President’s National Budget Message 2014

Message
of
His Excellency Benigno S. Aquino III
President of the Philippines
to the Sixteenth Congress of the Philippines
on the National Budget for Fiscal Year 2014

[July 23, 2013]

Ladies and gentlemen of the 16^th Congress of the Philippines:

By the mandate vested upon me by the sovereign will of the Filipino people, I have the honor to submit to you, through the President of the Senate and the Speaker of the House of Representatives, the proposed National Budget for 2014.

Our People’s Quest for Prosperity

Our journey on the Daang Matuwid has been bearing fruit.

Because we painstakingly sought to restore public trust and confidence in our democratic institutions, our country has reached new heights that were thought of as impossible in the recent past. In the past three years of our Administration, we have succeeded in installing greater transparency and accountability in public institutions; we have achieved critical wins in socio-economic reform; and we have seen the resurgence of our economy in ways never seen before.

The new prosperity that our country has achieved was because of the power of trust: trust between the people and its government; trust by the people in each other; and trust in themselves and their capabilities. Dahil sa tiwala, nagawa nating maging posible and dating imposible.

At nagtitiwala tayong higit pa ang makakamtan natin sa patuloy nating pagtahak sa Daang Matuwid.

We continue to face important challenges as we pursue our journey in the remaining three years of our Administration. I believe that the foremost task that we have now is to further deepen our people’s ownership of our newfound prosperity.

I believe that every Filipino holds the key to his or her own prosperity. Our role as government is to further empower our people in actualizing their individual and collective potential, by laying the foundations for equitable progress; for growth that benefits all and leaves no one behind. This is what we have been working on in our first three years in office; and this is what we continue to fulfill from now until the end of my term.

Sa pamamagitan ng Paggugol na Matuwid, patuloy nating tatahakin ang Daan sa Kasaganaan ng lahat

Ladies and Gentlemen of the 16^th Congress, this Budget that I submit to you today is a Budget that supports our agenda for Inclusive Development.

A Budget for Inclusive Development

On behalf of our people, I ask you to examine and thereafter approve this proposed P2.268-trillion National Budget for 2014.

This proposed Budget is 13.1 percent higher than the current year’s budget of P2.006 trillion. It is consistent with our macroeconomic and fiscal program for the medium term. More important, this proposed Budget is designed as a tool that we must maximize as we continue to fortify the foundations for Inclusive Development.

The framework of Inclusive Development eschews the fallacy of “trickle down,” for it is about promoting the equalization of opportunities for all, regardless of their life circumstances. Since the beginning of our term, we have operated under the belief that growth must be owned by the people; that our people are empowered to shape their destinies. Consistent with this framework, we continue to uphold our obligation as government to put our people on an equal footing to take advantage of opportunities.

This Budget embodies this lasting commitment. For one, it intensifies our investments in capacitating our people through basic services, such as education and manpower development, adequate healthcare, and social protection services. This Budget also enables us to sustain our growth trajectory in a way that promotes growth that directly and substantially benefits the lowest of sectors.

Ang hangarin natin: ang mga mamamayan mismo ang lumilikha at magmamay-ari ng bagong kasaganaan ng ating bansa. Ang obligasyon natin bilang pamahalaan ay ilagay ang ating mga kababayan sa patas na tungtungan.

At upang magampanan ang obligasyong ito, kailangan nating maging masigasig sa pagtupad sa ating sinumpaan sa bayan: kung walang corrupt, walang mahirap.

At the core of Inclusive Development are public institutions built on stable foundations of good governance: transparency and accountability, and our citizen’s active participation in statecraft. This Budget was thus designed to help us ensure the sustainability and irreversibility of the governance reforms that we nurtured and set in place during the first half of our term.

With this, allow me to share with you the principles and reforms that shaped our Proposed Budget for 2014.

