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Governance and Development Outcomes in Davao City

Conference Paper · December 2010

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 Governance and Development Outcomes in Davao City
Prof.Sherlito C. Sable*

The study was conducted to determine the socio-demographic, economic,

administrative, investment climate profiles, governance processes, outputs and outcomes
of the City Government of Davao. Both primary and secondary data were used. Key
informant interviews and focused individualized interviews were conducted to generate
primary data while secondary data were sourced from reports of concerned relevant
offices. Trend and thematic analysis with data triangulation were done on the data
gathered. Findings showed that there are significant evidences of an emerging robust
economy and favorable investment climate due to improving governance processes in the
City. The study concluded that the City Government has managed some of its resources
very well although some improvements are called for in the income generation. The City
governance values participatory and empowering arrangements. Discernable though in
policy formulation is the tinge of influence maximization. Fiscal governance points to the
seeming inability to optimize resources for local development projects. Although the
constituencies have benefited from the city government’s governance mechanisms, there
is a discernable need to optimize limited fiscal resources for better development
outcomes. Governance and development are not entirely exogenously driven but
endogenous ones.

_______________________________________________________________________
*
I am very grateful to the Dean of College of Governance Business and Economics,
Dr. Marcelo M. Angelia, Dr. Rec Eguia, the Department Chair for allowing me to
use the resources of the college so that I would be able to finish this study. I am also
very grateful to the WB-Knowledge Development Center put in place in our
University for the wealth of knowledge resources I have accessed without which I
would not be able to enrich my paper.
 2

I- INTRODUCTION

The paper would like to find out whether or not the manner Davao City is
governed given the direction of the local government code of 1991 affects household
standard of living in terms of average consumption and expenditure at current price as a
measure of its development. There is a need to trace the connection between the quality
of governance of Davao City and the quality of its development to thresh out best
practices that could be sustained by the city or perhaps replicated by other cities of the
region. Furthermore, claims of some sectors that while the city develops both in
infrastructure and investments people are still struggling to attain a certain level of social
and economic security.

This concern is also supported by existing studies of the World Bank indicating
strong positive correlations between growth and development indicators and quality of
governance (Kaufman, 2003). Kaufman’s findings that 1) better governance exerts a
powerful effect on per capita incomes, 2) higher incomes lead to better governance, and
3) countries are richer due to sustained efforts associated with better governance, bring to
fore the need to find evidence in the field. Moreover, inspired by the claims of Capuno
(2005) that “the observed persistent imbalances in local development across and within
regions…is due to the less than prudent exercise of the devolved powers and
responsibilities… and that decentralization has led to not a few innovations in local
service delivery and financing, and in increased people’s participation in the mandated
special bodies” this paper embarks towards an objective inquiry. It is within this general
context that this paper is made with Davao City as the microcosm of interest.

This paper seeks to find out whether or not governance of Davao City results to
development not just in terms of growth factors(Korten, et.al, 1982) but improved
standard of living. Specifically, it answers the following questions: How does the City
practice governance? Given what they practiced, has the standard of living of the
households improved in the last ten years? What influence changes in the standard of
living of the Davao City constituencies? And what policy recommendations would best
improve local governance?

In order to answer the questions, primary data and secondary data were gathered
and analyzed. The primary data were to be taken through key informant interviews of
selected public officials (City Department Heads) of the city government, barangay
chairmen or secretaries of barangay samples, civil society organizations, and the business
sector representatives from the Davao City Chamber of Commerce. Content and thematic
analysis were use to analyze the primary data. Secondary data were sourced from the
respective concerned city departments and were analyzed using secondary analysis. The
paper used mixed methods of analysis, namely, descriptive exploratory qualitative
design, and quantitative-ordinary least squares employing multiple regressions. This
paper, however, is constrained by non-availability of existing studies relative assessments
of the city governance except that of the Antipolo rapid appraisal report conducted in
1994. Hence the quantitative analysis relies heavily on the secondary data provided by
the City government and the National Statistical Coordination Board.
 3

The findings of this paper would provide a basis for the City government to
evaluate their development performance within the context of the institutional
arrangements and mechanisms which presumably would evolve from this inquiry.
Government would be able to understand the paramount value of the institutional
mechanisms as the background in the exercise of governmental authority by its power
apparatus either by reinforcing institutional decay or by becoming agents of change in the
process of realizing its development goals. Among the households they would have a
basis to actively assert a stronger role in governance through a process from which they
would be able to check the imbalances of power whose priorities are either personal or
parochial gains over common good. Then the city government would be able to identify
appropriate rules, norms, and procedures in achieving its development goals.

The paper is focused on the analysis of Davao City’s governance within the
context of administrative, economic, and legislative dimensions given the institutional
arrangements in the exercise of these dimensions and how these dimensions are
contextualized into experience with the end in view of whether or not they affect changes
to the standard of living of its household constituencies in the last ten years form 1994 to
2004.

Better Governance Better Development Outcomes

There had been a good number of studies and literature which are focused on
governance highlighting arrangements on how the power to govern is exercised in
relation to the quality of development of countries around the world. These dimensions
are centered on economic, administrative, and political governance within the context of
rule of law, empowerment, transparency,control of corruption, bureaucratic quality and
participation (Kaufman, et.al, 2002). According to Campos (1999), there are detectable
positive effects of these dimensions to development performance among countries in
Europe-Balkan states, Latin America, and Southeast Asia.

Governance Defined

Keefer (2004) pointed in his study on governance that whether in policy or

academic settings, governance is among the most elastic concepts in the social science
and development lexicons. Definitions tend to encompass one or both of the following, a)
the extent to which governments are responsive to the citizens and provide them with
certain core services, such as property rights, more generally, the rule of law, and b) the
extent to which the institutions and processes of governments give decision makers the
incentives to be responsive to citizens; though similar, in fact the first are “outcomes “,
while the second are “causal “or more fundamental concepts. Keefer’s definitions
highlighted the second concept as the more basic because it reflects the causality issue
which is focused on the optimal and strategic value of arrangements and processes of
government rather than the extent to which government responds to public needs which is
just the effect of the cause. The Institute of Governance of Canada (2004) defined
governance in the second category as comprising the “traditions, institutions, and
processes that determine how power is exercised, how citizens are given a voice, and how
 4

decisions are made on issues of public concern”. The Ford Foundation (2004) viewed
governance as the extent to which government institutions are transparent, accountable,
responsive, and guided by the rule of law and dedicated to reducing inequality. While the
Organization of Economic Cooperation and Development (OECD) relates to institutions,
policy making, and participation of civil society, the USAID(2004) focuses on outcomes
in defining good governance in terms of maintenance of social peace, guarantee of law
and order, promotion or creation of conditions necessary for economic growth, and
insurance of a minimum level of social security. The UNDP(2005) on the other hand
views governance as democratic governance emphasizing on responsiveness of state
institutions and processes to the needs of ordinary citizens. Given with these various
definitions, a common view can be extrapolated that governance is a concept that is
basically a “process or manner” from which government performs its power to govern;
broken down into voice and accountability, political stability, government effectiveness,
regulatory quality, rule of law, and control of corruption (Kaufman, et.,al, 2002).

