Building Budget Democracy: Fiscal Openness Reforms in South Africa

post_SABy Paolo De Renzio

This post is part of the “In Their Own Words: Reform Champions Speak About Incentives for Fiscal Openness” series. The original interview was conducted in 2015 as part of a Global Initiative for Fiscal Transparency (GIFT) and International Budget Partnership (IBP) research project.


Trevor Manuel was South Africa’s Minister of Finance from 1996 to 2009, serving under three different presidents. During his long tenure, he built South Africa’s Treasury into a strong and well-respected organization and introduced wide-ranging budget reforms – including many that greatly improved budget transparency, thrusting South Africa to the top ranks of the Open Budget Index.

In this interview with Paolo de Renzio, Senior Research Fellow at the International Budget Partnership, Mr. Manuel looks back at some of the reforms he introduced that turned South Africa into a world leader in budget transparency.


What were the fiscal openness reforms that were introduced in South Africa, and what was their impact?

During the apartheid regime, public finances were very opaque and fragmented, making it difficult to have a clear idea about what public resources were being spent on. This led to lots of waste and misuse, and kept citizens in the dark. The ANC [African National Congress] government that came to power in 1994 sought to overturn these practices and open a new stage of transparency and openness. When I became finance minister in 1996, we immediately set about drafting a new Public Finance Management Act, and introduced a series of other reforms to improve fiscal transparency and accountability.

“Apartheid was a system that was based on very high levels of secrecy. In order to demonstrate transparency, we started announcing the government’s spending plans four months before the budget was tabled in Parliament.”

Let’s start with budget documents. The government started publishing a Medium-Term Budget Policy Statement (MTBPS) in October of each year to set out fiscal policy targets and get parliament involved at the early stages of the budget process. Detailed Estimates of National Expenditure were then prepared by each government department to detail not just how much money they were going to spend but also detailing their objectives and expected results. We also started producing monthly budget execution reports which were published within three weeks of the end of each month.

Apart from these publications, the Auditor General’s office was reformed so that it could play a more effective role in providing independent scrutiny of government spending, and a number of initiatives were undertaken to promote a better informed debate around the budget. For example, we conducted a workshop for the media every year to explain to journalists where to find specific budget information, how to interpret it, and so on.

 

What were the key factors that shaped government incentives in adopting and sustaining these fiscal openness reforms?

First of all, I would not say that international actors played as crucial a role as they play in other African countries. Although we looked at relevant international experiences and promoted learning through peer exchanges, we did not borrow from the World Bank or the IMF, and levels of foreign aid were also negligible, which meant that international pressure was not a significant driver. In 1995 we started raising money on international financial markets, so of course it was important to have fiscal information available for that purpose. On the other hand, we always saw parliament as our key audience and aimed at ensuring that legislators — and the people whom they represent — had access to all relevant information and data, both on planned and executed budgets. This was part of our efforts to build strong institutions, and respect, and put into practice constitutional and legal provisions around public finance management — including the democratic principles that underpin them.

“The way in which budget debates are structured does not focus sufficient attention on evaluating actual performance. We applaud the policy intent but do not interrogate the policy outcome.”

Unfortunately, budget information is not always fully utilized by parliament, especially in terms of closing the loop by using annual reports and audit reports to assess what public money actually bought, and what benefits it brought. In fact, we often felt frustrated by the lack of engagement with the budget process by various actors. Parliament has strong budget powers, but it is poorly equipped to analyze and use budget information. Newspaper reporting on the budget is weak, except for when a large corruption scandal breaks out, and universities and think tanks also do not play an important role in budget debates. For about a decade, we also had something called the People’s Budget Initiative, which brought together various social actors who marched on parliament on budget day to present an alternative budget proposal. Of course their timing was very unfortunate, because their proposals came too late for us to include them in the actual budget proposal.

That might be one of the key challenges that South Africa’s budget transparency reforms face. The Treasury has developed sophisticated systems and skills, but those are not matched by other actors, both within and outside government, limiting the potential impact of budget transparency. The Treasury might therefore need to spend more time in educating other actors on the budget process and on the content of budget documents to ensure the quality of public debate improves.

 

What is the role that international initiatives like gift could play in promoting fiscal openness?

We have many indices at international level to measure many different things — from budget transparency to income inequality — but we still lack good measures of the quality and efficiency of public spending, to help guide budget decision making and to provide citizens with ways to judge whether public resources are being well spent. GIFT could look at this matter and develop some interesting new measures, which could add a lot to existing debates moving beyond a focus on public availability of budget information.

 

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The interview took place on 6 October 2015.

For more details on South Africa’s fiscal openness reforms, see:

Cole, N., A. Shah and G. van der Linde (2016). “Increasing Budget Transparency.” In Alam, A., R. Mokate and K.A. Plangemann (eds.) Making It Happen: Selected Case Studies of Institutional Reforms in South Africa. Washington, DC: World Bank. (pp. 37-54) (https://openknowledge.worldbank.org/bitstream/handle/10986/23739/9781464807688.pdf)

Friedman, S. (2013). “What We Know Can’t Hurt Them: Origins, Sources of Sustenance, and Survival Prospects of Budget Transparency in South Africa.” in Khagram, S., A. Fung and P. de Renzio (eds.) Open Budgets: The Political Economy of Transparency, Participation, and Accountability. Washington, DC: Brookings Press. (pp. 51-75).

