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HISTORICAL BACKGROUND The Local Government Code of 1991 (LGC) was landmark legislation that initiated the decentralization of governance in the Philippines and provides the overall framework for central-local relations. Enacted in the wake of the 1986 People Power revolution, the LGC consolidated and amended various existing laws that specified the parameters for local government (i.e. the Local Government Code of 1983, the Local Tax Code [P.D. 231], and the Real Property Tax Code [P.D. 464]) and laid the foundation for increased local autonomy and accountability through the assignment of service delivery and expenditure responsibilities and revenue mobilization powers to local government units (LGUs).1 The LGC also specified the basis for revenue sharing between the national government and LGUs and provided for the participation of civil society in local governance. Several factors are cited to explain the push for increased devolution of fiscal and service delivery responsibilities to LGUs that resulted in the enactment of the LGC. One explanation is the widespread sentiment to democratize after the change of government in 1986, which led to a strong determination to dismantle the mechanisms of central control instituted by Marcos.2 This coincided with an increasing demand for local autonomy from local politicians. Furthermore, decentralization has been cited as a way to respond to the armed resistance of the New People’s Army and the separatist movements in Mindanao. As in many cases of decentralization in developing countries (e.g., Latin America, Indonesia), the primary impetus seems to be political and the desire to improve government performance (e.g., service delivery) seems to be only a secondary motive. As the following sections on expenditure and revenue assignments indicate, the current intergovernmental fiscal arrangement is hardly conducive to efficient service delivery and LGU accountability. But more than 15 years since the passage of the LGC, the data on the level and the quality of public services provided by LGUs remain scarce, which has prevented researchers from establishing a solid empirical basis for assessing the effects of decentralization on service delivery.
Manasan, Rosario G. 2007. “Decentralization and the Financing of Regional Development.” The Dynamics of Regional Development: The Philippines in East Asia. Ed. Arsenio M. Balisacan and Hal Hill. Asian Development Bank Institute. Manila: Edward Elgar Publishing Ltd. and Ateneo de Manila University Press. 2 Rood, Steven. 1998. “Decentralization, Democracy, and Development.” The Philippines: New Directions in Domestic Policy and Foreign Relations. Ed. David G. Timberman. United States Agency for International Development. Manila: Asia Society.
g.) local infrastructure facilities (e. the LGC allows national government agencies to implement public works and infrastructure projects and supplement local service delivery when these are not available or are inadequately provided by LGUs. communal irrigation. such as the operation and maintenance of district and provincial hospitals. In addition. and slaughterhouses. sewerage. public cemeteries. “Local Public Finance in the Philippines: In Search of Autonomy with Accountability. Series No. the LGC includes provisions that compromise the apparent clarity of the expenditure assignments. However.” Discussion Paper. water supply. the responsibilities of LGUs were limited to the administration of basic local services and enterprises such as garbage collection. school buildings. 2004. legislative allocations by congressmen and senators are commonly used to augment LGU spending. etc.g. particularly on infrastructure. The LGC formally transferred from national government agencies to LGUs the principal responsibility for providing and financing services in the following areas: o o o o o o o o land use planning agricultural extension and research community-based forestry solid waste disposal system environmental management pollution control primary health care social welfare services o o o o o hospital care local public buildings and structures local public parks local services and enterprises (e. housing. Finally. flood control) Municipalities and cities are primarily responsible for the frontline delivery of local public services. provinces are tasked with responsibilities for functions that involve inter-municipal provision of services. and the construction and maintenance of public school buildings. the center influences local expenditures through the enactment of laws that result in mandated 3 Manasan. Rosario G. local roads and bridges. health facilities. public markets. the provision of basic education was not devolved to LGUs and continues to be the responsibility of the national government’s Department of Education. the responsibility for the construction and maintenance of public school buildings was assigned to LGUs. public markets. While the delineation of responsibilities between national and local governments are generally consistent with the normative assignments suggested by decentralization theory (with education being a prominent exception). such as the operation and maintenance of local health centers. the collection and disposal of solid waste. While the national government continues to provide for and finance basic education. slaughterhouses. .FISCAL DECENTRALIZATION Expenditure Assignment:3 Prior to the enactment of the LGC. Manila: Philippine Institute for Development Studies. On the other hand. public markets. drainage. Specifically. 2004-42.
