WORLD  BANK  URGES  'QUALITY  SPENDING'  FOR  RP

MANILA, AUGUST 11, 2006
(STAR) By Aurea Calica - The Philippines is now beginning to rebuild its credibility before the international investment community with its above-target revenue collections but it should be able to observe "quality spending" and ensure the funds would go where they should, according to the World Bank.

World Bank country director Joachim Vom Amsberg said the government-improved revenue collection was "one more step reached toward rebuilding credibility and really restoring the fiscal health of the Philippine state."

"That’s very positive news and we are very supportive of that. And I think what it means is that the country is really gaining breathing space to work on delivering better services to its citizens and what I would emphasize is really these elements of quality of spending," Amsberg told reporters after a televised roundtable discussion with President Arroyo at Malacañang on the country’s revenue collection.

"Now that there are revenues that can be spent, the focus (now) should be on how it is being spent, what is being spent for? And that puts the whole agenda on government and quality of spending," he said.

Amsberg emphasized the importance of transparency in spending, procurements to ensure that nothing is wasted due to corruption.

"What I mean by that is transparency spending, meaning clear and public disclosure of where expenditures are planned, whether implemented, whether executed. (There should be) civil society participation in monitoring expenditure execution. That’s where the transparency part (comes)," he said.

Amsberg praised the Philippines’ procurement law and said it must be strictly implemented to be able to generate savings that could be used for other projects.

"The Philippines has one of the best procurement laws of any country and if it was implemented for all public procurement there will be huge savings. I mentioned that about 16 percent of public procurement go now to the disclosure and the mechanisms of competitive bidding of the procurement law and it has brought down the cost of textbooks, brought down the cost of roads, of infrastructure."

Another source of substantial savings, he said, would be the effective enforcement of the country’s anti-corruption agenda by "putting together the different pieces of the country’s anti-corruption approaches."

Efforts of government agencies to curb corruption, such as the Commission on Audit and the Office of the Ombudsman, were "all good experiences but have not yet added up to an improvement of overall perception of government."

Amsberg said the administration must improve on its strategy to prevent corruption — from detection to conviction.

Amsberg said the government must also set its priorities right in spending especially in delivering better social services to the people.

Proper targeting would mean using the money where the need and requirements were largest.

"That’s should be the agenda of quality of public spending for which the fiscal reforms have opened the opportunity to pursue. That is our main message," Amsberg said.

Slow bureacracy

Mrs. Arroyo acknowledged the need for the government to spend well and fast in order for the public to feel the results of economic reforms.

The government had been cash strapped for such a long time that the bureaucracy is not used to working fast on the bidding, documentation and other processes involved in spending, she said.

"We’ve shown that we can do things and now we have to show that we can do things faster so that the benefit to the people will also come faster."

Mrs. Arroyo said revenue from the expanded value-added tax was above target while exports grew 20 percent last June compared to last year.

Trade Secretary Peter Favila said the gains were mostly in the garments and semi-conductor sectors as well as in furnishings, furniture, footwear, travel goods and marine products.

National Economic and Development Authority director general Romulo Neri said there had been an "overflow of savings" that the government must invest quickly where it is needed.

Mrs. Arroyo pointed to her massive spending initiative that she unveiled in her annual State of the Nation Address last month aimed at jumpstarting the country’s sluggish economy.

Her program includes building or upgrading at least 20 airports as well as roads, railways, bridges, ports and ferry services, tap water and irrigation projects. The objective is to spread development in the countryside.

"We have the money and we need to see how we can spend it in the right way," Mrs. Arroyo told the discussion yesterday.

Amsberg said the fiscal reforms and the increased tax collection would create the stage for much improved economic performance and trickle down to better services, investments and improved quality of life for the people.

International Monetary Fund representative Reza Baqir also lauded the Philippines for its landmark fiscal reforms and called on the government to sustain its performance on revenue collections.

He said the reforms were done even in the face of increasing oil prices in the world market.

Baqir said the Philippines’ economic fundamentals had been strong and the country was one of the "emerging markets" that actually rebounded what it lost from previous crises.

Baqir noted that investors were recognizing the improvements and were ready to take the risk of putting their money in the Philippines again.

The government has been delivering results and should just sustain good revenue performance and accelerate the pace of infrastructure and social services.

Baqir added that the P46 billion supplemental budget should be passed by Congress to increase productive spending.

He said the IMF was also fully supportive of the Philippines’ effort to balance the budget by 2008.

Revenue collections from the EVAT continued to improve in the first six months of the year, official documents showed.

For the six-month period, the government has raised some P38.22 billion from VAT collections, higher than the P31.03 billion target for the period.

Collections of the Bureau of Internal Revenue (BIR) for the period doubled to P12.4 billion as against the P6.03 billion target while the Bureau of Customs barely surpassed its P25-billion target when it registered collections of P25.7 billion for the period under review.

Republic Act 9337 or the Reformed VAT law took effect in November last year. An estimated P81.4 billion in additional revenues is expected from VAT collections this year.

Of the P38.2 billion VAT revenues, the bulk was accounted for by collections from the lifting of exemptions at P31.5 billion.

Out of the previous VAT-exempt sectors, the biggest contribution came from raw materials for petroleum products at P14.3 billion; petroleum industry, P9.57 billion; electric power industry, P6.3 billion; domestic transport of passengers by air and sea, P387.6 million; coal, P384.6 million; electric cooperatives, P258.5 million; medical services, P91.5 million; legal services, P66.6 million; passenger vessels, P25.7 million; non-food agricultural products, P19.5 million; natural gas P16.5 million; and professionals, P6 million.

For the first six months, input VAT spreading and caps generated P3.2 billion while VAT withholding on government purchases raised P763 million.

Non-VAT reforms, on the other hand, generated P4.16 billion with the increases in the rate for corporate income tax yielding P3.95 million; gross receipts tax, P161.4 million; and Philippine Amusement ang Gaming Corp. tax payments, P49.9 million.

The mitigating measures implemented by the government, meanwhile, resulted in foregone revenues of P7.9 billion.

The bulk was accounted for by the reduction in excise taxes on petroleum products, which amounted to P5.7 billion. The repeal of the franchise tax on power distribution and the common carrier’s tax on domestic transport resulted in P1.7 billion and P44.4 million foregone revenues, respectively.


Chief News Editor: Sol Jose Vanzi

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