DRAFT FOR DISCUSSION

Challenges and Opportunities for Financing Development in the Philippines

by Marina Durano1

Presented at a Panel on Human Rights and Macroeconomic Policies at theExpert Group Meeting on Promoting Human Rights in Post-Crisis Financial Regulation

and Macroeconomic Policies

Organized by the Office of the High Commissioner on Human Rights in cooperation with the Center of Concern

24-25 April 2013, United Nations, New York City

The Philippines and the Global Financial CrisisThe immediate impact of the global financial crisis on the Philippine economy was a

decline in exports resulting in a decline of GDP growth (from 7.1% in 2007 to 1.1% in

2009). GNP growth also declined over the same period but less dramatically (from 7.5%

in 2007 to 4.0% in 2009) because of the continued growth of the overseas workers re-

mittances (Manasan 2011). The impact was compounded by the sharp rise in food and

fuel prices during the first quarter of 2008 (Manasan 2011; Balisacan, et al. 2010; Yap,

et al. 2009). The Philippine government responded through the Economic Resiliency

Plan (ERP), which aimed to pursue a countercyclical fiscal policy amounting to PHP330

billion (or USD6.9 billion) to sustain growth rates achieved before the crisis, reduced the

unemployment effects, protect vulnerable social sectors, reduce inflation, and ensure

competitiveness in preparation for the global economic recovery (Manasan 2011; Yap,

et al. 2009). Flexibility to undertake countercyclical policy was possible because the

Philippines improved its fiscal position between 2003 and 2007 as indicated by a de-

cline in the primary deficit of 4.6% of GDP in 2003 to 0.2% of GDP in 2007. National

government’s outstanding debt (including contingent liabilities) to GDP ratio also de-

clined from 95.4% in 2004 to 63.1% in 2007 (Manasan 2010).

The ERP fiscal stimulus package resulted in an increase in the budget deficit to -

0.9% of GDP in 2008, to -3.9% in 2009, and -3.7% in 2010. Total outstanding debt to

1 Assistant Professor, School of Economics, University of the Philippines-Diliman, Quezon City, Philippines. For correspondence, send email to mbdurano@econ.upd.edu.ph.

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GDP ratio also increased slightly to 65.2% in 2009. Manasan (2011) evaluated the ef-

fectivity of the fiscal stimulus package of the Philippine government and found that the

package was able to counteract the decline in exports and in private investments. The

figures on the Philippine government’s fiscal position remain within a comfortable zone

but that is not to say that there are no risks to fiscal sustainability. The 2014 budget

deficit target is 2 per cent of GDP, with the Philippine government aiming for a balanced

budget. Improved tax effort is needed in the Philippines. The Philippines recently

passed a new tax law aimed at increasing revenues but this will not be enough so that a

key element in the financing strategy is private-public partnerships for various types of

infrastructure projects, including classroom building. A reduction in the debt burden,

particularly in reducing borrowings just to pay off debt is very much needed if it is to

meet internationally agreed development goals, contribute to the achievement of the

MDGs, and fulfill its human rights obligations.

On Development Budgets, Fiscal Deficits, and Imperfect ObligationsThe phrase “fiscal deficits” fails to carry the weight of responsibility and obligations

that state institutions have in fulfilling commitments to human rights. I prefer the term

development budgets that clearly convey the outcomes desired by this policy target. My

preference is to speak of budget deficits in the context of pursuing development in its

broad sense rather than its narrow interpretation of per capita income growth (as well as

other income-based measures of development). By insisting on this phrase, the connec-

tion between macroeconomics and human rights becomes more explicit.

Human rights may be viewed, as argued by Amartya Sen, as ethical demands for

the freedoms that are contained in the set of rights being deliberated. These freedoms,

in turn, from a capabilities approach, are constitutive of human development (Sen

2004). When viewed as ethical demands, rather than the narrower interpretation of hu-

man rights as legal instruments, the potential for fulfillment are more broadly shared

across society; that is, that perfect obligations are not only specified (typically through

legal means) but imperfect obligations come into play as it becomes necessary to also

ask how each member of society and its multitude of organizations and institutions can

contribute to pursuing the freedoms being sought (Sen 2004). Imperfect obligations “in-

volve the demand that serious consideration be given by anyone in a position to provide