Supply, Demand, and Sustainability: Tracking Budget Transparency Reforms in Afghanistan

postBy Paolo De Renzio

This post is part of the “In Their Own Words: Reform Champions Speak About Incentives for Fiscal Openness” series. The original interview was conducted in 2015 as part of a Global Initiative for Fiscal Transparency (GIFT) and International Budget Partnership (IBP) research project.


Dr. Mustafa Mastoor has been Deputy Minister at the Ministry of Finance of Afghanistan since 2008. Previously, Dr. Mastoor served as Director General for Budget in the same ministry. In these functions, he has promoted a series of budget transparency reforms that resulted in impressive improvements in Afghanistan’s Open Budget Index score.

In this interview with Paolo de Renzio, Senior Research Fellow at the International Budget Partnership, Dr. Mastoor reflects on Afghanistan’s budget transparency reforms trajectory, and the challenges encountered along the way.


What were the fiscal openness reforms that were introduced in Afghanistan, and what was their impact?

Fiscal transparency and openness reforms in Afghanistan date back to the Constitution of 2002 and to the PFM [Public Finance Management] law and regulations that were introduced in 2004/5. Those provided the basis for the reforms we started introducing shortly after I joined the Ministry of Finance as Director General for Budget in 2005. The situation was not very encouraging. Budget reporting was very fragmented and often delayed — information from the provinces came by post and had to be re-entered at the central level — and it was difficult to find complete and accurate budget information. Large amounts of donor-managed funding (on-budget as well as off-budget) complicated the picture, meaning that a large share of the budget was effectively managed by expatriates. We therefore set out to ensure that: 1) responsibility for managing budgets was handed over to Afghan officials; 2) the quality and accessibility of information in the budget documents improved, so that line ministries, donors, Members of Parliament, and civil society could better understand what was happening with public money; and 3) technology was utilized to improve access to budget information.

“The information we were providing was not understandable even by ourselves. If you are not able to interpret budget information yourself, how can you ensure that it is accessible and user-friendly for others?”

At the beginning, demand for budget information was limited to line ministries and donors. More recently, as we started publishing more documents routinely, including budget proposals, financial statements, audit reports, and the Citizens Budget, we are seeing more interest coming from other actors as well, including civil society organizations.

Of course we also faced important challenges. While the legislative framework was favorable to transparency, the capacity of various actors to effectively use budget information was weak, which meant we were often faced with questions that showed that people did not really understand how to read a budget document. In some cases, budget information has been misused for political reasons, causing problems for the government. We have therefore learned that a clear and effective communication strategy is very important.

 

What were the key factors that shaped government incentives in adopting and sustaining these fiscal openness reforms?

First of all you should understand that we interpreted transparency and openness as a way to provide clarity to different actors, including other parts of government, about the availability of public financing for various services and activities. Secondly, transparency was important for us to argue with donors in favor of providing foreign aid as budget support. And donors wanted to make sure that the budget was transparent, so that they could see where resources were going. Recent improvements did in fact convince many donors — especially bilateral ones, as multilaterals were already on board — to provide more resources through the government budget, or to provide us with better information on their spending.

“We rarely faced questions from civil society. Sometimes questions came from the media, but mainly from parliament and sometimes unions or interest groups.”

Parliament has been the source of most demand for budget information. In presidential systems like ours, parliament has a particular interest in double-checking what the executive branch does with public resources. Usually, requests from parliament were related to such information as allocations to specific constituencies. In general terms, we did not face political hurdles and significant resistance to transparency reforms. The resistance was mostly bureaucratic and related to changing systems and practices, rather than to transparency per se.

“In our case, transparency reforms were spearheaded by technicians in the Ministry of Finance, based on conviction that transparency can be helpful in many ways, and responds to the needs of different clients.”

International assessment tools like the Open Budget Survey and the PEFA methodology were also useful for us to understand global norms and standards, and see what we could do to improve, even though clearly each country context has its own characteristics, and in certain ways various tools could be made more complementary. Our recent up-and-down performance on the Open Budget Index might be a signal that we need to do more to institutionalize our reforms — for example through legal reforms — rather than promote ad hoc improvements.

 

What is the role that international initiatives like GIFT could play in promoting fiscal openness?

I think that the most important role for GIFT is still that of advancing international norms and standards around fiscal openness, while at the same time recognizing the peculiarities of each country. GIFT should work on norms that are general enough to accommodate differences in country contexts.

Two other areas that deserve GIFT’s attention are building the capacity of civil society organizations to make effective use of budget information — in order to put further pressure on governments to open up budgets — and promoting the use of new, “proper” technologies that can facilitate access to fiscal information and promote accountability.

 

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The interview took place on 5 October 2015.

For more details on Afghanistan’s fiscal openness reforms, see:

Bizhan, N. (2012). Budget Transparency in Afghanistan: A Pathway to Building Public Trust in the State. Washington, DC: International Budget Partnership.

(http://www.internationalbudget.org/wp-content/uploads/OBI-case-study-Afghanistan.pdf)

Guinn, D. E. and J.D. Straussman, (2016). ‘Improving the Budget Process in Fragile and Conflict-Ridden States: Two Modest Lessons from Afghanistan’. Public Administration Review, 76: 263–272.

