Business World, 29 March 2016


In less than 100 days, President Benigno S. C. Aquino III will complete his six-year term. By then, he would have underspent by close to a trillion pesos — the difference between what Congress has authorized him to spend and what he actually spent.

That total amount has huge opportunity costs in terms of jobs not created, benefits from social projects not delivered and physical infrastructure projects left undone.

At a time when the growing economy needs better infrastructure, when the youth needs large government investment in human capital, when criminality is on the rise, and the drug menace grips most communities, the government continues to underperform and underspend.

Mr. Aquino underspent by P76 billion in 2011, by P56 billion in 2012, by P130 billion in 2013, by P267 billion in 2014 and P276 billion in 2015. The rising trend in underspending defies logic. One expects that the gap between the budget plan and budget implementation should fall, not rise, as the years go by.

The Aquino men explain this epic underspending as a result of being cautious in spending public funds to minimize corruption. Seriously?

This reminds me of the first Aquino administration. Mrs. Corazon C. Aquino appointed an irrefutably honest Public Works Secretary. For a year and a half, the Secretary didn’t approve any public works contract. ‘No project, no corruption,’ he said. As expected, public construction plummeted to its lowest level. But that’s not how to run a government.


I think the underspending phenomenon is a result of any or all of the following factors:

First, there is that element of being cautious — not ending up in jail not being tied up in expensive and prolonged legal problems after serving the government. There is nothing wrong with the desire of the new President and his crew to review and fix (if something’s wrong) the operating rules and regulations. But after a few months or at most a year, it should be all systems go. Underspending for the entire six years just doesn’t make sense.

Second, some Department Heads are incompetent and clueless. But inept people are replaced, not kept. Yet, the President continues to support and defend these non-performing Department heads, which reflects poorly on the management style of the President.

Third, the national budget is poorly prepared. The Budget Secretary may have deliberately included slacks in the budget in the hope that the Executive can realign them for other purposes not authorized by Congress. That was the case of the Disbursement Acceleration Program (DAP).

The Supreme Court has unanimously declared the DAP unconstitutional. It ruled that the President usurped the congressional power of the purse since the he rearranged the national budget as approved by Congress and illegally disbursed funds not originally authorized in the general appropriations act.

Another indication that the President’s budget is poorly prepared is that it includes many projects that are not yet ready for implementation. Worse, if it contains appropriations for projects that have yet to be identified.


The Aquino III administration should be commended for having all the President’s Budgets approved on time, meaning before the start of a new fiscal year.

But having the President’s budget approved on time is a necessary, but not sufficient condition, for ease and timely implementation. A direct proof of this is that a significant chunk of the budget remains unspent despite the budget’s timely approval, year after year after year.

The harsh conclusion is that the epic underspending is self-inflicted. Congress has nothing to do with it.

The key to easy and timely budget implementation is good budget preparation.

It is possible to implement on time a carefully crafted budget, but it is impossible to implement properly a poorly prepared budget.

There is a lesson here for the next president. The new head of state should have a clear idea where to bring the Republic within the entire six-year term. He/she should start by having a six-year Budget Framework, divided into two 3-year Frameworks (Fiscal Year 2017-2019 and 2020-2022).

The First 3-Year Budget Framework should be submitted to the next Congress, which it has to concur in the form of a joint budget resolution. This will keep the president and the next Congress on the same page, same aspirations and programs for the next three years. The Second 3-Year Budget Framework should be submitted in the next, next Congress.

The next President’s first budget, FY 2017, should be consistent with the First 3-Year Budget Framework.

Each Department Head should have a 6-Year Budget Framework divided into two 3-year Budget Framework. There should be Health Budget Framework, Education Budget Framework, Energy Budget Framework, and so on. This means that the Department Secretary should be deeply engaged in the planning of his annual, medium-term, and long-term resources.

This means that each Department Secretary and head of agency should have a deep understanding of the role of his agency in the overall government goals and objectives, the kind of technical expertise needed, and the amount of resources needed to carry out the agency’s programs, projects and activities.

This new budget framework will take away the arbitrariness and temporization of budget formulation. This will take away the need for the legally flawed provisions in the 2015 and 2016 budgets which allow select Department Secretaries to make adjustments in the budget after it has been approved by Congress.