Moving Toward Performance-Informed Budgeting

The Budget is a critical tool that we must harness to steer our government toward Inclusive Development. However, the way that our Budget has been structured through the years—focused on the financials and on programs and projects, with no clear link to performance—does not address our aim to promote a government attuned to meeting real outcomes for the people.

For this Proposed Budget for 2014, we embark on a bold move to change the way the Budget is presented. With the Performance-Informed Budget Structure, each peso is now presented alongside the results that we want to achieve.

With the Performance-Informed Budget Structure, we organized the Budget to reflect non-financial performance information alongside the budgetary allocations. Each program, activity, and project that the government spends on is linked to the major final outputs that departments and agencies must deliver according to their mandates; and these are further linked to the broad outcomes that we have spelled out in our development agenda.

Through this new budget structure, we are redefining accountability as a commitment to deliver the direct, immediate, and substantial dividends of good governance to our people. All the major final outputs of departments and agencies of government have corresponding performance indicators and targets that they are committed to meeting using their respective budgets.

The reforms we nurtured earlier in our term made this fundamental shift possible. The Performance-Informed Budget builds on the Organizational Performance Indicator Framework and our recent effort to clearly define the outputs and performance indicators of each agency.

Our earlier efforts to promote a performance culture in the bureaucracy through the harmonization of performance management systems, the introduction of performance-based incentives, and the creation of the Office of the Cabinet Secretary have also paved the way for the Performance-Informed Budget.

This new face of the Budget should empower you, the men and women of Congress, as you exercise your oversight function on the Budget. Sa huli, sa pamamagitan ng Performance-Informed Budget, binabago natin ang mukha ng Pambansang Budget para higit na maging malinaw ang kuwento sa bawat kuwenta.

Tighter Budget Prioritization for Inclusive Development

Kasama sa kuwentong binibigyang-linaw natin ang higit na lumalalim na pananagutan natin bilang pamahalaan na siguruhing nakatutok sa mga susing pangangailangan n gating mamamayan ang Pambansang Budget.

Earlier in our term, we defined the five Priority Areas of our Social Contract with the Filipino People(1) and directed all departments and agencies to focus their resources and efforts to fulfilling these Priority Areas.

1. Transparent, Accountable, and Participatory Governance
2. Poverty Reduction and Empowerment of the Poor and Vulnerable
3. Rapid, Inclusive, and Sustained Economic Growth
4. Just and Lasting Peace and the Rule of Law
5. Integrity of the Environment and Climate Change Adaptation and Mitigation

When we assumed office in 2010, we introduced the Zero-Based Budgeting Approach to scale down funding for activities that were not aligned with the set priorities or were otherwise inefficient, ineffective, and fraught with leakages. We also introduced the Program Budgeting Approach to further deepen the level of budgetary prioritization within each priority area of the Social Contract by defining the strategic programs that had impact on meeting our development objectives and should therefore be prioritized in budgetary decision making.

In preparing this Budget for 2014, we issued a Budget Priorities Framework (2) to direct all departments and agencies to design their respective budget proposals along with program priorities in line with the Social Contract and the midterm updating of the Philippine Development Plan. This document stemmed from several discussions at the Cabinet level (3) to define the priorities that should be funded for 2014 to 2016, particularly for 2014.

This Budget Priorities Framework also identifies geographic focus areas where our poorest people are and where great potential lies. We have directed these departments to not only prioritize their resources for these programs and areas but also tighten their collaboration in these areas for greater impact.

Better Collaboration as the New Standard in Government

Sa pagsasakatuparan ng ating Social Contract, mahalagang siguruhin na nagbubukluran—at hindi nagkakanya-kanya—ang bawat institusyon ng ating pamahalaan.

To build collaboration across the program and geographical priority areas, we leveraged the Program Budgeting Approach with the aim of encouraging departments and agencies to move out of their silos and synergize their efforts in achieving strategic objectives.