(http://onlinelibrary.wiley.com/doi/10.1111/puar.12397/full)

 

This post also appears on IBP’s blog here

Budget Transparency as a Means to Reduce Poverty: Uganda’s Fiscal Openness Reforms

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By Paolo De Renzio

This post is part of the “In Their Own Words: Reform Champions Speak About Incentives for Fiscal Openness” series. The original interview was conducted in 2016 as part of a Global Initiative for Fiscal Transparency (GIFT) and International Budget Partnership (IBP) research project.


Florence Kuteesa served 21 years in the Ugandan Ministry of Finance, Planning and Economic Development, rising from the level of economist to the post of Budget Director, which she held until December 2004. She then worked for two years in a private consulting firm, and thereafter six and half years with the International Monetary Fund’s Fiscal Affairs Department, until 2016. In the Ugandan government, she introduced a number of budget reforms that turned Uganda into a regional example in PFM systems and budget transparency practices.

In this interview with Paolo de Renzio, Senior Research Fellow at the International Budget Partnership, Ms. Kuteesa remembers the early stages of Uganda’s budget transparency reforms, and the bridges that they built between government and civil society.


What were the fiscal openness reforms that were introduced in Uganda, and what was their impact?

In 1998 I was heading the Budget Policy and Evaluation Department  at the ministry and was responsible for coordinating the budget preparation process and related reforms. As part of my work, I was tasked to oversee the development of the budget communication and transparency strategy, which was launched in 2001.[1] The strategy was part of a broader political agenda of poverty eradication and was based on the understanding that promoting transparency and accountability in the management of public resources was essential in spearheading and sustaining the government’s efforts in reducing poverty.

The consultative process of developing the strategy was an eye-opener, enabling the ministry to appreciate the flaws in its communication systems. The ministry had never paused to reflect on how to support stakeholders in accessing and using budget information to demand for public accountability. This is an invaluable lesson for all budget reform champions.

“The Budget Communication and Transparency Strategy had an overall objective: enhance understanding of the budget and its contribution to poverty reduction.”

The strategy was developed after a two-year consultation process, and had three components. The first component dealt with improving internal communication within the ministry: strengthening procedures for decision making and promoting coherent messages around budget reforms. There was a lot of heated internal discussion on the need for government, especially the ministry, to be proactively transparent, collaborate with the media, and so on.  Top management eventually agreed to work toward positive engagement with our “clients,” providing a platform to deal with both their challenges and our fiscal constraints in pursuit of a shared objective: effective use of public funds to reduce poverty.

The second component related to developing a more effective engagement with various stakeholders (civil society organizations [CSOs], donors, members of parliament [MPs], media, etc.). The ministry met with and trained MPs and CSOs, and spoke with the media to explain the budget process, how it worked, how to engage with it, and the fact that public resources ultimately belong to citizens. Our budget formulation process was overhauled and made more open to include a series of consultation opportunities (i.e., national budget consultative workshops, sector working groups in sector ministries, etc.) on the definition of budget priorities and on issues of efficiency and effectiveness in the use of public funds. In addition, at the tabling of the budget proposal to parliament, the ministry produced simplified versions of the annual budget, and a newspaper pull-out with key facts about the budget.

A third and final component focused on the extent to which budget information and documentation could be made more user friendly and understandable to a general public. The reforms included: a) adding a glossary of key terms to all technical budget documents; b) publishing simplified versions of national policies, the annual budget, and the budgeting process in several local languages; and c) publishing budget releases on a quarterly basis in the local print media.

These reforms generated a shared understanding of the benefits of budget transparency and communication, which underpinned improved internal communication and coherence within the ministry, as well as more effective communication and engagement with other stakeholders. Simplified versions of budget documents became very popular and instrumental in enhancing the interest and engagement of citizens, CSOs, and MPs in the budget process. The practice was quickly adopted by sector ministries, who produced simplified versions of their sector policy and investment programs that further enhanced the transparency of public funds. The number of CSOs getting involved in budget policy discussions also increased.

Enhancing budget transparency, however, proved to be an expensive venture. Overtime, it was not possible to sustain all the citizen engagement activities, some of which were originally supported by the World Bank and other donors. The political commitment for transparency has also somewhat dwindled over time. Nonetheless, many of the gains were retained, as shown by Uganda’s continued good performance on the Open Budget Index, even though documents have become very voluminous and more complicated, and therefore less useful.

 

What were the key factors that shaped government incentives in adopting and sustaining these fiscal openness reforms?

The main driver behind the reforms was high-level political commitment to poverty reduction, and to the key role of effectively using public resources for that purpose. A Poverty Eradication Action Plan (PEAP) was formulated and launched in 1997 to guide budget allocation and implementation, increasing funding for priority sectors that could have an impact on poverty. However, reductions in poverty levels were not as strong as expected. A tracking study carried out in collaboration with the World Bank revealed that public resources were not getting to where they were needed — i.e., to the schools and health posts that were providing services — so fiscal decentralization and transparency were identified as important additional components of public finance management (PFM) reform. These reforms were meant to ensure that resources were transferred directly to service delivery units, and create mechanisms for citizen control over these resources. Some civil society groups like the Uganda Debt Network jumped on this possibility, and started monitoring how resources targeted at poverty reduction were being spent. This provided further incentives for government to become more open.

“Political commitment came all the way from the President, but we had strong support from the top levels of the Ministry of Finance as well. That commitment was matched by a team with good analytical skills, strong passion for the work, and reform-mindedness.”

