The Arroyo administration expects to save P1.4 billion initially from the "deactivation" of some line agencies, but economic officials said this savings will be negated by the "generous" benefits that will be offered to government employees who will be displaced in the process.
The Department of Budget and Management (DBM) said the government has no alternative but to undertake the painful process of deactivating some of its agencies, beginning with 14 overlapping agencies that would initially allow it to save P1.4 billion in operating costs.
The Department of Finance (DOF) said the reengineering of the bureaucracy is being rushed ahead of the 2004 presidential elections to avoid the political backlash that would make the effort more difficult, if not impossible.
Budget Secretary Emilia Boncodin told reporters that the department has identified 14 agencies so far that had overlapping and duplicating functions and could therefore be "deactivated".
The DBM said these agencies employ 6,851 employees who will have to be provided for when their agencies have been deactivated. Boncodin said the DBM has no estimate of how much the actual savings would be but she said the government was currently spending at least P1.4 billion to operate these 14 agencies.
"So, if all these 14 agencies could be rationalized, this is what we will save in terms of operating costs," Boncodin said. "But it’s not just a matter of savings, it’s also a matter of overall efficiency."
However, Boncodin admitted that the integration of these agencies would also have attendant up-front costs that would be much bigger than what the government would save initially.
"Naturally, we will have to give benefits to the government employees who would be displaced," Boncodin said.
According to Boncodin, the government was preparing a "generous retirement plan" for the displaced employees although she did not reveal any detail of what the government plans to offer.
"It will be very generous, we will make them an offer they would find hard to refuse," Boncodin said. "We are being very careful how to proceed because something like this will create anxiety in the bureaucracy and we don’t want to cause undue panic."
At present the government employs roughly 1.5 million in all its line agencies and attached agencies, widely considered one of the most bloated bureaucracies in East Asia.
Boncodin said the DBM is still calibrating its estimates to make sure that the streamlining would preserve the mandated functions while shedding excess fat from the bureaucracy.
A DOF source told reporters that the streamlining was being rushed to enable the agencies to implement the directive with the least resistance. "The closer we get to the elections, the harder it will be and the agencies recognize this," the source said.
The source said that on the whole, the government would save a significant amount of money once this streamlining process has been completed. "We don’t have specific figures of how much but it's big," the source said. "We wouldn't be doing it if it wasn't significantly big."
The realignment and integration of these 14 agencies would come ahead of the Second Social Expenditures Management Program (SEM2) that the government is negotiating for a $100-million funding with the World Bank.
WB has extended loans in the past for the SEM program for the health, education and social work sectors.
When granted, SEM2 would include the restructuring and reengineering of government agencies, also providing funding for the retrenchment benefits of the displaced government employees.