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reasonable help to the person whose human right is threatened (Sen 2004: 341).” With

this interpretation, therefore, macroeconomic policy makers, most prominently central

monetary authorities, finance and budget ministers, and planning ministers, are at least

held responsible for the fulfillment of human rights commitments. The most direct argu-

ment for the involvement of these actors are that they are part of the state apparatus,

that is often acknowledged as the duty bearer. But even when, these actors may be

able to deny direct connection with the state, as in the case of central monetary authori-

ties and their claims of independence, they remain members of society and have im-

perfect obligations to the fulfillment of human rights. Let me quote, for example, a

deputy governor of the Central Bank of the Philippines explaining why the national gov-

ernment cannot issue debt instruments of behalf of the central bank: “The differing in-

centives arising from the separate objectives of fiscal and monetary policy could pose

conflicts of interest for the Bureau of the Treasury, part of the Department of Finance, as

the expected issuer. Consequently, coordination may be difficult even if detailed agree-

ments are made between the monetary and fiscal authorities. Furthermore, as the na-

tional government operates in a more politicised environment, the BSP could be forced

to defend its operational decisions to political forums. Such politicisation of the monetary

policy implementation process represents an unnecessary distraction in the conduct of

monetary policy and imposes transaction costs on the regular policy-setting process

(Guinigundo 2012: 274).” This type of statement defies the process aspect of the human

rights framework that insists on transparency, participation and public deliberation. It is

very important to try to reconcile the “independence” position with human rights obliga-

tions.

Imperfect obligations also imply that international coordination over macroeconomic

policies have a role in supporting nation-states’ abilities to fulfill human rights commit-

ments. Again, fiscal and monetary authorities can reasonably consider in what way they

not only promote, protect and fulfill the rights of their fellow citizens but, since their ac-

tions affect people beyond their borders, an extension of the application of reasonable

consideration is justifiable. I would argue further that The Right to Development serves

to reinforce this expectation of reasonable consideration.

On Multi-layered Governance Structures

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Let me focus on central monetary authorities. Their scope of influence in macroeco-

nomic matters extends not only to national and international relations but also to local

government financing. This multi-layered governance structure means that monitoring of

human rights obligations of central monetary authorities needs to occur at all three lev-

els of governance.

At the regional level in Southeast Asia, for example, as part of the regional response

to the global financial crisis, independent surveillance units are being established but

many efforts appear under-resourced and fragmented (Sussangkarn 2010). Among

these units are: the ASEAN Surveillance Process attended by ASEAN Finance Minis-

ters, the Economic Review and Policy Dialogue among Deputy Finance Ministers of the

ASEAN+3, and the Executives Meeting of East Asia Pacific Central Banks that include

Hong Kong, PRC, Australia and New Zealand as well as ASEAN-6. Therefore, along

with the daily task of monitoring macroeconomic developments at the national level,

there must be appropriate monitoring of external events considering shocks recently ex-

perienced. At the international level of governance, sovereignty issues may arise and so

the coordination aspect needs to be emphasized. The question is the transparency of

these international forums to the broader public. Can mechanisms be established to al-

low for non-government analysis and opinions to be considered in the deliberations?

For example, is it possible to institute an instrument similar to an amicus brief for con-

sideration in the coordination meetings?

In the Philippines, national level monitoring is undertaken through a Development

Budgets Coordination Council (DBCC), which as inter-agency group at the Cabinet level

that includes the Secretary for Department of Budget and Management, the Secretary

for Finance, the Secretary for Socio-Economic Planning and the Executive Secretary of

the President. The DBCC has the mandate to recommend the annual government ex-

penditure program and the spending ceilings for socio-economic development, national

defense, general government, and debt service. The Central Bank of the Philippines is a

non-voting member of the DBCC and recommends inflation targets but the approval is

made by the entire committee so that the Central Bank does not enjoy full indepen-

dence (Guinigundo 2012). Another venue for coordination between the Central Bank

and other agencies is through the Investment Coordination Committee, which is tasked

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with evaluating the macroeconomic implications (monetary, fiscal, and balance of pay-

ments) of major investment projects and the domestic and foreign borrowing program.

At this level of governance, an active civil society is helpful through their direct en-

gagement in the analysis of the budget as well as proposals for expenditure allocation.

