Pork Barrel and Systemic Corruption

Pork Barrel and Systemic Corruption

Pork Barrel and Systemic Corruption

The PDAF is actually just a small part of the vast government mechanism of patronage and pork barrel politics centered around the presidency.

By Sonny Africa

THE Napoles pork barrel scam is a sensational corruption scandal involving billions of pesos, prominent senators and representatives of congress, supposedly development NGOs, massive ill-gotten wealth and ostentatious lifestyles by the accused. The spontaneous outrage was enough to drive hundreds of thousands to gather in protest at Luneta on August 26. The scam has rightfully drawn attention to legislators’ gross abuse of the notorious Priority Development Assistance Fund (PDAF).

However the PDAF is actually just a small part of the vast government mechanism of patronage and pork barrel politics centered around the presidency. The persistence of presidential powers and discretion over hundreds of billions of pesos in public funds—including the PDAF which is really the president’s to dispense more than solely at legislators’ discretion—is the real issue. And even this is just one aspect of the most basic problem: the use of the enormous resources and power of the State for the private gain of government officials and big domestic and foreign business elites.

Undemocratic economics and politics

The Napoles scam triggered intense indignation because of its sensational circumstances but also because the massive corruption and extravagant living happens amid a deep social crisis and desperate circumstances for tens of millions of Filipinos.

The people are in the middle of the worst jobs and poverty crisis the country has ever seen. There are more unemployed, underemployed and poor Filipinos today than at any time in history—while a few families and corporations, including foreign companies, amass unparalleled profits and wealth. Manufacturing has declined to as small a share of the economy as in the 1950s and agriculture to its smallest ever. Millions of peasants still only nominally own land and remain under the sway of landlords and corporations. The privatization of social services is accelerating especially in public health and hospitals but also in education and housing.

This is because economic policies remain unreformed and are geared mainly to opening up the national economy to exploitation for profit by foreign capital and their local big business counterparts rather than to providing the jobs, incomes, goods and services needed by the people. Three decades after the supposed return of democracy to the country in 1986 the economy remains deeply and systematically undemocratic. There is severe poverty for the majority while a few domestic and foreign elites continue to prosper.

The problem is long-standing and not accidental. It is the inevitable result of an undemocratic political system where elites hold on to political power to preserve and promote their economic interests at the expense of the majority of Filipinos. This is done through the facade of elections as well as outright violent repression. Oligarchic, anti-nationalist and anti-people politics cannot but result in an elite-dominated, foreign-biased and exploitative economy.

This unjust political and economic arrangement—and the Aquino administration in particular—is fully supported by the United States (US) as long as it serves their imperialist agenda. The US is the Philippines’ biggest foreign investor and trading partner implying that its corporations benefit the most from the country’s raw materials, markets and labour power. At the same time the US is the sole foreign power using the country as its forward outpost for projecting military force in the region. It is also the government’s biggest provider of military aid and foreign grants aside from being a vital source of diplomatic and international legitimacy.

Undemocratic budgets

The State is the single biggest and most powerful entity in the country. The national government (NG) budget in turn is the biggest concentration of revenues and spending in the nation and hence among the most potent instruments for influencing the government and the economy. This is a strong motivation for vested interests to ensure that they control the budget.

The budget system is not transparent and has poor accountability by design. This opaqueness serves the national and local political elites who would use public resources for self-serving purposes. The budget is moreover fundamentally regressive with, for instance, the poor bearing a disproportionate tax burden while the rich and big corporations benefit disproportionately from economic services. In these ways, the prevailing lack of democracy is reflected in the budget.

The most basic rule in the use of public funds is articulated in Article VI, Section 29 of the 1987 Constitution: “No money shall be paid out of the National Treasury except in pursuance of an appropriation made by law.” The NG budget process is supposed to follow the doctrine of separation of powers and the principle of checks and balances. These seek to prevent the concentration of authority in one person or branch of government which may lead to the abuse of power or gross errors in decision-making. This is a crucial point of democratic principle against the infallibility of any one person – such as the President—or branch of government.

The prescribed budget process begins with budget preparation where the executive branch prepares the budget and submits this to Congress. The next step is budget authorization where the budget is reviewed, with public hearings, first by the House of Representative (HOR) which drafts the General Appropriations Bill (GAB) and then the Senate. The HOR and Senate reconcile their versions in the Bicameral Conference Committee and the final GAB approved by Congress is submitted to the president for signing into law as the General Appropriations Act (GAA). The GAA defines ‘appropriation’ as the authorization of payment for goods and services out of government funds under specified conditions and for specified purposes.

