New post on The Society of Honor by Joe America alt alt A matter of trust: the rest of the Abad story by Joe America aquino abad philstar dot com Now THIS is trust. [Photo source: philstar] A Society reader kindly sent me a report, recently made public. I read it and was suddenly struck with a new awareness. What if the shrill cry for Secretary Abads resignation has been wrong all along, built on an emotional bubble provoked by enemies of the straight path, fueled by sensationalist headlines and leftist rants? Provoked by our own general mistrust of all politicians, even a good President. What if that mistrust is wrong, too? What if the Supreme Court is wrong, or remiss, or did a poor reading of the constitutional issues and historical precedents? (refer to Raissa Robles article). What if we were too quick to judge? Didnt have the whole picture? What in the world are we doing? The report which follows, an interview with Philippine Budget Secretary Butch Abad, was conducted by GlobalSource Partners in December of 2013. It was recently released for public readership. The interview gives us a better understanding of how the Philippine budgeting process works, what some of the challenges are, and why the current Administration applied DAP to the benefit of the Philippines. It is rather striking to me how pragmatic Secretary Abads approach is. This is no conniving slackard staying in the shadows and shuffling bags of money for personal gain. This is a professional working to build a strong budgeting process. This is something his colleagues have been telling us all along. Why dont we listen to those who know the secretary instead of the sensationalist headline writers? Or our own suspicions of everyone in politics? He clearly has not been coasting on the job. He also has not been charged with any personal gains from corruption. I read this report and suddenly the shrill cries for Secretary Abads resignation rang small, hollow and grossly uninformed. I say this embarrassed because I, too, had suggested that President Aquino could have saved himself a lot of grief by suspending Mr. Abad. Now I conclude that - once again - the President is right and I am wrong. This has happened on occasion, before. In this instance, I should have heeded a stronger principle than political expedience: the principle of trust in a good man. Ah, make that TWO good men, Mr. Abad and Mr. Aquino. Senator Drilon, upon hearing that President Aquino had not accepted the Secretarys resignation, said: “I am not surprised. I know the President. His trust and confidence in the members of his Cabinet is not based on what may be convenient.” The critics somehow seems to believe DAP is like PDAF, that in both cases, people abused discretion for personal gain. That illustrates how little trust the people hold for Philippine politicians, and how little understanding of the issues ordinary citizens possess. Or even EDUCATED citizens. It also illustrates how easily suspicions emerge as shallow emotional conclusions hyped by sensationalist headlines. And - perhaps more important than anything . . . it illustrates how vengeful those penalized by the straight path are, and how ruthless the leftists are in seeking to destroy all that Mr. Aquino has built. The people we should be suspicious of are not those in the Presidents cabinet, but those who are relentless critics of everything the Administration does. And we should be suspicious of Mr. Binay for not taking the PDAF/DAP brouhaha as an opportunity to speak out strongly against power and favor corruption. We should be suspicious that he does not forthrightly support the Presidents straight path initiatives. Ill leave you with the report now. It is lengthy so I have highlighted a few of the sections I found interesting (in case you are in a hurry). Excerpt from Introduction by Dr. Romeo L. Bernardo In his three and a half years so far atop the Department of Budget and Management, Secretary Abad was a prime mover in what the World Bank described as significant reforms in public financial management. Apart from the greater transparency, accountability and openness to civil society participation that the reforms brought to the Philippine national budget process, the changes also helped to improve budget efficiency, thereby creating fiscal space for government and allowed faster disbursements to support economic growth and greater social inclusiveness. SPECIAL REPORT Romeo L. Bernardo & Christine Tang 708 THIRD AVENUE, NEW YORK, NY 10017 WWW.GLOBALSOURCEPARTNERS.COM The Point Guard (In this, our year-end report, we print in full our conversation with Philippine Budget Secretary Florencio Butch B. Abad, by all accounts one of the Presidents most trusted men. The “point guard on budget matters, he talks about the pork barrel controversy and its possible impact on public expenditures and the administrations reform agenda, as well as spending priorities in the 2014 budget, including programs in support of public-private partnerships. He also answers our questions about the Liberal Partys plans for 2016.) Face- to-Face with the Budget Secretary Florencio Butch B. Abad, the Philippine Budget Secretary, is one of President Benigno Aquinos most trusted men. Acknowledged by the President as his mentor from his days as a neophyte congressman in the 11th Congress (1998-2001) when the Secretary was already serving his third of four terms representing the northernmost province of Batanes (1987-89,1995-2004), Sec. Butch, as he is referred to by