Philippines call centres: Hot seats
IT IS LUNCHTIME at the Department of Budget and Management and everywhere, staff tuck into their lunchboxes with evident relish. Everyone that is except the department head, secretary Rolando Andaya. Pulling on another cigarette, he listens intently to a local official’s entreaty for more funds to rebuild his barangay’s (parish) school, destroyed in a fire. The supplicant is not alone: the line of local lobbyists snakes out of Andaya’s office and into the corridors of the dilapidated office building.
"It’s pretty much like this every day of the week," says Andaya, "but it’s election time now so everyone wants to see me."
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"We’re going to need a lot of help from the private sector, and we need to send them the right signals: that government will get out of business" Gary Teves, finance secretary |
There is much to talk about. The Philippines has suffered more than a decade of under-investment by a government strapped for cash and struggling to meet its international debt obligations, and it shows. The country’s physical infrastructure is in poor shape and its basic utilities in need of new investment.
It is not only the government that has been under-investing. Foreign direct investment hit an all-time low of $161 million in 2003. Although it recovered to about $2 billion in 2006, FDI is still woefully behind its peak in 1996 of $3.5 billion. International investors have left in droves: manufacturing now contributes about two-thirds less to GDP than services.
But there are signs that the country is finally on the mend. For the first time in nearly 13 years, the government has money to spend. A combination of hard work from the economics team and some luck has resulted in the promise of a balanced budget by 2008. If this year’s spending programme was curtailed, the books could be balanced already.
Instead, the administration of president Gloria Macapagal Arroyo is embarking on a government-led infrastructure and social services investment programme for 2007–10 budgeted at Ps527.2 billion ($10.8 billion). There are grand plans to build roads, ports and airports, schools and hospitals with several so-called super regions projects aimed at improving connections across the scattered archipelago.
The objective is to stimulate the economy, create jobs and improve the environment for investment, leading to increased private sector funding, thus pump-priming the economy. The danger is that the money does not get spent where it is supposed to, through a potent mix of corruption, bureaucracy and incompetence.
Realistic republic
Fortunately, it seems that those in government holding the purse strings are imbued with a refreshing sense of realism about the scale of the task ahead.
"Our task ahead is much more challenging than before," says Margarito ‘Gary’ B Teves, finance secretary for the Republic of the Philippines. "We’ll be put to a real test of our ability to increase spending on target while increasing revenues and maintaining fiscal discipline."
So far the government has been under-spending, hamstrung by the need to re-enact the previous year’s budget after the Senate rejected its proposed budget in 2006. Although that helped reduce spending at a time when revenues had been boosted by the imposition of expanded VAT and improving collections by the customs and internal revenue bureaux, no one pretends that it is a long-term solution to delivering meaningful economic growth.
So government departments and agencies are being urged to spend, no easy task according to Andaya, who has started to introduce clearer spending targets and performance measurements.
"One of the first things we noticed when we took over," he says, "is that if we released money during the middle of the year, it never got spent. So all the infrastructure projects are being front-end loaded into this first quarter. We’re also asking the departments how much they can produce. Before, the attitude was if we give them more, they’ll do more."
According to Andaya, even departments with relatively small budgets were failing to spend their allocations, partly because they refused to spend anything at all. In late 2006, when Andaya asked for details of budget positions from department heads, he was greeted with total silence.
"Not even one department replied to me," he says. "They refused to report it to us. They’d become so used to dealing with a government with no money that they were holding back money to pay Christmas bonuses!"
Basketball and bus shelters
What money was being spent was often misallocated, says Andaya, often through political interference at local levels. This meant that departments were approving budgets and allocating spending into areas often unrelated to their specific mandates, what Andaya laughingly refers to as basketball courts and bus shelters.
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"I asked all the departments to specify their exact mandates. I had a hell of a time getting even that out of them. I even told the president to get them to tell her what they were doing. For their capital outlays, no one could give her a 100% account" Rolando Andaya, Department of Budget and Management |
"I asked all the departments to specify their exact mandates: told them to limit it to just four outputs," says Andaya. "I had a hell of a time getting even that out of them. I even told the president to get them to tell her what they were doing. For their capital outlays, no one could give her a 100% account."
To tighten accountability, Andaya has implemented a set of key performance measurements and piloted it in 20 key departments related to infrastructure spending, pressing department heads to specify clear output and cost parameters and then commit themselves to them.
"This kind of exercise hasn’t been done in years," he says. "We stopped once we had financial problems. Now we look at targets on a quarterly basis. If we don’t see it getting spent, we won’t allocate for the next quarter."