After this is budget execution where government departments or agencies prepare their work and financial plans according to the GAA. The Department of Budget and Management (DBM) releases funds to agencies for the implementation of programs and activities – most commonly by issuing Special Allotment Release Orders (SAROs) and then Notices of Cash Allocation (NCAs). The SARO basically authorizes the agency to incur an obligation of a particular amount while the NCA refers to the actual amount that the agency can withdraw from a government bank to cover the obligation.

Finally there is budget accountability where the departments and agencies conduct various performance reviews and financial audits on a monthly, quarterly and annual basis. The Commission on Audit (COA) plays a crucial role here as the constitutionally independent auditor of government finances providing checks and balances such as on the executive branch.

Presidential pork powers

However the prescribed budget process is subverted by various laws and practices that render the supposed Congressional power of the purse meaningless and that give the President hundreds of billions of pesos in pork barrel. The President benefits from a series of laws that give the executive vast powers at the expense of the legislature, the doctrine of separation of powers, and the principle of checks and balances.

The President uses vast lump sums funds without Congressional oversight. This is by virtue of every GAA (or NG budget) passed annually by a compliant Congress which contains hundreds of billions of pesos in lump sum funds in PDAF, Special Purpose Funds (SPF), and regular agency budgets. SPFs are appropriations for purposes not yet identified during budget preparation; the PDAF was considered part of SPFs until 2013.

The President uses unprogrammed funds (also part of SPFs) and confidential and intelligence funds (under agencies) in the NG budget without oversight. The President also declares unused or unreleased appropriations as ‘savings’ and uses these for other purposes within the executive branch. The President, through the DBM, can also delay or outright withhold the release of authorized appropriations. All these are by virtue of Executive Order (EO) No. 292 or the Revised Administrative Code (RAC) of 1987 (Book VI). Unprogrammed funds are supposedly only spent when additional revenues or foreign funds are generated.

The President also uses various off-budget items without oversight. These include the Malampaya Fund, the President’s Social Fund with a contribution from the Philippine Amusement and Gaming Corporation (PAGCOR), the Charity Fund with a contribution from the Philippine Charity Sweepstakes Office (PCSO), and Motor Vehicle Users’ Charge (MVUC) fund. These are by virtue of Presidential Decree (PD) 910 (Malampaya Fund), Republic Act (RA) 9487 (PAGCOR), RA 1169 (PCSO) and RA 8794 (MVUC).

All these funds are based on laws drawn up during the Marcos dictatorship which ensured that power especially over public resources was concentrated in the executive and in particular the president. Although drawn up during the Corazon Aquino administration and the supposed return of democracy, EO 292 draws heavily from the Marcos regime’s PD 1177. PAGCOR was established by PD 1067-A and PD 1869, PCSO by Batasang Pambansa (BP) Blg. 42 and PD 1157, and the MVUC is from an earlier road tax under BP 74.

The conventional definition of pork barrel imported from the US – i.e. of legislators deciding on projects for their constituencies – does not capture this concentration of fiscal power in the chief executive and so cannot capture the corresponding abuse of public funds. In the Philippine context, pork barrel is better understood as public funds vulnerable to use for patronage and partisan politics and, at worst, corruption because of the undue discretion of government officials over these. More to the point and given current laws and practices, pork barrel refers to the public funds that the President can dispense to legislators, agencies, local government units and beneficiaries at his discretion, for purposes that he can define unilaterally, and even with only a semblance of legality.

Understood in this way the presidential pork barrel sums to at least Php1,134.8 billion. (See Table) This includes Php975.18 billion in the NG budget consisting of: the Php25.2 billion of the PDAF (albeit distributed to agencies as part of its supposed ‘abolishment’), Php294.0 billion in SPF lump sums, Php235.3 billion in regular agency budget lump sums, Php139.9 billion in unprogrammed funds and Php280.8 billion in savings. The off-budget items combined are worth Php159.6 billion including: the Php137.3 billion Malampaya Fund; Php2.0 billion PSF (PAGCOR); Php8.1 billion Charity Fund (PCSO); Php10.7 billion MVUC; and Php1.5 billion CHED Higher Education Development Fund. These figures use the Makabayan coalition’s House Resolution No. 298 calling for the abolition of pork barrel as a starting point.  

Pork barrel abuses

The PDAF accounts for just 2.2% of presidential pork barrel. At any rate, the history of PDAF provides a useful case study of how political elites abuse the national budget for self-interested purposes. Philippine legislators were able to identify projects as early as 1922, during American colonial rule, through a Public Works Act. This continued in the 1950s with lawmakers identifying ‘community projects’, ‘miscellaneous community projects’ and ‘nationwide selected projects’.