The concern to find out the connectivity between governance and development
outcome is anchored on the theoretical framework of the World Bank Studies particularly
that of Kauffman. Kauffman hinted that there is a possible causal relationship between
governance and development outcomes. The quality of development outcomes is
exogenously driven by the quality of governance taking into account the role of efficient
mechanisms in the exercise of governmental responsibilities. At the background of
governance is the need for appropriate norms, rules, values and procedures (transparency,
rule of law, participation, empowerment and accountability) (ADB, 2002) being the
imperatives for good governance. The exercise of administrative, economic, and
legislative powers is not an end in itself but a means to an end as implied by Kauffman.
Such exercise is meant for the attainment of development. This notion on the normative
requirements (norms, rules, and procedures) is also mentioned by North (1999) minimize
the transaction cost of governance because they create checks and balances, facilitate
political cooperation, and reduce political uncertainties in the realization of governmental
goals. The same is held true by Frederickson (1999) that traditional public administration
focused on government as an actor amid clashing interests each seeking to "win," norms,
rules, and structure refocuses public administration on government actors as embedded in
networks of cooperation which often transcend the public sector. The quality of standard
of living is the strategic measure of the quality of development which in return measures
the quality of governance.
 5

Figure 2 : Framework of Analysis

Administrative
(Spending decision, HR, etc.)
Governance
(Local) Economic
(Income Transfer, appropriations, etc.

Norms,
roles,etc Legislative(Political)
( Voice, Accountability, etc.)

Development
Outcomes Household
Standard
Of
Living

Transparent governments govern better

Djankov, et.al(2001) pointed out that in countries where state ownership of the
media is high, the price is less free. Hence, households tend to have lower opportunity
levels in the economy. This is the case of India and Bangladesh where households have
incorrigibly lower standard of living.

Islam’s regression analysis (2003) results revealed that among poorly governed
countries in terms of transparency indicators, income levels per capita tend to show a
negative change. Meaning, the lower the transparency arrangements among these
countries, the lower is the per capita income. On the other hand among the advanced
economies in North America and Europe, the regression analysis yielded a strong
positive correlation between per capita income and transparency arrangements in
governance. Meaning, transparency arrangements result to a positive change in per capita
income because disclosures of information facilitate control of corruption,
implementation of laws, and effective bureaucracy.

Islam (2003) found a link between information flows and governance institutional
quality. He pointed out that countries with better information disclosures also govern
better. Information is a critical ingredient in efficient well functioning markets, both
economic and political. More information allows better analysis and better monitoring
and evaluation of events, which are significant for people’s economic and social well-
 6

being. It allows economic and political decision makers to evaluate opportunities and
manage risks better. It allows for the possibility that decisions in economic and political
markets will enhance social welfare (Brazerman, and Stiglitz, 2002).

Moreover, Dyek and Zingales (2002) found out that in India, a more active media
could be a powerful influence on the corporate governance environment. The media
provides information that affects the refutation of government bureaucracy and thus their
incentives to behave in a certain manner is constrained. Shiller, and Herman (2002)
confirmed these findings that media influence may in fact distort economic reality or
provide a biased version of the truth.

Furthermore, Stiglitz (2002) stressed that governments play a critical role either in
restricting or facilitating information disclosures on basic transactional information from
price data to information on governmental processes and laws, and to disclosure of
private company accounts. Djankov, et.al, (2001) demonstrated that who provides
information has a strong influence on what information is transmitted. Given these
concerns on openness on information flows of government, a legal framework governing
access to information and availability of basic economic data are found to be crucial in
the quality of governance.

Accountability and Control of Corruption

In coming up with the arrangements of accountability and corruption control,

political institutions matter most, according to Laderman, Loayza, et.al (2001). Political
institutions affect corruption through two channels: political accountability, and the
structure of provision of public services. The main results show that political institutions
seem to be extremely important in the prevalence of corruption. In short, among
democracies and parliamentary systems, political stability and freedom of the press are
all associated with lower corruption. This study showed that stronger accountability
arrangements among politicians and bureaucrats are effective control of corruption.

Laffont and Meleu (2001) hinted that political accountability is composed of the
following dimensions: a) the degree of competition in the political system, b) the
existence of checks and balances arrangements, and c) the transparency of the system.
These three dimensions allow the punishment of politicians that adopt bad policies,
meaning, policies that bring about politician’s preferences over the electorate instead of
aligning their preferences with those of the electorates.

Downs (1957) held that political institutions determine the efficiency of political
outcomes. In other words, the simple existence of fair elections guarantees that politicians
can to some extent, be held liable and accountable for their actions while in public office.
Any arrangements that strengthen the harm imposed on politicians enhance the force to
control politicians’ behavior. Rules or institutions that lengthen politicians’ time horizon
increase the force of elections as a reward device. The more the system biases politicians
toward long-term goals, the higher are their incentives to stick to good governance. Rose-
Ackerman (1999) argued that political systems that allow for executive re-elections, or
 7

that make parties relatively stronger vis-à-vis candidates should have fewer myopic
politicians, and therefore less corruption.

Persson, et. al (1997) pointed the importance of the existence of checks and
balances arrangements across the different branches of power. Dynamic checks and
balances simply refers to arrangements from which the check and balance is mitigated
not by political interest but by the presence of solid evidence of power abuse. Generally
speaking, separation of powers together with checks and balances arrangements and the
right incentive design help prevent abuses of power with different government bodies
disciplining each other in citizen’s favor.

