989
million has been given to the DND.
(4) The Department of Interior and Local GovernCopyright

ment (DILG) is at fourth with P101.4 billion, representing an increase of 15.1 percent. These covers allocations for the security sector agencies, including the
the PNP, the Bureau of Jail and Management Penology
(BJMP) and the Bureau of Fire Protection (BFP)
(5)Finally, but certainly not the least concern, there
is the Department of Agriculture, at fifth, getting the
largest budgetary increase of 53.6 percent to P54.1
billion, from P35.2 billion in 2011.
This last item on the DA appears the most strategically
meaningful with the qualification that:
With better targeting of agricultural support for small
farmers and sustainable fisherfolk, the increased
agriculture budget will support this administrations
Rice and Food Sufficiency agenda: the construction and
rehabilitation of irrigation facilities, the establishment
of postharvest facilities, the expansion of research and
development (R&D) and increased provisions for
the National Rice, Corn, Fisheries, Livestock
and High Value Crops Programs.
Let us also note at this point the oft-mentioned
development approach that is the PPP. As the
Presidents Budget Message points out:
...[W]e continue to employ PPPs as an innovative
approach to tapping private capital into key, growthdriving infrastructure projects. This year, we again provisioned in the national budget P22.1 billion as national
governments counterpart funding for various infrastructure and other capital outlay support of the DWPH,
DA, and Department of Transportation and Communications (DoTC) for PPP as well as for the rehabilitation
and maintenance of regional hospitals of DOH and the
construction of school buildings of DepEd.

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In view of the concern for financing, as suggested above, what is the

governments approach to ensuring that there are monies
for the 2012 budget scheme?

Whats the Financing Plan?

The Presidents instruction to the Department of Finance (DOF) is
reportedly to increase revenues without raising the tax burden of our people.
This Malacaang posits to do by introducing more collection
efficiency measures.

In particular, to sustain the total projected disbursements of

P1.8 trillion for 2012, the DOF has set its sights to increasing
revenues by 11.1 percent to P1.569 trillion from its
current years target of P1.411 trillion.
Moreover, Malacaang recognizes
the need to be fiscally
responsible and to
level the playing
field in

the case of taxes paid that should be refunded. Hence, embedded in its revenue program is
the effort to convert P10.0 billion worth of tax refunds, both current and outstanding since
2001, from tax credit certificates into cash in the coming year. The President, in his budget
message says that of these tax credits, P9.0 billion is due for input value-added tax (VAT),
mostly for exports. Fairness means giving back to taxpayers promptly what are due to them.
There is also the aim to reduce the share of the Debt Burden on the National Budget, with
the allocation for this Debt Burden lessened by 3.0 percentage points to 19.6
percent or P356.1 billion from 22.6 percent or P372.1 billion.
Then of course there is governments counterpart in PPPs, including the employment of
Multi-Year Obligational Authorities to encourage private participation in the construction,
operation and maintenance of basic government infrastructures.
Finally, a notable scheme is that in the 2012 budgets design, there is the consideration
to deepen national-local partnerships in implementing social interventions. Says
the President in his budget message: We have been encouraging co-financing schemes
between national government agencies and local government units (LGUs) in the
implementation of crucial programs and projects, such as the construction
of school houses... and health care centers...

Inclusive and Sustained Growth?

To reaffirm governments focal concerns in achieving its Social Contract with the Filipino
people, the President issued on 13 May 2011, Executive Order (EO) No. 43 that defines five
areas of priority of the so-called Social Contract.
Accordingly, Cabinet was organized into five Clusters in line with these priorities:12
1. Transparent, accountable and participatory governance;
2. Poverty reduction and empowerment of the poor and vulnerable;
3. Rapid, inclusive and sustained economic growth:
4. Just and lasting peace and the rule of law; and,
5. Integrity of the environment and climate change adaptation and mitigation.
Put even more parsimoniously, the development rationale behind the budget is to fight
corruption and pursue good governance, poverty reduction, and employment generation.
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Fighting Corruption for Good Governance. As mentioned at

the onset, good governance and anti-corruption activities have
been designed or programmed into the budget. In the budget
process itself, one expression of this has been the removal or
discouragement of lump-sum budgeting. Lump sum budgeting delays the implementation of programs and projects,
especially critical ones...[and] masks the lack of master plans in
core undertakings, the weak planning capacities and poor
monitoring and evaluation systems in the bureaucracy.
Moreover, Lump-sum budgeting has also encouraged political
intervention given the lack of firm criteria or priorities, allowing anomalies in the use of public fundssuch as the Fertilizer
Fund Scamto flourish, argues the President.13

Program (4Ps) the Aquino administrations central

poverty reduction agenda, which claims to have already
served at least 2.3 million households. Employing the
National Household Targeting System (NHTS) to
more accurately determine and locate beneficiaries,
the 4Ps is being expanded to reach key sectors
like our farmers, fishers, and indigents.
These concerns are set within the framework of the
Millennium Development Goals (MDGs), that commits
government to reduce poverty from 26.5 percent in
2009 to 16.6 percent by the end of 2015. Hence, for
2012, 20.3 percent of the total budget, or P368.8
billion, is set towards direct poverty reduction, the
biggest among the key areas of expenditure and 15.8
percent higher than its 2011 level at P318.5 billion.

More pointedly, for 2012, there is a

P29-billion allocation for various initiatives
to improve the state of governance in the
country a hefty 54 percent increase
over a comparable allocation in 2011.

