RP budget process: Less and less transparent

By all accounts the freest democracy in Southeast Asia, the Philippines, ironically, has become less and less transparent in its budget and financial processes.

The situation makes it more difficult for citizens to hold the administration of President Arroyo accountable for cases of abuse, misuse, and corruption of public funds.

While the Philippine government provides some information to give citizens “a somewhat comprehensive picture” of its revenue and expenditures plan for the upcoming year, “it is difficult to track spending, revenue collection and borrowing… and assess budget performance once the budget year is over,” says the Open Budget Survey 2008 that is scheduled to be launched in Bangkok this week.

The survey is a comprehensive evaluation of budget transparency in 85 countries that was conducted by the Washington-based International Budget Partnership (IBP), in coordination with independent media and research agencies from as many nations.

The Philippine report authored by the Philippine Center for Investigative Journalism (PCIJ) showed that the country ranked only No. 34, and scored 48 percent or two points less than its rating two years ago.

The Philippines was outdone by Indonesia (54 percent), but came ahead of Thailand (40 percent) and Malaysia (30 percent), in the survey.

Writer-researchers Avigal Olarte and Ma. Gisela Ordones-Cascolan worked on the Philippine report for the PCIJ.

The survey employed an Open Budget Index (OBI), a comparative measure of the accessibility and comprehensiveness of the eight key budget documents that international good practice says all governments should publish.

The OBI is based on responses to a subset of survey questions. The average score for the OBI 2008 is 39 out of a possible 100. This indicates that, on average, countries surveyed provide minimal information on their central government’s budget and financial activities.

For sure, the Philippines cannot boast of a stellar showing. The survey notes that while the Philippine government’s yearend report allows some comparisons “between what was budgeted and what was actually spent and collected,” it fails to offer a detailed explanation of the differences.

And although reports of the Commission on Audit (COA) are made public – if often beyond lawful deadlines for many public agencies – there is negligible detailed information on how and whether audit recommendations are successfully implemented by agencies.

The survey also points out that while COA may be a constitutional commission, its independence is “somewhat limited” by the appointive powers of the president, and the lack of funds and resources.

Yet another drawback that prevents optimal budget transparency in the Philippines is the fact that the country has not passed an access to information law, even as the right to information has been enshrined in the Constitution and laws against graft and on ethical conduct of public officials.

Bad as all these may sound, the Open Budget Survey 2008 finds that the state of budget transparency in other parts of the world to be worse. Indeed, it says, the global situation is deplorable.

The survey says that setups in many of the countries it scrutinized encourage inappropriate, wasteful, and corrupt spending and – because they shut the public out of decision-making – reduce the legitimacy and impact of anti-poverty initiatives.

Yet all is not lost. According to the survey, a number of countries have significantly improved their performance over the past two years. It also shows that many more governments could quickly improve budget transparency at low cost by making publicly available the budget information that they already produce for their donors or internal use.

Gaps everywhere

The survey does show worldwide transparency gaps.

Only five countries of the 85 surveyed – France, New Zealand, South Africa, the United Kingdom, and the United States – make extensive information publicly available as required by generally accepted good public financial management practices. These countries all score above 80 out of a possible 100 points on the Open Budget Index 2008.

Twenty-five countries surveyed provide scant or no budget information. These include low-income countries like Cambodia, the Democratic Republic of Congo, Nicaragua, and the Kyrgyz Republic, as well as several middle- and high-income countries, such as China, Nigeria, and Saudi Arabia.

Less transparent countries share similar characteristics. The least transparent countries are mostly located in the Middle East and North Africa (with an average OBI score of 24 out of 100), and in sub-Saharan Africa. The worst performers tend to be low-income countries and often depend heavily on revenues from foreign aid or oil and gas exports.

Many poor performers have weak democratic institutions or are governed by autocratic regimes.

Lack of transparency undermines accountability and prevents participation. Almost all countries publish the annual budget after it is approved by the legislature. The exceptions are China, Equatorial Guinea, Saudi Arabia, and Sudan, where the approved budget is not published, completely preventing the public from monitoring its implementation.

Most countries provide much less information during the drafting, execution, and auditing stages of the budget process. This prevents the public from having input on overarching policies and priorities, improving value for money and curbing corruption.

Weak formal oversight institutions exacerbate the situation. In the majority of countries surveyed, legislatures have very limited powers, time, and capacity to review the Executive’s Budget Proposal and monitor its implementation.

In many countries the supreme audit institutions do not have sufficient independence or funding to fulfill their mandate. Often, too, there are no mechanisms in place to track whether the executive follows up on audit recommendations.

Immediate improvements are possible. Comparisons between the OBI results for 2006 and those for 2008 show that some countries have started to improve their budget transparency over the past two years. In Croatia, Kenya, Nepal, and Sri Lanka, significant improvements either were influenced by the activities of civil society groups or have created opportunities for greater civil-society interventions. Important improvements in budget transparency were also documented in Bulgaria, Egypt, Georgia, and Papua New Guinea.

There is evidence that good performance can occur in challenging contexts: Jordan and South Africa stand out among their regional counterparts. Among lower-income countries, Peru and Sri Lanka both provide their citizens with a significant amount of budget information.

Progress could be made elsewhere quickly and at relatively low cost, given sufficient political will. Many countries that perform poorly are already producing much of the budget information required for good practice. By making this information available to the public, these countries would increase their OBI scores and consequently, would encourage effective oversight and improve accountability.

Urgent action

In light of the survey’s findings, the IBP called for urgent action to improve budget transparency and accountability. In particular, it exhorted:

• Governments to make publicly available the budget information that they already produce. In all those countries where information is produced but withheld from the public, governments should immediately release it.

• International financial institutions and donors to encourage aid-recipient governments to make publicly available the budget information they produce for their donors or internal purposes.

• Civil society to publicize and demand explanations for instances in which governments do not make publicly available the budget information they produce for their donors or internal purposes.–The Philippine Center For Investigative Journalism