Getting government to work with CSOs was a difficult task, as many were initially against it. We had to bring in the more competent organizations that knew how to engage government in dialogue. At the same time, building a positive and constructive relationship required innovative undertakings to build capacity of interested CSOs to engage in budget policy dialogue, and funding to enhance the coverage of their work to communities in the districts. My own experience as a voluntary member and chairperson of a policy advocacy organization working on women’s initiatives a few years prior helped a lot in that respect. Through my engagement with that CSO, I understood the importance and usefulness of engaging with civil society groups to improve policy making. But many in the ministry could not understand why government should open up. Showing the usefulness of civil society inputs, and how these could in fact make the government’s job easier was important in convincing skeptics.

Donor agencies were important in Uganda as providers of financing and technical assistance. Of course, given their support to the PEAP, they were also interested in budget transparency, in order to know how and where resources were being spent, as well as their impact on poverty reduction. But in many ways, rather than provide direct incentives, their influence was more indirect, through policy dialogue and expertise, or through supporting civil society groups in accessing and using budget information to demand for accountability, especially at lower levels of government.

 

What is the role that international initiatives like GIFT could play in promoting fiscal openness?

I think that, in general, external actors have played a positive role in recent times, both in setting norms and standards and in providing support to — and putting pressure on — governments to become more transparent. In this way, they are helping to ensure that transparency reforms are included in governments’ agendas. It is not clear to me, however, to what extent politicians really understand and believe in the value of fiscal openness, undermining reform success. Many PFM reforms – take IFMIS for example – look good on paper but do not deliver real improvements.

Fiscal openness should be linked to demand for budget accountability and ultimately improved access and quality of basic public services. Showing the real value and benefits of fiscal openness — and linking it to issues that are important to each specific country situation — is therefore key to convincing governments to take reforms seriously, and in this area international actors and initiatives could play an important role. Support is required to undertake studies designed to examine the impact of budget transparency initiatives on citizens’ demand for accountability and government accountability mechanisms.

Finally, fiscal openness should cease to be seen solely as a Ministry of Finance initiative. Sector ministries and agencies at all levels of government have a critical role to play in promoting transparency in the use of public funds. GIFT could therefore reach out to other actors, to ensure that fiscal openness really becomes a government-wide undertaking, where different actors and stakeholders play well articulated and complementary roles.

 

***

 

The interview took place on 21 January 2016.

For more details on Uganda’s fiscal openness reforms, see:

Kuteesa, F. et al. (2006). “Uganda: A Decade of Budget Reform and Poverty Reduction,” OECD Journal of Budgeting, 6(2): 1-25.

(https://www.oecd.org/countries/uganda/43470207.pdf)

Williamson, T. (2013). “Budget Transparency in Uganda.” Interview with Ryan Flynn. London: Overseas Development Institute.

(https://www.odi.org/node/25007)

Kuteesa, F., E. Tumusiime-Mutebile, A. Whitworth and T. Williamson (2010). Uganda’s Economic Reforms: Insider Accounts. Oxford: Oxford University Press.

[1] Published as “Improving Budget Transparency in Uganda – A Medium Term Communication Plan.”

 

This post also appears on IBP’s blog here

Weaving a New Narrative: How Budget Transparency Reforms Took Hold in Mexico

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By Paolo De Renzio

This post is part of the “In Their Own Words: Reform Champions Speak About Incentives for Fiscal Openness” series. The original interview was conducted in 2016 as part of a Global Initiative for Fiscal Transparency (GIFT) and International Budget Partnership (IBP) research project.


benjamin-hill-mexico_rounded

Benjamin Hill Mayoral held a series of important policy positions in the Government of Mexico, both in the Ministry of Public Administration (Executive Secretary of the Inter-Ministerial Commission for Transparency and Corruption Control, and Head of the Transparency Policy and International Cooperation Unit) and at the Ministry of Finance (Head of the Performance Evaluation Unit). While at the Ministry of Finance, Mr. Hill oversaw the creation of Mexico’s budget transparency portal, an award-winning initiative that has greatly improved citizens’ access to budget information.

 In this interview with Paolo de Renzio, Senior Research Fellow at the International Budget Partnership, Mr. Hill recollects his efforts to build the portal and other related reforms.


What were the fiscal openness reforms that were introduced in Mexico, and what was their impact?

The starting point for many of the reforms in Mexico is the year 2000, when for the first time in 70 years an opposition party won the elections, opening the doors to a period of reform and renewal, with Access to Information (ATI) reforms being among the first to be enacted. Despite the recognized quality of Mexico ATI legislation, we saw that it was not sufficient to improve Mexico’s rankings in a number of international indices like the Corruption Perceptions’ Index published by Transparency International. We therefore started thinking about other, more proactive forms of disclosure that could better respond to social demand for information. Access to information can be very broad, and citizens sometimes do not always have a clear view of what information they may need, what kind of information the government has, and which specific institution they need to approach to ask for relevant information. Citizens also need information on policy formulation and ongoing initiatives, rather than the post facto information that citizens can usually access through ATI requests.

“Access to information reforms are not enough to ensure transparency and accountability. They are reactive in nature. We felt the need to shift to a more proactive transparency policy.”