Take the case of the Tourism Development Program, which the government has been maximizing for its job-generating and value-creating potential. The Department of Tourism’s lead role in promoting domestic and international tourism has been complemented by the outputs of other agencies: access infrastructure to tourism destinations; efficient visa, immigration, customs, and quarantine processing; the development of products and services, security for travelers, among others.

We firmly believe that better collaboration must be the new standard that we should continue to uphold to effectively achieve our societal objectives. The government is a potent catalyst in society.

Enabling the Private Sector as Engine of Economic Growth

As we do our part in establishing the right environment for growth, the private sector must likewise fulfill its role as engine of economic growth. This is why, in our first three years in office, we have been enabling the private sector to perform its role by creating the enabling policy, regulatory, political, and physical environments.

The revival of public trust in government in our first three years in office—given our commitment to fairness as well as to economic and political stability—bolstered the private sector’s confidence in our economy, lowered our borrowing costs, and enabled us to reach record highs in economic growth and competitiveness.

We are committed to following through, from today up until the end of our term. This Budget embodies this commitment. For one, it is designed to sustain our medium-term fiscal plan toward keeping a fiscal deficit limit to 2 percent of GDP from now to 2016 and toward further reducing our debt stock to 46.8 percent of the GDP from 51 percent in 2012.

This Budget also supports efforts to further streamline business processes in order to advance our country’s competitiveness. Lastly, this Budget escalates our investments in public goods, particularly in infrastructure: our target is to increase government infrastructure spending to five percent of GDP by 2016.

At the beginning of our term, we introduced the Public–Private Partnership program as a strategy to entice private sector investment in critical public infrastructure and for the faster delivery of social services, such as the closure of the long-standing gap in classroom supply. We acknowledge the fact that this program encountered delays at the beginning as we addressed policy issues and updated feasibility studies to ensure the program’s viability. With confidence, we can now say that the PPP program is now moving forward.

I must emphasize that the private sector is not only composed of big businesses and foreign investors. The private sector must include the communities, small entrepreneurs, farmers and fishermen, and other citizens on the ground whom we want to empower as co-producers of our country’s new wealth. We must likewise support the efforts of those who work with our people on the ground, such as microfinance institutions, non-government organizations, and enlightened businesses that have enshrined the creation of “shared value” at the core of their business model.

Bilang pamahalaan, dapat nating kalingain itong bagong balangkas ng pag-unlad na nagsisimula sa ibaba. Through the investments we make using our Budget, we are adopting this new model of wealth creation that eschews “trickle down” and embraces “bottom-up.”

Transparency at the Core of Effective Public Financial Management

We believe that transparency is not just a by-product of effective public financial management. We assert that it is at the core of public financial management, for it ensures efficiency, speed, predictability, and effectiveness in the use of public funds.

In our first three years, we carried out and deepened reforms that promoted greater fiscal transparency. We continued our war against un-transparent lump-sum funds that have caused anomalies and sluggish public spending. We also mandated all departments to disclose their budgets and finances in their respective websites. To date, 96 percent of all departments of the executive branch and their line agencies have complied with the Transparency Seal provision of the Budget. Greater transparency also means making information accessible to the people. Through the People’s Budget publications and the BudgetNgBayan.Com advocacy website, our government has translated the Budget in the language of our citizens.

Last year, we announced the move toward a Budget-as-Release-Document Regime through the 2014 Budget. This regime promotes predictability and speed in budgetary releases, as well as in implementation, as the budgets of agencies—except for those that need prior clearance, to be contained in a negative list—are considered as released as soon as the Budget is enacted.

Likewise, we have rolled out important structural reforms toward a new PFM regime. First, we have adopted the Unified Account Code Structure, which is the backbone of our new PFM, to ensure that all financial processes—from budgeting to cash management to accounting and audit—will follow a single classification system. Our proposed 2014 Budget was crafted using this structure.