Some of these initiatives are:

Aiming at the closure of large-scale and notorious cases
of corruption that have been left unresolved, the budget of
the Sandiganbayan has been increased to P357 million, with
P254.0 million of this is set aside to help the primary graft
court to fast track the disposition of 3,546 pending cases of
corruption.
Information and communications technology (ICT)
is considered a vital tool in open governance, hence,
P2.9 billion is allotted to support major ICT projects that
promote transparency and accountability in government
operations and more responsive front line services. This
effort includes a P978 million budget for the GIFMIS a
project that seeks to improve the link between public sector resource allocation and expenditure management.
To reduce customs fraud and smuggling and increase
revenue collections, the Bureau of Customs (BOC) has

been budgeted with P740 million, P500 million of

which will go to an On-Line X-ray Imaging System
and a Petroleum Inventory System.

The 4Ps, with a P39.5-billion budget, should cover 3

million households across 80 provinces, 138 cities
and 1,496 municipalities in the 17 regions. This
means an P18.3-billion increase over its
2011 budget of P21.2 billion.

Government is also maintaining its Kapit-Bisig Laban

sa Kahirapan-Comprehensive and Integrated Delivery
of Social Services (KALAHI-CIDSS), a top-to-bottom,
The budget mandates the public disclosure of
people-powered development approach wherein
budget information through the internet as all
agencies are required to post a Transparency Seal on communities participate in the design and
implementation of pro-poor activities in their respective
their websites, which link to important information
on governance including annual reports for the last areas. Since its launch in 2003, the project has already
three years; approved budgets and their correspond- covered 4,583 barangays in 200 municipalities. Next year,
with its provision of P1.3 billion, 3,404 more barangays
ing targets; major programs and projects, and their
are expected to be given assistance.
implementation status, and beneficiaries; contracts
awarded and names of suppliers, among others.
Underpinning all this of course is the view that general
Pursue Poverty Reduction in the Context of Good
budget allocations on health and education are human
Governance. The Zero-Based Budgeting approach,
resource investments that are ultimately aimed at
also used last year, makes government spending more
poverty reduction by increasing the capabilities
focused and expands the Pantawid Pamilyang Pilipino
and employability of people.
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In Conclusion: Some Fine Tuning and the Need for

Revenue Generation

These should be among the key challenges and opportunities to a

truly sustained and inclusive Philippine development plan
with a balanced and realistic budget.

Key concerns raised with regard to the 2012 national budget can be summed up in three
themes.14
First, there is, as already pointed out, the debt burden. The slight decrease in the allocation for debt servicing next year the P738.6 billion allocation for principal and interest
payment is rather misleading. This is still more than twice than P309 billion allocation
for education and 15 times larger than the P49.9 billion allotment for health.
Then there is of course the underinvestment in the people their education and health.
The budget for state universities and colleges (SUCs) for instance was reduced by P146.6
million, with 51 SUCs suffering cuts in their budget. Meanwhile, the allocation for public
hospitals in the country decreased by around P1.1 billion15 and, as mentioned earlier,
there has been a general complaint on the decrease in allotment for health.
Third, and perhaps most crucial of all from an economic managers perspective, is the
need for revenue generation. Needless to say, the ability of the government to
achieve its revenue goals will impact significantly on the budget plan of government.
As government is now wont to say, Walang mahirap, kung walang corrupt
[There will be no poverty if there is no corruption]; in this case, there
will be nothing to spend without those revenues.
For now, the budget process for 2012 is a done deal. We can only expect so much
leeway in the allocation of the set national budget. For 2013, the best thing to do is to
look at the challenge of revenue generation as a central concern. After all,
government can provide so much for so many with but a limited pie.

Endnotes:
Mendez, C. CJ trial going over P10-M budget, The Philippine Star, 6 February 2012, http://www.philstar.com/
Article.aspx?articleId=774832&publicationSubCategoryId=63

Chua, R. and Cruz, RG. Senate, House ratify 2012 budget, ABS-CBN News, 29 November 2011, http://www.
abs-cbnnews.com/nation/11/29/11/senate-house-ratify-2012-budget

Ibid.

Ibid.

Sy, M. Senate OKs 2012 budget, The Philippine Star, 23 November 2011, http://www.philstar.com/Article.aspx?ar
ticleId=751134&publicationSubCategoryId=
5

Ibid. Chua, R. and Cruz.

Ibid, Sy.

Office of the President (OP). Tungo sa paggugol na matuwid: The Presidents Budget Message, 2012, http://www.
gov.ph/2011/07/26/president-aquinos-2012-budget-message/; House okays P1.8T proposed budget for 2012,
Philstar.com, September 17, 2011, http://www.philstar.com/article.aspx?articleid=728179&publicationsubcategory
id=200
8

Revenue generation should be a central concern of this regime. Three approaches must
be considered in this regard attracting more foreign investments, improving on local
government expenditure and revenue generating schemes, and weeding out corruption in
the Bureau of Internal Revenue (BIR), Bureau of Customs (BOC), Philippine Amusement
and Gaming Corporation (PAGCOR), Philippine Charity Sweepstakes Office (PCSO),
Land Transportation Office (LTO), Ninoy Aquino International Airport Authority
(NAIAA), Duty Free Philippines, Philippine Ports Authority (PPA), and other
revenue-generating agencies under the different departments of the Executive Branch.
All these opportunities must be tapped and maximized to push bold
developmental reforms under a regime of good governance.

Ibid.

10

Ibid.

11

Ibid.

12

Ibid.

13

Ibid. OP.

14
Tucay, M. 2012 National Budget Deceptive, Anti-Development-IBON, Philippine Collegian, 23 August 2011,
http://www.philippinecollegian.org/?p=2152.
15

Ibid.

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