Furthermore. Revenue Assignment:4 The following table summarizes the various taxes that were assigned to LGUs by the LGC. Importantly. Local tax assignment is generally consistent with the traditional criteria for assessing appropriateness: economic efficiency. 2004. only the real property tax and business tax bases provide substantial local revenues. Rosario G. The majority of the productive tax bases are restricted to the national government and among the local tax bases. and other X Quarry Resources On Amusement Places X On Professionals X On Delivery Vans and Trucks X On Real Property X On Idle Lands X On Businesses X On Community Tax X * Shares in the proceeds of the higher level X X LGU that collects the tax. Examples of these so-called unfunded mandates include the salary standardization law. . Several key tax bases are reserved for the national government. fixed rates on local taxes. the value added tax. the LGC allows LGUs to adjust tax rates only once every 5 years and by no more than 10 percent. Gravel. tobacco products. the assignments are weak in terms of providing local fiscal autonomy for LGUs. The LGC also limits the power of LGUs to set tax rates by specifying floors and ceilings on the tax rates that can be imposed and. The broader range of taxes and higher rates 4 Manasan. the Magna Carta for Health Workers. and excise taxes on alcoholic beverages. equity. inspection. and the requirement for LGUs to pay for the health insurance premiums of their indigent residents. LGUs are allowed to levy user fees and charges on businesses and occupations commensurate with the cost of regulation. Cities have the widest range of taxing tools available while provinces and municipalities either have no access to certain tax measures or are required to share the proceeds with sub-levels of LGUs. and administrative feasibility. and licensing of business entities and individuals. Local Tax Cities Provinc es X X X X X X X X X * * * * X * * Municipaliti es Baranga ys On Real Property Transfers X On Business of Printing and X Publication On Franchises X On Sand.increases in spending on the part of LGUs without any corresponding financial support from the national government. In addition to local taxes. including the personal and corporate income tax. custom duties. in some cases. cities are generally allowed to set higher tax rates compared to provinces and municipalities. and petroleum products. However.
2006.4 38. 2003.0 12. which is the primary transfer of shared revenues from the national government to LGUs. Manila: Asian Development Bank.9 43. although many remain unresolved.1 1992-2003 100.1 22. 9 Manasan.8 31. What is clear is that the IRA represents the primary source of income for the vast majority of LGUs and research has indicated that the relatively large transfers from the center have had a disincentive effect on local tax effort. “Subnational Government Finance in the Philippines: Findings on the Efficacy and Distributional Implications of the Internal Revenue Allotment. This has created a strong incentive for municipalities to convert into cities. The only restriction imposed by the LGC is for LGUs to set aside 20 percent of their IRA allocation for a local development fund. results in wide disparities in local revenue mobilization between cities. Rosario G. 2007..9 37.2 Intergovernmental transfers.0 14.9 5 6 Manasan. “Philippines.3 Cities 42. which only cities and municipalities can collect. the IRA is supposed to be automatically and unconditionally released by the national government to LGUs on a quarterly basis. In practice. This is illustrated in the following table.5 27.5 64.0 10. the IRA formula has been adjusted for various reasons. and Health and Education Spending . 1985-2003 (%) Year All LGUs Provinces Municipalitie s 1991 100. Signe Zeikate. Amitabha Mukherjee.” Intergovernmental Fiscal Transfers in Asia: Current Practice and Challenges for the Future. Rosario G. which shows the shifts in the shares of own-source revenues among the three levels of LGUs. Ed. Rosario G. on the other.0 18.0 11.8 67. Yun-Hwan Kim and Paul Smoke. 2007. although the LGC provides conditions for the national government to withhold a portion of the IRA during periods of national fiscal distress. 2004. Daniel R. and Jung-Joo Lee.8 Some of these issues have been brought before the Supreme Court.0 19.3 2003 100.A Subtext for Reformed . and municipalities and provinces.1 Average 1985-91 100. The LGC institutionalized the internal revenue allotment (IRA).9 1995 100. The IRA is essentially an unconditional grant that LGUs can utilize at their discretion. Manasan. on one hand. The vertical fiscal imbalance is further exacerbated for provinces given their lack of access to business taxes.available to cities coupled with the requirement for provinces and municipalities to share real property tax collections.0 60. Joseph J. 2004. 7 Capuno. 8 Manasan.9 23.7 53.7 2001 100. Rosario G. Mullins. typically a primary source of local revenues. including the proper interpretation of the stipulated IRA formula7 and reductions in annual IRA transfers to LGUs as a result of fiscal austerity measures of the national government.5 Distribution of Own-source Revenues of LGUs by Level of Government.6 In principle.