Djankov (2001) argued that transparency arrangement depends crucially on the

freedom of the press and expression, and on the degree of centralization of the system.
Freedom of the press and expression facilitates the disclosures of the right and wrong
doings on the part of government by publicizing them; hence, it reduces informational
problems between principals (citizens-household stakeholders) and agents (government),
which subsequently improves governance and particularly reduces corruption.

Rose-Ackerman (1999) emphasized that transparency arrangement is also

correlated to decentralization, because informational problems are smaller at the local
level, which makes monitoring easier. Smaller constituencies facilitate the monitoring of
the performance of elected representatives and public officials, and additionally reduce
the collective action problems to political participation. Thus, in this sense, decentralized
political systems tend to have stronger accountability mechanisms and lower corruption.

Public Services Delivery and Corruption

Furthermore, the manner public services are delivered and provided could create
restrictions on rent seeking behavior of politicians and those in charge of delivering the
services. Weingast (1995) pointed out that corruption aside from being constrained by an
appropriate political structure is also weakened by an appropriate arrangement of a
market structure in the provision of public services. Under a price system, the demand for
a service is determined by the preference or choice of those who need it, hence, their
willingness to purchase it is something that is constrained by the appropriate price of such
service. Under this condition corruption is usually represented by an extraction of a rent
by someone who is vested with some form of public power. While the political structure
determines the incentives for politicians to fight corruption, the market structure
determines the capacity of public officials to extract rents from the households. This
means that when several government agencies provide exactly the same service and
citizens can freely choose to purchase it, competition among agencies will reduce
corruption. This is the case of different bureaucracies providing substitute services, and
without any control over each other or over the services provided by each other
maximizing the household’s choice on preferences of a particular service at hand. Public
power to initiate payoffs and bribes is thus weakened by the mechanism of competition.
 8

Shleifer and Vishny (1993) presented the other extreme of the cases when
government agencies provide complementary services. This occurs for example, when
different licenses have to be obtained to perform the same job, or different spheres
legislate over the same activity. In this case power is shared among different
bureaucracies that extract rents from the same single source, without taking into account
its effects on the others. This institutional set up increases the possibility of bribes and
pay offs and the inefficiency of the system.

Similar observation is made by Ahlin (2001) that these two structures:

competition and monopoly of public services provision can be associated with different
types of decentralization of power. The first one refers to situations where, for example,
several offices compete to issue the same license, so that each agency has lower
monopoly power over license provision, and thus corruption is lower. In its more explicit
form, competition among public services providers refers to situations where different
agencies compete for the same households and therefore the ability to extract rents is
reduced by the possibility of migration of these households to other jurisdictions of
service providers. The second structure characterized by different agencies providing
complementary services, can be produced by decentralization when different spheres of
government are able to impose additional legislation on areas already legislated by each
other, thus increasing the number of bureaucracies that households have to deal with to
obtain a certain service, hence, red tapes, bribes and pay offs are made as efficient
arrangement of transaction from which households bear the burden of rent while public
officials become inefficient.

Moreover, corruption can take place in the prioritization of public fiscal

resources. Campos, et.,al. (1996) stressed that under a condition of resource scarcity a
more demanding problem of prioritization of competing claims of individuals and groups
arise. It is a challenge because the underlying problem is the disproportionate scenario
that those who claim more in the expenditure outlay have lesser contribution in terms of
revenue to the expenditure program. Alternatively, the next problem is the intrinsic
difficulty of prioritization with high transaction cost in getting feedback to and from civil
society on how to map expenditures into preferences, and information asymmetries
within the government hierarchy characterized by the fact that line agencies posses better
information how best to allocate resources within their mandates. Under the regimes of
democracy, prioritization of allocations is a political process. It is within the realm of
politicians that priorities are set based on their understanding of the preferences of their
constituencies. When politicians understand their constituencies’ preferences it is also
overshadowed by what incentives they can get if they will consider their constituencies
claims. This of course is determined by the political structure from which politicians
decide. Their incentive claim is characterized by whether or not, if the claims of the
constituents are considered. They could still prolong their power.

However, Krehbel (1991) emphasized that the best way possible to check on the
effectiveness of claims prioritization is through an arrangement of transparency and
accountability. In these arrangements, mechanisms for a broader consultation with civil
 9

society, parliament, and household constituencies are important so that discussions on

competing priorities, and review of planning horizons could take place.

Campos, et.al (1996) further emphasized the need for fiscal control mechanisms
in the expenditure allocations of the public sector. There are three major control
mechanisms of the budget. The formal constraints are the existence of a development
program under a long term, medium term, and short term horizon from which claims are
appropriately outlined and becomes the basis for which public spending is oriented. In
short, outside of the development program, no spending must be incurred. Second is the
appropriate aligning of expenditure program from capacity to generate funds. In short,
no spending must be programmed when there are no venues from which funds can be
sourced. A coordination mechanism is the strategic alignment of national development
goals localized down to the household development claims. Third is the market
mechanism. Financial markets act as a disciplining device on the government even in the
absence of other mechanisms. Over spending results to inflation, and devaluation, which
are actually, conditions that do not encourage investment which when unmanaged would
result to macroeconomic crisis.

Capuno ( 2005 ) pointed out that common among local government units in the
Philippines is a pattern of expenditure that maximizes more the operational needs of the
government’s internal bureaucracy rather than on what it can produce for its citizens.
This is an endemic practice that is vulnerable to corruption.

Rule of Law

The role of the rule of law in governance is vital because of the complications of
government processes in the making of decisions of public concern. An appropriate legal
framework works best in simplifying transactions.

Berkowitz, et al (2000) found out that there is a strong correlation between rule of
law arrangements and economic development, which essentially means good legal
institutions are a pre-condition for long term growth and development.

Klapper and Claessens (2002) further found out a positive relationship between
per capita GDP and judicial efficiency. This holds true on economic transactions between
firms and the government and between the government and the household. In this
instance, countries with weaker legal systems have lower firm level governance, and
household level governance in terms of fair adjudication of contractual arrangements. An
appropriate legal framework that could facilitate the reduction of number of permits and
other regulatory requirements with respect to firm level governance works best in
attaining long-term growth and development.

Campos, (1999), in the context of household governance, argued that laws

governing behavior of public officials should be appropriate to the circumstances and
must command broad consensus within the framework of democracy, participation, and
empowerment. There is a strong positive correlation between households per capita and
 10

the legal structure of government in terms of household’s participation and empowered

civil society in the monitoring of laws.

