The Navy’s Resources

By DR. JESUS P. ESTANISLAO
Saturday, September 17, 2010

As a unit of the Armed Forces of the Philippines, the Philippine Navy (PN) operates on the basis of budgetary allocations that the national government provides and releases to it. This amount has always been subject to severe constraints: the Navy is always called upon to do so much on the basis of so little.

There is little the Navy can do about the budgetary allocations the General Appropriations Act provides for the AFP in general and for the PN in particular.

Thus, under the priority of “balanced financial programs,” one of two priorities listed under the resources perspective, the PN puts forward this initiative, to strengthen PN fiscal administration. The first measure of success under this initiative is keep at 100% the rate of obligation, i.e., ensure that the entire budgeted amount and released to the PN is duly and properly obligated and deployed. The other measure of success is to keep at zero Commission on Audit (COA) exceptions: the Navy plays by CoA rules and regulations, and intends to stay well within their ambit.

There is a limit, however, to what can be done under such stringent fiscal straits. Despite the inventiveness and creativity of PN personnel, inevitably budgetary tightness has long-term consequences. “Having to make do with so little” imposes severe constraints on the modernization of the fleet and the needed capital and other requirements of a modern Navy serving such a huge maritime area that the Philippines is blessed with. The President himself in his first State-of-the-Nation Address in July, 2010, specifically referred to the “MacArthur vintage” of some of our Navy ships, which miraculously are being made to run and operate in large part due to the maintenance expertise of PN personnel.

It is against this background that the second priority under this perspective should be understood. That priority is to secure “adequate financial resources” for the Navy Sail Plan. This priority is in line with the AFP modernization program, which calls for a sustainable non-traditional resource generating system for the PN. This means looking for other sources of funds that the Navy can use for its fleet modernization as well as its capital and other requirements. The President mentioned the Navy as a specific case under his proposed public-private partnership. Under such a partnership, with Navy land and other assets properly and judiciously deployed, the PN should start building a trust fund in 2011.
The initial amount targeted for 2011 is small: Only half a billion pesos. This amount should rise each year by half a billion pesos until 2013. The target for 2020 is modest at only five billion pesos: It is from the earnings of this fund that the Navy should be able to find the much needed supplement to the budgetary allocation it gets through the annual General Appropriations Act.

In fact, more broadly, through public-private partnership, the PN can have access to extra-budgetary resources that can be made available for its programs. The key lies in properly packaging the programs that can be funded under PPP arrangements; this would entail due observance of all relevant laws and proper practices of transparent, accountable governance that the President has called for.

The PN has already taken various steps in the direction of building a multi-sector governance coalition that would assist it in raising the standards of governance that it practices. It is also beginning to find out that with the commitment of such a coalition whose membership is drawn from various sectors of the Philippine community, it has many doors leading to additional financial resources it can tap for the critical priorities it included in its Sail Plan.