Better infrastructure spending seen after 2014’s ‘hard lesson’

STATE SPENDING on infrastructure — a key driver of the economy — ended last year on a muted note due to persistent bottlenecks with agencies, the Budget department said yesterday, adding that it expected disbursements to improve in succeeding months after the “hard lesson” learned in 2014.

Public spending on infrastructure and other capital outlays totaled some P276 billion last year, 5.4% more than 2013’s P261.8 billion. Last year’s total, however, fell 24.4% short of the P365.2-billion program for infrastructure.

The Department of Budget and Management ( DBM), in its assessment of the national government’s disbursement performance at end- 2014, said infrastructure was where the government bared its “largest underspending in terms of magnitude.”

This, DBM added, was due mainly to “considerably low” fund use by the Department of Public Works and Highways ( DPWH) and Department of Transportation and Communications (DoTC).

DBM said government underspending was due to several factors.

“Some justified reasons were the non- spending of items affected by the SC (Supreme Court) decisions on PDAF (Priority Development Assistance Fund) and DAP (Disbursement Acceleration Program worth P2.1 billion), and unspent funds in the amount of P9.7 billion due to factors beyond their control such as weather dis- turbances, peace and order problems, and delayed concurrence/ difficulty in securing approval from authorities and donor institutions,” DBM said.

Lower fund use was also blamed on “structural inefficiencies and constraints” that hindered both implementation of and payments for infrastructure projects. Bottlenecks included delays in the approval of documents for DPWH contractors, coordination and capacity problems of partner agencies, unresolved right- of-way and other legal issues, as well as difficulties in securing clearance.

DBM particularly cited three unreleased appropriations that contributed to infrastructure underspending last year, namely: Basic Educational Facilities (P2.2 billion under the Department of Education and P21.5 billion under DPWH), DPWH’s Public-Private Partnership (PPP) Strategic Support Fund (P3.3 billion) and the Department of Agriculture’s

farm-to-market roads (P2.4 billion).

“These funds remain intact due to the delayed submission of documentary requirements prior to release, as required under the special provisions of the GAA ( General Appropriations Act),” DBM said.

Noting that “2014 was a hard lesson on public spending,” Budget Secretary Florencio B. Abad said in a statement: “The government was certainly challenged in ways that few had foreseen, particularly in the wake of Yolanda.”

“The High Court rulings on the Priority Development Assistance Fund and Disbursement Acceleration Program likewise affected our spending levels,” Mr. Abad added.

“However, we found out that poor agency capacity was actually the most serious roadblock to efficient spending. We’re working closely now with agencies to help them make the most of their yearly budgets.”

Mr. Abad said public spending should improve this year mainly on the back of Administrative Order No. 46 which Pres. Benigno S.C. Aquino III signed last month, ordering all agencies under the Executive branch to adopt budget execution and procurement policies to speed up disbursement of public funds.

Spending for the broader capital outlay last year totaled P351.5 billion, up 2.1% from P344.3 billion in 2013. The amount, however, fell 23.3% short of a P458.4billion program.

Expenditures on other items also fell short of program.

Current operating expenditures grew 6.4% to P1.617 trillion from P1.519 trillion in 2013. However, the amount was 10.2% below a P1.801-trillion program.

Net lending likewise fell below program by as much as 46.3%, or P13.4 billion against P25 billion. The total was also 19.4% lower than the P16.6 billion in 2013.

Total state expenditures rose just 5% to P1.98 trillion last year from P1.88 trillion in 2013. Spending last year likewise fell 13% short of a P2.284- trillion program.

Lower disbursements in 2014 caused the national government to post its smallest deficit in six years. The country’s budget balance last year ended in a P73.09-billion deficit or 0.6% of the Philippine economy, the lowest level since the P68.12 billion shortfall recorded in 2008 that was equivalent to 0.9% of gross domestic product ( GDP). Last year’s deficit was likewise well below the P266.2-billion program for 2014 equivalent to 2% of GDP, as well as 2013’s actual deficit that was equivalent to 1.4% of GDP.

WHY?

Sought for comment, Bank of the Philippine Islands associate economist Nicholas Antonio T. Mapa said in an e-mail: “It really confounds us as to why, even if we have the budget for spending, we are unable to spend our money.”

“True, it may be down to the implementing agency to utilize the funds allocated to them [ sic] and thus may show once again reluctance of government officials — all the way down to the barangay and provincial level — to make a ‘mistake,’ only to have some ammunition for authorities to run after them should they fall out of favor.”

Mr. Mapa, however, said he expects government spending to pick up this year, although it may be difficult to hit the government’s target of increasing its infrastructure spending to 5% of the Philippine economy by 2016.

“They’ve been bragging about this since day one and we doubt they’ll be able to hit their overly ambitious target,” Mr. Mapa said.

“You can’t go from 0.7% to 5% in merely two years without needing to resort to gray- area methods such as DAP. Perhaps the government can simply take over the PPP projects mired in legal impediments in order to spend.”

Sought for comment, business leaders pressed the government to ramp up infrastructure spending.

“Infrastructure is badly needed if economic growth is to be maintained. The implementation of PPP projects needs to be accelerated, especially on the DoTC side,” Henry J. Schumacher, European Chamber of Commerce of the Philippines executive vicepresident, said in a text message.

American Chamber of Commerce of the Philippines Senior Advisor John D. Forbes noted separately via text: “The government can’t spend enough on infrastructure fast enough.”

“Poor infrastructure combined with fast growth will lower growth if it creates too much congestion,” Mr. Forbes warned.

“This administration has already greatly increased infrastructure spending, but should still do much more.”

Anemic government spending last year weighed on the country’s economic expansion, which clocked just 6.1%, falling below the government’s 6-7% target for the period. —