In 2012, the Philippine government through the Department of Budget and Management (DBM) started implementing the Bottom-up Budgeting (BUB) process, which is also known as  Grassroots Participatory Budgeting (GPB). The BUB is a reform measure that aims to encourage ordinary citizens to actively participate in crafting the national budget. In the past, a top-bottom approach was the norm, with government officials at the national level deciding where public funds should go. With the BUB, citizens have a say in identifying projects they deem beneficial for their localities.

The BUB was initially intended for the poorest municipalities identified by the Cabinet’s Human Development and Poverty Reduction Cluster. In 2014, it was expanded to cover 1,233 municipalities and cities and was extended to all municipalities and cities across the country in fiscal year 2015.

The BUB process provides an excellent venue for people to express their needs and, together with the local governments, identify concrete solutions to problems they face. It is a good mechanism for local participation in community development and promotes transparency in the planning and budgeting processes. But does it really work? Initial assessment of the program conducted by PIDS in 12 municipalities and cities in four provinces across the county yielded not-so-favorable results. It revealed shortcomings and weaknesses in program implementation that negatively impinged on the quality of citizen participation.

In three municipalities in Quezon Province, PIDS consultants Cleofe Pastrana and Marites Lagarto observed the limited participation of civil society organizations (CSOs) during the assemblies. Local government unit (LGU) officials dominated the identification of projects, drawing doubts as to whether the real needs of the citizens were truly taken into account. In other areas like Agusan del Norte, PIDS researchers Danileen Parel, Keith Detros, and Christine Salinas observed that most of the projects prioritized during the Local Poverty Reduction Action Plan (LPRAP) workshops appear to be responsive to the needs of the citizens as identified by the CSOs and LGU officials but they do not seem to be well targeted to the poorest areas, which is a major objective of the BUB.

Another weakness found is the slow implementation of the projects identified during the CSO assemblies and prioritized during the LPRAP workshops. In most of the areas where the assessment was conducted, a new BUB cycle had ensued yet the CSOs and LGUs have not witnessed the start and completion of the projects they proposed nor have been informed of the status. In another case, the project was changed without the LGU’s knowledge. Evaluation reports also indicate the minimal participation of the CSOs in project implementation and monitoring.

Moreover, apprehensions have been raised by various sectors that the BUB could be exploited by the present administration to advance its own political interest. But PIDS Senior Research Fellow Rosario Manasan pointed out that the provisions of the Joint Memorandum Circular No. 4-2013, which lays down the rules for the implementation of the BUB, give national government little, if not, zero discretion in the allocation of funds across LGUs. She noted that even if the BUB budget is a lump-sum appropriation, the guidelines under the joint circular appear to be applied uniformly regardless of political affiliation of incumbent local chief executives. Manasan explained that the funding allocation across cities and municipalities is based on a formula, in which LGUs with more residents living below the poverty line get a higher BUB funding. Since BUB funding across LGUs is rule based rather than discretionary, Manasan said that it is not as vulnerable to patronage politics at both the national and local levels compared with other more discretionary funding sources for LGUs.

Further evaluation of the BUB in other areas can provide more clues on what other aspects need to be fine-tuned. For the BUB to become truly inclusive and participatory, meaningful participation of basic sector organizations and CSOS, which represent the citizens, should be encouraged and supported. The DBM should also ensure that transparency is always present—in the identification and prioritization of BUB projects, and even in the implementation stage—and that the program is insulated as much as possible from patronage politics.

Know what other PIDS studies have to say about the BUB in the Philippines. For other related studies, visit the SocioEconomic Research Portal for the Philippines. Simply type “bottom-up budgeting”, “local governance”, “budget reform”, “participatory budgeting”, and other relevant keywords in the Search box.

1. Bottom-Up Budgeting: People’s Participation at Work
2. Assessment of the Bottom-up Budgeting Process for FY 2015
3. Grassroots Participatory Budgeting Process in Negros Province
4. Bottom-up Budgeting Process Assessment: Agusan del Norte
5. Process Assessment of the Bottom-up Budgeting: The Case of Quezon Province
6. The impact of fiscal restraint on budgetary allocations for women’s programs
7. Gender-Responsive Budgeting through the CBMS Lens
8. Analysis of the President's Budget for 2013
9. Analysis of the President's Budget for 2012
10. Improving the Financial Management of Local Economic Enterprises

27 AUGUST 2015
Australia-Philippines Policy Forum: Economic Diplomacy and the APEC Agenda
Venue: Makati Diamond Residences, Makati City
Co-organizer: Griffith Asia Institute

16 JULY 2015
Pulong Saliksikan on SME Internationalization and Finance in Asia
Presenter: Dr. Ganeshan Wignaraja, Advisor in the Asian Development Bank's (ADB) Economic Research and Regional Cooperation Department.
Venue: C.P. Romulo Hall, NEDA sa Makati Bldg., Makati City

. . . . . . . . . . . . . . . . . . . . . . . . . .

