September - December 2007
Power and poisons
Public Eye

Has NEDA gone nada?

HE IS known by many Filipinos as the author of that economics textbook with the blue cover, but once upon a time Gerardo P. Sicat was the head of a powerful government agency that took care of preparing and coordinating the country’s socioeconomic and development plans. In fact, back then, the National Economic and Development Authority (NEDA) was very powerful, particularly given its oversight function with respect to the plans of government agencies. Though by protocol, the NEDA director general was not a member of the Cabinet, the position was of Cabinet rank and the NEDA chief was even regarded as a primus inter pares (first among equals).

A COMPROMISED NEDA. Romulo Neri (right), with acting director general Augusto Santos [photo courtesy of NEDA]

NEDA was created by then President Ferdinand Marcos in 1972 by merging the Presidential Economic Staff (PES) and the National Economic Council (NEC). Sicat, who was appointed by Marcos as NEC chairperson in 1970, served as the newly organized NEDA’s first director general. Recalled Benjamin Turiano, who joined NEDA at about the same time as Sicat and is now a director there: “That was the time when NEDA really had so much clout, when it was looked up to by the Cabinet.”

But Sicat was eased out of the agency in 1981, and moved to the Philippine National Bank to become its chairperson and president (during which he also wrote that ubiquitous textbook that has been used by millions of students). Apparently, the Palace had been displeased with his criticisms of the economic directions being taken at the time, as well as with his having too seriously pushed for a liberalized economy. Yet another reason for Sicat’s sudden change of workplace was because then First Lady Imelda Marcos, as minister of human settlements, had already began bulldozing her way through the bureaucracy; her pet building projects, for instance, were no longer coursed through NEDA for evaluation and approval.

Today the now 72-year-old Sicat — along with other NEDA chiefs who came after him — is seeing a similar deed being done to the country’s premier social and economic development planning and policy coordinating body. And again a powerful woman is in the picture: no less than the president herself, Gloria Macapagal Arroyo, although as things stand, it is not that clear what role she has played in driving NEDA to — as Solita ‘Winnie’ Monsod describes it — “its lowest point.”

Monsod served in the reorganized agency from February 1986 to May 1989 under the first post-Marcos government of Corazon Aquino. At a forum last week at the University of the Philippines, she, Sicat, Cayetano Paderanga, Felipe Medalla, Cielito Habito, and Dante Canlas agreed that, essentially, what the recent revelations by another former NEDA chief, Romulo Neri, boiled down to is that the agency’s independence and integrity have been compromised. At the very least, it seems that under Arroyo, NEDA and its director general are again being sidelined, if not marginalized, on matters that fall within their mandate, particularly seen as being less important in relation to the president’s economic team — which consists of the secretaries of the Department of Finance (DoF), Department of Trade and Industry (DTI), and Department of Budget and Management (DBM).

Neri and a ‘weak’ NEDA

Neri had testified at one of last month’s Senate hearings on the scrapped National Broadband Network project that he approved a $329-million deal that had the Department of Transportation and Communications (DOTC) hastily signing a supply contract awarded to Zhong Xing Telecommunications Equipment Limited (ZTE) Corporation last April in Hainan, China. The contract, he said, was covered by a yet-to-be perfected executive agreement with the Chinese government.

Neri, however, also testified that he had done so even after he was offered a P200-million bribe by Commission on Elections (Comelec) chairperson Benjamin Abalos Sr. in exchange for approving the project in favor of ZTE. Neri said he flatly rejected the bribe and reported the incident to the president. (Abalos, who has since resigned as Comelec head, said Neri was lying about the alleged bribe.)

Neri invoked the executive privilege when grilled by senators about the extent of Arroyo’s involvement in approving the NBN deal. But he did recall a November 2006 NEDA board meeting when Arroyo had made it clear that the government broadband project should comply with the following conditions:

  • that it be established along a build-operate-transfer (BOT) or similar undertaking using private funding
  • that there should be no government subsidies
  • that there should be no “take or pay” conditionalities and instead be a “pay for use” facility.

All of which were, interestingly enough, absent in the deal that Neri gave the go-signal to. Neri, though, painted a picture of a rather “weak” NEDA in his testimony. While the agency assesses project viability and consistency with the country’s long-term development goals, he said it is not the one that chooses suppliers. “We approve the project,” he said, “and the implementing agency in turn goes around and finds out what is the best way to implement the project that NEDA approved, whether it’s a BOT or, in this case, a government-to-government undertaking.”

