Economists and lawmakers have warned the Aquino administration again against too much government under-spending in the wake of another below-target economic growth rate in the second quarter of the year.
The Philippine economy grew by only 3.4 percent in the second quarter, way below the government target and a big drop from the first quarter’s 4.9-percent growth, which was also below target. The 3.4-percent second quarter growth rate was less than half the 8.9-percent growth registered in 2010, which was, of course, boosted by election expenditures.
Senators scored the economic team of President Aquino for its “fixation” on reducing the budget deficit at the expense of public spending and economic growth.
“Are you more fixated on reducing the deficit rather than pushing growth and creating more jobs?” Senator Edgardo Angara asked Finance Secretary Cesar Purisima during the budget hearing last week.
“In our drive to reduce our deficit – which to me is not unreasonably high even at 3 percent of GDP (gross domestic product) – we are really sacrificing, not just economic growth, but the lives of the people,” Angara said. “Don’t have the tunnel vision of just simply reducing the deficit … we ought to strike a balance between reducing our deficit and debt and, at the same time, not constricting our economy and creating incomes and jobs for our people.”
Even the Bangko Sentral ng Pilipinas or the Central Bank is calling on the administration to crank up public spending in the second half of the year to accelerate growth.
Indeed, the Aquino administration’s reduced spending resulted in a lower budget deficit, which stood at P17.23 billion, much lower than the expected P152.13-billion deficit from January to June this year.
But in reducing the budget deficit, the government stalled numerous public works projects that would have given thousands of people jobs and would have given foreign investors more incentives to pour in their money into the country’s economy.
Angara said the government was behind by around 60 percent in infrastructure spending in the first half of the year.
According to former Budget Secretary Benjamin Diokno, for the first three quarters of the year, the Aquino administration has failed to spend some P179.2 billion out of a programmed budget of P1.023 trillion.
“The P179.2 billion is a lot of money that could have created a lot of jobs and could have brought benefits to the people and the economy much sooner than when these projects would finally be implemented (perhaps next year),” he said.
While Purisima insisted during the budget hearing that the government has been accelerating spending, Finance Department records show that the August surplus still stood at P9.22 billion. Angara also disputed Purisima’s claim that the Department of Public Works and Highways has been accelerating its spending at a rate of P20 billion a month.
“That’s not true, Mr. Secretary, that’s not true.” Recalling the Senate hearing on the DPWH budget. Angara noted that the agency’s officials merely said they “intend to accelerate spending.” He said that as of July or August, the DPWH had spent only P16 billion out of its P90-billion fund for infrastructure.
The Aquino administration explains that it is not yet spending the already allotted public works funds because it is still reviewing hundreds of government contracts entered into during the previous administration, which they said could be tainted with graft.
It has been more than a year since Aquino took over and it seems only a few contracts have been cleared and implemented. Meanwhile, roads, bridges and schools that already have appropriations await construction; the Laguna Lake still need to be dredged despite an P18-billion grant from the Belgian government and a valid contract with a Belgian consortium; 72 roll on, roll off (RORO) port projects that have already been funded and contracted to a French firm under the Aquino administration’s public-private partnership program (PPP) remain unbuilt; and hundreds more of public works projects could not be started or finished because their contracts are still awaiting review.
Can you imagine how fast inter-island commerce and transportation would go if even half of those RORO port projects had been completed? Can you imagine how fishing and tourism would improve in the Laguna lakeshore towns if the Laguna Lake had been dredged? Former Sen. Ernie Maceda estimates that the lake would have been 40% dredged by now if the contract with the Belgian consortium had not been cancelled in November last year by Aquino. Imagine how fast commerce and public transportation would go all over the country if those roads that already had appropriated funds were built as scheduled. Just imagine how much better life would be for farmers and rural folks if those farm-to-market roads for which P7 billion were allotted were built on time.
Almost 15 months into its presidency, the Aquino administration should have gone past paranoia by now and started pursuing approved and funded projects to put the economy back on track. The administration cannot continue claiming that all the government contracts signed during the previous administration were the result of graft. If they were so, let’s send the culprits to jail and re-bid the projects. I hope it doesn’t take the administration five more years to find out if the contracts were above-board.
Commenting on the government’s under-spending, Diokno said: The government justifies the delay by their focus on parsimoniousness. But why can’t we have both – speedy implementation of projects and zero corruption?” Is this not possible?
While they sit on the stalled government contracts, foreign investors are wary of bidding in Aquino’s PPP projects because they need assurance that the contracts they would be entering into would be honored by this administration and succeeding governments. The Philippines is fast becoming the pariah of the investing world because of previous bad experiences with the NAIA 3 airport (Germans), the Laguna Lake (Belgians), and the RORO projects (French).
It is great that this administration is frugal and honest as opposed to the Arroyo administration’s lavish and wasteful spending habits and impunity in pocketing taxpayers’ money. But it doesn’t have to swing to the other extreme of the pendulum to make its point. As long as the funds are spent wisely and honestly, the people will not begrudge Aquino for accumulating a little deficit. Taxes are collected after all to spend for needed services and to redound to the people’s benefits, not to accumulate mold in some government banks.
If it really wants to cut the budget deficit to a minimum, the Aquino administration should push the Bureau of Customs and the Bureau of Internal Revenue to increase collection, minimize graft in other revenue-generating agencies, and make good its promise to reduce subsidies to government-owned and controlled corporations (GOCCs).
Instead of reducing the GOCC subsidies as Aquino promised in his first State-of-the-Nation Address (SONA), the administration has hiked it monetary support to these state firms during the first eight months of the year. Data from the Bureau of the Treasury revealed that the government gave out a total of P17.402 billion to GOCCs at end-August, or 86 percent more than the P9.352 billion released during the same period last year. In August alone, financial support to state firms ballooned to P2.137 billion or nearly 25 times more than the P86 millionreleased last year.
Also, Aquino may want to consider slowing down on his travels, which is costing the taxpayers tens of millions of pesos per trip. This month alone, Aquino has already visited three countries – China, the US and Japan. Since he took over the presidency at noon of June 30, 2010, he has traveled outside the country 12 times, visiting eight countries – once each in Brunei, China, Thailand, Singapore and Vietnam; twice in Indonesia and the US; and thrice in Japan. While admittedly, the trips were less lavish as those of Arroyo, he may want to refuse some invitations unless really necessary.
American President Barack Obama is pushing a jobs program that would further raise the US budget deficit and is certain to meet strong opposition in Congress, but he is doing it anyway because the economy needs a big boost. Aquino, on the other hand, already has Congress approval on P179 billion worth of projects but wouldn’t do anything to launch them, generate much-needed jobs, and give the economy a major push.
Is it a case of paranoia, inertia, or just plain indecisiveness?