NOY DEFENDS P72-B ECO STIMULUS PACKAGE /ANALYST: STIMULUS FUND CAME LATE
MANILA, OCTOBER 17, 2011 (STAR) By Aurea Calica - President Aquino has defended the P72-billion stimulus package he announced on Wednesday, saying the amount came from savings from infrastructure projects and not from underspent funds in the first three quarters of the year.
“Our critics call this ‘underspending’ but is it underspending when you save 20 percent of contract cost on infrastructure projects as Public Works and Highways Secretary (Rogelio) Babes Singson has done?” the President said in his speech before the 37th Philippine Chambers of Commerce and Industry (PCCI) Business Conference and Expo on Thursday night in Manila.
“Is it underspending when you restructure your maturities so that you save P26 billion in interest payments in a year? Is it underspending when you demand a work program from a regional director who asks for a bridge in his district?” he said, stressing that fiscal prudence is not underspending.
The Chief Executive said that the P72 billion in new programs would shield the economy from the ill effects of a global financial slowdown.
In the same forum, Department of Transportation and Communications Secretary Manuel Roxas II said the President should be commended and not criticized for generating savings.
“Because of the President’s matuwid and matipid na daan (straight and frugal path), our interest expense has come down. Meaning we didn’t have to spend for that interest,” Roxas said.
“In the DPWH (Department of Public Works and Highways), there is P12 billion in savings. That means the DPWH built the same amount of roads, the same length of road, P12 billion less. Because they tightened their standards, they followed the bidding procedures, they didn’t allow kuntsaba or collusion among the bidders,” Roxas said.
“That is part of what they are saying is our underspending,” Roxas said. “If this is done in your company, you will applaud your Chief Executive, right?”
At least P6.5 billion of the stimulus fund will go to local government units for their infrastructure or poverty alleviation projects, the President said.
At the same time, the government is spending an additional P10 billion to help resettle and relocate informal settlers currently residing in danger zones, he added.
The President also said that P5.5 billion would go to infrastructure projects of the DPWH. There will also be additional P4.5 billion and P1.8 billion for the improvement of the Metro Rail Transit and Light Trail Transit lines, respectively.
He, however, clarified that the stimulus package is not merely for growth’s sake.
“We chose initiatives for the stimulus package that are either high-impact or anti-poverty projects that are easy to get off the ground so that Filipinos can feel the effects immediately,” he said.
“Our people are the ultimate beneficiaries here and these projects are important because we know that through these we can take significant steps towards alleviating poverty and addressing the needs of our countrymen,” the President said.
Other countries are experiencing painful restructuring because they took in too much debt and are now hard pressed to repay, the President stressed.
Aquino also assured members of the business community that the nation is prepared to tackle the effects of the global slowdown.
“There are many of us who feel uncertain and that is natural. But I am here to tell you that our government is ready to deal with these problems. Fifteen months of fiscal prudence and taking the necessary steps to ensure that money is spent wisely have given us the wherewithal to have decisively addressed the economic uncertainty we face today,” the Chief Executive said.
He also thanked the PCCI for its support for his administration’s economic initiatives.
“Since we saw each other last, the Philippines has garnered four positive rating actions from credit rating agencies such as Fitch and Moody’s and Standard & Poor’s. Our country moved up 10 places in the World Economic Forum’s Global Competitiveness Index. We are now at 75th place from 85th in 2010,” the President noted. – With Rainier Allan Ronda
“Truly, these developments show us that our reforms and our focus on fostering a business climate conducive to growth are indeed taking effect. We are maintaining the momentum we have built from last year. But for the record, while the government has indeed worked hard for this, all of you here are equally deserving of praise and of thanks,” he added. - With Rainier Allan Ronda
FROM MALAYA BUSINESS INSIGHTS
‘Stimulus’ fund came late BY ANGELA CELIS
WITH only 10 weeks remaining of the year, the P72-billion acceleration program will barely have an impact on the country’s growth target.
"With 10 weeks to go before the end of the year, and the slow-moving bureaucracy, I expect that, at best, only one-tenth of the proposed outlay will be spent this year, the rest will be spent next year," said Benjamin Diokno, University of the Philippines economist.
Diokno said that 10 percent of P72 billion, or P7.2 billion, won’t make much difference in a P10-trillion economy.
"My GDP growth projection before the announced expenditure acceleration plan was 4.2 percent to 4.8 percent. I stand by that projection," he said.
The government recently announced that the outlook for the year is 4.5 percent to 5.5 percent, lower than the 5 percent to 6 percent target. Without the acceleration package, the government’s projection is 4.2 percent to 5.2 percent.
"The more I look at the details of the stimulus package, the more I’m convinced that it won’t accomplish its desired objective," Diokno said.
Diokno said that the plan is not a "fiscal stimulus," as President Aquino announced, but more of a "disbursement acceleration plan" as the Department of Budget and Management (DBM) calls it.
"Mr. Aquino’s wordsmith did him a disservice by letting him call the P72 billion spending plan an ‘economic stimulus package," Diokno said.
"With 10 weeks to go before the end of the year and with the poor selection of projects, the spending package will not help perk up the economy this year," he added.
Diokno said that fiscal stimuli are government measures which normally involve higher spending or lower taxes, and aim to give a "positive jolt" to economic activity.
President Aquino explained that the spending will be sourced from "savings" in the past, which partly came from underspending.
"It is in this sense that I call the P72 billion plan ‘catch-up plan with a twist’ – the twist being replacing slow-moving and discontinued projects and items of expenditures with new ones," Diokno said.
Diokno said that the Executive Department cannot just make sudden changes in the budget without Congress’ approval.
"It is important to respect the existing balance of power in the budget process – the President proposes, Congress approves, and the Executive Department implements the budget," Diokno said.
"The Executive Department cannot slice and dice the national budget, change approved budget priorities, come up with a ‘new’ spending package, without getting congressional concurrence," he added.
He said that the legislators should have been consulted in the design of the P72 billion acceleration package.
"Under a totalitarian regime, what President Aquino and his men have done is perfectly acceptable. But under a constitutional regime, where there is a perfectly functioning Congress, such massive rearranging of the budget should be sanctioned," Diokno said.
"Coming up with an entirely new spending package worth P72 billion, roughly 7 percent of total budget (net of interest payments), by slicing and dicing the past and present budgets without prior consultation and authorization from Congress, casts serious doubts on whether the government is serious about strengthening existing political institutions," he said.
Diokno also pointed out some flaws in the acceleration program. While the funding amounts to P72.1 billion, only around P50 billion worth of spending items have been identified.
"What happened to the P22 billion? Are they yet to be identified? Or have they been identified but kept in the dark?" Diokno said.
He added that a significant part of the spending package is in the nature of imports. This will boost other economies, but not the Philippine economy, he said.
"These include the purchase of additional train cars for MRT, the rehabilitation of LRT 1 and 2, PAGASA’s radar system, and the equipment for the various specialty hospitals," Diokno said.
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