The effects of the global financial crisis in 2008/9 led to a heated debate in the Mexican congress about allocating scarce resources. Transparency again became important in the justification of important policy choices. We therefore looked at a few examples from around the world, from the Brazilian transparency portal to Australia’s Economic Stimulus Plan portal, and especially at the U.S. portal recovery.gov, based on Obama’s economic recovery plan. We wanted to develop a user-friendly tool using simple language and geo-referenced information to facilitate dissemination of information and ultimately accountability. Requests in a similar direction were coming from civil society groups as well.

We faced both political and technical challenges in our endeavor, but we gradually managed to overcome them, and with support from the IADB we set out to design our own budget transparency portal. The portal was eventually launched in 2011 with high-level support from the Minister of Finance himself. This helped gradually shift the culture in the Ministry of Finance, which was very opaque and suspicious of transparency initiatives. A few years later, there is a lot more commitment to transparency and openness in the budget process. The portal has become an important tool for both governments and CSOs, has won prizes and contributed to improvements in the Open Budget Index score for Mexico. Also, the portal has helped improve the level of public debate on budget policies, with more media stories, more research using budget information, and so on.

 

What were the key factors that shaped government incentives in adopting and sustaining these fiscal openness reforms?

Initially, many people were not convinced about the need for further transparency reforms, questioning the need for proactive disclosure, given the strong Access to Information procedures already in place. Incentives therefore were not very strongly in favor of reforms. What we did was start constructing a new narrative that eventually turned the creation of the portal into a political necessity. The new narrative was based on three elements: a) government had all of the information needed to populate the portal, and all it had to do was organize it in a more user-friendly manner; b) there was demand from the media and civil society for fiscal information; and c) other countries — including some in the region — had already created their own portal, showing that it was possible and leaving Mexico lagging behind. We argued that it was only a matter of time before nongovernmental actors were going to use publicly available information — or ATI requests — to set up a separate portal, showing the lack of government commitment to transparency and to responding to citizens’ demand for information.

“High-level political support was needed to send the message that the portal was an important project for the Ministry, and that everyone had to align behind the Minister’s statement that proactive transparency was the way forward.”

Pressure from civil society came mostly through the media and helped build support for reforms within government. Some civil society groups and think-tanks are quite influential and respected in Mexico, speaking on TV programs, writing op-eds, and more generally influencing public opinion. But given some of the overlapping interests we had with some civil society groups, we set up meetings and working groups to see how the portal could better respond to information needs, and in return we could understand how to showcase the portal and use it to improve Mexico’s score in international indices like the Open Budget Index. Congress, on the other hand, did not get actively involved in the reform discussions.

Getting political support for the portal gradually became easier, combining the expected benefits of adopting the reforms and the costs of not adopting them in a single, powerful narrative. The culture shift that followed came from a combination of continued top-level political support and from the increase in legitimacy that came from international recognition.

 

What is the role that international initiatives like GIFT could play in promoting fiscal openness?

GIFT could ensure that international comparative indices — like the OBI — are used for putting issues on the public agenda in different countries, and help indicate reform paths. International comparisons can be quite powerful for creating some competition and motivate governments to reform. In the case of Mexico, I can tell you that one of the best ways to get the Mexican government to do something is to say that Brazil is already doing it!

 

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The interview took place on 1 September 2016.

For more details on Mexico’s fiscal openness reforms, see:

Salamanca, M. and T. Takahashi (2015). Opening Lanes: Budget Transparency and Innovation in Mexico. Washington, DC: Global Initiative for Fiscal Transparency.

(http://www.fiscaltransparency.net/resourcesfiles/files/20150831127.pdf)

Ackerman, J.M. (2013). “Budget Transparency and Accountability in Mexico: High Hopes, Low Performance.” in Khagram, S., A. Fung and P. de Renzio (eds.) Open Budgets: The political economy of transparency, participation, and accountability. Washington, DC: Brookings Press. (pp.130-157).

 

This post also appears on IBP’s blog here

From Domestic Accountability to International Recognition: Fiscal Openness Reforms in the Philippines

By Paolo De Renzio

This post is part of the “In Their Own Words: Reform Champions Speak About Incentives for Fiscal Openness” series. The original interview was conducted in 2015 as part of a Global Initiative for Fiscal Transparency (GIFT) and International Budget Partnership (IBP) research project.


Florencio “Butch” Barsana Abad was Secretary of the Department of Budget and Management (DBM) of the Philippines during the period 2010-2016. Previously, he had served as Secretary of the Department of Education and Secretary of the Department of Agrarian Reform. He was also a congress member (three terms), lawyer, trade unionist, and an educator and activist. As Budget Secretary, he championed active citizenship and open government through citizen participation in planning and budgeting and making essential budget documents and information publicly available. Through the Bottom-Up Budgeting (BUB) Program, he institutionalized people’s participation in the budget process and enabled civil society organizations to partner with their local governments to address poverty in their communities.

 In this interview with Paolo de Renzio, Senior Research Fellow at the International Budget Partnership, Mr. Abad recalls the range of reforms that he helped introduce while at DBM.


What were the fiscal openness reforms that were introduced in the Philippines, and what was their impact?

Benigno Aquino III, who came to power in 2010 and in whose government I had the honor to serve, continued her mother Corazon Aquino’s fight for good governance and against corruption. The new administration strongly believed that better governance leads to better government performance, and better performance leads to poverty reduction. Economic management improved substantively, freeing up resources for investments in infrastructure, cash transfers, and basic services. This led to a significant increase in trust in government, both from citizens and from international investors.

