Amid deficit spending and debt burden, save up toward economic freedom
Despite much general suspicion and opposition to its timing, the overwhelming approval of House Bill No. 6608, creating the Maharlika Investment Fund (MIF), virtually shuts out any doubt on the huge government investment house, composed of two prime government banks, Development Bank and Land Bank of the Philippines, the Bangko Sentral ng Pilipinas, plus the national government, from becoming a reality. Will the MIF be a better investment alternative for the country’s meager resources? That’s the big question.
The more serious problem President Marcos Jr. must now face are the twin economic challenges of the annual pervasive government deficit spending and the debt burden. With our heads hardly above water in debt, infrastructure and economic development programs are needed, but cannot come from loans anymore. Like the responsible head of a family unable to make both ends meet, the President must start freeing us from the debt trap and onto the long, lonely road not taken: forced savings. The average savings rate of 16 countries in Asia and the Pacific, surveyed by TheGlobalEconomy.com in 2021, was 29 percent, while ours was only 20.22 percent (Singapore has 44 percent); we don’t have enough for the future, and have to rely on borrowings. The P1.6 trillion operating deficit in 2021, and a similar deficit or worse expected in 2022, are added economic whammies to bear.
A national savings fund can address our priority long-term needs:
Roads and highways linking the country from Aparri to Mindanao, and more Skyways, all necessary to ease up congestion in Metro Manila;
Dams and flood control projects to prevent recurrent disastrous flooding and preserve precious water resources; the long delayed desiltation of our lakes and waterways, which have not come off the planning board, for many administrations now;
Full digitalization of the country for global competitiveness;
Massive development of our agricultural/mineral and sea resources;
Climate change projects and other environmental concerns.
Unless we wake up and start saving up for the future, it will be a continuing hand-to-mouth financial situation with no improvement in the double-digit mass poverty rate.
Substantial forced savings could come from combing through the bloated National Expenditure Program (NEP) budgets. The 2023 national budget of P5.268 trillion stands out as proof. In the recent congressional budget review, unnecessary intelligence funds were highlighted in some government offices, like the Department of Education, but getting away with it, for political considerations; consider also that an estimated 20 percent of the budget is lost to corruption, reported by the World Bank’s UNDP in 2019, in a disclosure by Deputy Ombudsman Cyril Ramos.
The potential for savings in budget cuts, in the bloated bureaucracy, is great but will not find footing without the blessings of Malacañang, the way the President circled the wagon for the overwhelming passage of his pet bill, HB 6608. The workers themselves will even go along with the budget cuts if they’ll end up benefited by it in terms of productivity bonuses awaiting them for the efforts to save—“what’s in it for me” mindset is a given human syndrome.
There are measures already in government providing productivity incentives, like the productivity enhancement incentives (PEIs), entitling all workers to P5,000 yearly bonus. Bigger productivity incentives, however, can motivate them more, without jeopardizing operational efficiency, by cutting unnecessary expenses like: a) unnecessary and expensive foreign travels, with entourage in tow; b) representation expenses; c) manpower redundancies; d) overpricing in purchases; e) ghost manpower and ghost projects, which are prevalent in many public works projects; f) congressional pork barrels; g) intelligence funds. Name them, and you’re bound to have a long list. It can happen only with employees working, as a highly motivated TEAM, out to generate the savings.
It is suggested for the Department of Budget and Management secretary to consider in future budgets that a team productivity bonus be given to all personnel, civil service, and casual workers, (except department secretaries, appointed officers, elected officials, or consultants on contract), on the actual savings in operating expenses. Between 25 to 30 percent of the NEP savings would be reasonable to set aside for the total team bonus to be earned and distributed fairly based on an equitable productivity performance formula.
As a background info, the government bureaucracy in 2021 spent P1.5 trillion for salaries and benefits for the estimated 1.7 million workers. If savings would come, from just minimizing the 20 percent losses to corruption of P1 trillion, the 30 percent bonus will be P300 billion; theoretically, the average per capita bonus would be P176,000 per year, much higher than the PEI of P5,000, which is uniformly given to all workers and not directly related to productivity.
The yearly contributions to the national savings fund could be a hefty P700 billion. We can imagine the additional amount that can be saved from excesses found beyond just addressing the corrupt practices.
Mind-boggling possibilities, but doable with a determined and purposeful presidential leadership. The added advantage is that the ordinary government worker, who would have imbibed the productivity culture, becomes the watchdog for prudent government spending, hereon.
Marvel K. Tan,
[email protected]