was funded by Priority Development Assistance Funds (PDAF) of legislators and the funds were mainly used to finance local infrastructure. Amitabha Mukherjee. 13 Capuno. Nisperos. Ma. it is the other way around. ranging from ad hoc grants from legislators to matching grants from national government agencies and donors. wherein the provincial government organized a multi-sectoral council (including representatives of all component LGUs) that collectively Intergovernmental Resource Allocation (Detailed Findings). and foreign donors and creditors to support various local services. Unlike the IRA. 12 Steffensen. which has adverse effects on LGU planning and budgeting. However. very little is known about transfers between different layers of LGUs. Rosario G. 2007. and city income. often worsening the horizontal imbalance that exists within each level of LGU. A study conducted to analyze the quantity and composition of non-IRA transfers to LGUs in 2003 estimated that the aggregate total for these transfers represented over 20 percent of the total IRA transfer for that year. 2006. 2003.. 2007. the extent of inter-local transfers and the processes these entail have not been studied in depth. Finally.P. There is generally less transparency in the non-IRA funding systems. with spending strongly paralleling IRA allocations. Non-IRA Transfers: LGUs also benefit from ad hoc grants from national government agencies. and Jung-Joo Lee. the current formula is inconsistent with the distribution of expenditure responsibilities among the three main levels of LGUs. An exception was a case study of the Provincial Development Council of Davao del Norte conducted in 2000. Daniel R. Daniel R. comprising 61 percent. Cecilia G. Mullins. The current formula also does a poor job of compensating for the varying levels of fiscal capacities of LGUs. Rosario G. 2006. Amitabha Mukherjee. and 40 percent of provincial.. and Jung-Joo Lee. Mullins. E. Analysis has shown that disparities in health spending among LGUs are substantial and not directly related to the distribution of dependent/need populations. legislative funds. 2005. “Assessment of NonIRA Transfers and Other Funds for Devolved Services in the Philippines. 2003. Joseph J. the LGC also allows inter-local grants from one LGU to another. respectively. Jesper.” Manila: World Bank. Soriano. as discussed in the earlier sub-section on Revenue Assignment. Furthermore. there is evidence of uneven and distortionary effects of the IRA on expenditure on local services. and J. Hence. Furthermore. Manasan. Makayan. 10 Capuno.10 Finally. these transfers are distributed to LGUs through a wide variety of mechanisms. municipal. . Signe Zeikate.” Manila: World Bank.13 The LGC provides for revenue-sharing between levels of LGUs for various taxes.Based on Statement of Income and Expenditure data for 2006 from the Bureau of Local Government Finance of the Department of Finance. rather finance following function in health spending. Joseph J. Signe Zeikate. the IRA represented 79 percent. 74 percent. thus exacerbating the vertical fiscal imbalance. and less information available for these miscellaneous transfers.B.11 LGU structural and fiscal factors are what primarily determine levels of health spending. 11 Manasan.12 The largest component of this total.
