Inefficiency, Push for Honesty Are Cited : Unspent Aid: Manila Tries to Explain

Times Staff Writer

At a time when the Philippine nation is deteriorating and the government is crying out for massive foreign aid, hundreds of millions of dollars in development funds are sitting idle in government bank accounts in Manila, President Corazon Aquino’s top aides conceded Thursday.

Most of the money has been earmarked for roads, schools, hospitals and public markets, but the officials said that President Aquino’s penchant for strict honesty in government and the general bureaucratic inefficiency have combined to delay use of those funds.

“The money for development is there already,” said Aquino’s Budget Secretary Guillermo Carague. “And the projects have all been planned. We’re just waiting for the departments to ask for the money. And they just aren’t asking.”

Carague was reacting to congressional testimony in Washington by Reagan Administration officials, who said Wednesday that as much as $1.5 billion in foreign aid already allocated to the Philippines from the United States, Japan and international lending institutions has yet to be used by the Philippine government.


Carague attributed the slow distribution of funds partly to the slow transition to democracy that the Aquino government has been attempting after two decades of corrupt and authoritarian rule under Ferdinand E. Marcos.

“It’s like a man who has been on a starvation diet for many years, and all of a sudden you give him a lot of food,” Carague said. “He just cannot digest it all at once.”

Under Marcos, Carague said, departments in charge of development projects grew accustomed to long delays in the release of federal funds, which investigators now say Marcos administration officials deliberately froze in interest-bearing accounts so they could skim off the interest for themselves.

Begs Them to Spend


“Now, we release these funds as soon as we receive the request, but it seems the various departments got used to the style of the old administration,” Carague said. He added that he became so frustrated that no one was asking for the money last month that he actually sent letters to various departments telling them they had hundreds of millions of dollars at their disposal, and begged them to spend it.

In all, the budget secretary said, less than half of the $65 million worth of desperately needed, foreign-funded development projects that were planned and budgeted for 1987 have even begun. As of December, he said, more than $40 million of the aid money remains unused in the central bank.

Trying to explain the difference between his figures and the Reagan Administration’s estimate of $1.5 billion in unused foreign aid, Carague speculated that the Administration was including projects for future years as well.

Other senior Philippine leaders, among them Aquino supporters, blamed not only the corrupt and inefficient bureaucracy that Marcos left, but also the inability of Aquino or her Cabinet to dismantle or control that bureaucracy.


Even before Wednesday’s testimony in Washington, Ramon Mitra, speaker of the Philippine House of Representatives and a key Aquino supporter, brought up the problem in an interview. He blamed Aquino’s preaching of honesty in government for the backlogs, which include more than $250 million for road development projects alone--foreign and Philippine development money that has been sitting unused in a government bank for the past 11 months.

“The Cabinet members are now too timid or too scared to spend money,” said Mitra, who served for more than a year in Aquino’s Cabinet before he ran for Congress last May. “They are afraid that if they spend this money, somebody down the line, either in government or the private sector, might steal it.

“Maybe they will steal a small part of it, and the president’s call for honesty is very important and admirable, but the fact is that the country will not grow unless we spend that money. The country cannot afford this kind of pace. Being like a housewife and counting every centavo is admirable, but it is not helping us to grow.”

Asked what advice he would offer Aquino to rectify the problem, Mitra said, “I would tell her to tell key Cabinet members to take risks and go out there and get these projects going. Our future depends upon it.”


Carague and other top Aquino aides said the president already is well aware of the problem, which was a principal topic of her recent meeting with visiting Under Secretary of State Michael H. Armacost.

After the visit, Carague said, Aquino created a task force to push the key Cabinet departments of public works, education, agriculture and health to requisition the earmarked money and begin work on the projects immediately. He said it is too soon to tell whether there has been any improvement.

Already, though, the Aquino government’s go-slow approach appears to be threatening the level of future foreign aid to the Philippines, an increasingly poor nation that owes $28 billion to foreign banks.

The Asian Development Bank, a private aid institution that Reagan Administration officials testified has allocated $187 million in aid that the Philippines has not yet spent, plans to cut its Philippine aid level drastically next year. Senior bank sources recently said that the usual allocation of more than $300 million a year to the Philippines is likely to be slashed to just $50 million next year.