Why billions in DAP money didn't boost economy

By Gigi Grande, ABS-CBN News

Posted at Sep 03 2014 08:44 PM | Updated as of Sep 27 2014 12:13 PM

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MANILA - Over P40 billion worth of projects funded by the Disbursement Acceleration Program (DAP) between 2011 and 2013 had no pump-priming effect on the economy, experts say, in part defeating the purpose for which the mechanism was created.

In separate interviews, economists Margarito Teves and Benjamin Diokno gave almost similar analysis of data uploaded by the Department of Budget and Management last July.

A former budget secretary, Diokno said the value of projects that did have a pump-priming effect was too small relative to the country's gross domestic product (GDP).

“It had little, if any, impact, at all,” he told ABS-CBN News.

Government has said the DAP was created to “speed up public spending” and “boost economic growth."

But by the time DAP was terminated, only P91.15 billion had actually been disbursed out of P144.38 billion released, the DBM data shows.

Former Socio-economic Planning Secretary Cayetano Paderanga, a member of the Development Budget Coordination Committee that endorsed the DAP to President Aquino, said the idea was to disburse government funds “as fast as we could, “ adding, “if we could spend it next week, we would.”

The challenge was for the President’s men to choose the right projects.


In February 2013, packets of frozen chocolate milk arrived at the Pinaglabanan Elementary School in San Juan.

The school was only too happy to accept a gift it did not ask for.

Some 400 students became instant beneficiaries of what was to be a month-long milk feeding program under the DAP, courtesy of then San Juan congressman, now Senator JV Ejercito.

Milk feeding programs are usually undertaken to address problems of malnutrition. But in the case of Pinaglabanan Elementary School, majority of the beneficiaries -- or 314 students -- were actually healthy, according to school officials.

What’s more, each student received 4 packets of milk per day.

Ejercito recalled how he came to the decision to use government funds for the milk feeding program.

Just days after he signed the impeachment complaint against Chief Justice Renato Corona in December 2011, he received a call from the office of House Speaker Feliciano Belmonte.

“I was told we would be getting additional P10 million on top of our regular allocation of P70 million PDAF (Priority Development Assistance Fund) ,” he said.

There was a limited menu where Ejercito was to earmark the P10 million.

“Some projects would only be applicable to rural areas, not to an urban center like San Juan, so I chose National Dairy Authority and the other half went to TRC [Technology Resource Center],” he said.


And he asked no questions. “Binibigyan ka na nga, alangan namang kwestyunin mo pa,” he recalled.

The Special Allotment Release Order (SARO) for the National Dairy Authority (NDA) was issued on December 22, 2011.

Data from the NDA shows at least 39 other congressmen -- all of whom signed the impeachment complaint against Corona -- also received DAP allocations for their chosen beneficiaries that went to the P213-million milk feeding program.

Budget Secretary Butch Abad told a Senate hearing last July that DAP was meant to ensure social services and public goods would be delivered to the poor “as swiftly as possible .“

Yet it took nine months before the first tranche of the milk feeding program began. Succeeding tranches commenced even later.

Because of the slow and piecemeal implementation of the various milk feeding programs, Teves, a former finance secretary and congressman who chaired the House committees on economic affairs and rural development, said what could have been a pump-priming project became futile.

“When we talk of “pump-priming” we talk about something dramatic, immediate, and something that will either lead to more employment, income or inclusive growth, ”he said. “But in this case, the project would have no pump-priming effect on the economy because of the considerable delay in its implementation.”


Teves identified over 33 DAP projects with disbursements of P48.9 billion which, he believes, had no pump-priming effect on the economy because any impact would be felt in the medium to long term.

These projects include equity infusions to Bangko Sentral ng Pilipinas , Home Guaranty Corporation, and the Trade and Investment Development Corporation of the Philippines, one of several “underperforming” GOCCs recommended abolished in a bill filed by Rep. Rufus Rodriguez.

