Shaking Philippine economy out of the doldrums

While he has openly admitted the subject of economics is not his strong suit, President Rodrigo Duterte rightly echoed the sentiments of every layman’s understanding of how a supposedly growing economy of the Philippines should benefit the people, especially those living in the provinces. During the first quarter of this year, the country’s gross domestic product (GDP) reportedly grew by 6.8 percent.

At this pace of GDP growth, the Philippine economy becomes one of the fastest among countries in the region.

However, Duterte’s economic team conceded the GDP growth for the first quarter was lower than the government’s target of seven to eight percent. According to his economic managers, it might have been slowed down during this period by the higher prices of rice and fuel products. 

In his usual extemporaneous speech last Friday in Davao City, President Duterte noted with concern the Philippine economy is seemingly “in the doldrums” as far as he sees the situation on the ground, particularly in the countryside. Worse, he rued, “interest rates are picking up, are getting high so it destroys the existing (economic gains).”

Last Monday, presidential spokesman Harry Roque sought to clarify the Chief Executive was just emphasizing the need to fast track the implementation of the “Build, Build, Build” infrastructure program of the administration as a means to get the country’s economy out of the doldrums.

Without identifying any, the Chief Executive pointed to slow-moving government projects in the provinces compared to the “mega projects” in Metro Manila which seemed to him are being implemented on time – as they should all be done on schedule. The President’s concerns over such slow-moving projects are valid amid escalation of interest rates.

More than half of the administration’s “Build, Build, Build” infrastructure projects are funded by official development assistance (ODA). Although these ODAs carry highly concessional rates, these are still loans contracted by our government and paid for by us, Filipino taxpayers. Interest rates of ODAs range from one to three percent per annum but have longer repayment period from a minimum of 10 to 15 years.

The President’s musing about a higher interest rate regime came after the Bangko Sentral ng Pilipinas hiked interest rates for the second time since September last year. Tweaking interest rates is one of the tools being used by our monetary authorities to check against unusual spikes in consumer prices and push up inflation rate.

The government has assured the public that measures are in place to shield the poor from the impact of price spikes or inflation following the implementation of the Tax Reforms for Acceleration and Inclusion (TRAIN) Law that took effect starting Jan. 1. The latest inflation rate hit a five-year high of 4.6 percent in May.

From his experience as former Davao City mayor, he knows for a fact that a government infrastructure program could make a big difference, especially in the countryside. These infrastructure projects do not only provide jobs and income needed by the people but more importantly, they boost economic growth in the rural areas.

President Duterte perhaps may find relief that the Commission on Audit (COA) has agreed to conduct pre-audit of contracts for government projects that could facilitate, if not fast track, their implementation. Newly installed Department of Tourism (DOT) Secretary Bernadette Romulo-Puyat disclosed to us last week during our Kapihan sa Manila Bay that COA chairman Michael Aguinaldo has granted her request to pre-audit DOT contracts and projects.

Pre-audit refers to an examination of documents supporting a transaction or a series of transactions before they are paid for and recorded. 

On the other hand, post-audit refers to the review of documents or a series of transactions after the transaction has been recorded or consummated.

Upon her request, the newly installed DOT Secretary sought COA’s help to expedite government projects and contracts to conduct pre-audit and not just the post-audit review. All branches of government – the Executive, the Legislative and the Judiciary – go through the required post-audit by COA as the constitutional body tasked to protect public coffers.

Romulo-Puyat inherited a lot of questionable transactions, contracts with dubious provisions and projects entered into by her immediate predecessor, ex-DOT Secretary Wanda Teo. President Duterte appointed Romulo-Puyat after he sacked Teo last May 8 following the latest scandal involving his Cabinet official who figured in several DOT transactions.

The new DOT Secretary vowed to undertake a “thorough housekeeping” in her first 100 days in office. Romulo-Puyat promised to stay out of the picture and let the internal auditors of COA do their job in sifting through the questioned contracts and projects entered into by her predecessor.

Also, Romulo-Puyat adopted the policy that internal auditors would no longer enjoy their previous perks of DOT-sponsored trips here and abroad. Going to such DOT sponsored trips have seemingly made them look the other way and not raise any red flags after post-audit of past DOT transactions.

During a check of the COA website it turns out there are existing guidelines under COA Circular 81-162 issued on July 1,1981 that allowed pre-audit. It was signed by former COA chairman Silvestre Sarmiento, our late member of Tuesday Club who passed away last year. Apparently, however, such required pre-audit was not being implemented at all as they ought to be.

Romulo-Puyat vowed to observe transparency and good governance of the DOT over its 16 regional offices and eight attached agencies through pre-audit, not just post-audit, of all DOT transactions.

Pre-audit of government projects could very well shake the Philippine economy out of the doldrums and prevent corruption and other anomalies from seeping in.