In 2014, we will start the implementation of another important reform: the Treasury Single Account, which will inject more transparency and predictability in treasury cash management. With this reform, some 9,500 agency bank accounts will be consolidated into a highly manageable number by 2014. This provides government with clear visibility on the bank balances of agencies on a daily basis. Ultimately, this will lead to savings of about P1.5 to 3 billion from interest costs on borrowings.

These reforms will support another ambitious PFM reform, which we intend to complete by 2016: an integrated Public Financial Management System, which will automate and speed up the processing and flow of funds and financial management information within government.

Empowering the Citizenry Through the Budget

The Budget is not only for the people: we assert that it is, first and foremost, owned by the people. Through reform, we seek to empower our people to take ownership of the Budget and to meaningfully take part in the budget process.

In the first three years of our Administration, we jumpstarted and nurtured relationships with reform-oriented stakeholders, which include civil society organizations (CSOs), community-based organizations and the private sector. We then introduced new mechanisms for citizen participation in the budget process.

We introduced the process of Budget Partnership Agreements (BPAs) between government agencies, corporations, and CSOs and piloted it in crafting the 2012 Budget. In this process, government agencies and CSO partners enter into a formal partnership in the review of the agencies’ budgets, programs, and projects as well as in the crafting of their budget proposals for the following fiscal year. From the pilot stage in which BPAs were implemented in six agencies and corporations, the number of agencies that have BPAs increased to 15 during the crafting of the 2014 Budget.

We also sought to create a direct “voice and vote” for citizens—through their communities and local governments—in crafting the Budget. We piloted the Bottom-Up Budgeting process in crafting the 2013 Budget by tasking the poorest municipalities and cities to develop local poverty reduction programs and projects in consultation with their communities and the CSOs in their localities. This led to P8.4 billion in poverty reduction projects, developed by 595 cities and municipalities, which were integrated into the 2013 Budget.

For 2014, the process was expanded to 1,226 cities and municipalities with poverty incidence of at least 20 percent, with high economic potential, and with barangays exposed to high geo-hazard risks. As a result, the earmarked amount for BuB in the 2014 Budget was increased to P20 billion to cover the minimum basic needs for electrification, potable water, education, health, training, livelihood opportunities, and the protective services of these local government units (LGUs).

Ipinagkatiwala po sa atin ng mga mamamayan ang kapangyarihang ating tangan. At nararapat lang na gamitin natin ang kapangyarihang ito para higit pang palakasin ang kanilang boses sa proseso ng pamamahala.

Overview and Dimensions of the 2014 Budget

This proposed 2014 Budget is 13.1 percent or P262.1 billion higher than the 2013 budget. It is equivalent to 17 percent of the country’s GDP. More important, we have successfully changed the complexion of the Budget with our determined implementation of our Social Contract with the Filipino People.

The Budget by Sector. In 2014, the Social Services sector will continue to have the largest share of the Budget at P842.8 billion as we expand social protection and basic social services to increasingly benefit our poor.

Table 1: The Budget by Sector

This allocation is followed by that for Economic Services at P590.2 billion as we promote tourism, agribusiness, and manufacturing to sustain our economic growth trajectory. Interest Payments will have a lower share of P352.7 billion or 15.5 percent from 20 percent in 2010 as we actively reduce our fiscal deficit and debt levels.

Budget by Expense Class. Because of our intensified budgetary focus on poverty reduction and economic expansion, we increased Maintenance and Other Operating Expenses (MOOE) by 16.5 percent to P375.3 billion to support our human development and social protection programs.

We also increased the budget for Infrastructure by 35.5 percent to P399.4 billion, (4) which is equivalent to 3 percent of GDP. This allocation will pave the way for the increase in infrastructure spending to 5 percent of the GDP in 2016.