ASIA-PACIFIC RESEARCH AND TRAINING NETWORK ON TRADE

The Asia-Pacific Research and Training Network on Trade (ARTNeT) is an open regional network composed of leading trade research institutions and think tanks across the Asia-Pacific region. It was established by the United Nations Economic and Social Commission for Asia and the Pacific UNESCAP in 2004 with the support of the International Development Research Centre (IDRC), Canada. Since 2005, the Philippine Institute for Development Studies has been an active member of this network.

. . . . . . . . . . . . . . . . . . . . . . . . . .

Call for Papers: Philippine Journal of Development

The Philippine Institute for Development Studies (PIDS) is inviting submissions to the Philippine Journal of Development (PJD). The PJD is a peer‐reviewed journal published twice a year by PIDS. Now on its 40th year, PJD considers original, unpublished papers on economic development, political economy, public administration, foreign relations, and other fields/topics, which are policy oriented and may or may not explicitly have a bearing on the Philippines. Book reviews are also accepted. The theme or topic of the book should fall within the scope of the articles accepted for publication. The target readers of PJD include researchers, educators, policymakers, and development planners. Click here for the guidelines in the preparation of articles. Inquiries and submissions should be forwarded to the Managing Editor at ssiar@mail.pids.gov.ph.

POLICY NOTES

• PN 2015-13: Why We Should Pay Attention to the Middle Class
  by Jose Ramon G. Albert, Raymond E. Gaspar, and Martin Joseph M. Raymundo

This Policy Note describes the middle class and provides its contributions to economic growth. It adopts an alternative definition by dividing the income distribution based on official poverty lines. To maximize the role of the middle class in growth and development, it is important to make the middle class a stable force to sustain the growth of the Philippine economy. To do so, the government should find more avenues to attract investments that will create more and better-quality jobs, such as tapping the corporate social responsibilities of major companies to generate more and better-quality jobs for the middle class. The proposed income tax reform will likely bolster the income share of the middle class. This income boost will provide an opportunity to capitalize on domestic demand-led growth spurred by domestic consumption. Click here for the full article

• PN 2015-12: Prospects of Stronger Economic Cooperation between the ASEAN and India: Implications for the Philippines
  by Gilberto M. Llanto

This Policy Note explores the prospects and opportunities of a dynamic ASEAN-Indian trade and investment relation. Specifically, it analyzes the greater economic relation between India and the Philippines in the services sector, particularly in information technology and business process outsourcing (IT-BPO). Both India and the Philippines can use the ASEAN-India Trade in Services and Investment Agreement to exploit greater synergies in their respective IT-BPO services where they have developed world-class capabilities. India can tap the Philippines as an IT hub as it tries to expand toward the IT-BPO services chains. Together, both countries can provide IT and related services to the ASEAN region, which are critical services to enhance connectivity under the ASEAN Economic Community. To do this, one of the recommendations is to harmonize the taxation of IT-BPO and related services in both countries to reduce tax disparities and cost of doing business. Click here for the full article

• PN 2015-11: Liberalizing Trade of Environmental Goods and Services: How to Address the Free-rider Problem
  by George Manzano and Shanti Aubren Prado

Reducing trade barriers in environmental goods and services (EGS) makes adoption of environmental technologies cost effective for different industries. The Asia-Pacific Economic Cooperation (APEC) put forward its own list of 54 environmental goods (EGs) slated for sectoral liberalization as its contribution to foster trade in EGS. This Policy Note explores how APEC can liberalize trade in EGs based on the most-favored-nation (MFN) principle. Liberalization of these EGs on an MFN basis, however, generates free-rider problems. Using the predominant supplier approach could address free riding and provide the stimulus needed to foster free trade in EGS. The results show that APEC has a dominant supplier role in renewable energy and clean technology production. These are followed by waste water management and potable water treatment, management of solid and hazardous waste and recycling systems, and natural risk management. Click here for the full article

ECONOMIC ISSUE OF THE DAY

• EID 2015 Vol. XV No. 1: Bottom-up Budgeting: People’s Participation at Work
  by Gizelle G. Manuel

As part of the government’s effort to pursue sustained and inclusive growth and, at the same time, promote good governance at the local level, the Bottom-up Budgeting (BUB) exercise—also called the Grassroots Participatory Budgeting (GPB) process—was initiated in 2012. It is a reform measure that aims to make the national budget a participatory process. Through the BUB, the government hopes to involve citizens in identifying projects that they believe will be beneficial for their own communities. This Economic Issue of the Day discusses the concept of participatory budgeting and how it works. Specifically, it looks at the Philippine government’s BUB process from planning to implementation of projects. Initial findings of an initial evaluation by PIDS in 12 municipalities and cities in four provinces representing Luzon, Visayas, and Mindanao were also discussed. Click here for the full article

