DAP fallout will lead to economic and political paralysis

Ben D. Kritz

Ben D. Kritz

We do not yet know what the real impact of the surprisingly firm ruling by the Supreme Court on Tuesday against the controversial “Disbursement Acceleration Program” (DAP) will be, but there is a growing sense that the issue may have far broader implications than first thought.

The public’s initial euphoria over the Supreme Court decision rejecting the invention of President B.S. Aquino 3rd and his clever accountant as unconstitutional was quickly replaced by an understandable cynicism.

The President’s deep control of the various organs of government makes it virtually impossible—or so everyone believes—that he will ever be called to account for what, in effect, was ruled to be malversation of public funds on a breathtaking scale; according to Palace memos that have already surfaced, at least P177 billion was diverted from the national budget for DAP expenditures, and the actual amount might have been considerably more.

But, or so the common assumption goes, his influence on members of the Supreme Court is such that the final ruling was just vague enough to allow him to escape reckoning. And even if it were not, the overwhelming number of Aquino minions in the Legislature, and the not-at-all subtle willingness to do his bidding displayed by the Justice Secretary, Ombudsman, and Commission on Audit ensures that not only will Aquino (or anyone he designates as being under his protection) go unpunished, any “investigation” that may be launched will not even begin to uncover the true extent of the DAP scandal.

That dour view of the prospects for justice being done may not be warranted. While the Administration has claimed the DAP was created and implemented “in good faith,” the Supreme Court ruling actually does not support that notion. Nor could it; accepting the principle of “good faith” in the way the Administration is trying to use it is ludicrous, because it suggests that any violation of the law could be claimed to have been made “in good faith,” which would obviously lead to chaos.

Whether or not that application of basic logic will result in actual legal consequences for anyone remains to be seen. The Commission on Audit is already being pressed to investigate and disallow DAP expenditures—a necessary prerequisite for any legal action to recover the funds—and impeachment complaints against the President, as well as criminal complaints against Budget Secretary Butch Abad, are already being prepared. Even if the processes being set in motion are eventually defeated by Aquino people fear will be the case, the fact that they are even being started may very well have negative consequences—and fairly soon—for the country’s healthy yet still curiously tenuous economy.

The first and most obvious problem is institutional paralysis; having all three branches of government focused on the DAP issue for an extended period of time will prevent much progress from being made on other critical issues. The Legislature is set to take up the Bangsamoro Basic Law, the enabling legislation for the peace agreement signed between the Aquino government and the Moro Islamic Liberation Front last year. That accord is regarded as being deeply flawed in a number of respects anyway (the Organization of Islamic Cooperation, without whose blessing the agreement will almost certainly collapse, recently refused to endorse it), but a more immediate problem is that it is deeply mired in the DAP controversy; upwards of P8 billion in unaudited DAP funds were distributed to MILF leaders and local governments in Mindanao. Even if the Bangsamoro Basic Law was quickly passed—which is unlikely now that the government is busy with other things, so to speak—it would instantly be challenged in the courts, at best delaying and possibly even entirely preventing the implementation of Aquino’s signature work, the one he at one time vainly hoped would earn him the Nobel Peace Prize. The MILF is already expressing annoyance at the slow pace of progress; further delay is likely to lead to greater unrest in Mindanao, and once the MILF realizes the chances of their special arrangement with the Philippine government actually being honored are virtually non-existent, the situation in Mindanao could become very grim indeed, with correspondingly poor prospects for any development or investment in the region.

The Bangsamoro Basic Law is just one of several measures that will suffer. Congress also needs to complete work on a revised Labor Code, an updated Mining Law, and is being pressed to review and amend the dysfunctional Electric Power Industry Reform Act (Epira) of 2001 that is responsible for the country’s chronic power shortage and atrociously high electric rates. Beyond that, Congress will also need to take up the 2015 national budget—which now lies in complete disarray—after the delivery of the President’s State of the Nation Address at the end of this month. Besides the legislative activity that is now at risk of being completely derailed by the DAP issue, there is also the problematic Typhoon Yolanda reconstruction effort, the slow and inconsistent pursuit of which has already reduced the country’s GDP growth; the only recently-started large-scale effort to combat a widespread, lethal infestation of the country’s coconut trees; and preparations for integration under the Asean Free Trade Agreement scheduled to happen in 2015.

All of those matters will fall by the wayside for the next few months, and that’s only if things proceed politically as most people expect, i.e., a period of intense wrangling resulting in Aquino, Abad, et al., escaping punishment, with not much of the DAP-distributed funds being recovered and returned to the treasury. If there are any more significant consequences, the impact will be far more serious than just political and economic stagnation.

If there’s any bright spot in the grim prognosis for the country’s near future, it may be that there are a few key institutions that have managed to remain independent and above the fray. The Bangko Sentral ng Pilipinas (BSP) is one good example; throughout the various scandals involving the Executive Branch’s mishandling of state finances, the BSP has managed to keep itself—and as a result, the wider financial system—safely at arm’s-length for the most part. This at least gives us some assurance that there will be a stable base to build on once the disastrous Aquino era is brought to an end, whenever and however that comes to pass. DAP was a terrible budgeting idea compounded by less-than-honorable intentions, and its fallout will harm the economy for some time to come; but at least there is a reason to hope that harm will not be permanent.



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