“The budget process was one of the key areas where innovative policies and reforms were introduced, bringing about greater transparency and accountability, and meaningful participation by citizens at all stages of the budget process.”

The first thing we did was to upload all budget documents online so that all could see how government managed public resources. We also set up a website to publicize details of “pork-barrel” projects proposed by representatives in congress, and an e-procurement system to improve transparency in the process of government contracting, from bid to implementation. We introduced Budget Partnership Agreements between government ministries and relevant stakeholders in their respective sectors to promote participation and dialogue, and created something called Bottom-Up Budgeting, to foster meaningful devolution in the definition of local projects, with decisions being taken jointly by local governments and civil society groups.

“Bottom Up Budgeting started with a budget of 8.3b pesos in a few hundred municipalities, and now covers all 1,600 plus municipalities with more than 20b pesos.”

Finally, in the past few years we have been introducing performance information in our budget process, with government ministries and departments now linking spending to inputs, outputs, and outcomes. Putting performance information in the public domain is a way to improve accountability. As a consequence of our efforts, our score in the Open Budget Index hit a score of 64 in 2015, the highest one among ASEAN countries.

 

What were the key factors that shaped government incentives in adopting and sustaining these fiscal openness reforms?

Clearly one of the key drivers behind the reforms that we put in place was the government’s commitment — stemming from its electoral manifesto — to improve governance, reduce corruption, and manage resources to benefit the population at large. But other factors helped us, too. A corruption scandal around pork barrel projects generated a great demand for further improvements in transparency in the budget process, from the opposition, civil society, churches, and the media. Popular support and outrage ensured that people responsible were held accountable — in fact, a number of members of congress were detained — and funds had to be returned, also thanks to the intervention of the Commission on Audit. However, this also generated resistance and a populist backlash, resulting in a slowing down of other related reform processes, for example, those relating to the approval of Access to Information legislation.

 “We faced a lot of resistance to reforms, for example on the adoption of a unified set of budget accounting codes that facilitates tracking of spending.”

Another important factor motivating us to become more transparent was the need to attract foreign investment. We know that our good transparency and economic management record has affected our credit ratings, which in turn are important to attract foreign capital and investment. Such international recognition was important for the government as a seal of performance and legitimacy, especially as we struggle to overcome a tradition based on patronage and protection of vested interests.

“Vested interests are always ready to capture institutions and block reforms. Patronage needs to be countered. External pressure can help with that.”

 

What is the role that international initiatives like GIFT could play in promoting fiscal openness?

GIFT should push even harder and engage more with investors and credit rating agencies to recognize the importance of fiscal transparency in budget reforms and in improving economic management and fiscal performance. GIFT could also go even further and engage the United Nations to discuss how fiscal transparency can help achieve the Sustainable Development Goals.

 

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The interview took place on 22 October 2015.

For more details on fiscal openness reforms in the Philippines, see:

Abad, Florencio B. (2014). “On the cusp of budget transformation: the work for an inclusive budget process under the Aquino administration,” The Philippine Review of Economics, Vol. LI No. 1 (pp. 28–59).

(http://pre.econ.upd.edu.ph/index.php/pre/article/viewFile/902/802)

Magno, Francisco A. (2015). “Public Participation and Fiscal Transparency in the Philippines.” Washington, D.C.: Global Initiative for Fiscal Transparency.

(http://www.fiscaltransparency.net/resourcesfiles/files/20150706115.pdf)

 

This post also appears on IBP’s blog here

Starting from the Top: Political Leadership and Fiscal Openness Reforms in Brazil

By Paolo De Renzio

This post is part of the “In Their Own Words: Reform Champions Speak About Incentives for Fiscal Openness” series. The original interview was conducted in 2015 as part of a Global Initiative for Fiscal Transparency (GIFT) and International Budget Partnership (IBP) research project.


Jorge_Hage_B&NJorge Hage Sobrinho was Deputy Minister of Brazil’s Federal Comptroller General (Controladoria-Geral da União, or CGU) from 2003 to 2006, and its Chief Minister from 2006 to 2014. While at CGU, he oversaw significant transparency reforms, including the launch of Brazil’s fiscal transparency portal, a user-friendly online tool for searching and downloading detailed budget information that has drawn wide praise both within and outside Brazil. During this period, Brazil has achieved the best Open Budget Index score in Latin America, and the second best score among middle-income countries.

In this interview with Paolo de Renzio, Senior Research Fellow at the International Budget Partnership, Minister Hage reflects on his time at CGU and on the transparency reforms that he helped introduce and implement.


What were the fiscal openness reforms that were introduced in Brazil, and what was their impact?

Some of the most significant fiscal openness reforms in Brazil were introduced after Lula’s Workers’ Party (Partido dos Trabalhadores, PT) took power in 2003. Previous reforms, like the introduction of the Fiscal Responsibility Law in 2000, included some important fiscal transparency provisions, but were mostly instrumental and not linked to a broader policy of improving transparency and accountability. Lula created the CGU shortly after becoming president and nominated a well respected senior politician, Waldir Pires, to be its Minister for Control and Transparency. One of the PT’s electoral promises was to provide public access to the government’s financial management system (called SIAFI), so that anybody could see how public money was being spent. Given the complexity of the system, the CGU decided instead to set up a Transparency Portal where this — and other types of — information could be disseminated using a more user-friendly interface, “translating” data for public consumption.

