Commentary: Concerns on viewing the 2018 budget as tool for dev’t

In broad strokes, the government appears to be taking the right direction if one is to review its key programs and priorities as reflected in the 2018 budget. In total, the budget for the year is at P3.767 trillion, representing a 12.4 percent increase from the 2017 budget.

For analysts, the 2018 national budget is an important piece of legislation, because it is, for all intents and purposes, the first full financial plan crafted under the Duterte government. In contrast, the 2017 budget and the National Economic Development Authority strategic plan documents were first developed under President Benigno Aquino III and some provisions were just inserted by the current administration.

Looking at this budget, one sees that the ten main allocations were for: [1] education with P691.1 billion; [2] public works/infrastructure with P643.3 billion (37.5 percent increase since 2017); [3] local governance and the interior with P172.3 billion (15.4 percent increase); [4] health with P164.3 billion (10.6 percent increase); [5] defense with P145 billion ; [6] social welfare with P138 billion; [7] transportation with P73.8 billion pesos (32.6 percent increase); [8] agriculture with P54.2 billion (17.9 percent increase); [9] Muslim Mindanao with P33.5 billion; and, [10] nature and natural resources with a budget of P27.9 billion.

The numbers above reveal that these five sectors are the “winners” for having the biggest budget increases in terms of percentage of allocation: public works, transportation, agriculture, interior and local government, and health.

Most would agree that these are great priorities. They touch on the most basic daily concerns of the Filipino public—food, safety and transportation.

Let’s take the case of education.  The Department of Education has the second highest departmental allocation in the 2018 national budget. DepEd was allocated P553.31 billion (US$11.12 billion), accounting for 14.7 percent of the total 2018 national budget. Its 2018 allocation is 1.69 percent higher than that in 2017. The budget is targeted towards building new and maintaining existing education facilities, hiring people for teaching and non-teaching positions and providing learning resources to Filipino students across the country.

Moreover, there is the P62.12 billion (US$1.25 billion) allocated for state universities and colleges (SUCs). This means each SUC will receive an increase of at least P10 million for procuring equipment and the repair and construction of buildings. Then there is the P40 billion (US$803 million) budget for the so-called Universal Access to Quality Tertiary Education Act.  A P327 million (US$6.57 million) allocation has even been set aside for setting up free wi-fi for all SUCs.

The Commission on Higher Education gets P49.4 billion (US$991 million), a hefty increase of 164 percent over that of the 2017 allocation. The bulk of CHED’s budget is set to finance scholarships, grants and subsidies for higher education.

Last but not least, the Technical Education and Skills Development Authority was provided with a P7.6 billion (US$152 million) budget for 2018.

Of course, the higher budget allocation for the education sector, an expense item very close to hearts of Filipino families, is a welcome development.

With regards to where the funds for such programs will come from, the government has seen the necessity of pushing for a comprehensive tax reform program. The first tranche of a package of laws for such reform has already been passed last December 2017.

Putting the infrastructure program at the top of the agenda for this year’s economic growth efforts is seen as neatly dovetailing with the revised national taxation scheme. How so?

Studies on the growth of national economies show how transport infrastructure improvements (including road networks, airports, railways, ports, and logistics) have led to higher trade flows. Infrastructure, particularly information and communications technology (ICT), also strengthens trade, as the density in numbers of telephone lines, mobile phones, broadband access, internet users, and secure internet servers has a positive impact on trade for both exporters and importers.

Relatedly, it has been highlighted in studies that tax revenue resources have a positive effect on infrastructure development. These studies propose that the government should provide the necessary human and material infrastructure that are needed to support seamless tax collection so increased revenues can really enhance development.

As noted, the national budget for 2018 is closely tied to the Comprehensive Tax Reform Package (CTRP) being pushed for by the government. The recently-signed Tax Reform for Acceleration and Inclusion Law, the first package of the CTRP, seeks to lower personal income tax rates, limits value-added tax exemptions, introduces tax administration measures and raises excise taxes on several commodities, while generating the requisite funds for infrastructure spending, education, health and other social safety nets. This is seen as crucial for sustaining long-term economic growth.

While the government’s goals sound very rational and sensible, serious governance-related concerns remain.

For the sake of argument, even if we assume that the monies budgeted for the key programs are really used by the concerned agencies, there is a need for vigilance in ensuring that the agencies prioritized are truly prudent in spending their respective budgets.

Indeed, it would be helpful if investing on infrastructure translates to faster economic growth that would ultimately trickle down to the ordinary Filipino. Unfortunately, key infrastructure agencies have yet to effectively address public spending bottlenecks.

The government also has to introduce additional measures to ensure that tax evasion is minimized so enough revenues can be tapped to finance these public investments. Finally, authorities responsible for collecting taxes should be strengthened and held more accountable in enforcing compliance by taxpayers. 

Louie C. Montemar is a fellow of think tank Stratbase Albert del Rosario Institute, a partner of Philstar.com.