WITH congressional deliberations on the P7.2-trillion national budget proposed for 2027, we are once again witnessing the usual sound and fury over items deemed questionable by one party or another. A number of local economists and think tanks have sallied forth to criticize the budget process and the scale of proposed expenditures for various things — particularly those that seem to be of unclear purpose — and just a few days ago, the 1,400-member strong Management Association of the Philippines (MAP) issued a near-unanimous statement calling for the government to have “zero tolerance” for dubious budget line items, and do end the “opacity” of the budget process.
Concerns and criticisms over aspects of the budget process that are confusing or unclear to the ordinary citizen, and over budget items that are of uncertain value, or worse, appear to be pathways for corruption, are absolutely valid, and must be addressed. After all, this is the people’s money, not a free slush fund for those currently holding elected office to do with what they please. However, we believe that the budgeting process and Congress’ review should not stop there, but go deeper to critically examine the efficiency of government spending, particularly in the area of government subsidies. Ironically, it was a comment from Finance Secretary Frederick Go a couple of weeks ago about a seemingly unrelated topic that was the tip-off to a deep and mostly hidden dysfunction in the government’s approach to spending.
In comments to the media, Go pointed out that there are “over 100” government-owned and -controlled corporations (GOCCs), and that “about 10 percent of them should be closed.” This would, Go explained, free up additional government resources that could be applied to programs and services.
A GOCC, in simple terms, is a government service or agency that is run as a business, rather than just simply being funded outright by the government. GOCCs tend to be those services that are capable of generating revenue, and ideally, they should be run efficiently enough that they generate some profit, which is then remitted to the national government. In practice, however, almost all of them do receive some budget annually, although the better-performing ones are able to leverage that into positive income gains. The Philippine Amusement and Gaming Corp. (Pagcor), for example, is one GOCC that routinely remits billions to the government coffers, and there are others.
However, there are a disturbing number of GOCCs that have become dead weight, soaking up government resources without providing the expected dividends. According to the Government Commission for GOCCs (GCG), which has jurisdiction over them, there are 156 GOCCs, of which only 124 are considered active. Of the other 33, 11 have already been dissolved or abolished, although there are in some cases some lingering business loose ends that need to be resolved, and 21 more are at some stage of the process of being shut down or merged with other GOCCs.
If we take Secretary Go’s observation at face value, we can add another 12 to the list of those that should be wound down, which means that of the existing GOCCs, nearly one in three GOCCs (44 out of 146) are unproductive. This represents an incredible amount of financial leakage, which ought to be fixed immediately, with the money the government directs toward these obsolete or failing GOCCs redirected to better purposes.
You may be asking yourself at this point, what does this have to do with government subsidies? The answer is this: The GOCCs, by taking up government functions that ought to be the financial responsibility of the government, and providing programs and services derived from those functions at a cost to their recipients, are the model on which subsidies are built here in the Philippines. They pass costs for what are effectively subsidies directly to taxpayers, when in fact it should be those taxpayers’ continuing contributions to government revenues that cover those things. The most obvious example of this is in consumer electric bills, where 15 to 19 percent of the total is accounted for by various subsidies and taxes.
This entire model needs to be taken apart and remade. For one thing, continuing to provide budgetary support for failing businesses is pure waste. Beyond that, the institutionalization of double taxation of the citizenry for things that we already pay the government to shoulder the responsibility for — the basic needs of public health, education, food, housing, and access to public services such as water, electricity and transportation — needs to end. The crafting and enactment of next year’s budget is a good place to start that reform.