Neri even acknowledged that the NEDA staff didn’t have the capability to verify the project cost or the savings from such an undertaking, “though the staff tried to verify these through the Internet.” He likewise explained the decision to eventually approve the project as naturally resulting from the collegial character of the NEDA-Investment Coordinating Committee (ICC), and that he was only one of its members. It is the NEDA-ICC that evaluates the fiscal, monetary, and balance of payment implications of major national projects.

It was a description of NEDA that left the likes of Sicat quite aghast. At the recent UP forum, Sicat insisted that NEDA is “not an ordinary government agency.” The 1987 Constitution even mandated it to be a constitutional body, although the lack of an enabling law means it has yet to become one in fact.

Monsod, for her part, was particularly resentful of how Neri has distanced himself from the NBN deal. She pointed out that NEDA has everything to do with the country’s development projects. “In principle,” she said, the approval of projects depends on the president, the leadership of the director general, and the NEDA staff.”

If a project is bad, Monsod said, the NEDA director general is “morally constrained to tell the president.” She adds that under the circumstances, resignation would have been the better option for Neri, who has since been transferred to the Commission on Higher Education, which he now chairs.

Sources of power

It was during Monsod’s term at NEDA that its director general, drawing lessons from the past, was concurrently designated as Secretary of Socioeconomic Planning and Development. Monsod also initiated NEDA’s commendable turnaround from its image of a Marcos rubber stamp — although the Aquino administration continued to convene the Coordinating Council for the Philippine Assistance Plan (CCPAP) that usurped NEDA’s investment planning function.

Yet while the powers and functions do reside in the NEDA Board chaired by the president, the NEDA director general is not as powerless and less influential as Neri had portrayed the position to be. The director general, as chief executive officer of the NEDA Secretariat, exercises general supervision and control over the agency’s technical and administrative personnel. The Secretariat, in turn, serves as the research and technical support arm of the NEDA Board in all the various aspects of development planning and policy formulation, coordination, evaluation, and monitoring of plan implementation.

The NEDA director general is also vice chairperson of the NEDA Board, as well as co-chair of four of the six cabinet-level inter-agency committees that provide assistance to it: Development Budget Coordination Committee (DBCC), Investment Coordination Committee (ICC), Social Development Committee (SDC), and Committee on Tariff and Related Matters (CTRM). He chairs the other two committees: Infrastructure Committee (InfraCom) and Regional Development Committee (RDCom).

In light of the NBN controversy, Medalla, the NEDA chief during Joseph Estrada’s brief presidency, said the public should also be made to understand the dynamics between the two NEDAs: the “NEDA sa Pasig,” the NEDA Secretariat under the director general with its offices in Ortigas in Pasig City, and “NEDA sa Pasig River,” an obvious allusion to Malacañang, the seat of executive power.

Medalla said he was disturbed while listening to Neri explain during the Senate hearing the NEDA project evaluation process and how the national broadband deal bagged by ZTE Corporation got past NEDA. It was evident, he said, which of the two NEDAs had managed to gain the upper hand.

As NEDA director general, Medalla said it was his job to “stop bad things and make good things better.” For the many times he said “no” to proposed projects, particularly recalling the proposal to extend the MRT 3 line from North Avenue to Monumento in Caloocan City, he said Estrada came to the point of casually referring to him as “Dr. No.”

To Medalla, Neri’s justification that NEDA does not look at the financial side of the project is a “distortion.” Medalla said it is precisely NEDA’s role to determine how a project should be financed, whether it is going to be under a BOT scheme or will be funded by official development assistance (ODA). “(But) here, you see a NEDA policy completely reversed by a line agency,” he said. “Unless, of course, it’s been changed in private.”

Protecting projects from ‘crocodiles’

Attempts to bypass NEDA have actually reached the level of amendments to the implementing rules and regulations of the BOT Law that have been in the pipeline for the past year. Among the proposed changes — which the private sector and multilateral lending institutions are opposed to — are replacing the two-pass approval system with a one-pass one, limiting NEDA-ICC’s role to approving only the list of priority projects, and giving the authority to approve individual projects and contracts to implementing agencies or local government units.

“But this is like leaving the zoo to be guarded by crocodiles,” remarked Habito at the UP forum. He added that his enduring recollection of NEDA is encapsuled in a quote from the late journalist Luis Beltran: that it is the only agency “na hindi nalalagyan (cannot be bribed).”