staff, has also been tagged as the administrations “political ideologue”, and is an influential member of the Presidents Liberal Party, which he headed as its president from 1999-2004. Described as a politician and a technocrat, Secretary Abad, a lawyer by training, has the respect of colleagues in and out of government, having been involved in the reform movement during Martial Law, under which he was twice jailed, and spending his early professional years in socially-oriented civil society organizations, including as trade unionist and head of an academic social and public policy center. Coming from a political family, he was a young supporter of the Presidents father, the late Senator and democracy hero Benigno “Ninoy” Aquino, Jr., but only joined government after the restoration of democracy in 1986. Aside from Congress, he has held Cabinet posts briefly under Aquino I (Agrarian Reform, 1989-90) and the Arroyo Administration (Education, 2004-05, from which he resigned with nine other Cabinet members, dubbed the “Hyatt 10,” when an election fraud scandal involving the then-President broke). In his three and a half years so far atop the Department of Budget and Management, Secretary Abad was a prime mover in what the World Bank described as significant reforms in public financial management. Apart from the greater transparency, accountability and openness to civil society participation that the reforms brought to the Philippine national budget process, the changes also helped to improve budget efficiency, thereby creating fiscal space for government and allowed faster disbursements to support economic growth and greater social inclusiveness. Secretary Abads background in both social movements and mainstream politics equips him with a keen understanding of the imperatives for growth of democracy as well as the practical workings of governance. His ability to balance idealism and realism puts him in a good position to navigate the intricate process of reforming governance and public expenditure management. (On this, he can count on a trusted ally – his wife, Rep. Henedina Abad, currently Deputy Speaker of the House of Representatives). As the Presidents point guard on budget matters, he sat down with us on a Friday afternoon to talk about recent controversies – the Priority Development Assistance Fund (PDAF) and the Disbursement Acceleration Program (DAP), their impact on public expenditures and the administrations reform agenda as well as spending priorities in the 2014 budget, including programs in support of public-private partnerships (PPPs). He also answers our questions about the Liberal Partys plans for 2016. GlobalSource Partners: What is the impact on government spending of the PDAF and DAP controversies, first in terms of the so-called “chilling effect” on bureaucrats who would understandably not exercise discretion if they see downsides to any action? Secretary Abad: There will be an effect both from the expenditure side (the Executive) and oversight side (Congress and the Commission on Audit); in particular in trying to decipher what the Supreme Court means with its decision on the PDAF. But the bigger sources of concern are the cases being filed. As you said, by their nature, the people in the bureaucracy are conservative, it’s like “If in doubt, don’t.” But I think this will not be something that will be here for quite a while. This is just an initial knee-jerk, instinctive reaction. They will eventually come around. What about in terms of how the new rulings may actually tie your ability to spend going forward? Abad: Next year, we will be introducing a lot of reforms that will in fact provide more leeway for spending without much red tape. For example, we are going into a “GAA (General Appropriations Act)-as-Release Document” system. This means that as soon as the budget is signed, on the first day of the new year, about 90% of the items in the GAA are already considered released to the departments and agencies and ready to be obligated. The only items that you will need a special budget request for, which you will need a SARO (Special Allotment Release Order), are lump sums like the Calamity Fund. Second, we adopted a policy of procuring in advance of the fiscal year. If you look at the procurement process, under ideal circumstances, it takes 3 to 4 months to bid out a project. In the past, when we allowed a two-year lapsing of appropriations, most projects would be implemented in the second year, not in the year the budget was passed. So we changed policies; now all appropriations will just have a one-year life and they need to start procuring on the last quarter of the prior year. So we are aiming for execution to be done for the most part in the first semester. Also, by next year (2014), because of the automation we have introduced, 80% of our disbursements will be bank-to-bank. We will no longer be using cash or checks for these. This will accelerate the payment system. We are also working on the other side of the transaction, which is payment to us. This is part of the Single Treasury Account, which by the way is going to save us a lot of money, not only from the revenue float but even more so from the expenditure float. We were looking at year-on-year growth in government spending and it was very strong through July, started slowing in August and declined in September. Does this have anything to do with PDAF/DAP? Abad: If it has, it would really be in September and October. I think any impact on spending may be in