The LGU Guarantee Corp. development of an LGU bond market. anecdotal evidence. “Governance Gone Local: Does Decentralization Improve Accountability. Jose Edgardo.” East Asia Decentralizes: Making Local Government Work. 2005.17 existing research indicates that the effects of decentralization on local governance in the Philippines is ambiguous. DECENTRALIZATION AND GOVERNANCE While the case for decentralization is typically rooted in the theory that it enhances the accountability of local officials by aligning government decision-making more closely to local preferences and emphasizing competition among regions to attract capital and labor. Paper submitted to the Philippine Center for Policy Studies .16 There has been some progress with the involvement of the private sector in infrastructure investments. 15 Manasan. Hellman. including bank credit. the subsidized interest rates offered by the MDFO acts as a disincentive to the relatively creditworthy LGUs to access funds from the private capital market.determined the unmet basic public service needs of the province and allocated provincial funds accordingly. . There were positive early assessments of the impact of the LGC (based on case studies. and build-operatetransfer (BOT) arrangements. primarily because these have not been allowed to become depository banks for LGUs. Finally.14 Sub-national Borrowing:15 The LGC also provided LGUs with greater flexibility to utilize credit financing. In 1996.” Report No. Washington. H. and optimization of GFIs role in LGU financing. 16 World Bank and Asian Development Bank. while upper-tier LGUs could access private commercial finance. 2007. mostly through management contracts. was created to guarantee debt issues of LGUs financed from private sources. leading to innovations in local governance and management. Manila: World Bank and Asian Development Bank. the LFF recommended the increased use of BOT schemes. Furthermore. improved LGU access to private banks. Baseline Study on the Indicators of Good Governance in Davao del Norte Province. increased participation of 14 Burton. 2004. 26104-PH. at best. The progress of implementation of the LFF has been uneven. bonds. with resource-rich LGUs not needing to borrow while resourcechallenged LGUs not meeting requisite creditworthiness criteria. Quezon City: PCPS.M. which provides for a segmented approach to capital financing: lower-income LGUs would have access to subsidized loans and grants from the Municipal Development Fund (MDFO). To improve access to private capital markets. While GFI credit to LGUs has substantially increased. but few efforts to use BOT arrangements. E. those in the middle tier could access credit from government financial institutions (GFIs).Governance Project. and local surveys) that cited the increased accountability of local officials. 2000. DC: World Bank. but the rate of bond issues has not accelerated. Rosario G. 17 Campos. the Department of Finance developed the LGU Financing Framework (LFF). “Decentralization in the Philippines: Strengthening Local Government Financing and Resource Management in the Short-term. and Joel. LGUs have not yet accessed financing through private banks. LGUs have generally tended to avoid debt.
20 The survey asked provincial and municipal government officials and members of households in the respective jurisdictions how hypothetic extra resources should be allocated among different public service options.19 Yet these are not uniformly available for all regions. Manila: Edward Elgar Publishing Ltd.21 The preferences of the provincial officials and those of the provincial residents were negatively correlated. much less for all LGUs. Maryland: University of Maryland. A survey-based analysis cast doubt on the validity of this assumption in the Philippines.citizens and civil society. One plausible reason for the local resident’s limited knowledge of local affairs is their tendency to rely on national media for information and the media’s tendency to focus on national affairs in their news coverage. The municipal officials were able to identify “roads” as the top priority of the residents in their jurisdictions. that are not necessarily comparable across datasets. When asked to name the vice president (of the national government). The study found that people’s knowledge of local politics was limited as well. Arsenio M. the evidence is thin that decentralization really 18 19 Rood. Overall. Azfar et al (2000) found that LGU officials were not able to predict local preferences very accurately. et al. a postulated benefit of fiscal decentralization is a better alignment of the government’s policy priorities and local preferences because of the sub-national governments’ presumed “proximity” to the local residents and their realities on the ground. Joseph J.” The Dynamics of Regional Development: The Philippines in East Asia. 21 Poor roads would be among the most visible public service deficiency and for those living in the locality it should be quite easy and obvious to identify them as a priority. Omar. but failed to predict other priorities. Balisacan and Hal Hill. at least as of the late 1990s when the study was conducted. Steven. According to theories. from inputs and processes to outputs and outcomes. Decentralization and Governance: An Empirical Investigation of Public Service Delivery in the Philippines. . and socio-economic benefits. Asian Development Bank Institute. which may be relatively unreliable as sources of objective information. the same survey asked the provincial and municipal officials how they learned about local preferences but the analysis found that none of the methods had a statistically significant effect on the officials’ abilities to predict local preferences. In a statistical analysis of survey results.18 More recent reviews of the Philippine experience have emphasized the scarcity of comprehensive empirical analysis on the long-term impact of decentralization. 20 Azfar. and focus on various governance concerns. the mayor and the vice mayor of their own localities in a test of people’s knowledge of national and local politics. 41 percent of the respondents were able to name the vice president but only 1 percent knew who their vice mayor was. In addition. Department of Economics. 1998. 2000. A wide range of quantitative indices. Ed. 2007. and qualitative performance measures have been developed over the years to assess the quality of local governance. and Ateneo de Manila University Press. Center for Institutional Reform and the Informal Sector. customer satisfaction surveys. based on data from the late 1990s. “The Quality of Local Governance and Development under Decentralization. Hence only broad comparisons can be made. Capuno. Households are much more likely to obtain information about local affairs from friends and family and local officials themselves.