Kaufman, et, al (2003) found similar observations of Campos that rule of law in
terms of speed in trial and convictions has direct relationship to better development
outcomes. An improvement in the rule of law would result in the long run to an estimated
fourfold increase in per capita income due to a positive feedback among the households,
resulting to an increased level of credibility of government. At the firm level scenario, the
more credible government is, the better the investment climate is, as it results to better
investment opportunities and long run growth.

Bureaucratic Quality

The manner in which public agencies and institutions administratively exercise

governance significantly affects the quality of development outcomes (Manasan, and
Mercado, 1999). According to Goold and Campbell (1991), organization theory also has
a contribution to make to the understanding of the more differentiated institutional
structure that is now coming to characterize the management of public organizations. The
move to the decoupling of hierarchical relationships has been a means both of creating
and managing more complex structures both of the market and the public with the
intention to become more efficient. The decoupling of hierarchical structure simplifies
transactions and reduces the number of decision centers. The prevailing orientation is to
make the administrative hierarchy move fast and economical in the delivery of public
services leading towards clientele satisfaction from which possibilities of corruption are
reduced.

Child (1987) has provided a characterization of this structure: blurring of

organizational boundaries, and emphasis on the continual creation and maintenance of
relations among these boundaries. The focus in other words, is shifting from structure to
process of organizing orientation. It is not the structural hierarchy that matters in decision
making, but more of the process from which decisions are made.

Walsh (1995) stressed that public service provision requires that the structure of
administrative hierarchies have to be broken down into smaller units or networks of
organization rather than an integrated bureaucratic hierarchies with independent
organizations or quasi-autonomous internal units, operating with devolved control,
providing services on a contractual basis. This model of organizing believes in the theory
that public services possess varied forms both in quantity and quality since social
preferences are articulated differently across geographical boundaries. There can be no
uniformity of services since societies have varying degrees of needs and preferences
across geographical boundaries. The pattern therefore is one of differentiation either
between or within organizations. The coordination of the network tends to come from a
mixture of planning based upon a framework of authority and mutual adjustment.

Common, et, al (1992) pointed out the second aspect of administrative

governance is the manner in which performance of civil servants is tracked and evaluated
 11

with corresponding built in mechanisms of sanctions and incentives. Standards and

performance measurement of public servants have a central part of the initiatives for
change, and there has been increasing emphasis on the evaluation of public services and
the right of the public to complain and obtain redress if they do not receive an adequate
service. Performance management of public servants must be oriented towards output
from which they are expected to deliver and the better output generated must be
appropriately rewarded through a framework of incentive system while those who failed
to deliver certain required targeted outputs must be sanctioned within the framework of
an appropriate legal structure. An appropriate performance tracking mechanism would
make things better in the manner civil servants perform official functions. Traditional
supervision of in-house supervisors does not guarantee that a public servant performs his
job. Client based performance-tracking works best on service clients. The view that
public servants are service providers and the clients, (it is actually households with
respect to governance as principal stakeholder), as service purchasers could best be taken
as a way of tracking performance of civil servants. The feed back of the households on
the manner services are provided to them must be taken into account as essential gauge of
performance tracking.

Campos and Pradhan (1996) pointed out that the quality of bureaucratic
responsiveness is an important structural determinant of public services provision
efficiency. There are three indicators of bureaucratic responsiveness: compensation
scheme of civil servants, merit based recruitment and promotion, and managerial
autonomy of public managers. A necessary requisite for the public bureaucracy to deliver
services efficiently is adequate compensation scheme, which aligns with private sector
compensation. Without such a system, competency will not be rewarded appropriately.
The worst-case scenario is one in which promotions and recruitment are based solely on
political connections and influence. Under such scenario, high salaries will tend to go to
those who are most well connected and civil servants would tend to concentrate on
establishing such connections rather than on accomplishing their tasks efficiently in
delivering public services. Managerial autonomy of public managers is focused on the
autonomy over allocations of resources including the power to hire and fire employees.
Given these parameters, public services delivery is enhanced, while corruption is
minimized, which could result to household’s income level increase.

Guerrero (1974) pointed out the importance of systems in a bureaucracy’s

organizational inputs may come from within or outside of the system to work inter-
relatedly in a process to produce results called outputs. The quality of bureaucratic
response is a result of well-functioning processes of the organization.

Empowerment

Empowerment as a governance arrangement facilitates control of information and

convergence of interests among all the stakeholders of governance. Alsop (2005) found a
positive correlation between the degree of empowerment and development outcome
levels among less developed economies of Nepal, India, and Ethiopia.
 12

Moser (2003) pointed out that empowerment by expanding assets and capabilities
of poor people to negotiate, participate, influence, and control accountable institutions
that affect their lives, minimized corruption, improved services delivery, and moved
faster the government bureaucracy.

Moreover, Molena (2003) stressed the strategic effect of empowerment as

enabling or giving power to do something for the people’s lives to governance
effectiveness. By building capacity for collective action household needs are optimally
articulated resulting to a more meaning delivery of services. Mason and Smith (2003)
pointed out that the extent, to which some categories of people who can control their own
destinies even when others with whom they interact in the community oppose their
interests, becomes stronger to predict their economic and social well being. Examples of
cases studied among 56 communities in Pakistan, India, Malaysia, Thailand and the
Philippines showed significant success indicators on family planning, livelihood
programs, and gender related projects.

Malhata (2003) stressed the need to enhance assets and capabilities of diverse
individuals and groups to engage, influence, and hold accountable the institutions that
affect them. Empowerment in this context is making institutions of government
accountable to them through mechanisms of contestability of public services delivered.

Participation

According to Walsh (1995) participation of civil society is best shown both in the
delivery of public services and policy decisions. He stressed that there are two major
ways to deliver public services that work well for the achievement of development goals
in a given country, namely, partnership mechanism with civil society comprising the
people’s organization and the private sector, and the market mechanism. The notion of
partnership is supported by Krocker (1995) that a stronger partnership with civil society
facilitates effective delivery of services, while the market structure makes it efficient. The
market increases access to resources at a competitive price, while civil society reverses
the process of alienation and disbelief over the conditions and decisions that affect them
and their environment.