Habito was NEDA director general under the Ramos administration. In his column in the Philippine Daily Inquirer, he had also noted that the NEDA’s clout lies in its role in the evaluation and approval of ODA-funded projects, which was what the NBN project was supposed to be. Republic Act 8555, or the Official Development Assistance Act, is explicit as well about the submission to NEDA by all concerned implementing and oversight agencies of all information and reports it may require in its review of draft contracts.

Habito said, too, that RA 8555 does not allow ODA funds to be used “directly or indirectly for…telephone programs contracted as of January 1, 1996, except basic telephone programs and projects for rural areas not adequately serviced and/or currently developed by private enterprises.” No doubt, the NBN project was nothing less than a very ambitious telecommunications undertaking.

On the issue of foreign grants and concessional loans, Medalla also believes that NEDA had been remiss in its obligation as stipulated in the ODA law. Under Section 4, it is NEDA’s duty to ensure that the ODA obtained shall be for previously identified national priority projects that are urgent or necessary. ODA, the provision further stated, shall not be accepted or utilized solely because of its availability, convenience, or accessibility.

At the forum, Habito recalled that even during his tenure at NEDA, there was already a general desire to bypass the agency as it was perceived to be an “unnecessary obstacle” to government projects. Habito recounted that then President Fidel Ramos had told him that the feedback he got from some in the private sector about NEDA was that it was doing “too much analysis to the point of paralysis.” Ramos, a former military man, was known for having projects “fast-tracked.”

But Habito said he told Ramos that “NEDA is there to protect him from Senate blue ribbon committee investigations.” At the very least, said Habito, NEDA’s project evaluation process should help agencies anticipate issues and questions to be raised during meetings of the NEDA Board and NEDA-ICC.

Paderanga, who was NEDA director general during the Aquino administration, also defended the agency’s duty to make its own expert comments on proposed projects. During his time, he said, NEDA saw to it that two documents were submitted for review by the NEDA-ICC: the feasibility studies of the implementing agencies and the NEDA report containing its objective comments on the studies.

“What NEDA should do,” he said, “is to look at the socioeconomic costs and benefits of the projects, rank them, and then identify which of these are priority projects.” The search for funding is also within NEDA’s area of expertise, he also said, as it is the one coordinating with assistance agencies. “NEDA,” said Paderanga, “would know their preferences, what funds are available for what types of projects.”

Continuing its ‘exemplary reputation

In the last two weeks, the Senate has been trying to pry more information from NEDA about the Palace’s connection with the NBN deal. Current NEDA Director General Augusto B. Santos, however, has done a Neri by invoking the executive privilege and refusing to hand over the minutes of the meetings of the NEDA-ICC that led to the deal’s approval. In a recent letter to the Senate, he argued that since “discussions in closed-door Cabinet and NEDA meetings are considered executive privilege…the minutes of said closed-door meetings are also covered by executive privilege.”

Such an argument could well add more to the growing frustration of Sicat and company over NEDA’s current state, especially since it is the first time that the agency has obviously been put under a gag order. Yet Sicat and the other former NEDA chiefs present at the UP forum said they would like to believe the staff of the agency remain professional and want the agency’s “exemplary reputation” to continue.

This can be done, they said, by promoting greater transparency and a clearer accountability in every step of the evaluation process. Monsod, in particular, also recommended that post evaluation of projects be conducted to find out if the assumptions borne by projects are correct, aware that rates of return can be manipulated.

And if NEDA is worth saving at all, Monsod said it is imperative to make sure that the right person heads it. In 35 years of its existence, NEDA had been headed by a non-economist only once. That lone non-economist happens to be Neri, whose background is in marketing and finance, though he teaches macroeconomics at the Asian Institute of Management and has several books on the economy.

Monsod, however, warned the public of an even graver threat. “It’s the beginning of the end of NEDA,” she said, “when it’s headed by a politician.”

But with NEDA being only a creation of an executive order, can the agency really be insulated from politics and pressure from politicians?

“Even now, we get a lot of pressure from legislators for their own projects,” Turiano told PCIJ, confessing that he thinks the agency will really not be independent as long as Congress passes a law to operationalize Section 9 of Article XII on National Economy and Patrimony in the Constitution.

Yet even that provision appears to be contradictory, as Medalla pointed out. “It calls for creating an independent planning agency but which would still be headed by the president,” he said.

Monsod and Paderanga are not receptive to the idea, though. To them, establishing an independent economic and planning agency will only make it a “paper tiger” — isolated and even more innocuous than what NEDA has apparently become.