citing another empirical analysis of correlation between changes in poverty rates and the share of vote obtained by incumbent governors re-elected. new governors often commence their administration with a lower level of support than the re-elected incumbent governors. and Joel. Capuno (2007) shows weak correlation between LGU performance (as measured with the proxy of human development index at the provincial level) and the electoral performance of the governors standing for re-election in 2001. Jose Edgardo. In a rare attempt at empirical analyses of these questions. ranging from political dynasties and clientelism 22 23 Capuno. Capuno also argues that “in economically depressed provinces. 232). improvements in local governance since the enactment of the LGC have been uneven. Table 7. Other studies have cited the presence of different non-democratic modes of governance at the local level.24 Weak electoral accountability is evident in the existing research. Changes in HDI Score. reproduced from Capuno (2007). Hellman. Despite the development of an active local civil society network. of governors) Change in HDI Governors Standing for Re-election Score Re-elected Defeated >20% 1 10-20% 6 6 0-10% 24 9 0% (no change) 2 1 <0% 3 4 Total 36 20 Source: NSCB. Together these results reflect the persistence of patronage politics at the local level” (2007. Jose Edgardo.7. Elections seem to be effective at rewarding outstanding local leaders but have clearly been ineffective at punishing poor performers. Furthermore. though still limited in number and constrained by data limitations. Joseph J. Campos.23 However. there was evidence of a decline in overall perceptions of corruption and improved service delivery standards during the 1990s. 1994-2000 and Gubernatorial Election Outcome in 2001 (no. Overall. 2005. 24 Campos. H.22 In addition. 2007. p. This indicates the difficulty of replacing incumbent provincial leaders in economically depressed areas. p. and Joel. 220.” at least in the sense that the expressed preferences of the government were close enough to those of the people. the link between these outcomes and the accountability of local officials is weak and local officials continue to be subject to the risks of state capture and clientelism. . 2005. H. countervailing institutions at the local level generally lack the capacity and independence to mitigate these risks. There has been an observed upsurge in public participation and a growing number of cases of innovative practices by LGUs. Hellman.brought the government “closer to the people.