the very short term, maybe in the last quarter, but even then we are trying to make up for it in these last months. The other thing that would accelerate spending is the rehabilitation and reconstruction program in the three regions affected by the typhoon. I understand that with Yolanda [international name, Haiyan] and all the typhoons, you have more leeway for spending. What are the guidelines for this? Abad: Under a State of Calamity, we can procure on a negotiated basis P500 million and below. But the GPPB (Government Procurement Policy Board) met and adopted a policy that for the duration of the State of Calamity, we will allow negotiated procurement even for P500 million and above, so we can really accelerate spending for relief and rehabilitation. And this period of calamity would extend for? Abad: On a sliding basis, the relief will continue until end of January. And then they will phase in, as they are now doing, the rehabilitation. So I think the impact will not be for long and we are also driven by the policy of the President to build back better. It’s not just restoration but to climate-proof the design of the construction, so that would probably add about 30% to the cost. So there will be some compensating, recovery-related spending. Abad: We are hoping that it should induce additional growth income. There is also strong international support which can bring in more grants and concessional loans. What would be the impact of the Supreme Court decision regarding the unconstitutionality of the PDAF on the quality of engagement between the Executive and Congress? Abad: Institutionally, I don’t think that the inherent powers of the Congress have been eroded by the decision of the Supreme Court. I am referring to the power over the budget, the power over appointments and the power of oversight. I think the problem is that all these years, Congress has been more preoccupied with constituency work service and not strengthening these powers, which they have, but they hardly use. And because of that, it also became a source of weakness. If the president withholds the pork, then politically, it impacts individually on the legislators, but institutionally they ought to be revisiting their powers to see how they can use that as a stronger lever. But the one good thing about the decision is clarifying the roles of the branches. In fact the gist of the PDAF ruling is declaring as illegal or unconstitutional post-enactment interventions by Congress, except when they are exercising their power of oversight I see what you’re trying to do long-term in terms of improved governance. But I am more worried about the short-term. While the Supreme Court ruling prohibits Congress from interfering in execution, nothing prevents it from being involved, so it’s just a question of putting it ahead and being more participatory in some sense, and maybe if they can get their constituency involved in the process as well, you will actually have a more people-oriented budget process. Abad: Exactly, there is nothing wrong with Congress participating during budget preparation, especially during budget authorization, because that really is in the realm of the power of Congress. But what I mean is they have to do more work in order to get their proposed projects into the Budget before it is enacted into law. That will really impose more on you, right? To be more provocative or put it more bluntly, the PDAF system, stripped of the abuses or criminality of the Napoles type, in which each legislator gets a fixed allocation for projects for his constituency, is actually an efficient system that meets the political objectives of the legislators in an equitable devolved non-partisan and budgetwise limited manner, while engendering good working relationship between the executive and legislative branches which under a good president facilitates passage of key legislation. With the Supreme Court decision, you will need to find less transparent ways, involving 250 congressmen and 24 senators in opaque negotiations with so many, with indeterminate bargaining outcomes, potential charge of partisanship, high administrative and friction costs and potentially larger budget spending distortions. How would you respond to this characterization? Abad: You have a good point. In fact, the President once told Congressmen that if 300 of you called the Budget Secretary once, twice or thrice a week, can you imagine the time it will take him to answer each of you? And you will start by calling the provincial offices (of executive departments), the regional offices, then the Secretary, until you see your projects in the NEP (National Expenditure Program). As I mentioned, this is a lot of work that has to be done in order to get representatives’ projects into the Budget before enactment. Is there a way of doing these efficiently before the budget is passed, without violating the Supreme Court ruling? Abad: We haven’t been able to figure out how to do this in the most transparent way. In fact, the legislature is at a disadvantage here. At the same time, for us, administratively, it will mean a lot of work. The problem is the negative public reaction even to be talking to politicians; that the mere thought of the executive working with the Congress for projects in their districts is already to them repulsive. Our challenge, really, is how do we remove avenues for leakages and abuse; while at the same time addressing the need to deliver basic services to the people, including the constituents