First Aquino budget unabashedly pro-poor

COMMENTARY

MANILA, Philippines–With the approval of the 2011 national budget, we now have three economic road maps we can compare—the government’s, the people’s, and the World Bank’s. All three are important blueprints for growth, so it is important to see if they jibe.

Economics being at best an inexact science, we used to poke fun at it in school with an old riddle: If you put three economists in a room, what do you get? Three theories and the right one.

Fortunately, President Aquino has access to the people’s version of their economic expectations, so he can compare. In addition to what his economic managers submitted to Congress, the people have drawn up their own. In three words, it’s livelihood, jobs and prices.

The people’s road map came in the form of a national survey—carried out by the Social Weather Stations polling organization—which asked the people to identify the top three issues they wanted the President to address.

In a midyear economic briefing last year, the President’s economic team likewise drew the broad strokes of the growth targets over the next six years of the Aquino presidency. They said the nation needed to sustain an average 7 percent growth until 2016 to create more jobs, reduce poverty, and make the country more competitive than its neighbors.

This aligns the economic managers’ announced targets with the people’s economic expectations—in general terms.

A World Bank study released at about the same time said the country’s economic growth had failed to impact a third of the population who remained poor.

Cash handouts

The 2011 budget, at a massive P1.645 trillion ($37.3 billion) almost 7 percent higher than the previous year’s, is designed to fight poverty and spur development, Mr. Aquino said in signing the law. It focuses on social programs and includes controversial cash handouts to qualified poor families.

Budget Secretary Florencio Abad said more than a third of the budget, the single biggest allocation, would go to social services.

“This budget puts into pesos the Aquino government’s unabashed bias for the poor,” he said.

The education budget got a major boost, almost 20 percent, enabling publicly funded kindergarten for 5-year-olds to prepare them for the 12-year basic education program designed to increase the employability of high-school graduates. Some 880,000 students were enrolled in the public preschool program this year, 81 percent of the target.

Critics have said the cash handouts foster mendicancy where a third of the people live in poverty and are better put to use in sustainable livelihood programs.

Looking up

In the first quarter of 2010, the economy grew 7.3 percent, largely on account of election-related spending and rising exports, much faster than the 2.9 to 3.9 percent targeted for the period.

The Aquino economic team—the heads of the National Economic and Development Authority (Neda), the Department of Finance, the Department of Budget and Management, the Department of Trade and Industry, and the Bangko Sentral ng Pilipinas—expect gross domestic product (GDP) growth of 6 to 7 percent in 2010 and 7 to 8 percent in 2011. Official data showed an average 4-percent growth from 2004 to 2009.

Economic Planning Secretary Cayetano Paderanga, also the head of Neda, said the higher growth rates would be sustained through greater private participation in government infrastructure projects considered crucial to spurring economic growth, and through fiscal consolidation and better governance—objectives first set forth in the President’s first State of the Nation Address to Congress last July 26.

To conserve public funds, Paderanga said, the government will encourage private-public partnerships (PPP) —such as build, operate and transfer (BOT) schemes and its variants—in building infrastructure, a broad term used for roads, bridges, ports, airports, warehouses, utilities and other public works facilities that sustain markets and the economy.

Other efforts will focus on enticing more private investments, more efficient tax and revenue collection, better performance by government-owned and -controlled corporations (GOCC) and government financing institutions (GFI), better management of the budget deficit, and improving the country’s competitiveness.

World Bank study

The World Bank study suggested that the failure of the country’s economic growth to reduce poverty was a key factor in making it uncompetitive.

The study, titled “Philippines: Fostering More Inclusive Growth,” said economic benefits had failed to trickle down to the poor because of lack of investments in social services (like health and education), unbalanced patterns of development among the regions, and unequal access to public services.

“The main problem has been that the sector that employs the bulk of low-skilled workers (agriculture) has been growing more slowly than the other sectors, while the sectors that have been contributing most to the acceleration of GDP growth (mostly manufacturing) have been very capital-intensive and have not generated many low-skill jobs,” the study said.

It suggested two strategies to make the poor feel the impact of development. One is to create more jobs by attracting more businesses, which in turn require a better investment climate and infrastructure. The other is to improve labor skills to meet the needs of investors.

At the midyear briefing, the economic team said growth must be sustained at 7 percent for the people to feel the benefits.

People’s priorities

Although people in general—and their leaders in particular have an innate sense of what are important in the overall scheme of things, what the people identify as their priority programs do not necessarily coincide with government priorities because other factors come into play, like allocating insufficient funds among, say, food, classrooms, wage increases, health care, disaster relief, or fighting the insurgency in Mindanao.

SWS asked the people to choose up to three issues “for the new President to focus on” from a list of 20 “that had been culled from promises made by presidential candidates” in the last elections.

“Livelihood (programang pangkabuhayan) clearly topped the people’s agenda for the attention of President Aquino, according to a report from the June 25-28, 2010, Social Weather Survey,” SWS said.

“The 43 percent who chose livelihood programs were far more than the 32.6 percent who said ‘jobs’ (hanapbuhay) and the 32.5 percent who said ‘prices of basic commodities,’” SWS said.

It’s the economy!

SWS added: “Note that the first three issues of livelihood, jobs and inflation all concern economic well-being. The next three issues, each with roughly 25 percent, were ‘helping farmers,’ ‘prices of medicines,’ and ‘graft and corruption.’ Thus graft and corruption is, at best, tied for fourth place in the people’s priorities.”

(For perspective, the top three issues rated by respondents have always concerned the economy, in one way or another—livelihood, jobs, employment, prices, inflation, or some such. That was consistently shown in SWS surveys since its fledgling years, when San Miguel Corp. had responded immediately to its urgent appeal with a corporate social responsibility grant to help it sustain its work.)

The national budget for 2011 will be the first detailed look that the people will get of this new presidency’s road map to the future and blueprint for development.

Making it work

The national budget is perhaps the most striking example of the democratic process and its system of checks and balances, although the budget as passed is generally what the administration submitted, signaling an era of cooperation between the executive and legislative branches. The executive branch proposes, and the legislature, wielding the power of the purse, disposes.

Then the executive, now armed with the resources it needs, implements programs for the people’s welfare. And finally the people, the true sovereign in a democracy, render judgment on their elected representatives in the next election.

That’s the general idea. Making it work is the hard part. And that explains why people look for an economic blueprint, a road map of sorts—a statement of vision, mission and objectives—which they can use as a yardstick for judging government performance when the day of reckoning comes.

When the people sent Sen. Benigno S. Aquino III to Malacañang last May, they expressed both a moral and physical yearning—a thirst for justice and a hope for a better life.

They have done that and more: they have crafted for him a road map, a statement of their fondest hopes and dreams, as they embark on the first year of a journey of some two thousand days with him. –Winston A. Marbella, Philippine Daily Inquirer

(The author is chief executive of a think tank specializing in transforming social, political, cultural and technological trends into public policy and business strategy. Comments are welcome at Marbella International Business Consultancy, e-mail mibc2006@gmail.com.)