Brown (2003) pointed out that a mechanism of partnership and collaboration with
civil society empower the households to explore opportunities to alter their potential
reality towards the means to improve themselves. Romero (1996) called this as
developmental partnership from which the households in their collective action are
involved in all phases of development cycles: policy, and programs and projects
formulation. This was supported by McMillan (1995) in his assessment studies of Latin
America that collaboration and partnership mechanisms with the various sector of
community allow people to gain influence over development events, thus, affecting their
standard of living. Likewise, allowing the market sector and civil society to participate in
services delivery or even in policy decisions could exert effort to government to initiate
fundamental change in the institutional structure enhancing endeavors to address the
issues on accountability, transparency, rule of law, and bureaucratic responsiveness.
 13

These issues provide parameters of effectiveness of any mechanisms of contract more

particularly contracts that deal on public services delivery.

Davao City Governance and the Local Government Code

The City Government of Davao is expected by the local government code to

formulate their local development plan which will serve as their macroeconomic
framework for local development to take place. The Antipolo appraisal report(1997) on
the 4th Rapid Appraisal of Decentralization and Local Development for Region X1
showed a significant leap on Davao City local governance since the implementation of
the local government code. It was found in the said report that Davao City updated its
socio-economic and physical development plans and was ready to embark on the
formulation of the City Master plan initiated by the City Development Council with the
City Planning and Development Office as lead department.

II- How does the City Government Practice Governance?

In order to generate data on how the City Government practices governance, open
ended questions were prepared for the key informant interview. These guide questions
centered on the dynamics of local governance from local development planning to local
fiscal administration (please see annex A for the interview schedule for key informants).
The responses of the key informants were then subjected to thematic analysis to detect
patterns of concepts that would highlight practices categorized according to the
functional code of local governance. Thematic analysis can be described as “the
“identification of what, and how frequently, concepts occur in texts” (Popping, 2000)

As shown in table 1, there are discernable evidences of observable practices how the City
Government practice governance in the exercise of its governmental powers according to its
functional features. The city government as portrayed by the Key Informants (City Department
heads, and Civil Society: Business Sector) is transparent, accountable to the public, adhering to
the rule of law, participatory, bureaucratically responsive to public claims in the exercise of its
administrative, legislative, and economic functions. First, administratively, the City Government,
in terms of transparency, posted financial statements in the City’s Bulletin Board in the semi-
annual basis for public information, and with media participation periodically informed the public
on the status of government programs and projects. By linking priorities and plan to the annual
budget, adopting service-based fiscal review system in monitoring departments performance,
decentralizing budget prioritization at the department level, practicing a tracer system for those
with unliquidated cash advances, adopting character advocacy and target based performance
evaluation system among its human resources, the city government considered itself as directly
accountable to the people it served. The city government sees to it that the rule of law prevails by
monitoring business requirements compliance based on existing laws of the City, periodic
holding of conference with department heads and Commission on Audit in relation to application
of General Accounting and Auditing Rules to every fiscal transactions, enhancing of logistical
support to City Philippine National Police for the deterrence of index and non-index crimes to
improve police response and assistance, and periodic warning of the public that criminals have no
place in the city through print and broadcast media. Moreover, participatory mechanisms were
also put in place by the city government in the exercise of its administrative powers through
periodic feed backing conferences with concerned sectors on matters relating to city
 14

operational efficiency, partnership with DLPC( Davao Light Power and Company) for
911 police response team efficiency, and event partnership with civil society on the
City’s significant celebrations ( Kadayan, Araw ng Dabaw). In the area of bureaucratic
responsiveness, the city government simplifies transactions in the exercise of its licensing
powers by adopting one stop shop for business application, decentralizes spending
decisions among its departments, and adopts a policy of 1 to 3 day prescription period in
all areas of administrative transactions by its departments given the 1:300 city employee
and public clients ratio. Second, in the exercise of the City’s legislative powers by the
legislators, the city government is transparent through posting of whereabouts of
legislators outside their respective offices, and full media coverage of legislative
deliberations. Legislators are made accountable to the public through citizens watch
mechanism from which legislators’ performance and transactions are monitored City
legislators are not above the law, hence, their behavior in legislation is regulated through
implementation of existing laws that govern them (house rules, ethics committee). By
conducting periodic dialogue with their respective constituencies in the field, utilizing the
special bodies for policy discussions, and using participatory rapid appraisal in the
formulation of barangay development plan, legislators are able to integrate in their
legislative agenda public interest. To fast tract executive and legislative priorities, both
branches of City governance come up with coordinating mechanism to iron out priority
ordinances for public concern. Third, in the exercise of economic decision making
powers, in terms of transparency, the City government adopts an open business climate
policy, and report to both print and broadcast media it accomplishments based on its
fiscal targets. Furthermore, the city economic planers take into account the need to base
departmental spending decision from its service based work targets to maintain
answerability to the public who are in need of such services, and strengthening of
enabling strategies such as, peace and order, reduced criminality to enhance investor
confidence. To see to it that the rule of law is observed in its fiscal resource
administration, the city government sends notices to delinquent tax payers, conducts
public auction of real properties of tax evaders, examines book of accounts of business
establishments, publishes names of tax evaders, and firm implementation of regulatory
business policies relating to environment, and health hazards. In terms of participatory
mechanisms, the city government enters into developmental partnership with Davao City
Chamber of Commerce for policy inputs governing business climate, and conducts trade
expos participated by both local and international entrepreneurs. To enhance bureaucratic
responsiveness for economic concerns, the city adopts a data based business intelligence
mechanism in coordination with DTI( Department of Trade and Industry, Bureau of
Internal Revenue, and Bureau of Customs to enhance better tax collection and
implementation of appropriate business policies.
 15

Table 1: Institutional Mechanisms in The Exercise Of Governmental Powers

(Extracted from thematic Analysis of Key Informant’s Data) by functional
categories.
Functional Institutional mechanisms in the exercise of governmental Powers
code on City (Extracted from thematic Analysis of Key Informant’s Data)
governance Transparency Accountability Rule of law Participation Bureaucratic
Responsiveness
 Posting of  Linking, priorities,  Monitoring,  Periodic,  .Simplifying
City plan to budget in the requirements feed backing, transactions,
financial annual compliance of city conferences stages, one
statements in implementation plan operations based on with stop shop
bulletin  Services based existing laws concerned  Department
board review system  Periodic conferences sector based budget
 Forums with  ROA(Request of on COA accounting  Partnership preparation
civil society Obligation for rules application with DLPC and
Administrative on Allotment as  Enhancing logistical for 911 execution
governance monitoring support for police  1 to3 day
programs mechanism deterrence of both response prescription
 Budget Prioritization index and non-index team for every
at department level crime efficiency transaction
 Internal audit review  911 police response in all areas
of documents prior strategy , and other of operations
disbursements public safety for example,
 Tracer system for concerns public
unliquidated cash service
advances delivery, and
 Character Advocacy other
requests
.

