September 22, 2017 | MANILA, PHILIPPINES

A SONA cum budget road show

Headline news last week announced that President Rodrigo R. Duterte approved his Cabinet’s proposed P3.767-trillion 2018 national budget for submission to Congress on his first-year State of the Nation Address (SONA) on July 24 (BusinessWorld [BW], 07.05.2017).”


A SONA cum budget road show -- it is actually a very good idea. Budget Secretary Benjamin E. Diokno declared, “The plan is to submit the President’s Budget of Expenditures and Sources of Financing (BESF) on the day of the SONA (Ibid.),” and presumably the detailed BESF will draw much of the applause for the President at the SONA for the transparent and concrete plans and projects/programs for the country in 2018 and to 2022, when his mandated 6-year term ends.


The administration’s “build, build, build” program and its focus on human capital have reserved 25.4% for “infrastructure and capital outlays” and about 29.4% of the proposed budget to “personnel services,” Presidential Spokesperson Ernesto C. Abella announced (Ibid.). The biggest departmental budget allocations will go to Education, Public Works and Highways, Interior and Local Government, Health, Social Welfare and Development, Agriculture, Environment and Natural Resources, and the Autonomous Region in Muslim Mindanao.

The proposed 2018 national budget is equivalent to 21.6% of (a projected P17.44 trillion) gross domestic product (GDP), and is about 12.4% more than the P3.35-trillion budget for 2017, Abella noted (Ibid.). Next year’s budget counts on P2.841 trillion in revenues (16.3% of GDP) to be available for disbursements of P3.364 trillion (19.3% of GDP), for which the shortfall will be covered by borrowing.

Duterte’s economic team assumes that the Tax Reform Package (House Bill No. 5636) already approved in the House of Representatives will generate P133.6 billion revenues in 2018. The high optimism for tax reforms to provide revenues had earlier pushed for the 2018 budget to be at P3.84 trillion, but revenue expectations had to be reduced 35% after Congress pared down in May the Department of Finance’s (DoF) first stage of a five-stage tax reform program. Yet despite the reductions in corporate and individual taxes, and the increased taxes on oil and “sinful” food for example, the calibrated increased net tax collection bolstered by incentivized tax compliance, all are expected to bring in 17% more than the P2.427-trillion projected 2017 revenues.

Disbursements will increase by some 15.6% to P3.364 trillion (19.3% of GDP), from 2017’s P2.909-trillion program (18.3% of GDP). Of disbursements, infrastructure spending will be pumped up 54.47% to P752.9 billion, from the P487.4 billion planned for 2017. The deficit-to-GDP ratio will be capped at three percent from 2017 to 2022, to keep to disbursement targets that have so far been missed (Ibid.). The government intends to borrow P889.72 billion in 2018, up 22.72% from the P727.64 billion planned for 2017 (BusinessWorld, 07.05.2017, Melissa T. Lopez reporting). Eighty percent or P711.776 billion will be borrowed locally, while the remaining 20% or 177.944 billion will be from foreign lenders (Ibid.).

And so Diokno says “there will be a ‘strong call’ for the Senate to approve the proposed tax measure after the President certified as urgent the CTRP (comprehensive tax reform program) bill...thus removing the requirement under legislative rules for second- and final-reading approval to be granted by each chamber of Congress on separate days (Ibid.).” Clever and neat move to present the 2018 Budget to the Legislature on the day of the SONA, if only to impress upon all that the budget, the proposed tax reform package, and the infrastructure projects are interdependent and bundled together for that Big Bang towards progress and development under “Dutertenomics.” With this road map, GDP growth is projected by government to grow 7-8% from next year to 2022, from 6.5-7.5% this year and from 2016’s actual of 6.9% (BW earlier cited).

It can be (or should be) presumed that the 2018 budget has been fashioned by Duterte and his Cabinet on the scenario of no-martial law for the country at least within next year. But today, since May 23, martial law has been proclaimed in the whole of Mindanao with its 22 million people, because of the rebellion of the rebel Maute group allegedly assisted by international terrorists, the ISIS. The destruction to public and private property from ground combat and air strikes is massive -- has the cost of rebuilding Marawi City and the loss of revenues from productive activity, at least during the 60-day martial law in the region, been factored in the 2018 national budget? Columnist Marichu Villanueva pointed out: “the P20 billion mentioned by President Duterte was just off-the-cuff estimates of funds needed to bankroll the reconstruction of war-torn Marawi City. The amount is twice as much as the P10-billion rehabilitation budget proposed by the Department of National Defense (DND) (The Philippine Star, 06.23.2017).”

Have the lost revenue, opportunity costs, deaths, and pain in beleaguered Mindanao from the first open civil war against rebellion in the country been considered in such a seemingly innocuous document as a national budget?

President Duterte announced that he is not lifting martial law in Mindanao before his State of the Nation Address on July 24. The Supreme Court in its July 4 ruling junking contrary petitions effectively allowed the 60-day period of Duterte’s imposition of martial rule in Mindanao, which ends on July 22. Duterte said he will depend on an assessment by the military and police when and if martial law will be lifted or extended (Business Nightly, ANC, 07.07. 2017).

It’s OK to PR at the SONA with the 2018 national budget and the “Build, build, build” P8-trillion infrastructure program promising to over-generously offset the P139.6 billion in reduced revenues under the Tax Reform Packages -- but say something definite about the pall of martial law that saps the joy of peaceful living in our free and democratic Philippines.

Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.

ahcylagan@yahoo.com