The Portal was launched in 2004 and grew gradually over time, including an increasing number of datasets and different types of information. Apart from very detailed revenue and expenditure information which is updated daily, nowadays users can access information about individual public servants’ positions and salaries, agreements and partnerships entered into by the federal government, and a register of companies that were barred from public tenders, and can search fiscal data for specific programs — like Bolsa Familia — or for important events like the 2014 Soccer World Cup or the 2016 Olympic Games.

“Starting with less than 300,000 visitors in its first year of operation, the Portal reached 14 million visitors in 2014.”

An interesting feature of the Portal is the access it provides to information about credit card expenses for all federal public servants who hold a government credit card. This initiative was taken as a response to the large amount of denunciations that the CGU received about misuse of government credit cards. As soon as the information was put in the public domain, the number of reported cases decreased dramatically. Values involved may have been small, but the symbolic function of putting such information out in the open is very important.

Legislation that was introduced in 2009 made similar portals mandatory for all levels of government — both state and municipal — greatly increasing access to fiscal information. And the passage of Access to Information legislation in 2011 further strengthened government openness.

 

What were the key factors that shaped government incentives in adopting and sustaining these fiscal openness reforms?

One of the key initial drivers of transparency reforms was Lula’s electoral campaign promise to open up budget information to public scrutiny. The CGU then became the champions for these commitments to become reality, with Waldir Pires as the “cobrador” — or ticket collector — ensuring everyone did their part.

“The Workers’ Party spent a long time in opposition and understood how important transparency and access to information were for democracy.”

While half of the argument in favor of transparency reforms was ideological, and based on the conviction that transparency was important in and of itself, we also had to convince the many skeptics — including many large ministries — with more practical arguments. We tried to show how transparency could be useful to public managers to better control government action at all levels, and to reduce the risk of corruption and mismanagement, which in turn meant a lower risk of political fallout from emerging scandals, etc.

To help us is in this “proselytism,” we found that we could count on both internal reform-minded allies and on pressure from outside government. Part of this strategy was the creation of a Council for Public Transparency, which included representatives from civil society organizations, trade unions, churches, professional associations, etc. It was a consultative body with no decision-making powers, but it brought reform ideas and provided important support to the government’s reform initiatives. Over time, external pressure grew. Civil society and public opinion became important to further reforms. The more information you provide, the more information people ask for. Civil society pressure came mostly from the media, giving voice to various groups or based on the work of investigative journalists. This led, for example, to the opening of special portals on spending for the World Cup and the Olympic Games, and to the use of improved open data formats.

“It was not easy. Government is not monolithic. There were many different opinions, and a lot of resistance. It was a slow and difficult process, convincing people that transparency could bring important benefits.”

A final set of important incentives for reform comes from beyond our borders. International indices and good practice examples trigger emulation and competition. We looked at international indices like the Open Budget Index, tried to learn from others and used our good score to further motivate people within government, showing them that their efforts were being recognized. The invitation we received to join the Open Government Partnership as co-initiators was also an important recognition that kept us moving on the reform path.

 

What is the role that international initiatives like GIFT could play in promoting fiscal openness?

I would highlight two things here. The Global Initiative for Fiscal Transparency, alongside OGP and others, is already playing and important role in providing local reform champions with tools and arguments to convince political leaders (evidence of impact, good practice examples, high-level events, etc.) about the importance of pursuing transparency reforms.

Possibly, however, GIFT should try to engage at the highest political level, rather than stop at senior technical levels. GIFT needs to talk to presidents and ministers, party leaders, MPs, etc. and convince them of the overall argument in favor of fiscal openness.

 

***

The interview took place on 11 September 2015.

For more details on Brazil’s fiscal openness reforms, see:

Graft, A., S. Verhulst and A. Young (2016). Brazil’s Open Budget Transparency Portal: Making Public How Public Money Is Spent. GovLab and Omidyar Network. (http://odimpact.org/case-brazils-open-budget-transparency-portal.html)

Alves, J.A. and P. Heller (2013). ‘Accountability from the top down? Brazil’s Advances in budget transparency despite a lack of popular mobilization.’ in Khagram, S., A. Fung and P. de Renzio (eds.) Open Budgets: The political economy of transparency, participation, and accountability. Washington, DC: Brookings Press. (pp.76-104). (https://jorgeantonioalves.files.wordpress.com/2013/10/alvesheller-2013.pdf)

 

This post also appears on IBP’s blog here

An effective and powerful independent international commission against corruption benefits from and strengthens fiscal transparency. The case of Guatemala.

Fiscal transparency GIFTBy Ricardo Barrientos [1]

The relationship between political power and fiscal transparency has always been there, or at least, has been an issue for theoretic or academic debate. But since 2015, Guatemala offered a very concrete case which showed this relationship, perhaps in a dramatic way.

 

The whole world heard how Guatemalans exercised citizenship in an exemplary and pacific way, by gathering massively in Central Square protesting against corruption and demanding the resignation of Vice President Roxana Baldetti and President Otto Pérez Molina. Today both of them, plus hundreds of Government officials, congressmen, Supreme Court members, mayors, judges, businessmen and individuals, face trial for corruption charges. By any standard, this is no small story, not to say for Guatemala, a country better known for rampant impunity, violence (suffered a 36 year civil war), poverty and deprived living conditions for most of its population.