 Periodic
dialogue
 Citizen feedback  Implementation of with  Executive
 Posting of mechanism to existing laws constituents and
ordinances in monitor legislators governing legislators and civil legislative
the bulletin performance society on coordination
Legislative board policy issues for
 Full media  Utilization of development
coverage local special agenda
during bodies for
legislative policy
delibrations discussions
 Participatory
Rapid
Appraisal in
the
formulation
of BDP’s
 Open  Work and financial  Sending of notices to  Trade  Budget
business plans as basis for delinquent tax payers Expo’s prioritization
climate departmental  Public auction of real  Partnership at the
policy spending properties of tax with department
 Strengthened  Strengthen enabling evaders business level
responsible strategies such as,  Examination of book org.(Davao  Data based
media peace and order, of accounts of City tax mapping
 Reporting reduced criminality business Chamber of in
Economic achieved to enhance investor establishments Commerce coordination
fiscal outputs confidence  Publication of names with othe
versus fiscal of tax evaders agencies,
targets in  Firm regulatory DTI, BIR,
print media business policies BOC
relating to
environment, and
health hazards
 16

III- Observable Indicators of City Government\s Performance in the Last 10 Years

One of the ways to track down governance performance at the local level is its
extent of effectiveness on, fiscal management, bureaucratic quality, and government’s
contribution to the growth of the market, socio-demographic indicators, and trends in the
house hold standard of living.

Fiscal Management

Table 2: Davao City Government’s Appropriation by Services

Year Appropriation by Services

Infrastructure Environment Peace and Education Health
Order
1994 61,000,103.51 2,060,092 4,841,663 13,087,658 33,224,713
1995 65,750,775 3,348,841 4,841,663 28,263,328 45,929,567
1996 29,650,202 94,218,603 8,323,615 3,150,000 86,367,072
1997 88,182,558 122,017,611 73,307,597 12,846,721 109,264,377
1998 90,925,217 121,234,529 97,798,000 9,529,810 115,790,430
1999 86,722,251 119,025,321 61,500,000 6,414,739 117,627,397
2000 110,416,923 131,263,712 90,250,000 6,187,163 121,538,522
2001 101,255,059 123,602,43 92,000,000 785,000 121,405,079
2002 102,243,508 122,318,323 124,756,000 4,959,634 122,444,422
2003 98,025,481 170,76,487 141,000,000 4,818,510 135,275,599
2004 100,773,307 171,775,981 311,000,000 2,015,000 135,,574,825
Average
per
Year 84,995,034.96 98,584,779 100,477,688 8,368,869 33,224,713

Size of Public Allocation

The share of developmental expenditure consisting outlays for the basic public
services in the over-all appropriation of the City government averaged to 40.%% per
year. Other services account for 60% of the total Local Income of the City. The total local
income includes national income transfers in terms of the internal revenue Allotment.
Executive and legislative coordination resulted to the prudent allocation of resources with
development priorities amounting to 615.5M, and other services amounting to 1.05B per
year from 1994 to 2004.

Figure 2: Size of Allocation from Total Local Income at 1.6 Billion

 17

Size of Allocation from Total Average Local Income Per Year at 1.6B (1994-
2004)

40.1, 40%
(615.5M)

59.9, 60%
Developmental
(1.05B)

Other Services(Operating
Allocation,etc)

Local Income Composition

Davao City’s aggressive implementation of its tax laws accounts for a total
collection of 709.3M or about 47.4% of total income including national transfers. The
internal Revenue Allotment (IRA) constitutes 52.6% or 1.09B per year from 1994 to
2004.

Figure 3 : Local Income Composition (1994-2004)

Local Income Composition (1994-2004)

47.40, 47%
709.3M
52.60, 53% per year
1.09B per
Year
Local Collections
Internal Revenue Allotment

Annual Appropriations

The City Government consistently increased its appropriations at the rate of 6.1%
per year. It however noted that while it increased from 1994 to 2000 it declined in 2001
but geared up again in 2004. Fiscal strength in 2001 is affected by a short fall of tax
collection in this year as shown in the succeeding figure on local taxes. But
appropriations recovered fast when the City Treasurer’s Office geared for more
aggressive tax collection mechanisms by implementing persistently the tax laws of the
City.

Figure 2: Size of Annual Appropriations per year (1994-2004

 18

Annual Appropriations Annual Appropriations

2,000,000,000 1,603,758,500
Appropriations
1,731,870,000 1,503,163,246
1,500,000,000 1,364,722,986
1,087,910,596 1,484,754,829 1,172,801,135
1,000,000,000 1,331,604,706
1,087,910,596 1,063,680,226
885,320,809
500,000,000

0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Year

Administrative Quality

The need to simplify transactions and align human resources with services
delivery, and hasten bureaucratic transactions resulted to the allocation of personnel to
services delivery sector with the highest number of personnel at 926 employees or 35.5%.
This is followed by the executive services under the City Mayor’s Office employing 881
plantilla employees or 33.9%. Income services of the City employees 646 personnel or
24.8%. The lowest number of personnel is in the legislative services sector with only 149
or 5.7% of the total work force of 2,602 from 1994-2004. The City Government of Davao
gives priority to Services Delivery Departments as they are directly linked to the needs of
the City’s constituencies. The services delivery department consists of the City Health
Office, City social services, CENRO, City Veterinarian’s Office, and the City
Cooperative Services. The executive services sector comprises the City Administrator’s
Office, City Mayor’s Office, City Accountant’s Office, City Planning Office, Human
Resource Office, City Legal’s Office, and the City Budget Office. Moreover, the income
services portfolio comprised the City Treasurer’s Office, City Engineer’s Office, City
Assessor’s Office, and the City Registrar’s Office. The City Vice Mayor’s Office manned
the legislative services.

