Arianne Clarise P.

Villegas International Political Economy

March 17, 2018 Sir Jumel G. Estrañero
AB Foreign Service 302

The Political Economy in Relationship with Public Works and Fund Allocations in
the Philippines

I. ABSTRACT

Way before our current administration, we have been commonly seeing a lot of
public works whenever we travel across our country particularly in the Mega Manila.
We've seen roads being repaired from time to time, bridge constructions, road dividers,
and other kinds of public works that we commonly see.

We may ignore it at times until it bothers us but, we might want to be wondering

"how" the budgets for these are being allocated. How the department budgets it's funds
and how political economy is affecting the allocation of funds. It's puzzling how they
budget and where does these funds came from because of frequent renovation of roads
and other works. From the funds in maintaining infrastructures, flood control systems,
it's a wonder how our country got so much budget for these kinds of projects but we
rarely feel any difference.

DPWH or Department of Public Work and Highways, is currently responsible for

the planning, design, construction and maintenance of infrastructure, especially the
national highways, flood control and water resources development system, and other
public works in accordance with national development objectives. This means that, this
department is also in control of distributing the funds in a political economic way, in
terms of this department is purely a Government organization. They have the means
and power to distribute funds to any point in our country when it comes to any
infrastructure maintenance and construction and obviously, they have the budget for the
labor force needed in particular projects, budgets for materials and other miscellaneous
included. The main role of DPWH is to provide vital infrastructures to this developing
country of 7,107 islands. Mainly hampering the socio-economic development of the
country are the various water-induced disasters brought about by its geographic and
meteorological conditions. The budget for flood control has remained small compared
with roads and bridges during the past decades. While recognizing the contribution of
road networks in inducing economic development countrywide, the importance of flood
control and sabo engineering should be given a second look as this may well spare the
populace, its livelihood and even various infrastructures from disasters.1

INTRODUCTION

The reason for this research is that, I'd like to show how proper political economy
could easily affect the managing of funds on public works without allowing even a single
cent go to waste, and also to avoid potential corruptions. The fact that DPWH is the one
who distributes and approves the budgets for projects in each city in this country, can
possibly be a potential corruption intent to others. As a tax payer, it is much obliged for
me to know how is the department's way of distributing our taxes to fund various
projects that will affect our common good.
2The
Department of Public Works and Highways functions as the engineering
and construction arm of the Government tasked to continuously develop its technology
for the purpose of ensuring the safety of all infrastructure facilities and securing for all
public works and highways the highest efficiency and quality in construction. DPWH is
currently responsible for the planning, design, construction and maintenance of
infrastructure, especially the national highways, flood control and water resources
development system, and other public works in accordance with national development
objectives.

At the end of this very research hopefully, I can show how the managing of funds
work and how political economy is related to it. It will not only benefit me, but it will also
benefit our regular tax payers so they are aware of where their taxes go. It's a privilege
for me to make people understand how a tiny bit of our system works.

II. A. STATEMENT OF THE PROBLEM

1. How much the government focuses it's fund distribution on Public Works?

2. How does the fund allocation system of DPWH works?

3. What are the processes in fund allocations?

4. How does political economy affect the fund distribution?

5. How often does the government funds for public works? Where particularly do they
focus in terms of public works?

1
“Department of Public Works and Highways”, Wikipedia,
https://en.wikipedia.org/wiki/Department_of_Public_Works_and_Highways(March 5, 2018)
2
“Infrastructure Projects- Region IV”, Department of Public Works and Highways,
http://www.dpwh.gov.ph/dpwh/projects/infrastructure(March 8, 2018)
2
“About DPWH”, Department of Public works and Highways, http://www.dpwh.gov.ph/dpwh/content/about-dpwh
 B. METHODOLOGY
This part of research shall be discusses available for this study and what is
applicable for it to use in response for the statement in the previous chapter which
directed towards the relation of political economy and the government processes and
ways on how they manage to allocate funds particularly in public works.
Likewise, this chapter presents the various procedures and strategies in
identifying sources for needed information on the analysis and evaluation of the Political
Economy in Relationship with Public Works and Fund Allocations in the Philippines.
Thus this part of the study specifies the method of research used, research
design, conducted systematic literature review and analysis of data gathered.
The purpose of this research is to answer problems stated above while utilizing
the available methods for this particular topic. Also, to share knowledge on how the
government distributes funds, how political economy is related to it, how much the
government allocates budget for public works projects and how the funding system
works.
My research approach for this is for me to gather as much information and data
through systematic literature review and analyze the data gathered in order to answer
each stated problem above.
As for systematic literature review, Systematic reviews are types of literature
reviews that collect and critically analyze multiple research studies or
papers, using methods that are selected before one or more research
questions are formulated, and then finding and analyzing studies that relate to and
answer those questions in a structured methodology.

