Sale of military assets to fund pension reform, AFP modernization

MANILA, Philippines — The government is planning to sell or lease the military’s assets to help raise funds for the proposed reforms in the pension system of uniformed personnel and the military’s modernization program, the Department of Budget and Management (DBM) said.

In an interview, Budget Secretary Benjamin Diokno said the government is considering to tap the Bases Conversion and Development Authority (BCDA) to sell, lease, or jointly develop with private partners some of the military’s reservations in different parts of the country.

“Maybe it’s better for us to sell some (assets), while the others we can put on a long-term lease of joint venture, so there will be an annual flow,” Diokno said.

The budget chief said half of proceeds from the sale and joint venture would be earmarked for the Armed Forces of the Philippines’ Modernization Program, while the remaining half may be used for the proposed reforms to address the military’s ballooning pension cost.

“Part of that, under the law, should be used to modernize the Armed Forces (of the Philippines). Part of it will be for modernization and part of it will be for the pension reform,” he said.

Under Republic Act 10349 or the Revised AFP Modernization program, the military has a share from the proceeds of the sale, lease or joint venture agreements made by the BCDA.

Diokno said the second phase of the AFP Modernization program would start next year and span over five years, with a total budget of P125 billion or approximately P25 billion a year.

On the other hand, the budget chief said there may be a need for legislation to earmark the other half of the proceeds to the new military pension program proposed by the government.

Earlier, economic managers in the Cabinet said they are mulling the integration of the pension system of uniformed personnel to the Government Service Insurance System (GSIS). However, the initial actuarial studies of the GSIS showed the government may need to infuse some P7 trillion into the state fund for the take-over.

Diokno said to fund this requirement, the government would ensure that part of the proceeds from the BCDA’s transactions would go to the GSIS.

“In addition, I am sure there will be a lump sum transfer to entice GSIS to take over, give them a one-time payment,” he said.

The budget chief said the government would also seek to require uniformed personnel to contribute to their pension fund, unlike now where it is being funded under the General Appropriations Act.

The ballooning pension cost of the military has been identified as one of the fiscal risks by the inter-agency Development Budget Coordination Committee.