Defense Secretary Gilberto Teodoro Jr. recently declared that the Philippines must nearly triple its defense budget to secure its own waters — but a closer look at the national ledger suggests the money was never truly absent. According to investigators, legislators, and international financial institutions, it has simply been redirected — into ghost projects, drainage canals never dug, and the discretionary war chests of congressional kingpins.
Teodoro, speaking at a Manila forum on the eve of the tenth anniversary of the Philippines' arbitral victory over China, said the country needs to raise defense expenditure from the current 1.3 to 1.4 percent of GDP to as high as 2 or even 4 percent. He described a "free-rider problem" — a public unwilling to shoulder the cost of national defense. When pressed on where the funding would come from, the Defense chief deferred to other officials.
The answer, according to a body of congressional testimony, investigative reporting, and civil society research, may already be embedded in the budget — just not where it is supposed to go.
The Scale of What Is Being Stolen
The World Bank, the Asian Development Bank, and the IMF have long maintained a structural benchmark suggesting roughly one-fifth of any given national budget is lost to corruption in high-risk environments. Applied to the Philippines' ₱6.793-trillion budget for 2026, that benchmark implies annual corruption losses approaching ₱1.36 trillion — a figure that remained largely theoretical until recent Senate hearings made it concrete.
The Department of Finance, in testimony before the Senate, reported that economic losses from corruption in flood control projects may have averaged ₱118.5 billion annually from 2023 to 2025. The basis: estimates placing the graft rate on Department of Public Works and Highways flood projects at between 25 and 70 percent of total project cost.
Finance Secretary Ralph Recto attached a human dimension to the loss. The stolen funds, Recto said, could have supported between 95,000 and 266,000 jobs, and their absence may have shaved growth down to the 4.4 percent recorded in 2025 — the weakest economic performance in five years — from a potential six percent.
Climate Spending Bled Before Projects Begin
Flood infrastructure is only one casualty. Environmental group Greenpeace, drawing on figures entered into the Senate Blue Ribbon Committee record, calculated that as much as ₱1.089 trillion in government climate-tagged expenditure may have been lost to corruption since 2023. Of that total, ₱560 billion is estimated to have disappeared in 2025 alone.
The foundation of that estimate is a finding attributed to Senator Erwin Tulfo during Senate proceedings: corruption cuts leave only 30 to 40 percent of a project's allocated budget for actual construction work. In practical terms, sixty centavos of every peso earmarked for climate infrastructure vanishes before a shovel breaks ground.
One Lawmaker's Allocation, Two Warships
Congressional pork barrel figures have now been named and quantified. A Philippine Center for Investigative Journalism report found that from 2023 to 2025, then-House Speaker Martin Romualdez received ₱14.4 billion in so-called "allocable" funds. Representative Sandro Marcos — son of the President — received the highest individual allocation at ₱15.8 billion over the same period, with the PCIJ report designating the two as the country's "pork barrel kings."
The comparison to defense procurement is not abstract. That ₱15.8-billion figure roughly equals the entire ₱16-billion contract that delivered the Philippine Navy's two Jose Rizal-class frigates — the most significant surface warships in the fleet's recent history. A single lawmaker's three-year discretionary allocation could, in theory, have purchased those vessels twice.
The 2026 Budget Extends the Same Logic
The pattern is not a relic of previous administrations. Makabayan bloc lawmakers have estimated that the 2026 national budget continues to assign approximately ₱230 million in "allocables" to each member of the House of Representatives and ₱3.2 billion to each senator. The budget also retains ₱249 billion in unprogrammed appropriations — a mechanism that critics in Congress have long described as a vehicle for laundering political spending into nominally "priority" infrastructure.
The People's Budget Coalition has characterised these allocables as a reconstituted pork barrel system that displaces more equitable and transparent public expenditure. Compounding the picture, the House of Representatives quietly increased its own institutional budget from ₱17.2 billion to ₱27.7 billion for 2026, even as it reduced public works appropriations. Former Budget Secretary Butch Abad estimated the cost of maintaining the lower chamber at ₱8.8 million per month for each of 315 sitting congressmen.
Comparing the Defense Gap to the Corruption Gap
The numbers, placed side by side, are difficult to dismiss. The Department of National Defense carries a 2026 budget of ₱305.87 billion. Teodoro's 4-percent-of-GDP target — measured against a ₱30.2-trillion economy — would require approximately ₱1.2 trillion, leaving a shortfall of roughly ₱900 billion annually.
That ₱900-billion gap is smaller than what Greenpeace estimates was drained from climate-related projects in 2025 alone. It is smaller, in most fiscal years, than the combined weight of congressional allocables, unprogrammed funds, and DPWH flood-control losses.