“Local Politics and Local Economy. Asian Development Bank Institute. or a succession of local politicians and their kin who take turns to perpetuate themselves in power beyond the term limits imposed by the Constitution.”27 Dynastic politics go hand in hand with other forms of governance. patron-client relationships. and Crime: Bossism in the Philippines. Sometimes subnational governments receive more expenditure assignments than the actual revenues made available can cover. “Growth. Inequality. Manila: Philippine Center for Investigative Journalism. hurts poverty reduction.” University of the Philippines School of Economics Discussion Paper No. Emmanuel S. One recent attempt to document the extent and the modus operandi of dynastic politics is the very illustrative account of the Philippine national congress and its members in Sheila S.26 However. Coronel. 0109. et al. 28 Sidel. The manner in which fiscal resources are made available to subnational governments also matters.g. 29 De Dios. California: Stanford University Press. Arsenio M. but its effect on governance has not been studied systematically even though anecdotes abound of favoritism. 27 Balisacan. and Nobuhiko Fuwa. one econometric analysis of economic growth and poverty reduction at the provincial level found that “the dominance of oligarchic political regime inhibits growth and. Balisacan and Hal Hill. Manila: Edward Elgar Publishing Ltd. DECENTRALIZATION AND LOCAL SERVICE DELIVERY The financial infrastructure supporting LGUs has not been conducive to improving local service delivery. whereas in other cases. Colombia). The misalignments of expenditure and revenue assignments often found in the decentralization frameworks in developing countries tend to undermine sub-national governments’ incentives and/or capacities for efficient service delivery. John T.. 1999. Ed.25 The presence of these “dynasties” is popularly acknowledged (and barely disguised. especially during electoral periods. the sub-national governments receive more revenues than justified given the expenditure assignments (e.28 Furthermore. (2004). 2007. The Rulemaekrs: How the Wealth and the Well-Born Dominate Congress.to the use of violence and coercion termed by one political scientist as “bossism. The use of violence and coercion by local politicians is said to remain common. nepotism. Arsenio M. Manila. as seems to be the case in the Philippines. continue to pervade local politics 29. Large block grants with ambiguous 25 26 Local executives are only allowed to serve up to three 3-year terms. Coercion. if at all). . and Ateneo de Manila University Press. through lower growth. Politics and Poverty Reduction in the Philippines. and cronyism resulting from this style of governance. a considerable of number of LGUs have been controlled by what are commonly called political dynasties.” The Dynamics of Regional Development: The Philippines in East Asia. these are not the kinds of politician-voter relations that foster accountability for government performance. 2001. Either way. whereby local officials provide protection and particularistic favors to individuals and families in exchange for the political support.” One of the most noteworthy political phenomena in the Philippines is the dominance of families as the basic organizing unit of political life both at the local and the national levels. Capital. Including some of the best-known cases of good local governance.
a period that included the retention of small portions of the total IRA appropriation by the national government due to “severe fiscal constraints. Joseph J. the absence of a substantial connection between taxation and service delivery serves to compromise the quality of local spending and undermine local accountability. Piza. Nonetheless. 2007. Asian Development Bank Institute.31 Another possibility is that local officials assess the net political trade-off of higher revenues versus greater expenditure and determine that the political costs are too high32. 2004. Ed. Rosario G. 2007. In short. and Sharon F.” The Dynamics of Regional Development: The Philippines in East Asia. 2007. 34 Capuno. In any case. Rosario G. . generally struggle to provide high-quality local public services given resource constraints. Balisacan. Arsenio M. 32 World Bank and Asian Development Bank. Arsenio M. Manasan.g. the distortionary effects of the IRA exacerbate imbalances among and within the three levels of local government. Hal. 2004. 2007. and Ateneo de Manila University Press. In spite of the growth in incomes. 31 Hill. particularly provinces and municipalities. Arsenio M. Piza. resulting in sub-optimal service delivery. LGUs have generally been unwilling to maximize local revenues through local taxes and fees. as the overall governance environment that determines the nature of local political accountability. One widespread perception is that state capture of LGUs by local elites prevents local officials from taxing themselves. it cannot be denied that overall income has steadily increased coinciding with the expansion of the IRA. IRA transfers annually comprised approximately two-thirds of total LGU income during this period (and have continued at this level up to the present). As mentioned. As proof of the continued poor quality of local health services. restrictions over local taxation) can under-exploit the potential of allocational efficiency presumed in the fiscal decentralization literature and stifle local innovations. Emmanuel S. the LGUs’ share of total public sector expenditures is more than three times their share of public sector revenues30 and LGUs. Balisacan.” the aggregate IRA distributed to LGUs increased from PhP81 billion to PhP141 billion.6 percent. In the Philippines. Manasan. Manila: Edward Elgar Publishing Ltd. if not more. a nationwide survey 30 Hill. earmarked transfers. Excessive tightening of the use of fiscal resources by sub-national governments (e. “The Philippines and Regional Development. From 1998 to 2004. the design of the intergovernmental fiscal arrangement is as important. Local revenues continue to make up a miniscule share of LGU income and the IRA has effectively substituted for own-source revenue generation.34 Spending on social services has flattened at around two pesos per capita in real terms since 1996 and this may be indicative of free-riding by LGUs on the national government’s continued provision of devolved services.expenditure assignments are likely to lead to weak accountability for resource use by sub-national governments. LGU spending on social services has stagnated after a sharp increase immediately after the devolution of health services in 1993. Balisacan and Hal Hill. representing an annual increase of 10.33 In spite of the acknowledged financial difficulties faced by LGUs. 33 De Dios. 2007. Hal. and Sharon F.
