public policies for financing sustainable development cielito f. habito, ph.d. professor, ateneo de...
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Public Policies for Public Policies for Financing Sustainable Financing Sustainable
DevelopmentDevelopment
Cielito F. Habito, Ph.D.Professor, Ateneo de Manila UniversityFormer Secretary of Socioeconomic Planning
Republic of the Philippines
December 11, 2002
Cielito F. Habito, Ph.D.Professor, Ateneo de Manila UniversityFormer Secretary of Socioeconomic Planning
Republic of the Philippines
December 11, 2002
International Development Institutions
International Development Institutions
GovernmentGovernment
Civil SocietyCivil Society
Private Business
Private Business
Financing Sustainable Development: A Four-Way
Partnership
Financing Sustainable Development: A Four-Way
Partnership
National level Resource pricing policy
Tax & subsidy policy
Public expenditure policy
International contextglobal taxes
ODA
National level Resource pricing policy
Tax & subsidy policy
Public expenditure policy
International contextglobal taxes
ODA
Public Finance for Sustainable DevelopmentPublic Finance for Sustainable Development
National Level Policies
National Level Policies
Management by prices vs. management by control
Actual cost pricing (e.g.timber resources, water)
Environmental funds
Management by prices vs. management by control
Actual cost pricing (e.g.timber resources, water)
Environmental funds
Resource Pricing PolicyResource Pricing Policy
Environmental fees
Energy taxes
Pollution taxes
Perverse subsidies
Environmental fees
Energy taxes
Pollution taxes
Perverse subsidies
Tax & Subsidy PolicyTax & Subsidy Policy
Never enough
Highly inadequate to meet all needs
Usually makes up a small proportion of total environmental resources
Never enough
Highly inadequate to meet all needs
Usually makes up a small proportion of total environmental resources
Public Expenditure PolicyPublic Expenditure Policy
Ensuring stability and sustainability in public expenditure program
Ensuring that the Budget funds activities that truly promote sustainable development
Ensuring that public expenditures by environmental agencies address fiscal, economic and social considerations integratively
Ensuring stability and sustainability in public expenditure program
Ensuring that the Budget funds activities that truly promote sustainable development
Ensuring that public expenditures by environmental agencies address fiscal, economic and social considerations integratively
Public Expenditures for Sustainable Development: Three Concerns
Public Expenditures for Sustainable Development: Three Concerns
Goals of Sound Public Expenditure ManagementGoals of Sound Public Expenditure Management
Aggregate Fiscal Discipline (spending within affordable limits)
Allocative Efficiency (spending on the right things)
Operational Efficiency (providing public services at reasonable quality and cost)
Aggregate Fiscal Discipline (spending within affordable limits)
Allocative Efficiency (spending on the right things)
Operational Efficiency (providing public services at reasonable quality and cost)
Limiting spending to total budget resources (domestic revenues plus a sustainable level of domestic and foreign borrowings)
Total budget is determined in the context of the medium term
Annual total budget increases are matched by revenue increases
Limiting spending to total budget resources (domestic revenues plus a sustainable level of domestic and foreign borrowings)
Total budget is determined in the context of the medium term
Annual total budget increases are matched by revenue increases
Aggregate Fiscal DisciplineAggregate Fiscal Discipline
Allocative EfficiencyAllocative Efficiency
Budget allocation based on
strategic priorities
effectiveness of programs
Reallocation is encouraged
from lesser to higher priorities
from less to more effective programs
Spending levels are set for each sector
Budget allocation based on
strategic priorities
effectiveness of programs
Reallocation is encouraged
from lesser to higher priorities
from less to more effective programs
Spending levels are set for each sector
Operational EfficiencyOperational Efficiency
Refers to the production of goods or delivery of services
Costs should be competitive with market prices
Cash limits on operating expenses
Managers have discretion in using resources in exchange for pre-specified outputs
Refers to the production of goods or delivery of services
Costs should be competitive with market prices
Cash limits on operating expenses
Managers have discretion in using resources in exchange for pre-specified outputs
Sound Public Expenditure Management: Key PrinciplesSound Public Expenditure Management: Key Principles
Transparency (ready access to relevant information)
Accountability (by whom, for what, to whom?)