of legislators? The latter is a reality that we must acknowledge and address together – how do we help our representatives ensure that the legitimate needs of their constituents are met, and without resorting to patronage-based relationships of the past? Bottom line: we want to make public spending more transparent, more accountable and more empowering for constituents. The reality is that patronage cannot be overturned overnight: there are steps we have to take, milestones we have to meet . And I believe we are already moving forward in that direction – for one, we are already disclosing budget information in unprecedented ways, such as publishing detailed releases from lump-sum funds, including PDAF before it was invalidated by the Court, on our website. In the meantime, what will happen to the administration’s priority legislation?Is there risk that the 2014 budget won’t be passed on time? Abad: We have no doubt that Congress will pass the 2014 Budget on time, the way they ensured the early passage of our previous budgets. In fact, the Senate just ratified the 2014 budget and the House is about to do the same by next week, so that the GAA will be signed into law by December 20. (Note: it was already enacted into law on the said date.) This alone is a clear indication of the support the President enjoys in Congress. I think we will see the same support for our other priority bills. On the subject of the DAP… Abad: At this point that the case is being heard in the Supreme Court; forgive me if I’ll have to refrain from answering questions on this point by point. But I think that most would concede that the DAP has achieved its economic purpose in an unprecedented way so that today, we have a more vibrant economy and better risk profile. We understand if you dont want to talk about the Supreme Court case, but are there really serious implications if the Supreme Court would rule that either it is unconstitutional… Abad: First of all, I think most people concede that the DAP has succeeded in bolstering public spending and economic growth. The issue is this: in doing so, did we abide by the rules? Our position is that if we go by the Constitution, statutes and practices in past administrations, we did. Just to be clear, DAP is not a fund but a label that we used to refer to the use of the president’s power over savings and unprogrammed funds – authorities that have been present and have been used by all previous administrations post-EDSA. To us it’s clear that DAP is not PDAF: the latter is a lump-sum fund, while the former is not a fund, but the label we gave for the mechanism of exercising the president’s Constitutional powers. It’s just unfortunate that the DAP got identified with PDAF, maybe perhaps because these two acronyms sound the same. On DAP, we acknowledge that the one that’s in the public consciousness, and also mentioned by the President in his recent public address, is the portion of the DAP that funded legislator-endorsed projects. Just to be sure, I checked the listing again, and all the projects went to national government agencies, not to legislators themselves. One of my other worries is how a decision that the DAP is unconstitutional will affect the President’s ratings, and what it means for his remaining three years if his political capital were eroded. Aren’t you worried that a tighter or a more restrictive definition will lead to less flexibility on your part and will affect spending looking forward? Abad: I wouldn’t want to speculate on the Supreme Court’s decision at this point. My hope, of course, is that the Supreme Court’s decision will put our country in a better place, just like the overall effect of their decision on PDAF, even with the practical challenges. More important, we’re not worried of a ruling that would tie the hands of the Executive in implementing the budget and addressing contingencies. At this point too, we already know a lot about the ins and outs of the Budget Process and we’ve also rolled-out important reforms to speed up the disbursement process. We also have a clearer idea of the structural bottlenecks that need to be addressed, such as the need to enable agencies to plan better. What are the spending priorities for 2014? Abad: A We have been able to significantly reshape the national budget to prioritize inclusive development. By 2014, the share of social services which increased from less than 30% in 2003 to 35% in 2013 will further increase to 37%; economic services will rise from about 20% in 2003 to 26% by next year. We have expanded our Pantawid Pamilyang Pilipino Program so we cover 4.3 million indigent households as well as 4.3 million high school children until graduation from secondary education. We are also near our target of closing our basic education resource gaps in classrooms, teachers and textbooks as well as in providing all poor households with universal healthcare services. We are also intensifying our investments in public goods for economic expansion. For one, we are targeting a public infrastructure spending level of 5% of GDP by 2016, from 2.3% this year. How is the 2014 budget different from past budgets? Abad: A lot. For instance, for the first time, the 2014 Budget will indicate the performance targets of each agency alongside their budgetary allocations. Through the GAA-as-release regime I mentioned earlier and the automation of financial processes, we expect to improve the speed of implementation of urgent programs and projects. Also in crafting this budget, we