University of the Philippines. 2005. public demand for specific basic services. participation in training programs.’ aggressive local government and civil society. Balisacan and Hal Hill. Gilberto M. and initiatives by academic institutions.conducted in 2001 revealed that the 74 percent of people were bypassing rural health units and 68 percent bypassing barangay health stations in favor of higher-level (but more distant) government and private hospitals.” The Dynamics of Regional Development: The Philippines in East Asia. Alex B. award-giving bodies that recognize LGU achievements in improving service delivery and public welfare. which links the local roads of cities and municipalities to the national roads and requires the use of common resources. beyond fiscal considerations. Manila: Edward Elgar Publishing Ltd. Joseph J. a ‘triggering crisis. there is evidence to suggest that investing in road 35 36 Capuno. Joseph J.36 Research on innovative practices suggests numerous internal and external conditions behind local innovations. The absence of a viable regional development council has led to a ‘missing middle’ in the intermediate road infrastructure. Peterson. inadequate financial resources. 2003.. such as the Galing Pook Foundation. However. Philippines: Meeting Infrastructure Challenges. While the expected competition that would spur LGUs to improve performance has not materialized on a broad scale. Capuno. Llanto. For the road sector. and Elisa Muzzini. 2005. 37 Brillantes. George E. . “Infrastructure and Regional Growth. such as a hospitable policy environment. 38 Peterson. even though there is considerable documentation of best practices. they typically have insufficient technical and financial resources to assume this role. George E. 2007. have succeeded in fostering some competition. it is unclear which tier of government is responsible for planning investments and coordinating the development of the secondary road network.” East Asia Decentralizes: Making Local Government Work. 2007. Asian Development Bank Institute. their adoption by other LGUs has been limited. Ed. While in principle provinces play a coordinating role. the national government retained the responsibility for providing primary road networks while cities and municipalities were assigned the responsibility for tertiary networks. and Elisa Muzzini. empirical analysis indicates that the quality of roads has a positive and significant effect on regional growth and that regional incomes tend to increase with an increase in the quality of road infrastructure. Manila: World Bank. However. 2005. “Decentralizing Basic Infrastructure Services.35 This may indicate that. 2007. The LGC assigned to LGUs the responsibility for developing and maintaining local infrastructure. Manila: National College of Public Administration and Governance.38 The poor condition and slow development of infrastructure in the Philippines and the adverse effects on the economy and development has been documented extensively. the governance issues raised in the previous section have also resulted in disincentives for local officials to efficiently allocate expenditures and improve service delivery.39 Specifically. DC: World Bank.37 Road Sector. In fact. and Ateneo de Manila University Press. Innovations and Excellence: Understanding Local Governments in the Philippines. Washington. Arsenio M. 39 World Bank.