Comprehensiveness (One Fund Concept to equalize marginal benefits of last Peso spent for each program)
Transparency (ready access to relevant information)
Accountability (by whom, for what, to whom?)
Comprehensiveness (One Fund Concept to equalize marginal benefits of last Peso spent for each program)
Government budgets prepared on annual basis
Prone to deviations in direction and priorities
Not adequately related to medium term development strategy/plan
Subject to arbitrary political forces
Government budgets prepared on annual basis
Prone to deviations in direction and priorities
Not adequately related to medium term development strategy/plan
Subject to arbitrary political forces
The Way We WereThe Way We Were
• Little regard for environmental sustainability in activities funded by the budget
• Lack of priority on environmental expenditures (low in hierarchy)
• Environmental expenditures derive greater funding from extra-budgetary sources
• Little regard for environmental sustainability in activities funded by the budget
• Lack of priority on environmental expenditures (low in hierarchy)
• Environmental expenditures derive greater funding from extra-budgetary sources
The Way We WereThe Way We Were
• Proliferation of earmarked special funds
• Disjoint (sometimes conflicting) activities
• Failure to tap complementarities and synergies among sectoral concerns (e.g. water supply and health);
• Inefficient operational mechanisms for budget implementation
• Proliferation of earmarked special funds
• Disjoint (sometimes conflicting) activities
• Failure to tap complementarities and synergies among sectoral concerns (e.g. water supply and health);
• Inefficient operational mechanisms for budget implementation
The Way We WereThe Way We Were
Multi-year budgeting framework tied to medium term public investment program
Environmental Assessment of the budget
Move towards integrative programs
Multi-year budgeting framework tied to medium term public investment program
Environmental Assessment of the budget
Move towards integrative programs
Now: Public Expenditures for Sustainable Development
Linking the Budget to the Plan (and to Agenda 21)
Linking the Budget to the Plan (and to Agenda 21)
MTPDP/
PA21
MTPDP/
PA21MTPIPMTPIP
Plan Objectives linked with PAPs
Plan Objectives linked with PAPs
3-yr Budge
t (MTEF
)
3-yr Budge
t (MTEF
)
Annual
Budget
Annual
Budget
Assessing Environmental Funds & Expenditures
Regular Budgetary Resources of Dept. of Environment & Natural Resources
Special Environment Funds/AccountsEnvironment Guarantee Fund
Environmental Heroes Fund
Power Industry Environmental Trust Account (PIETA)
Regular Budgetary Resources of Dept. of Environment & Natural Resources
Special Environment Funds/AccountsEnvironment Guarantee Fund
Environmental Heroes Fund
Power Industry Environmental Trust Account (PIETA)
Performance Triangle Analysis of Environmental Funds
Performance Triangle Analysis of Environmental Funds
•Environmental policy•Public finance•Effective fund mgt
International Policy
International Policy
•Aviation fuel tax•Aviation fuel tax
Global TaxesGlobal Taxes
•Tobin tax•Tobin tax
•Global Environmental Facility•Multilateral assistance•Bilateral assistance
•Global Environmental Facility•Multilateral assistance•Bilateral assistance
Official Development AssistanceOfficial Development Assistance
Concluding Points
Public resources not likely to be the largest component of financing for the environment
Sustainability enhanced by a tangible counterparting of resources (and efforts)
Challenge is how to leverage limited government resources for much larger private sector resources potentially available
Public resources not likely to be the largest component of financing for the environment
Sustainability enhanced by a tangible counterparting of resources (and efforts)
Challenge is how to leverage limited government resources for much larger private sector resources potentially available