As indicated in the Department of Budget and Management’s National Budget Memo-

randum No. 115, the 2014 budget cycle includes mechanisms for people’s engagement

with the budget preparation process. A Budget Partnership Agreement (BPA) will be en-

tered into by the a government agency or corporation and civil society organizations

who are participating. Before this formal mechanism, an Alternative Budget Initiative led

by Social Watch Philippines was already actively engaging with the budget typically dur-

ing the stage when the budget is presented to the legislature.

National Budget Memorandum No 115 also mentions the Bottom-up Budgeting

Projects, which are meant to increase the linkages between national and local levels of

governance. In 2013, only 609 cities and municipalities were involved. For the 2014 ex-

ercise, there will be 1,233 local government units. The Department for Social Welfare

and Development working with the National Anti-Poverty Commission are especially im-

portant for ensuring the success of this mechanism. The Philippine Commission on

Women implements the GAD (Gender and Development) Budget equivalent to 5 per

cent of total budget allocations as mandated by the Magna Carta of Women (Republic

Act 9710). The GAD Budget is focused on government agencies that must plan and

program in a way that incorporates the gender perspective and promotes gender equal-

ity. Planning for 5% of the budget is expected not only to promote gender equality but

also to influence the design and programming of the remaining 95% such that these ac-

tivities complement the GAD plans.

However, most if not all of these mechanisms focus on expenditures and not on the

macroeconomic assumptions, targets and ceilings. These continue to be the exclusive

domain of the main macroeconomic policymaking institutions. An exception is the work

of the Freedom from Debt Coalition that is focused on the impact of the sovereign debt

problem of the Philippines on expenditure ceilings and overall growth prospects. Indeed,

the debt burden creates risks to fiscal sustainability.

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Debt financing also comes into play for local government financing. The Central

Bank of the Philippines has the potential to influence this, especially on debt-issuance of

local government units. It has been more than 20 years since the Local Government

Code (Republic Act No. 7160) was enacted that gave local government units (LGUs) in

the Philippines fiscal autonomy at the same time guaranteeing that these LGUs receive

a share of national taxes known as their internal revenue allotment. Unfortunately, these

LGUs continue to be dependent on the internal revenue allotment unable to generate

their own revenues. These LGUs become vulnerable to the political influence of mem-

bers of the House of Representatives who can use their Provincial Development Assis-

tance Fund (more popularly known as the pork barrel) to buy support. Along with fiscal

decentralization came devolved expenditure responsibilities on basic health care, social

welfare programs, agricultural extension work, local environmental concerns, and local

public works (Diokno 2012).

There is limited financing available to LGUs for their projects beyond the intergov-

ernmental fiscal transfers from the national government. Official Development Assis-

tance grants are limited, for example. There is a better chance of accessing ODA loans

that are re-lent through national government agencies, government financial institutions,

and the Municipal Development Financing Office (MDFO). Unfortunately, due to the

rules on the financing framework, many LGUs withdraw from the facilities because they

cannot afford the counterpart equity (Brillantes, et al. 2010). Another limitation of the

LGUs is that foreign donors require a sovereign guarantee but the Foreign Borrowings

Act (R.A. 4860 of 1966, predating the Local Government Code of 1991) does not allow

such guarantees to be given to LGUs. Only national government agencies are entitled

to sovereign guarantees (Brillantes, et al. 2010).

The private sector has stepped in to fill this gap in financing with the establishment

of the LGU Guarantee Corporation, whose owners are the Bankers Association of the

Philippines, the Development Bank of the Philippines, and the Asian Development

Bank. The guarantee, while not applicable for ODA funds, is helpful not only for the LGU

to access commercial bank financing but also for bond flotation. Unfortunately, eligibility

requirements state that guarantees are only available to first and second class prov-

inces and cities, and first class municipalities numbering only 500 out of 1,714 local gov-

6

ernment units. Key to obtaining a guarantee is the use of the IRA as collateral. Specific

to bond flotation, an important step is for the LGU to obtain approval from the Central

Bank of the Philippines, particularly on the macroeconomic implications of the potential

bond float. The role of national government has been clarified in terms of planning and

programming links through the Bottom-up Budgeting Projects. The question here is the

role of the central bank both on regulatory aspects (capital adequacy requirements of

bond flotation, for example) as well as macroeconomic effects. The macroeconomic ef-

fects might become a hurdle to the late comer (or late floater) municipality as the liquid-

ity will have been mopped up by early floaters but much of this will depend on market

conditions. Intergovernmental fiscal relations takes on a different character since it will

be a relationship between the central monetary authority and the local government unit

that has to be defined. As with national government financing, these macroeconomic

concerns are outside of the public discussions and deliberations.