The more direct precursors of the PDAF are the Corazon Aquino-era Php480 million Mindanao Development Fund (MDF) and Php240 million Visayas Development Fund (VDF) of 1989 which, upon the addition of Luzon, became the Php2.3 billion Countryside Development Fund (CDF) in 1990. CDF allotments to legislators were considered base figures and could be supplemented by so-called Congressional insertions; in the case of close allies of the president these could reach many times CDF allotments.

There were estimates in the mid-1990s that 60-90% of the value of CDF projects were going to the pockets of legislators and their accomplices. This implies only 10-40% implementation of projects. The CDF continued to grow, changed its name to PDAF in 2000, and stood at Php25.2 billion in the proposed 2014 budget. In the case of the Napoles scam, allegations are that 100% of the PDAF is lost to kickbacks divided 50% to legislators, 10-15% to implementing agencies and local government units, and 35-40% to Napoles herself. This implies zero implementation of projects.

There are already examples of abuses of most major categories of presidential pork barrel. In the case of PDAF/SPF there is the Napoles NGO scam involving Php10 billion over 10 years with Php581 million in kickbacks allegedly going to five senators. A COA audit report on PDAF/VILP meanwhile found Php6.2 billion worth of “not proper and highly irregular” NGO projects in the 2007-2009 period by 12 senators and dozens of representatives. The audit distinguished Congressional pork between PDAF ‘soft’ projects (i.e. livelihood, education, health, financial assistance and small infrastructure) and Various Infrastructure including Local Projects (VILP) ‘hard’ public works. The COA report has been criticized for its selectivity though in covering only 35% of some Php116.1 billion in total releases over the period covered, for focusing on opposition senators, and for not covering releases from 2010 during the current Aquino administration.

The Php12.8 billion channeled to legislators under the Disbursement Acceleration Program (DAP) by Pres. Benigno Aquino III, allegedly to be able to get a conviction for former Chief Justice Renato Corona during his impeachment trial in May 2012, is an example of the misuse of ‘savings’. It has been reported that 20 senators received Php40-100 million and representatives from Php10-15 million on top of their PDAF allocations. Total DAP releases have so far reached Php137.3 billion – with the DAP fund reportedly coming mainly from unreleased appropriations and partly from the unprogrammed funds. The constitutionality of the DAP is already being challenged.

The Malampaya Fund scam is an example of the abuse of off-budget items. Former president Gloria Macapagal-Arroyo and three cabinet secretaries, among others, are alleged to have received Php337 million in kickbacks from transactions worth some Php900 million. Pres. Benigno Aquino III has reportedly used Php18.5 billion of the fund since taking office. The COA previously reported a Php1.5 billion discrepancy in the MVUC where Land Transportation Office (LTO) collections worth Php71.9 billion over the period 2001-2010 were not fully reflected in Bureau of the Treasury (BTr) certifications of deposit which only amount to Php70.4 billion.

There is also an economic concern regarding pork barrel funds. The arbitrary, discretionary and patronage-determined use of public funds is an irrational and wasteful use of scarce government resources. Public funds should be consistently spent according to a larger socioeconomic plan that identifies development priorities and allocates finite resources between competing uses for maximum social and economic impact. The demands of real agrarian reform, pursuing agricultural development, building Filipino industry and providing vital social services to the people are vast enough as it is.

Yet it is irrational for public funds to be spent according to the whims of individual politicians whether the president, senators, representatives or other officials. Such decentralized decisions will tend to be parochial, misguided, based on incomplete information and even self-serving. It will be wasteful in the worst instances that funds are partially or wholly diverted to the pockets of corrupt politicians, government officials, middlemen and non-government racketeers.

Bureaucrat capitalism

There are three main aspects to the issue of pork barrel and, in particular, presidential pork barrel. The first is corruption which has underpinned the spontaneous outburst of rage on the part of millions of Filipinos. Plunder and malversation cases related to abuses of the PDAF and Malampaya Fund have already been filed against high-ranking government officials. Yet while the most sensational this is by no means the entirety of the issue.

There is, second, the patronage aspect and the conscious decision by every president to preserve and use the elaborate pork barrel system to remain in power and exert political influence. The Aquino administration’s alleged use of DAP in the partisan political campaign against a sitting chief justice could be a recent example of such a practice. Apart from the DAP the Aquino administration has also dispensed Php60.4 billion in PDAF to 21 senators and 285 representatives between July 2010 and July 2013. Any patronage-driven or politically-motivated use of public resources at the level of the presidency propagates an undemocratic and feudal political culture which is reproduced all the way down to the lowest barangay level of governance.