The AFP's Re-Horizon 3 modernization program — a restructured ten-year plan — carries a price tag of approximately ₱1.89 trillion, or roughly US$35 billion. The losses estimated from climate and flood projects in the single year of 2025 would, according to the figures in the Senate record, cover nearly a third of that entire decade-long modernization cost.
The Philippine Navy has sought submarine capability for years. Re-Horizon 3 budgeted ₱80 to ₱110 billion for two submarines — a sum smaller than a single year's high-end estimate of flood-control losses. The boats that should be patrolling Recto Bank were, in effect, poured into drainage canals that were never built.
Who the Real Free-Riders Are
Teodoro's "free-rider" framing, the editorial argument goes, has the problem inverted. The reluctant taxpayer is not the free-rider draining the defense budget. The free-riders are the legislators and contractors capturing public funds at the appropriations level — those who leave 30 percent of a dike's budget standing where a dike should be, and who ride on a sovereignty they are unwilling to pay to defend.
The fisherman forced off Panatag Shoal is not the one free-riding. He is the one left to make up the difference.
The Limits of the Argument
Intellectual honesty requires acknowledging constraints. A national budget is not a reserve fund that can be unlocked by simply ending corruption. Corruption represents a leak, not a savings pool — and closing that leak demands sustained prosecutorial action, procurement reform, and an Ombudsman with both independence and enforcement power. Defense procurement is not itself immune: the Jose Rizal frigate contract was shadowed by allegations of political interference, and the AFP has reportedly continued paying pensions to "ghost" soldiers recorded as living past the age of 100. Redirecting clean money into a compromised system may only move the theft downstream.
The core claim, therefore, is more precise: the Philippines' defense funding crisis is not primarily a resource scarcity problem. It is a resource capture problem.
A Legal Win Without the Force to Back It
A decade after the Permanent Court of Arbitration in The Hague invalidated China's nine-dash line and affirmed Philippine sovereign rights within its exclusive economic zone, Teodoro is correct that the award is beyond legal challenge — and correct that no administration can abandon it without forfeiting democratic legitimacy. But a legal ruling carries no patrol boats. The Philippines has spent ten years confirming that a court decision alone does not redirect a Chinese coast guard cutter.
The national tragedy is not that the archipelago cannot afford its navy. The evidence suggests it can. The choice, made budget cycle after budget cycle, has been to spend the money on something else. Sovereignty may be defended first at sea — but it is lost first in the appropriations committee.
By the Numbers
- ₱6.793 trillion — Philippine national budget for 2026
- ₱1.36 trillion — implied annual corruption losses based on World Bank, ADB, and IMF benchmark of roughly one-fifth of the national budget
- ₱118.5 billion — average annual economic losses from flood-control corruption, 2023–2025, per Department of Finance Senate testimony
- 25–70% — estimated graft rate on DPWH flood control project costs, per Senate hearing testimony
- ₱1.089 trillion — climate-tagged spending potentially lost to corruption since 2023, per Greenpeace calculations from Senate Blue Ribbon Committee figures
- ₱560 billion — estimated climate fund losses to corruption in 2025 alone
- 30–40% — share of a project budget that actually reaches construction after corruption cuts, per Senator Erwin Tulfo's Senate testimony
- ₱15.8 billion — allocable funds received by Representative Sandro Marcos, 2023–2025, per PCIJ
- ₱14.4 billion — allocable funds received by then-Speaker Martin Romualdez, 2023–2025, per PCIJ
- ₱249 billion — unprogrammed appropriations in the 2026 national budget
- ₱305.87 billion — Department of National Defense budget for 2026
- ₱1.89 trillion (approx. US$35 billion) — total cost of the AFP's Re-Horizon 3 ten-year modernization program
- ₱80–₱110 billion — Re-Horizon 3 allocation for two submarines
- ₱27.7 billion — House of Representatives budget for 2026, up from ₱17.2 billion
- ₱8.8 million per month — estimated cost per congressman, per former Budget Secretary Butch Abad
Why This Matters
The convergence of Senate testimony, Department of Finance data, and investigative journalism reveals a structural funding gap in Philippine national defense that is not primarily caused by a shortage of national resources but by the systematic diversion of public funds through congressional pork barrel mechanisms and inflated infrastructure contracts. With Re-Horizon 3 requiring nearly ₱1.89 trillion over a decade and annual corruption losses estimated to exceed that in a single budget cycle, the capacity to modernize the AFP exists in principle but is being consumed before it reaches the armed forces. Ten years after the historic Hague arbitral ruling, the inability to project credible naval force in the West Philippine Sea is, according to this body of evidence, a governance failure as much as a budgetary one.
Source: Originally reported by Interaksyon / The Philippine Star digital platform