The Impact of Decentralization in Northern Mindanao

IMPACT OF LOCAL DECENTRALIZATION ON THE

ECONOMIC GROWTH OF NORTHERN MINDANAOPhilip Camara

The Philippines (2007; in Million Pesos)

China (2004 ; 100M Yuan)

Central* Local** Central Local

Revenue 1,096,875 234,760 14,503 11,893

% to Total 82.37% 17.63% 54.90% 45.10%

Expenditure 1,029,377 194,736 7,894 20,592

% to Total 84.09% 15.91% 27.70% 72.30%

Net of IRA of P146,591.95 million**Inclusive of IRA of P146,591.95 millionSources: Philippine Commission on Audit 2007 Financial Reports; National Bureau of Statistics of China

Comparative Philippine and China Central and Local Government Share in Revenue and Expenditure

Central LocalTotal Revenue 82.37% 17.63%Tax Revenue* 93.08% 6.92%

General Income Permits and Licenses 77.03% 22.97% Service Income 94.24% 5.76% Business Income 68.65% 31.35% Other Income 94.65% 5.35%Gain on Forex 100.00% 0.00%

Philippine Central and Local Government Revenue Breakdown (in percent)

*Central-Net of IRASource: Philippine Commission on Audit 2007 Financial Reports

Sources: Country Report-United Nations Economic and Social Commission for Asia and the Pacific; Philippine Local Government Code

General Functions of Local Governments

The Philippines

Run the Health and Social Welfare Systems Provide Agricultural and Fishery Support Solid Waste Management Local Business Development Small Infrastructure Construction and

Development Tourism Development Social Forestry / Mining

Local Government Revenue SourcesThe Philippines

Local Taxes such as:Business TaxReal Property TaxTransfer TaxFranchise TaxPrinting and Publication TaxAmusement TaxCommunity TaxShare in National TaxesInternal revenue Allotment (IRA) representing 40% of internal revenue collections based on the third preceding year (Regional distribution is as follows: Provinces 23%; Cities 23%; Municipalities 34%; and Barangays 20%Non-Tax RevenueShare in national wealth exploitation in their areaShare in the earnings of government agencies or government-owned or controlled corporations engaged in the utilization and development of national wealth in their area based on the following: 1% of the gross sales or receipts of the preceding calendar year or 40% of mining taxes, royalties, forestry or fishery charges and such other taxes, fees or charges including related surcharges, interests, or fines, whichever is higherSources: Country Reports China and the Philippines-United

Nations Economic and Social Commission for Asia and the Pacific

United States : Sources of State Revenue

Source Percentage (US Average)

General Sales Tax 23.5%Selective Sales Tax 10.9%Property Taxes 30.1%License and Other Fees

8.2%

Corporate Income Taxes

4.7%

Individual Income Taxes

22.6%Source: Tax Foundation Report : stateline.org

LGU Income Generation• Region X - Northern Mindanao Php Millions

• Total Province Cities Towns

• 9,236 2,462 3,691 3,082 2006

• 11,072 2,913 4,570 3,588 2007

• 20% Growth Mostly due to IRA• IRA Dependency in 2006 = 82.6%• IRA Dependency in 2007 = 90.9%

• Dr. Gilbert Llanto: “LGU fiscal autonomy is constrained because the LGC limits the power of LGUs to set local tax rates and preserves the more revenue productive taxes in favor of the central government.”

LGC ‘91 Fiscal Constraints

Local Government Total* Central Central P000 Income Government Government Expenditure Expenditure % to LG Total Income Grand Total 234,642,572.58 762,534,007.59 324.98%National Capital Region 46,778,401.48 560,070,716.35 1197.28%Region 1 11,410,059.53 14,371,248.27 125.95%

CAR 6,223,710.33 7,499,513.73 120.50%

Region 2 9,160,569.36 10,132,758.94 110.61%Region 3 20,888,920.59 21,590,013.29 103.36%Region 4 35,866,590.31 27,646,932.60 77.08%Region 5 10,993,973.34 15,101,341.54 137.36%Region 6 16,679,840.96 18,419,954.59 110.43%Region 7 15,555,455.12 14,027,680.75 90.18%

Region 8 8,687,321.73 98,317,599.17 1131.74%

Region 9 7,781,531.08 9,821,773.23 126.22%

Region 10 11,300,406.23

11,512,490.21 101.88%

Region 11 10,170,596.06 10,980,183.03 107.96%

Region 12 8,285,249.49 8,623,777.18 104.09%

Region 13 7,545,245.07 7,146,537.05 94.72%ARMM 7,354,701.68 8,753,883.18 119.02%

Philippine LGU Total Income vs Central Govt. Expenditure per Region

*Inclusive of IRASource: Figures are from the Philippine Commission on Audit 2007 Financial Reports

If A Federal State…• And with a Tax Effort of Efficiency of just 15%..