Teves also cited the “capacity-building projects” of the Department of Interior and Local Government, Department of Labor and Employment, and state colleges and universities, as well as the settlement of obligations incurred by the Bureau of Customs, the upgrade of the communication system of the Presidential Security Group, and the construction of a jail facility for high profile prisoners, which had been issued a SARO in October 2012 but to date is only 30 percent complete, based on the DBM report.

The stem cell research project, Teves said, is downright dubious.


By the first quarter of 2012, new equipment arrived at the 631-square-meter stem cell research laboratory of the Lung Center of the Philippines.

But just how much of the equipment was funded by DAP remains murky.

Health Secretary Enrique Ona said it was over P50 million; LCP Executive Director Jose Danguilan, P30 million; and Dr. Fransisco Heralde, a visiting consultant of the Molecular Diagnostics and Cellular Therapeutics Laboratory, P31 million.

Whatever it was, the pump-priming effect of the project at the Lung Center, where hundreds of charity patients fall in line for medication each day, remains questionable.

Heralde admitted the project failed to create a single job, and the equipment was imported from the US, China, and Europe because there are no local manufacturers.

“It wasn’t intended for operating expenses like personnel hiring, “he said. “It was really intended for procurement of equipment.”

An official of the LCP Employees Association said the group would have objected had it known money from the DAP would be used to buy equipment for stem cell research.

“Ang daming pasyente dyan na walang maayos na higaan, wheel chairs,” said the group’s president Ely Sobinsky. “Eh kung yan ay dun na muna napunta, eh mas makakatulong yan sa maliliit na mamamayang Pilipino na hindi maka-afford ng private hospitals.”

Since 2012, only 3 indigent cancer patients have benefitted from this project through subsidies in stem cell treatment, according to Heralde.


When it terminated the DAP, government said it did so because it had served its purpose. But Diokno believes otherwise.

In 2011, based on the DBM’s projects list, Diokno estimated that only P30.5 billion DAP disbursements had a pump-priming effect on the economy.

With the country’s GDP at P9.736 trillion in 2011, that means the ratio of disbursements to GDP was 0.0031.

“To me, it’s unbelievable to claim that it made a difference,” he said. “Maybe a slight difference, but not a significant difference.”

In 2012, the ratio was even less significant.

Diokno estimated an even smaller figure-- about P17.7 billion DAP disbursements---had a pump-priming effect on the economy.

That means the ratio of disbursements to the country’s P10.565 trillion GDP was 0.0017. “It is so infinitesimally small that it won’t be able to stimulate the economy,” he said.

Diokno pegged the ratio of DAP disbursements to the 2013 GDP of P11.54 trillion at 0.000.

But Paderanga remains a staunch defender of DAP, saying it served the purpose for which it was created.

“These numbers may be small overall, but if put in at the right time, in this case, to reverse a decelerating momentum of the economy, it can be quite important. Clearly the disbursements had an impact on turning things around,” he said.

But apart from the amount of disbursements relative to GDP, Diokno said there was absolutely no new spending either-- which, to him, is a necessary component of pump priming the economy.

“There’s got to be new money,” he said. “Hindi re-align lang. New programs and projects were cooked up, while Congress-approved ones were bumped off. Worse, the new projects were less stimulative than the ones replaced.”

To date, the DBM has not detailed the fund sources of the DAP, but Congress-approved projects cancelled and diverted to the DAP include a P549 million upgrade and rehabilitation of airports nationwide, as well as the modernization of 25 regional hospitals.

“It is clear that the P30 billion-subsidy for BSP did not create a single job, while thousands of jobs were lost by not implementing (projects to build or rehabilitate) airports, seaports, hospitals and rural health units,” Diokno said.

Paderanga conceded the DAP was not perfect.

“If you have a thousand projects or so, you’re going to commit mistakes,” he said. “One can always ask for perfection, but I’ve been in economic planning and economic implementation for many years and sometimes good is good. Trying for perfect, we hope it’s not at the expense of the good.”

ABS-CBN's Investigative Group tried for weeks to get an interview with Abad but he remained unavailable as of posting.