Table 2: The 2014 Budget by Expense Class

Budget of the Top 10 Departments. Reflecting the thrust on Inclusive Development and the strategy to achieve it, the top ten agency budgets are as follows:

Table 3: Top Ten Departments

Allocated with P336.9 billion, the Department of Education (DepEd) will again have the largest part in the budget. Through the years, we have steadily increased the budget for DepEd to close the critical gaps in the supply of teachers, classrooms and others that we have inherited; and to prepare for increased needs brought about by the K-12 basic education reform program.

Also in the Top 10 are other premier social service agencies: the Department of Health, with P87.1 billion to pursue Universal Health Care, particularly for preventive healthcare services and for health insurance coverage for 14.7 million poor near-poor families; and the Department of Social Welfare and Development, with P79 billion to deliver meaningful social protection services, particularly the expanded P62.6-billion Pantawid Pamilyang Pilipino program that will benefit 4.44 million indigent households.

In laying the groundwork for further growth, the Department of Public Works and Highways (DPWH), as the infrastructure arm of the government, will receive the second largest budget. Its 40.1-percent budgetary increase to P213.5 billion in 2014 will enable DPWH to meet its national roads and bridges targets and support the growth of key sectors such as tourism.

Economic service delivery agencies which likewise belong to the Top 10 are: the Department of Agriculture, with P80 billion to raise productivity in agriculture and improve the incomes of farmers and fisher folk; the Department of Transportation and Communications, with P48.7 billion to construct the airports, seaports and railways needed to improve the competitiveness of industries; and the Department of Agrarian Reform, with P20.4 billion to complete the agrarian reform program.

Financing the Expenditure Plan

The Philippine economy has reached unprecedented heights. In the first quarter of 2013, our economy grew the fastest in Asia at a rate of 7.8 percent. We are confident that we will meet, if not outpace, our growth targets of 6.0–7.0 percent for 2013 and 6.5–7.5 percent for 2014. Our inflation, interest, and foreign exchange rates should remain stable.

Table 4: Macroeconomic Assumptions, 2012–2014

Our stable macroeconomic fundamentals will allow us to achieve our fiscal consolidation goals, towards a deficit that is equivalent to 2 percent of GDP from this year to 2016. For 2014, we will achieve this by increasing revenues by 15.6 percent to P2.02 trillion.

Table 5: National Government Fiscal Program

Paggugol na Matuwid: Daan sa Kasaganaan

Matutunghayan natin na ang Badyet na ito ay maglalatag ng pundasyon para sa kasaganaan ng bawat Pilipino.

We want to leave behind this legacy: a transformed government, a capacitated people, an inclusive economy, and a better nation. I cannot overemphasize my deep commitment to laying the foundation that will ensure the realization of this legacy.

Such is the goal of this 2014 National Budget, a Budget for Inclusive Development, a national expenditure program that builds on the new prosperity we have created for our country in the past three years.

Our esteemed ladies and gentlemen of the 16^th Congress, as you authorize this proposed Budget for fiscal year 2014, I invite you to commit with us in our efforts to realize this legacy. I encourage you to look at this Budget with the will to enact the same with speed and resolve so that our people can be on the road to prosperity. Let this Budget for Inclusive Development enable us to truly serve our people who gave us our mandate. They are the reason why we are all here.

Halina’t sama-sama nating tahakin ang tuwid na landas tungo sa kasaganaan ng lahat.

It is in this light that I ask you, the men and women of Congress, to examine and eventually approve this proposed Budget for fiscal year 2014.

In the spirit of People Power,

BENIGNO S. AQUINO III
President of the Philippines

End Notes:

1. Executive Order No. 43, Series of 2011, issued on 13 May 2011.
2. National Budget Memorandum No. 118, issued on 25 April 2013.
3. Led by the Office of the Cabinet Secretary, the Department of Budget and Management and the National Economic and Development Authority.
4. The total amount for infrastructure includes national government agencies’ budgets for infrastructure, subsidies for government corporations for their infrastructure projects, and infrastructure transfers to local government units.