• Total Region 10 Government Revenues would amount to P58 Billion…

• 200% higher than what it is today

GROSS NORTHERN MINDANAO DOMESTIC PRODUCT

• Current Prices, in Millions of Pesos• 2000 2003 2006 2010• • 124,524 197,101 277,269 389,624

Northern Mindanao Econ Sectors

• The almost-even distribution of the region’s economy among its major sectors may be considered by most economists to be almost ideal However, with the interrelation of the three (3) main subsectors (agriculture and fishery, manufacturing and trade) that may be deemed to be the pillars of the region’s economy, in the sense that agriculture provides the inputs to a significant part of the region’s manufacturing and, further, a significant part of the region’s trade depends on manufacturing.

• LINNITO M. PASCUAL

Top Manufacturing Outfits in Northern Mindanao

• Asia Brewery, • CATIMCO, • Coca-Cola, • Del Monte Phils., • LKKS Manufacturing, • Nestle Phils., • Phil Agro, • PICMW, Pilipinas • Kao, • RI Chemicals, • Mindanao Silicon, • STEAG State Power Inc• Elegant Chemical Alloy

AVERAGE FAMILY INCOME IN NORTHERN MINDANAO

• IN YEAR 2000 CONSTANT PRICES

• 2006 2009

• 102,000 98,000

• Poverty rate of Population in 2006: 43%

PHILIPPINES• INCOME BRACKET 2001 (%) 2010 (%)• Class AB 2 2

• Class C 18 12• Class D 56 64• Class E 24 23

• Despite the best years of GDP growth!

VIETNAM• INCOME BRACKET 1999 (%) 2010 (%)

• Class AB 7 21

• Class CD 31 55

• Class EF 62 24

“WHAT DOES GDP HAVE TO DO WITH ME?”

Results of PINATULO OR SUPERIORITY PRINCIPLE

GDP INDICATORS

COMPUTING PROGRESS FROM

CORPORATE ACCOUNTS

WANTED!

A change of crew& a direction.

Change.

From superiority to subsidiarity.From pinatulo to pinatubo.

GDP = NATIONAL INCOME in the Philippines

Pinatulo

• Land, labor , capital = enterprise

• Enterprise ++ = industry

• Industry++ = sector

• Sector++ = National Economy

Pinatubo• Environment, households, Man-

made assets = community income

• Community++ = towns / cities

• Towns/ / Cities = Regions & Provinces

• Regions ++ = National Economy

Filipino dignity.

Restoring

Subsidiarity starts with the Individual

A STATE EXISTS SO THAT A NATION’S CHILDREN MAY GROW UP WITH DIGNITY

Subsidiarity’s Unit of Org is the HH

Then from HH to Community

The Philippines Regions (17)* Provinces (80) /Cities(120)

Districts (219)* Towns (1,514) Villages (Barangays) (46,000) 1,956

people per village

Sources: Wikipedia; National Statistical Coordination Board; Country Reports-United Nations Economic and Social Commission for Asia and the Pacific*Under the National Government

Administrative Divisions

Trickle Down System

• Or PINATULO has been around with us since the colonial period…

• Independence merely Filipinized it but it is still Trickle Down or the Superiority Model…

• Only substantial change is the shift towards Pinatubo or Subsidiarity

• It is the SYSTEM that is incompetent, not the Filipino

EXECUTIVE VISION OF THE 1987 CONSTITUTION

• Section 14. The President shall provide for regional development councils or other similar bodies composed of local government officials, regional heads of departments and other government offices, and representatives from non-governmental organizations within the regions for purposes of administrative decentralization to strengthen the autonomy of the units therein and to accelerate the economic and social growth and development of the units in the region.

• Its membership is 75% from government sector which includes, elected officials like Governor, Mayor, etc. and regional line agencies like the DPWH, DOH, etc.

25% is private sector which includes NGOs, POs, and other private sectors.

MEMBERS OF THE RDC

• 1. Directly Supervise BIR Agencies in area• 2. Directly Retain Rev. Collections w/in IRA• 3. Strictly Enforce People’s Participation and• “bottom-up” Planning of LGC• 4. Enforce E-Comm Law having all LGUs• display in LGU websites: budgets / expens• 5. Directly Supervise all PNP units• 6. Ensure Prep of Land Use, Sus Dev. Plans• 7. Directly Supervise Reg. Line Agencies

PRESIDENTIAL AUTHORIZATIONS TO 17 RDCs

• Subsidiarity of the State

• Solidarity of Society

• Individual Responsibility for achievement

• All three must inform DECENTRALIZATION if it is to result in the balanced socio-economic development of the Philippines

Social Market Economy Frame