III. REVIEW OF RELATED LITERATURE

Local Studies Provided
This first study was taken from the DPWH: Infrastructure Development Cycle.3I have
read articles and studies that are related to public works in terms of their fund allocation
and its relation to political economy but first we have to know the cycle of the fund
allocation, as per the Department of Public Works and Highway, the process is to
identify the project in order to collect potential projects with expected return of
investments. Then the department makes a project preparation after collecting potential
projects so they can start a feasibility study which consists of various investigations and
tests necessary to determine whether the project can be carried out and if, so, how and

3
“Infrastructure Development Cycle”, Department of Public Works and Highways,
http://www.dpwh.gov.ph/dpwh/business/index(March 14, 2018)
when? Then the inclusion of medium-term, wherein if the project meets above
feasibility-criteria, it is considered for inclusion in the medium term infrastructure
program for the period of six-years. Next is fund-appropriation, based on the medium-
term infrastructure program, appropriations for the projects are authorized thru
legislation and finally the project implementation.
Second, these contexts were taken from the journal “In The Works: The Most Ambitious
Projects.”As for fund allocation a certain article stated that, P485 billion DPWH budget
will fund the most-ambitious projects in The Philippines’ infrastructure program last year.
That is mainly how much the government funds public work projects, to budget that
amount of money for infrastructure will make a huge difference if used correctly. The
proposed P458.61-billion budget of the Department of Public Works and Highways
(DPWH) will fund the country's "most ambitious infrastructure program" in 2017. The
proposed 2017 appropriation for the Department of Public Works and Highways
(DPWH) is P61 billion higher than this year's P397.108 budget.

This third reference was based on the study entitled “Proposed 2018 Budget of the
Philippines.”The proposed DPWH budget includes a P32.93-billion allotment for
the Mindanao Logistics Infrastructure Network, the agency's initiative to reduce logistics
costs in Mindanao by improving linkage roads to key ports and other production areas.
A study stated that, Philippine government is highly focusing on infrastructure program
most particularly in improving connectivity and mobility across the country, and the
upgrade of public transportation system. The Department of Public Works and
Highways see its 2018 budget rise 37.5 percent to P643.3 billion.

As for the fourth review, this was based on “Economist of the Philippines: Sectors’
Political Economy.” Political economy highly affects the fund allocation for public works
because it will determine how much the government’s funds will increase or decrease in
budget. Political economy will affect the flow of projects meant to be implemented
depending on how properly political economy in public works is managed. This will also
determine the credibility of finished infrastructure programs because if there is poor
political economy on fund distribution for public works, there will be shortage on
materials resulting on the postponing of a project or very much likely, it will never be
finished as to what the plan is expected.4

This fifth study was taken from an article entitled “National Expenditure Program of The
Philippines.” As for the government, budgeting for each departments are planned and
given simultaneously, the government will determine how much each department will
receive. This year (2018) the government gave the highest budget on Department of
Education with P691.5 billion budget while the second highest budget was given to
Department of Public Works and Highway with P643.3 billion budget.

4
“Public Works(Infrastructures), The New York Times,
http://www.nytimes.com/topic/subject/infrastructure-public-works
3
Jason Scott Smith, Building New Liberalism (University of New Mexico, December 2013), 66-109
Foreign Studies

Firstly, this was taken from a case study entitled “Innovative Research on Virginia
Public Works” In Virginia, other than in independent cities; towns with populations over
3,500; and 2 of its 95 counties, the Virginia Department of Transportation (VDOT) has
historically funded, constructed, and maintained all public roads. With the exceptions of
Alaska, Delaware, North Carolina, and West Virginia, this is in contrast to other states,
which have state oversight of primary roads but local control of and funding
responsibility for secondary (or county) roads (O’Leary, 1998). Because state funding
historically pushed projects along, local government funding was typically limited to
small local match amounts and therefore was not critical. The downside of this
arrangement is that when state funding sources dwindle, projects can stall. This has
spurred some localities to seek ways to obtain local funding to continue their priority
projects. It is stated here that not only the government funds for their public works, it
also allows local NGO to fund for their certain projects.