Figure 3: Functional Distribution of Human Resources

Functional Distribution of Human Resources at 2,602 Personnel (1994-2004)

5.7% 35.6%
(149) (926)
24.8%
(646)

Delivery of Services Sector

Executive Services
Income Services
33.9%
Legislative Services
(881)

Economic Growth Indicators

 19

Observable in the City of Davao is its booming economy indicated by the growth
of dollar investments, volume of construction, business survival rate, volume of
registered vehicles, and volume of energy consumption.

Balance of Trade

Davao City having mastered investor’s confidence through its peace governance
efforts impacts to an average balance of trade or trade surplus of $231,636,950 per year
from 1994 to 2004. This confidence catapulted Davao City to the safest entry and exit
point for both domestic and international trade transactions in the East Asian Region.

Figure 4: Balance of Trade

1994
Trade Surplus from 1994 to 2004
1995
$249,226,975 $105,357,697 $255,191,843 1996
$234,079,346 1997
$254,691,805 1998
$255,617,367 1999
2000
2001
$257,410,979 2002
$227,345,105 2003
$310,403,516
$212,716,373 $185,965,441 2004

Construction Boom

The assurance of stability that the City has provided in the market motivated the
private sector to pour in more investments in the hotel industry resulting to a boom of
construction with an average investment of PhP2, 261,166,667.00 per year from 1999 to
2004.

Figure 5: Volume of Construction

Volume of construction (1999-2004) 1999
2000
2001
1,110,000,000
1,124,000,000 2002
773,000,000 2003
2004

7,397,000,000 1,481,000,000

1,682,000,000

Growth of Business Capitalization

 20

With business licensing simplified and contained business capitalization boomed

to an average of PhP 82,794,400.00 per year from 2000-2004. This indicates discernable
proof of business confidence with PhP 118,548,000.00 in 2004.

Figure 6: Volume of Business Capitalization

Volume of Bussiness Capitalization 2000-2004 2000
2001
2002
62,000,000 2003
118,548,000
2004
69,449,000

83,855,000 80,120,000

Export Commodities

Fresh fruits exportation has the highest gross earnings from 1994 to 2004 with
value added following the trend. The lowest export gross value of exports is wood
products.

Figure 7: Export Commodities in Million Dollars

Export Commodities in Million Dollars
Export Commodities in Million Dollars

470,563,132
500,000,000
400,000,000
300,000,000 122,151,190
200,000,000 1,440,693
100,000,000
0
Fresh Fruits Value Added Agri Wood Products
Products

Export Destination

Southeast Asian countries have the highest export destination which accounts for
$ 426.8million from Davao City exporters in 1994 to 2004 indicating competitiveness of
their products to the world market.
 21

Figure 8: Export Destination

Export Destinationations in Million Dollars (1994-2004) Southeast
$68,038,880 Asia(Japan,China,Korea,
$2,399,706 Taiwan,Malaysia, Hongkong,
$42,705,243 New Zealand, Indo-
$18,312,230 China,Singapore,Thailand,
Europe(UK,Germany,France,Net
herlands,Russia

North America(Canada, USA)

$426,765,155

Business Survival Rate

The average survival rate of business in Davao City is 81.01 % per year or 17,090
entrepreneurs survived in their business from 1994-2004.

Business Survival Rate at 21,095 Business Permits Renewed per year from 1999-2004 1999
2000
84.21 79.51 2001
2002
2003

79.56
88.26

73.52

Volume of Tourists

Davao City has an average tourist arrivals of 365, 200 per year from 1994-2004
with year 2004 having the highest registered tourists. This is estimated to 1,000 tourist
arrivals per day indicating a positive outlook in terms of tourists’ most liked destinations
in the country.

Figure 9:Tourist Arrivals

Size of Tourists Arrival from 1995 to 2004 1995
568,000 215,000 1996
284,000
1997
278,000
1998
496,000
1999
2000
270,000 2001
2002
431,000 359,000
2003
418,000 333,000 2004
 22

Volume of Registered Vehicles

Davao City has an average of 74,778 registered vehicles in the last 10 years from
1994-2004 with 2003 having the highest number of registered vehicles. Although this has
impact on air quality, this indicates a favorable road infrastructure quality creating impact
on better mobility of people by land consisting of both public and private groups coming
from provinces of Mindanao.

Figure 10: Registered Vehicles

Registered Vehicles from 1995-2004 at 74,778 Vehicles per year 1995
1996
89,500 60,000 1997
65,000 1998
80,000 1999
70,000 2000
2001
2002
81,400 2003
74,600
79,700 72,800

Volume of Energy Consumption

In terms of energy consumption the city consumes an average of 828.6 million

kilowatts every year from 1994-2004 with 2004 having the highest energy consumption
at 1.5B kilowatts. The increase in capital intensive industries and residential subdivisions
brought about by favorable business climate has increased energy consumption by 10.7%
per year.

Figure 11: Energy Consumption

Total Pwer Consumption from 1995-2004 at 828,550,000 kilowats per year(1994-2004) 1995
400,500,000kwts 1996
1,500,000,000kwts 625,000,000kwts
1997
630,000,000kwts
1998
995,000,000 775,000,000
1999
kwts kwts
2000
2001
2002
875,000,000kwts 825,000,000kwts 2003
850,000,000kwts 810,000,000kwts 2004
 23

Socio-demographic Indicators

Economic growth and development are not identical terms (UNDP.org). Kuznets
[Economic Growth and Income Inequality, American Economic Review, 1955, Vol 45,
pp. 1-28] found empirical evidence that growth and income inequality were correlated
through an inverted-U. There is empirical evidence that GNP per capita as indicator of
growth is positively associated with income inequality, meaning as GNP per capita
increases so income inequality also increases. Hence, growth indicators have to be
revalidated by development indicators (socio-demographic) in terms of employment rate,
crime solution efficiency, population growth rate, gross participation rate in basic
education, and standard of living in terms of average consumption and expenditures.
While it is possibly true that Davao City has discernable descriptive evidence of
economic growth, there is a logical necessity to establish socio-economic development
indicators to measure development since better growth output does not mean better lives
for all.

Employment Rate

Davao City’s employment rate is 86.47% in average from 1994-2002 at 663,000

employable population per year. He highest were in 1999 to 2002.

