In the Philippines, the National Economic and Development Authority (NEDA) creates the economy’s master plan. Plans to overhaul NEDA to make it more responsive to the needs of the 21st century are underway. However, the changes are largely cosmetic, focusing on changing its name and status as a new cabinet department. A merger with more active agencies would boost policy coordination across different government entities.
NEDA was established on 21 September 1972, a day after then-president Ferdinand Marcos Sr declared martial law. NEDA’s mission is “to formulate continuing, coordinated, and fully integrated socioeconomic policies, plans, and programmes”. Once every six years, it crafts the Philippine Development Plan, which is supposed to be the incumbent administration’s “overall blueprint in development planning”.
NEDA also approves big-ticket infrastructure projects (for example, railways and airports) and ensures that the government’s objectives align with Sustainable Development Goals. NEDA figures prominently in cabinet clusters and interagency committees remotely related to economic development.
A Senate bill proposed that NEDA be transformed into the Department of Economy, Planning, and Development (DEPDev). A senator said this measure will put NEDA “on equal footing with their counterpart departments” and is “necessary… to effectively align our economic planning with our policy implementation.”
However, a closer look at the bill shows no material changes in NEDA’s functions and mandate. More importantly, the bill only entrenches NEDA as an increasingly redundant arm of the executive branch. For instance, the DEPDev bill from the House starts by saying that “DEPDev shall be the primary policy, planning, coordinating, and monitoring arm of the Executive Branch”. But that’s merely restating what NEDA has been doing since its inception.
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NEDA has been steadily emasculated and reduced to crafting plans that, by and large, it cannot implement. Elevating its status to a cabinet department will not remedy this fundamental problem.
Gerardo Sicat, NEDA’s first director-general (1973-1980), noted that the late President Marcos aimed to reorganise the bureaucracy and accelerated these efforts under martial law. NEDA improved coordination among economic agencies, with Marcos personally steering its Board, which approved infrastructure projects.
While NEDA facilitated economic coordination and boosted infrastructure spending, it struggled in other areas. Technocrats, including Sicat, pushed for trade liberalisation, clashing with Marcos’ cronies who thrived under protectionist trade policies. These conflicts weakened NEDA’s influence, leading to resignations, including Sicat’s in 1981.
After Marcos was ousted in the 1986 People Power revolution, NEDA continued creating the government’s development plan, vetting infrastructure projects, and coordinating the actions of various economic agencies. But without the covering authority of a dictator, its role diminished over time. Other agencies, namely the Department of Finance and the Department of Budget and Management, played a bigger role in steering economic policymaking.
For years, NEDA has also had difficulty ensuring that many of its prescribed development plans and programmes were implemented on the ground. Its lack of executive power is by design: its main function is to coordinate various committees that will “steer” the implementation of the development plan.
In recent years, NEDA’s diminished role has come to the fore. For example, during the term of former president Rodrigo Duterte, the rapid expansion of Chinese loans was mainly negotiated and entered into by the Department of Finance, with NEDA reduced to just monitoring the progress of the related projects or grants.
In recent years, it is the Department of Finance, not NEDA, that has taken a leading role in the government’s commitment to global climate change action. Meanwhile, the crafting of the government’s annual budget also rests with the Department of Budget and Management. NEDA, by itself, has very little control over the final version of the budget.
Under the administration of Ferdinand Marcos Jr, the economic managers — including Secretary Arsenio Balisacan of NEDA — prescribed subsidies for the national health insurance corporation and many foreign-funded projects. But lawmakers scrapped all these during budget deliberations. President Marcos Jr had little choice but to sign a budget law bloated with lawmakers’ pork-barrel projects, defunding many important spending items for social services such as health, education, and social protection.
NEDA’s independence was also repeatedly tested, and it was often pressured to approve projects favoured by presidents. Under the administration of Gloria Macapagal Arroyo (2001-2010), NEDA chief Romulo Neri testified that he was offered 200 million pesos (US$3.4 million) to approve the National Broadband Network (NBN) deal with China’s ZTE Corporation. Arroyo was allegedly involved, but public outcry and legislative hearings led to the project’s cancellation. The scandal tarnished NEDA’s reputation as a planning agency.
In sum, since its inception in the early 1970s, NEDA has been steadily emasculated and reduced to crafting plans that, by and large, it cannot implement. Elevating its status to a cabinet department will not remedy this fundamental problem.
A better solution would be to integrate NEDA into extant cabinet-level departments, such as the Department of Finance and the Department of Budget and Management, for development planning to translate more easily into better development programmes and outcomes.
There is a strong case for merging NEDA with the other two departments. Together, the three agencies can integrate their respective areas of expertise and ensure that good projects are prioritised for funding and execution, funding is adequate from both local and foreign sources, and funding for key development projects is prioritised in the national budget. Such a merger also aligns with previous technocrats’ push for government rightsizing. Some models from Italy, South Korea, and Vietnam can be used as a guide.
The merger of these three entities is no assurance that the Philippines will automatically see better development outcomes. It is also operationally difficult: civil servants will resist not just the necessary layoffs but also the need to harmonise organisational cultures and practices.
However, such a merger promises to improve the current system, which has made NEDA less relevant and less able to address many of the country’s 21st-century development problems. Simply converting NEDA into a new department will not cut it.
JC Punongbayan was a Visiting Fellow in the Philippine Studies Programme at ISEAS—Yusof Ishak Institute. He is an assistant professor at the University of the Philippines School of Economics, and a columnist for the online news site Rappler.
This article was first published in Fulcrum, ISEAS – Yusof Ishak Institute’s blogsite.