Gilbert M. the allocation of investments over time and space is a continuing challenge given the frequency of self-serving and short-term political objectives of politicians at all levels. as discussed in the earlier section on Sub-national Borrowing. 40 41 Llanto.45 Perhaps due to the inferior quality of public health services. 45 World Bank. 2005. DC: World Bank. it has been pointed out that local fiscal capacity remains insufficient to support significant local infrastructure expansion as LGUs have continued to rely heavily on the IRA and not maximized local revenue potentials. also remains a significant bottleneck. poor planning and policy coordination between the national and local governments has also stifled road development. However. Samuel S. .43 Health Sector:44 Generally..41 The structure of lending to LGUs for financing infrastructure. Washington. Richard. Ed. as discussed earlier in this section. As discussed above. World Bank. it is doubtful that decentralization has improved the quality of local health care. “Decentralizing Health: Lessons from Indonesia.” Washington DC: World Bank. A survey confirmed that Filipinos were more satisfied with private hospitals and clinics than government facilities. 2003. LGUs assumed responsibility for health services that are simple to administer or confer local benefits while the national government assumed responsibility for services with significant economies of scale or inter-jurisdictional spillovers. Finally. the division of responsibility for health functions between the national and local governments mandated by the LGC broadly reflects efficiency principles. 2007. 2007. In practice. George E.” East Asia Decentralizes: Making Local Government Work.” Report 25437-IND. Mukherjee and Van Wijk. There is also evidence supporting the benefits of community participation in infrastructure choices and management. Furthermore the absence of accurate and reliable aggregate LGU expenditure data at the sector level precludes an analysis of LGU road investments. case studies have revealed efficiency gains and benefits from increased participation in infrastructure development at the local level. Washington DC: World Bank. including higher rates of sustainability of locally selected infrastructure projects when there is direct community participation. 2001.42 Local savings have been found per kilometer of road construction by LGUs compared to costs of the Department of Public Works and Highways. “Philippines: Filipino Report Card on Pro-Poor Services.40 Nonetheless. the Philippines. a comprehensive assessment of the local road networks does not exist.improvements and the construction of high-quality roads at the local level is more beneficial to the region than investing in the national road network alone. Joseph J. however. Capuno. Washington DC: World Bank. 2005. 44 Lieberman. Gilbert M. 42 Peterson. and Vietnam. In terms of other existing research in the local road sector. “Indonesia: Selected Fiscal Issues in a New Era. even the poor continue to selffinance their access to private health services. 2003. 43 Hopkins. Llanto. and Elisa Muzzini. “How Well Did Those Development Projects in Flores Work?” Sustainability Planning and Monitoring in Community Water Supply and Sanitation. and Hoang Van Minh.
and thus the total public expenditures in health in the country. Finally. Amitabha Mukherjee. 2006. The under-5 mortality rate per 1. a law which provides for higher compensation and extra benefits and allowances to all health workers. such as national government agencies. thus reinforcing health disparities among LGUs. Furthermore. Although some of these cases are in fact documented as case studies (such as those awarded by Galing Pook).46 While public hospitals may collect user fees and charge for drugs. other levels of local government. decentralization has given local authorities greater leeway to adapt local innovations in health planning. There is no systematic tally of these innovations. Studies have also shown that other fiscal transfers. NGOs. These positive trends contradict the indirect evidence of poor health service quality obtained in subjective survey data cited above. and so does not ensure an overall propoor bias in health services.000 births declined from 66 in 1990 to 40 in 2000 while life expectancy at birth increased from 66 to 69 over the same period. and financing. nurses. Daniel R. the unfunded mandate posed by the Magna Carta for Health Workers. correlate weakly with poverty. LGUs in general do not seem to be in a rush to emulate these known cases of success. there do not appear to be studies that have clarified the role of LGUs in the health sector vis a vis other providers. . let alone objective quantified measures of service outputs. the Philippines has sustained favorable trends in overall health status after decentralization. other issues faced by LGUs in the health sector include: the struggle to hire and retain physicians. as discussed in the previous sub-section. Even so.. wide variations in local revenues and the distortionary effects of the IRA have resulted in uneven access to quality health services. has made it difficult to analyze local health expenditures. but the general perception among the analysts and observers seems to view these innovations as exceptions rather than the norm. appears to be holding back needed policy interventions by local decision-makers. rather than missing models. and the private sector. who are in great demand in foreign markets. and medical professionals. The absence of sectorspecific data for LGUs. and Jung-Joo Lee. The IRA favors highly populated LGUs and those with large land areas. recovery rates remain low because of the inordinate volume of charity and subsidized patients. 46 Mullins. The lack of incentives. such as an increase in the proportion of births attended by trained health workers and increased access to clean water sources and sanitation services. Finally.Nonetheless. service delivery. and the absence of a need-responsive and cost-effective health information system at the national and local levels. Signe Zeikate. including those from the Department of Health. These favorable results have been attributed to progress in health outputs and service coverage.
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