This second study was based on a journal entitled “How to Make Public Works Work.”
5Strong monitoring systems are necessary to support credible program evaluations

and to provide feedback for improvements in productivity, effectiveness, and impact.

Evaluation of public works are necessary to: a) provide feedback during the life of the
program to help improve their effectiveness; b) making projects accountable to the
public; and c) help inform government decisions about spending allocations. 6Despite
their value, effective M&E systems for public works programs have been rare. This
section illustrates the need to design of a good M&E framework with one good
practice example from Ethiopia, followed by a discussion of monitoring indicators
relevant for public works program and concludes with an overview of findings from
available evaluations of public works programs.

This third reference iss from “History of Public Works.”Countries have introduced
public works programs with diverse objectives such as protection from large covariate
shocks (such as natural disasters, macro crisis, or seasonal labor demand shortfalls),
to protect households from temporary job losses, fight against poverty, or to help poor
to gain more temporary employment. Moreover, public works program could be
regarded as one of the few safety net programs with a history dating back in recent
times to the 1930 in the United States, and mid-1940s in Germany when the program
was launched in the wake of post-war reconstruction7. More recently, countries in
almost all regions of the worlds and at different levels of development (middle income,
low income) have launched the program, driven by one motivation or another.
Countries like India and Bangladesh have a long history and experience with public

5
Carlo del Ninno, “How to Make Public Works Work: A Review of the Experiences” (May 2014)
6
“Public Works and Environmental Services”, Fair Fax County, https://www.fairfaxcounty.gov/publicworks/
7
“Policy of Public of Works”, Sage Pub, us.sagepub.com/en-us/nam/public-works-management-policy/journal200885(March
15, 2018)
workfare programs to fight against chronic poverty8 and address work shortages
during the slack agricultural season. Public works program has also become an
important conduit to deliver humanitarian assistance in post-disaster or post-conflict
situations.

The fourth study was based on the journal “Policy of Public Works.” A government’s
public works policy derives from the fact that certain economic goods and services are
deemed by economists to be “public goods”. Public goods are those goods which
provide economic benefit to society for which the market does not provide enough of.
These are goods which are difficult to price under the law of supply and demand. The
most common example of a public good is national defense. A country needs national
defense, yet it is indeterminate when defense is needed nor how much people are
willing to pay it, therefore it is deemed a service which is best provided by government.
Public works, which are usually large infrastructure projects, are also viewed by some
economists to be public goods. The best example of a public works project in the
United States is the interstate highway system. The congressional act authorizing the
federal, as opposed to local, funding of roads is known as the National Interstate and
Defense Highways Act of 1956. The highway system was deemed necessary for
national defense, to facilitate troop and armament movements throughout the country
during the Cold War. In addition to the national defense rationale for the highway
system the highway system also provides commercial benefits to the private market
because the producers and suppliers of private goods are able to reduce transportation
costs by using the publically-provided highway system. In economics this is known as
a positive “spillover effect” from the provision of a public good. Based on the journal
“Policy of Public Works.”

Lastly, this fifth context is from “Public works and the Economists.” Absent the profit
motive of a market which determines the supply and demand of a good or service,
governments need to plan for, to budget for, the provision of public goods. The method
by which a government plans for its activities is called the making of policy. How a
government makes policy depends on the form of government within the political body
the government represents and how public revenue and spending decisions are made
within that public body. In a democratic system policy is made by government
proposing revenue schemes (usually taxes) and spending plans, and these plans,
called budgets, are approved by the elected representatives of the citizens within the
political body (be it a local community or a larger political entity such as a nation). In
political entities in which collective action decisions are made by nondemocratic means,
such as in dictatorships, policy is made by those in power unilaterally. A public works
policy is how a political body plans for the provision of public works. For example, public
works planning is mostly decentralized and conducted by cities and states in the United
States whereas in Japan the national government plays a larger role and views public
works as a part of a national industrial policy. Another economic rationale for collective
action, be it government or voluntary self organization, is that some economic goods are
deemed to be “natural monopolies”. A natural monopoly is something which requires
large up-front investment and for which it does not make economic sense to build more
than one in a given location.

