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20 May, Manila -- Have you ever thought why social programs do not seem to be effective in reaching the poor or why the quest for quality education has been difficult? Or  why despite the same diagnosis and recommendations by experts who have investigated the problems of Philippine education since 1925, fundamental issues in education have not been resolved? What explains the inability of the public school system to formulate, adopt, or implement reforms that have repeatedly been identified and advocated?

Focusing on the theme “Institutions, Politics and Human Development in the Philippines”, the 2008/2009 Philippine Human Development Report (PHDR) that was launched today tackled issues at the core of the performance of government institutions and recommends measures towards changing institutions.

Fundamental to what has been holding back sustained progress in human development in the Philippines, the report argues that deeper than policies and larger than personalities, it is institutions -- how rules and regulations are defined and enforced and consequently, how norms and practices develop-- that structure behavior and motivate public servants.  “Institutions are simply the incentive systems that structure human interaction; they are the ‘rules of the game’ in society---formal rules, informal constraints, and their enforcement characteristics---which reduce uncertainty, generate regular behavior, and allow people to get on with every day business”, says the PHDR.  

Renaud Meyer, Country Director of the United Nations Development Programme (UNDP) said that institutions are the machinery that fosters or hinders good governance, and thereby positively or negatively affect the achievement of human development. He stressed that good governance clearly appears as a powerful enabler of positive outcomes and change. 
 

According to Dr. Arsenio Balisacan, president of the Human Development Network (HDN) that prepared the PHDR, “if the combination of informal and formal rules hampers rather than enables an agency’s fulfillment of its tasks, then the quality of inputs into human development will suffer.”  He added, “The most important controls affecting government agencies are those that directly motivate government employees, determine the level and management of agency funds, and exact accountability”.

The PHDR discusses the civil service corps, the national government budget process, and key judicial and quasi-judicial bodies. It found weaknesses in the civil service rules, budget processes, and rule enforcement mechanisms.

DepEd  Case

Using the illustrative case of the Department of Education (DepEd), being the largest government institution that employs a full third of the entire government bureaucracy and as an agency that has been the subject of most reforms, the PHDR identified the key factors as the ‘projectized’ nature of reform, rules emanating from other government agencies, leadership and policy continuity and the department’s own institutional culture.

The budget, on the whole, is constraining rather than enabling of human development and good government, says the PHDR. Education is one of the major elements of human development. Per-public school student spending increased by 1.38 percent per year in real terms from 2003 to 2008. However, the government still does not invest enough in education, spending only half of the global norm of 5 to 6 percent of GDP. 

Mandatory obligations comprise more than 80 percent of the total yearly budget on average, leaving little headroom to increase spending on basic services or fund innovations. The education budget is even more inflexible if one considers that after personnel expenses and capital outlays, only 8 percent is left on average for maintenance and other operating expenses, including supplies. There is hardly room to finance pedagogy-related and other innovations.

Consequently, according to the PHDR, there is an over-dependence on official development assistance (ODA) for critical projects and reform initiatives, as illustrated by the DepEd’s “almost absolute dependence over the last 20 years on the implementation of foreign-assisted programs” to drive education reforms. This dependence however is a key factor for its inability to adapt or mainstream those same reforms. 

The PHDR noted the largely ‘perverse’ incentives in the civil service that have weakened the quality of the bureaucracy at all levels in recent years. Salaries can be as much as 74% below comparable jobs in the private sector. Most affected are directors, district engineers, school superintendents, college professors, prosecutors, state auditors, assistant secretaries and undersecretaries who are responsible for policy design, higher-level technical services, and the day-to-day management of the government. Also affected are division chiefs, public attorneys, school principals, public health nurses, social workers, teachers, election officers, customs examiners, engineers, agriculturists, and others who directly implement public programs at the front line.

Other distortions cited in the PHDR include the “same” job being ranked differently across agencies. A bias against female-dominated positions, for instance, shows teachers and nurses being given a Salary Grade 10 while agriculturists and foresters SG 11, although both require four-year courses. Pharmacists and physical therapists are also given SG 10, while architects and engineers are at SG12, although all require five-year courses.

“For government to formulate quality policies and deliver quality services, it must be able to attract and retain good people for the tasks. The inequities described clearly make it difficult to do so”, according to the PHDR.  The report cited trends from recent years that indicate the toll on the quality of the bureaucracy of an outdated compensation structure and increased political intervention. It noted that decreasing quality is evident from decreasing numbers of career personnel in Non-Executive Career positions, indicating that the corps may be losing quality among highly technical positions and among executive positions at the local government level.

The share of eligible career executives occupying positions that have been reserved for them has been falling beginning around 2004, across all types of agencies, including those in the human-services sector. A decreasing share indicates that the share of political appointments (i.e., of ineligible personnel) is increasing or that CESO eligibles are leaving voluntarily.

Simple correlations between public approval ratings of the DepED, DOH, and DSWD and the shares of eligible career executives in executive positions give some evidence that a better quality of bureaucracy is associated with better agency performance.

The PHDR stressed that a strong civil service becomes a key to good governance, especially where political leadership is fickle and the turnover rate of appointive and elective officials is high. “A strong and professional bureaucracy is also required for the improvement of human development outcomes. If there is concern for good governance or human development outcomes, or both, then institutions (rules and incentives) that are currently impinging on the civil service clearly need to be reformed or, at the very least, contained.”

Presidential Appointees

The PHDR also pointed out the number of ad-hoc bodies, presidential consultants, and advisers that have increased in recent years through the Office of the President (OP). After peaking in 2002 at 175, there was a sharp decline in 2003 to 74, attributed to the work of the Presidential Commission on Effective Governance (PCEG). However, when the PCEG was abruptly abolished in 2004, the number of agencies again began to increase, reaching 85 in 2007.

The number of presidential consultants/advisers has risen significantly since 2002, reaching an all-time high in 2008 at 49 after a steady decline in 1994-1998 (Ramos administration), a slight spike in 1999 (Estrada), and a sharp decline in 2001 (Arroyo).

Another issue raised by the report has to do with political appointments to formal plantilla positions and the use of the presidential prerogative to appoint. About 10,000 positions are the subject of presidential prerogative.  One indication, according to the report, is that as of December 2007, there were 222 incumbent undersecretaries and assistant secretaries, when only 131 are actually prescribed by law. This is an excess of 81 incumbents, or 62 percent. If each draws an average of P722, 000 a year in salaries, allowances, and discretionary funds, then these excess incumbents cost government an extra P58 million a year. Moreover, 56 percent of the 222 were technically ineligible to occupy their positions. The OP has the most number of excess undersecretaries and assistant secretaries at 31, of whom 89 percent were ineligible.

The PHDR recommends that changing institutions require changing rules and changing norms.  Proposed legislation that should be considered are Freedom of Information to ensure transparency, Career Executive Service Act to restore meritocracy, Government Compensation Act to restore incentives, Budget Reforms to restore to Congress the power of the purse.