 

And what is more meaningful is that a whole citizen movement started with a corruption scandal in the tax administration, when a criminal structure called “The Line” was discovered within it, dedicated to tax and customs fraud. The scale of the citizen reaction is easily explained and understood if one takes in account that the tax administration is a State entity empowered to force citizens to comply with their tax obligations, and to sanction them severely otherwise. In any social contract, and fiscal transparency principle in particular, these powers must have as a proportional counterpart a fully honest and transparent institution, in order to achieve legitimacy and credibility to the eyes of taxpayers.

 

So, the Guatemalan tax administration failed outrageously to this basic social contract, and as a result, almost a whole Government was forced to resign and face trial. For the Guatemalan incipient, and many times dysfunctional democracy, it was highly encouraging that it didn’t matter if among those involved in the scandal were powerful people like the President, the Vice-President, the Superintendent of Tax Administration, businessmen and many others. The fact that a serious political crisis triggered by a corruption scandal was managed in a peacefully and democratic way sparked hope in the whole society.

 

But this fascinating story would not have been possible without the very active intervention of an independent and powerful international entity operating in the country: the International Commission Against Impunity in Guatemala (Cicig), created by an agreement between the Guatemalan Government and the United Nations. Thanks to the powers in its mandate, including freedom to conduct investigations, make accusations and others, in April 2015 Cicig and the Public Prosecutor Office (Ministerio Público, MP) made the first arrests linked to “The Line” case, including the Superintendent of Tax Administration in office, a former one, businessmen, and a dozen of public servants, some directly linked to the Vice-President.

 

The investigations and arrests made by Cicig and MP not only triggered the citizen movement, but also demonstrated how a criminal structure takes great advantage of fiscal transparency flaws. But perhaps far more important, it demonstrated that only a truly independent and powerful entity can challenge the political powers in the State branches. In the Guatemalan case, it was achieved by an UN special entity with strong and massive citizen support. Just think in how many countries the public prosecutor office is powerful enough to investigate, and, arrest or indict the President, members of the Parliament or the Judiciary, when evidence of corruption is found? The Guatemalan is an example of a successful case.

 

“The Line” would not be the only, but just the first of many cases of corruption prosecuted by Cicig-MP. Other relevant Cicig-MP cases like “State Cooptation” are on trial, where people is accused of violating transparency norms for public procurement (specially purchase of medicines and other public health services supplies), civil service, tax credit reimbursements, public investment contracts, political campaign financing, etc.

 

Perhaps the most important lesson from the Guatemalan case is that fighting corruption and achieving the highest standards of fiscal transparency is a question of changing the balances of political power. This is because people who manage to be corrupt with impunity are powerful, and in most cases is enjoying the party of their lives: they are not willing to surrender that share of power and will defend fiercely their privileges. Stopping them requires a counterbalance, a new actor that changes the status quo in the power distribution.

 

In environments where corruption is seriously widespread, impunity quickly becomes one of the most lucrative businesses: an illicit market where the possibility to break the law without punishment is appetizing merchandise. The Guatemalan case demonstrated that this merchandise gives enormous shares of power to the seller, empowering them both financially and politically. Before 2015 Guatemala achieved significant improvements to its fiscal transparency legislation, but the impunity masters were powerful enough to assure to break the improved tax code, laws for public information access, public procurement, probity and budget, with no consequences. Former President Pérez Molina and Vice-President Roxana Baldetti, several officials of their administration, businessmen, congressmen and many others, bought that merchandise, precisely, confident of the status quo.

 

What Cicig really means for Guatemala is a real counterbalance, which achieved the capture of a significant share of political power to break that status quo. How was this possible? What Cicig-MP did was just apply the existing legislation, made some arrests and gave a press conference explaining it. So simple and clear that citizens fully understood, and perhaps more important, believe that stopping impunity was possible in Guatemala, generating an unprecedented massive citizen support for Cicig-MP. And massive support is a share of political power capable to counterbalance the muscle of a corrupt administration.

 

This success in Guatemala is also linked with a carefully designed strategy by Cicig: of the overwhelming number of corruption cases, they decided to start with the tax administration. After that, then they followed cases in the social security institute, political parties, Congress, municipalities, Judiciary and in almost all State institutions. That decision hit right in the heart of taxpayers, who understood and felt that the social contract has been broken, and it is possible to demand reparation.

 

In the ongoing trials, strong fiscal transparency legislation is demonstrating its value, because the accusations are based in violations of those preexistent norms. The huge difference is that before Cicig, impunity reigned, where even good fiscal transparency legal reforms were violated without consequences. Now Cicig-MP demonstrated that it is possible to prosecute it.

 

Of course, this framework of an international entity counterbalancing the Government formal powers is controversial, and has sparked bitter debates from the perspectives of sovereignty and bad memories of past foreign interventions in Central America. For example, Honduras is essaying its version of an international independent entity, but weaker than Cicig. El Salvador has rejected it, trusting fully in its public prosecutor office. Results are to be seen in those two Central American countries.

 

But, in Guatemala undoubtedly it has worked.

 

[1] Senior economist at the Central American Fiscal Studies Institute (ICEFI), a regional think tank and GIFT steward.