Figure 12: Employment Rate

1994
Employment Rate at 663,000 Employable population per year from 1994-2002 1995
89 80.86 1996
82.62 1997
88.6 1998
1999
2000
2001
2002
89.1 84.38

86.14
89.6
87.9

Crime Solution Efficiency

The highest crime solution efficiency of the Philippine National Police-Davao

City is the years 1996 to 2004 at an average crime solved of 1,198 given a crime volume
of 1,363 per year. Logistical help form the Office the City Mayor helped in sustaining the
Davao City PNP crime solution efficiency.
 24

Figure 13: Crime Solution Efficiency

Crime Solution Efficiency per Year at 1,364 crime volume and 1,198 crime solution per year 1994
(1994-2004) 1995
89.20% 77.80% 1996
90.20% 75.50% 1997
87.80% 1998
92.20% 1999
2000
2001
90.60% 2002
94.80% 2003

92.30% 91.30% 2004

95.20%

Population Growth Rate

Davao City’s population growth rate average to 2.4% per year in the last 10 years
from 1994-2004. The city’s population program although directly contradicts that of the
Catholic Church of the City has effectively managed population increase.

Figure 14: Population Growth Rate

1994
Population Growth Rate at 1.1million population per year (1994-2004)
1995
2.3, 8% 2.8, 10% 1996
2.3, 8%
2.9, 10% 1997
2.3, 8% 1998
1999
2000
2.8, 10% 2001
2.3, 8% 2002
2.7, 10% 2003
2.4, 9%
2.5, 9% 2.7, 10% 2004

Gross Participation Rate

The average gross participation rate of Davao City’s educable population for
basic education is 84.19% in the last ten years from 1994-2004 indicating a very
satisfactory participation rate of educable population implying a fairly accessible basic
education provided by the public sector. Caution however is advised that the data only
reveal those of the DepEd subsidized public education system.
 25

Figure 15: Gross Participation Rate

Gross Participation Rate in Basic Education (1994-2002)

92.05% 83.905% 1994

1995
94.98% 87.385%
1996
1997
1998
1999
80.34% 2000
80.755%
2001
76.85% 80.97% 2002
80.435%

Average Income and Expenditures of Davao City and National Poverty Threshold

The average income and expenditures of Davao City households in 1994

increased by 8.31% in 1997, and subsequently increased by 5% in the year 2000 and
3.11% to 2003. The year increase of income is more than five percent (5.47%).
Discernable though is Davao City’s household income being higher than the national
poverty threshold in 1997 by almost 1% (.64%) it fails however to sustain in the
succeeding years.

Figure 16: Average Income and national Poverty Treshold

Average Income of Davao City Residents and National Poverty Threshold
Davao City Average Income (1994-
2003 NSCB data)
160,000 National Poverty Threshold(NSCB
Threshold at Current Prices

137,412
140,000 118,116 147,204
Income and Poverty

120,000
106,620 125,123 129,133
100,000 118,873

80,000
60,000
68,999
40,000
20,000
0
1994 1997 2000 2003
Year

Estimating the best predictors of standard of living of Davao City in terms of

average consumption and expenditures given governance output indicators,
economic growth indicators, and socio-demographic indicators as determinants.

After running a multiple regression of the log data of the determinants of standard
of living, governance output indicators’ variations are found to have better established a
linked in the variations of the household’s average consumption and expenditures at
current prices in the last 10 years. This confirms Kauffman’s findings that better
governance could exert powerful influence on the living conditions of people.
 26

Predictors Beta In t Sig.

PEAO(Peace and .071 .601 .567
Order)
IRA(Internal Revenue .105 1.021 .341
Allotment
ANAP(Annual -.073 -.942 .378
Appropriations)
POP(Population) .113 1.393 .206
LOCIN(Local Income) .169 3.246 .012
INF(Infrastructure .352 8.089 .000
allocation)
CRIMS(Crime 1.219 3.938 .000
Solution)
HEA(Health .189 4.579 .004
allocation)
TOPCON(Total Power .003 .099 .925
Consumption
REVEHI(Registered .005 .194 .853
Vehicles)
TOARR(Tourist .005 .224 .832
Arrivals)
BUSUR(Business .017 .482 .647
Survival Rate)
BUSCA(Business .025 .991 .367
Capitalization)
CONIN(Construction .000 .001 .999
Investment)
TRSU(Trade Surplus) -.005 -.143 .892
NUP(Number of -.013 -.563 .598
Personnel)
EDUC(Education .002 .193 .856
Budget)
 27

Partial Regression Plot

Dependent Variable: AVECON
.06

.04

.02

0.00
AVECON

-.02

-.04
-.2 -.1 0.0 .1 .2 .3

HEA

Partial Regression Plot

Dependent Variable: AVECON
.2

.1

-.0

-.1
AVECON

-.2

-.3
-.6 -.4 -.2 -.0 .2 .4

INF
 28

Partial Regression Plot

Dependent Variable: AVECON
.02

.01

0.00

-.01

-.02
AVECON

-.03

-.04
-.3 -.2 -.1 -.0 .1 .2

LOCIN

Partial Regression Plot

Dependent Variable: AVECON
.06

.04

.02

0.00

-.02

-.04

-.06
AVECON

-.08

-.10
-.06 -.04 -.02 0.00 .02 .04

CRIMS
 29

Conclusions

There are discernable evidences of observable practices how the City Government
practice governance in the exercise of its governmental powers according to its functional
features. The city government as portrayed by the Key Informants (City Department heads, and
Civil Society: Business Sector) is transparent, accountable to the public, adhering to the rule of
law, participatory, bureaucratically responsive to public claims in the exercise of its
administrative, legislative, and economic functions.

Discernable though is Davao City’s household income being higher than the
national poverty threshold in 1997 by almost 1% (.64%) it fails however to sustain in the
succeeding years

There is empirical evidence to show that better governance could result to better
living condition of households. Caution however is noted on the effect of the missing
values on some of the indicators of the predictors in view of the non-availability of
complete panel data from the secondary source. Data imputation as a method to resolve
the magnitude of missing values is not enough to arrive at robustness of results.

It is recommended that the City Government must improve its local income
generation to a level that it is not dependent to national income transfers. Opportunities
that would improve the households’ standard of living must be provided through realistic
livelihood programs, and other income generating interventions. The city must also give
preferential attention to education and other services to meet the desired targets of the
Millennium development goals of the United Nations from which the country is a party.
 30

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