The Aquino administration’s recent declaration that the PDAF will be abolished is disingenuous—the presidential pork barrel apportioned to legislators remains but now with legislators even more dependent on the discretion of the president. Pres. Aquino meanwhile keeps direct control of hundreds of billions of pesos that can be dispensed to allies, or withheld from opposition, or otherwise used to purchase political support. There is no reason to expect an end to the spectacle every six years of legislators changing to the newly elected president’s political party.

Patronage also wrongly makes public and social services something that political patrons dispense for loyalty and support rather than services that every Filipino is entitled to as a matter of right. Every beneficiary of medical assistance or scholarships from pork barrel funds for instance deserves and should be benefiting from public health care and education without having to depend on the discretion of any politician or government official.

Third is how the pork barrel system is used to ensure that the government serves the interest of big domestic and foreign elites. Various administrations have used the persuasive and punitive powers of the pork barrel to produce the current array of anti-people economic and political policies that keep the majority of Filipinos economically destitute and politically marginalized. This happened at least as early as 1946 when then president Manuel Roxas reportedly used pork barrel to get legislators to ratify the Bell Trade Act which ensured US domination of the post-independence Philippine economy. Similar benefits until today ensure that big business is a reliable provider of funds for the electoral war chests of candidates including those, such as the president, who overtly wield pork barrel as a tool of governance.

Seen in this way the pork barrel emerges as just one aspect of the much more expansive and multifaceted problem of bureaucrat capitalism where the enormous resources and power of the State are used for private profit and personal gain by those within or outside government. This is a gross distortion of public service and a deep form of corruption.

The different areas of public power are abused in many ways. The pork barrel controversies of officials getting kickbacks from public projects are examples of misusing the government’s fiscal powers. Other examples include officials paying themselves hundreds of millions of pesos in excessive salaries, bonuses and benefits such as in the case of the Metropolitan Waterworks and Sewerage System (MWSS) board members, Social Security System (SSS) board members, PhilHealth and PCSO. There are also the notorious payoffs for tax evasion and smuggling.

The government’s regulatory authority is likewise misused with payoffs for franchises, contracts and bypassing regulations, as well as kickbacks from asset sales and bribes around big privatization deals. Legislative powers are abused whenever big business pays off lawmakers to get favourable laws, investor incentives or trade deals. Judicial powers are misused whenever favourable court decisions are bought. Military and police forces are directly involved in criminal activities as well as used by the government to suppress dissent or assertions of social and economic rights that threaten landlord earnings or capitalist profits.

Remedies, reforms and struggles

The president’s patronage and pork barrel scheme is one of the most obvious manifestations of a government serving mainly the interests of the country’s political and economic elite rather than the majority of the people. It is deeply undemocratic and anti-development.

The abuses of the pork barrel system are slowly being exposed which naturally leads to demands for greater transparency and accountability. Real transparency and then accountability in the misuse of pork barrel however cannot be selective and must cover both opposition and administration officials. These must also go beyond the concern about plunder and malversation to also include the use of public funds for patronage, partisan political purposes, and pro-elite governance.

There are urgent and immediate reforms. The pork barrel in all its forms within and off-budget needs to be abolished and controls instituted. These funds need to be removed from the discretion of the chief executive—whose powers over budgets must also be reduced – and subjected to greater public oversight. It is difficult to expect this either from the presidency, which is the main beneficiary of the pork barrel system, or from Congress which is in many respects controlled by the president aside from also benefiting from the system. These make the process of lawmaking through a people’s initiative, though complicated, a potentially productive option.

Steps can also be taken to improve transparency and accountability such as passage of a meaningful Freedom of Information (FOI) law and reforming the COA to better fulfil its mandate of operating autonomously in the public interest.

The arbitrary, discretionary and patronage-driven use of hundreds of billions of pesos in public funds is an irrational and wasteful use of scarce government resources. These should be rechanneled to social services and regular agency budgets according to a socioeconomic plan that prioritizes people’s needs and welfare above all. Progressive party-list groups have already identified where these funds can be spent for additional health (Php96.5 billion), basic education (Php63.3 billion), higher education (Php33.4 billion) and housing (Php10.0 billion) services as well as government salaries, subsidies for farmers, and other welfare support.

The outcry against the pork barrel has renewed public interest in social issues and stimulated even greater activism. These are real foundations for meaningful change however the pork barrel issue plays out.

(Sonny Africa is the Executive Director of Ibon Foundation, a non-stock non-profit development organization)

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