expanded allocation, by P20 billion, for local poverty reduction programs and projects developed with grassroots communities and local civil society organizations in over 1,200 cities and municipalities. How would you assess progress in the reforms in the budget process you have introduced so far? (eg. linking budgeting with the development plans and programs, multi-year budgeting for capital outlays, performance based budgeting and auditing, single account for gov’t, etc.) Abad: The changes we made to the 2014 budget would not have been possible if we had not previously gone through a tedious review and refinement of all major outputs and performance indicators of government agencies, or if we had not done a disaggregation of lump-sum funds and imposed a one-year validity of all appropriations. The roll-out of our Government Integrated Financial Management Information System (GIFMIS) by 2016 is also made possible by the joint efforts of DBM, DoF and COA to develop a Unified Account Code Structure and to harmonize charts of accounts and accountability reports. Overall, I think the budget process is in a much better state now than before and the recent turn of events gives us a great opportunity to install more transparency, strengthen the accountability of institutions, and intensify our citizen’s voice and vote in the budget process. In terms of supporting PPP, based on feedback from the private sector, it seems they are looking for certainty that government can deliver on its contributions to projects, as well as in case something happens, its contingent liabilities. How is this handled in the 2014 budget? Abad: We have P30 billion in the Risk Management Program under the Unprogrammed Fund. This will cover commitments made and obligations of the National Government in the concession agreements for PPP proj ects, for example for regulatory risks. Once we generate the money, we can always augment that. Does this have to be appropriated every year? What the private investors are looking for is like a fund so that they will not be captive to the appropriation process. Abad: Yes, this has to be appropriated every year. That is as much as we can provide. Have you given thought to a multi-year allotment that commits government over a longer-term? Or does the process not allow it? Abad: We are doing a MTEF [Medium-term Expenditure Framework] which is for three years. Based on these forward estimates, we can provide a MYOA [multi-year obligating authority] to cover them. We acknowledge that the MYOA does not bind the legislature, but given our budgetary system now, this is something which we think is viable. Going to politics...taking Brazil as an example, former President Lula da Silva (in office from 2003 to 2011) who was very popular and was seen to have led Brazil in achieving sustained inclusive growth, was able to choose as a successor someone who had never won an election, who used to be his budget, I think. Who is the administration party eyeing to carry on the “daang matuwid” work? Abad: She was Lula’s chief of staff, President Dilma Rousseff. But now that you mentioned Lula, I think that’s a template to look at, which is that rather than be distracted by naming somebody you know at the start, I think it is better and less distracting if all the efforts are made to make the President and his inclusive development program hugely successful so that near the end, the President will be in a strong position to name his successor, as his mother was able to do so in 1992. I think that’s the preferred approach. If you look at Lula’s social protection program, the Bolsa Familia, he was able to cut poverty by half after three years. So if we are able to push social protection, social services, the focus on jobs, agri-industrial development, tourism, and now the reconstruction, and of course we’ll grow the infra budget to 5% by 2016, those will help. How would you assuage fears which we noted in our latest report, that the President’s popularity rating will fall further after Yolanda, and together with probable reduced influence over Congress and public confusion about DAP, he may become a lame-duck president? Abad: I think that considering the last survey, despite all of the things that happened, he was still at 71%, and that’s still very good. So his popularity is certainly holding. If he is able to execute the rehab and reconstruction well, I think that will be at least be maintained. That’s why I think the President is far from becoming a lame duck, especially in our presidential set-up. Compared to the US, the Philippine president on paper is so much more powerful, especially if you give him all t he levers. The other thing people don’t appreciate is that this is a president who is concerned not only about leaving a legacy but who is concerned about the legacy left by the father and the mother. “Malalim yun” (very deeply ingrained). He will make sure that the successor will carry those through. I think that’s what’s driving him to make sure that he succeeds and that his successor can take over. Personal question if we may, what are your plans for 2016? Optional. Abad: After all of this is done, I look forward to taking a really good break, to catching up on my gardening and carpentry projects in Batanes, and to having more quality time with Emma, my granddaughter. -----------------------------------------------------------------------------
Posted on: Mon, 14 Jul 2014 03:52:38 +0000
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