IV. ANALYSIS

This analysis will be on a qualitative approach because quantitative method is

not possible as for my research design. As for my research, I have analyzed all the data
I gathered to come up with an analysis that will spread knowledge about my topic which
is Political Economy in Relations with Public Works and Fund Allocations in the
Philippines, though the reason for this research is stated, I will now proceed to my
analysis.

I have analyzed that, the relationship of economy to public works and fund
allocations is very important when it comes to the needed budget, a potential project in
the Philippines takes a lot of investigations and process to carry out a certain program,
from the project preparation, to fund allotment, up to the implementation of the project.
The effect of political economy to public works needs a stable and good management
for its credibility and successful projects, because if fund allocation is handled with poor
political economy, it will result to impulsive spending of the people’s tax for nothing but a
unfinished project that was meant for the common good of the people. Political
economy plays a lot of role in a country’s economic system, this will determine the
stability of a state’s economy to produce budgets for the projects. Because if a country’s
infrastructure programs are well funded it will boost its economy fast, in a way that
labor force will increase, employments will increase and the people will feel where the
taxes they are paying goes. “Infrastructure investments” or public works have long been
the refuge of Keynesians and other progressives of like stripes as a cure for recession
or stagnation. “Infrastructure is the latest salvation of the economy proposed by those
who believe government must stimulate employment and demand. 9Infrastructure is a
recent favorite of some other countries like Japan then proceeds to debunk the
effectiveness of such policies based on recent world wide experience.
My interpretation for the data I gathered will be, everything is controlled by
political economy, it’s just the matter of how well you manage it, and how
knowledgeable you are in political economy, because this will be the key to a country’s
successfulness. This will determine how a country will rise. With a great foundation of
political economy for public works, it will dramatically increase the economic growth of a
state. Also, public works are also in times of financial crisis in order to prevent the
spread of poverty and provide a safety net for the poor. Maybe this is one problem of

9
“Public Works in Japan”, Facts and Details, factsanddetails.com/japan/cat23/sub152/item842.html
the Philippines because no matter how high they allocate funds for public works, it’s still
not enough to somehow decrease poverty and provide jobs for the needy. It’s obvious
that infrastructure programs are not credible in the Philippines.

V. SUMMARY, CONCLUSION AND RECOMMENDATION

The research was meant to give knowledge to other people about the processes
of fund allocation in The Philippines particularly in public works, and how the political
economy in The Philippines affects it. My aim for this research is to give transparency of
how the government budgets funds for public works with the use of political economy.
The political economy and the relation of it from fund allocation for public works has a
lot of processes, it takes a long time for time for a certain project to be implemented
and to have funds allotted for it.

I have concluded that this study will not only give others knowledge but it will also
give me more ideas on how political economy affects everything in our country.
Especially when it comes to boosting a country’s economy through public works
investments. I also want the readers to have the idea of the reviewed literature stated in
this research to adapt the ideas on how effective good political economy will be. Not
only it will benefit the country but also the neighboring countries that would also like to
invest in our country in terms of infrastructure programs, this will boost relationships to
other states also. 10A “political economy” is not something that has advantages or
disadvantages relative to some alternative. Political economy is how goods and
services are distributed, taking into account the ability of individuals and groups to
influence the distribution. Good political economy means, higher average incomes, this
enables consumers to enjoy more goods and services and enjoy better standards of
living. Economic growth during the Twentieth Century was a major factor in reducing
absolute levels of poverty and enabling a rise in life expectancy. Investments on public
works results in lower unemployment, with higher output and positive economic growth,
firms tend to employ more workers creating more employment. Good political economy
results in less government borrowing, Economic growth creates higher tax revenues,
and there is less need to spend money on benefits such as unemployment benefit.
Therefore economic growth helps to reduce government borrowing. The following are
also benefits from good political economy and pure investment in public works:
Improved public services. With increased tax revenues the government can spend more
on public services. Money can be spent on protecting the environment, with higher real
GDP a society can devote more resources to promoting recycling and the use of
renewable resources. Investment. Economic growth encourages firms to invest, in order
to meet future demand. Higher investment increases the scope for future economic
growth – creating a virtuous cycle of economic growth/investment. Increased research
and development. High economic growth leads to increased profitability for firms,
enabling more spending on research and development. Also, sustained economic
growth increases confidence and encourages firms to take risks and innovate.
11I would highly recommend for the government of the Philippines to focus on
effective political economy in allocating funds for public works because this will be a
good advantage for the country, I have stated the possible results of good economy and
who knows, it might just help The Philippines to combat intense poverty. Poverty is the
number one enemy of the Filipino Government in which, successful infrastructure
programs will be of huge help. This will decrease poverty in The Philippines and if it is
completely eradicated, coping up with the stronger countries will be much easier. Who
knows, with this method, the Philippines might be excluded from the list of the Third-
world countries. There are countries who’ve focused too much on public works that their
country is rich, there is almost no person in their society who were unemployed.
Everything in their country is accessible even for the poor and average. What the rich
eats can be eaten by the poor also like some communist countries. If other neighboring
countries can do it, The Philippines can do it, just by effective political economy and
higher investments on public works.