 

DISCUSSION PAPERS

• DP 2015-39: Industrial Policies and Implementation: Philippine Automative Manufacturing as a Lens
  by Gilberto M. Llanto and Ma. Kristina P. Ortiz

Philippine industrial policies such as those on the manufacturing sector are a critical element of the country's development strategy. Manufacturing creates opportunities for higher value addition and extensive employment owing to forward and backward linkages with other sectors of the economy, and linkage to regional production networks, which has become a key factor in the growth of major ASEAN countries. This paper discusses Philippine industrial policy reforms and implementation over the period 1973–2014 through the lens of the automotive manufacturing industry. It discusses the factors that will facilitate or hinder the process of reforms and implementation under the new approach to the development of the automotive manufacturing industry. Click here for the full article

• DP 2015-38: Social Enterprises and Employment: Mainstreaming SMEs and Employment Creation
  by Leonardo A. Lanzona, Jr.
  

This paper argues that mainstreaming small and medium enterprises (SMEs) and social enterprises (SEs) into various international treaties will require the assumption of positive externalities, which markets cannot fully evaluate. To show this, the possible influence that SEs may have on SME development and, eventually, on employment will be discussed. SEs are small- and medium-sized commercial businesses providing valuable social service to customers and sustainable jobs and training for up to about 200 people. Their goal is to provide public goods to the communities, in the form of increased productivity and employment. What separates SEs from SMEs is that it addresses the social issues at the forefront. Through this paper, the importance of providing such public goods to SME development will be highlighted. This study shall provide inputs to the analytical framework for the Philippines' engagement in the Asia-Pacific Economic Cooperation under the priority theme of "Mainstreaming Small and Medium Enterprises and Employment Creation" and shall make concrete recommendations on how employment can be created through the formation of social enterprises or socially inclusive companies. Click here for the full article

• DP 2015-37: Doing Business: A Review of Literature and Its Role in APEC 2015
  by Ronald U. Mendoza, Tristan A. Canare, and Alvin P. Ang

Since 2006, the World Bank has been ranking almost 200 countries in terms of their ease of doing business (EoDB) to underscore the importance of a thriving private sector in promoting high and inclusive growth. Comparing these metrics for business friendliness among economic partners is more important now that multilateral agreements that promote integration—such as the ASEAN Economic Community—are ongoing. Subsequently, the Asia-Pacific Economic Cooperation (APEC) has its own specialized group that monitors the EoDB progress of its members. Through a comprehensive review of theoretical and empirical literature on doing business, and through an assessment of the relative doing business performance of APEC economies, this paper provides policy inputs to the APEC EoDB Initiative and initial policy guidelines and recommendations on what the Philippines could propose for further discussion and elaboration in the APEC EoDB work stream when it hosts the summit this year. Click here for the full article

• DP 2015-36: The BPO Challenge: Leveraging Capabilities, Creating Opportunities
  by Fatima Lourdes E. del Prado

Using data from the Philippines, this paper describes the evolution of information and communication technology-business process outsourcing (ICT-BPO) services exports in the country and examines the factors that facilitated its transition from providing low-end contact center services to back-office operations, and to higher value-added services. It also reviews some of the Asia-Pacific Economic Cooperation initiatives relevant to the growth and expansion of ICT-BPO services in the region. The Philippine experience has shown that IT-BPO services is one area of trade in services where developing countries can take a shot at sustainable development, without relying so much on traditional primary industries and natural resource. Although the presence of an educated workforce and good telecommunication infrastructure do not always guarantee success in this area, the investments in human capital and critical telecoms infrastructure—considered by many as a backbone for other important industries—are more than enough reward for the decision or attempt to pursue and board the IT-BPO bandwagon. Click here for the full article

• DP 2015-35: Furthering the Implementation of AEC Blueprint Measures
  by Gilberto M. Llanto, Ramonette B. Serafica, Erlinda M. Medalla, Ma. Kristina P. Ortiz, Keith C. Detros, Fatima Lourdes E. del Prado, Melalyn C. Mantaring et al.
  
  The study identifies outstanding issues and bottlenecks and provides recommendations to facilitate the Philippines' full compliance to its commitments to the ASEAN Economic Community (AEC). Various in-depth interviews and surveys were conducted with concerned stakeholders from government agencies and the private sector to bring to fore the issues and bottlenecks for policymakers' action. Although its focus is mainly on services and investment liberalization, this study also tracks policy changes in trade facilitation, nontariff measures, standards and conformance, and mutual recognition arrangements after the release of the 2010/2011 AEC Scorecard Reports. Click here for the full article