“Public Works Engineering”, Department of Engineering and Public Works,

11

manila.gov.ph/government/department.../department-of-engineering-public-works/(March 18, 2018)

 VI. REFERENCES

i. Anderson, CJ (1945) “The Compensatory Theory of Public Works Expenditure”.

Retrieved from https://www.journals.uchicago.edu/doi/abs/10.1086/256271
ii. Brown, Hillary (15, May 2014) “Next Generation Infrastructure: Principles of Post-
Industrial Public Works”. Island Press.
iii. CPWA (2016, January 26) “Role of Public Works in Infrastructure in Our Society”.
Retrieved from
cpwa4.cpwa.net/Content/Chapters/cpwa...//20160126_CPWA_Role_Public_Wor
ks
iv. Del Ninno, Carlo (2014, May). “How to Make Public Works Work” Retrieved from
web.worldbank.org/archive/website01506/WEB/IMAGES/0905.
v. Department of Public Works and Highways (DPWH), “Infrastructure Projects –
Region IV”. Retrieved from http://www.dpwh.gov.ph/dpwh/projects/infrastructure
vi. Department of Public Works and Highways (DPWH). “Infrastructure Development
Cycle” Retrieved from http://www.dpwh.gov.ph/dpwh/business/index
vii. Department of Public Works and Highways (DPWH). “About DPWH”. Retrieved
from www.dpwh.gov.ph/dpwh/content/about-dpwh
viii. Gehrke, Ester (2015, September) “Can Public Works Infrastructure Affect
Employment Outcomes?” Retrieved from https://www.die-gdi.de/discussion-
paper/article/can-public-works-infrastructure-affect-employment-outcomes-
evidence-from-the-nregs-in-india/
ix. McCord, Anna (2012, September) “The Politics of Social Protection: Why Are
Public Works Programmes So Popular with Governments and Donors”.
Retrieved from https://www.odi.org/publications/6515-politics-social-protection-
why-are-public-works-programmes-so-popular-governments-and-donors
x. Pothole. (2016, September 26) “Public Works vs. Infrastructure”. Retrieved from
https://www.pothole.info/2016/09/public-works-vs-infrastructure/
xi. Robbins, Mark (14, May 2013) “New Public Works: Architecture, Planning, and
Politics”. Princeton, New Jersey: Princeton Architectural Press.
 xii. Smith, Jason Scott (December 2013) “Building New Deal Liberalism: The
Political Economy of Public Works”. University of New Mexico: Cambridge Press.
xiii. Science Tracer Bullet. “Infrastructure and Public Works”. Retrieved from
https://www.loc.gov/rr/scitech/tracer-bullets/infrastructuretb.html
xiv. The Japan Times. “Public Works. Retrieved from
https://www.japantimes.co.jp/tag/public-works/
xv. Weber, Cameron M. (15, March 2018) “Public Works Policies”. Retrieved from
cameroneconomics.com/public_works_policy
xvi. Wikipedia (2015, February 12). “Department of Public Works and Highways”.
Retrieved from
https://en.wikipedia.org/wiki/Department_of_Public_Works_and_Highways
xvii. Wikipedia (2017, November 1). “Public Works”. Retrieved from
www.dpwh.gov.ph/dpwh/content/about-dpwh
xviii. Yusuf, JE (2014) “The Case of Performance Management in Public Works”.
Retrieved from journals.sagepub.com/doi/abs/10.1177/1087724X14531921