Process-oriented approaches and the need for evaluative measures

In 2008, Administrative Order 249 mandated the National Economic and Develop-

ment Authority, the planning agency of the Philippines, to ensure that the human rights

based approaches was integrated into development planning. It launched a Human

Rights Based Approach Toolkit designed for development planners this year. The HRBA

Toolkit emphasizes participation and highlights the PANTHER (participation, account-

ability, non-discrimination, transparency, human dignity, empowerment, and rule of law)

principles in doing so. The HRBA Toolkit contains chapters on the parameters and pro-

cesses of development planning. Despite availability, however, it is not clear who and in

what areas the Toolkit has been applied. The Toolkit itself needs to be shared with the

technical staff and decision makers of the DBCC and the ICC particularly in preparation

for the macroeconomic assumptions and targets at the beginning cycle of the budget

process. What we have seen, so far, is the budget cycle incorporating PANTHER princi-

ples in the budget preparation process. There are, however, three other segments of the

budget cycle beyond preparation, namely legislation, execution, and accountability, that

might require also mechanisms of engagement.

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In reviewing the mechanisms for participation, it was noted that there are hardly any

opportunities or even interest in deliberating the macroeconomic issues. Key to its suc-

cessful implementation would be the availability of evaluative measures designed to as-

sess macroeconomic policies’ consistency with human rights commitments. The as-

sessment, we have noted must be done at all levels of governance. At the international

level, National Budget Memorandum No. 115 noted that fiscal consolidation is neces-

sary for the Philippines because of “the continuing economic weakness of Europe and

the United States (DBM 2013, paragraph 3.2).” International coordination is recom-

mended but the forums should begin discussions on how such assessments may be

conducted.

As part of the ongoing public financial management reform, the Philippine govern-

ment will be instituting an Organizational Performance Indicator Framework (OPIF) that

is expected to increase cost effective delivery and that programs are in line with the

Philippine President’s Social Contract involving five (5) key result areas2. At this level,

the key result area of “rapid, inclusive and sustained economic growth,” which is the

goal of macroeconomic policies, will have to be evaluated against human rights commit-

ments. The OPIF has space for identifying indicators of success and the HRBA Toolkit

has suggestions on how the choice of indicators can incorporate HR principles. Since

the basic institutional framework is present, the matter to be attended to is implementa-

tion.

In pursuit of implementation, a discussion between the human rights community and

macroeconomic policy makers might be helpful. The evaluative measures can come in

at various levels. Some might involve a discussion of the underlying normative frame-

works of the dominant macroeconomic theories applied by the Philippine government

and its agencies as well as by the Central Bank of the Philippines. It also implies that

chains of causality are established between national income growth and stability and

the variety of indicators of the well-being of the citizens of the Philippines or of specific

human rights obligations. This is not an easy task although there are many discussions

that focus on the link between growth and stability with employment, wages, and public

2 These are: anti-corruption and transparent, accountable, and participatory governance; poverty reduction and empowerment of the poor and vulnerable; rapid, inclusive and sustained economic growth; just and lasting peace and the rule of law; and, integrity of the environment and climate change adapta-tion and mitigation.(http://budgetngbayan.com/key-features-and-principles/)

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services. There are many intervening factors that come into play between income as a

means to development and improvements in well-being as the outcomes of develop-

ment.

The dilemma remains. Who are the human rights defenders when it comes to

macroeconomic policy design and implementation? What will be the mechanism for de-

liberation? How will can imperfect obligations be rationalized in the policy design when

the link between human rights and macroeconomics are not acknowledged or only

weakly so? The complexity of decisions around financing for development and its impli-

cations often means that these decisions are left to the specialists and experts creating

an exclusive technocracy whose accountability to the people is unclear. Meanwhile, citi-

zens and civil society focus on spending on projects and activities. Economic gover-

nance becomes a rigid hierarchy of upstream policy making over downstream program

or project implementation. Global economic governance becomes a confused web of

unilateral macroeconomic decisions of systemically significant nations whose effect is to

limit policy space or, worse, threaten the economic stability of smaller, open economies.

ReferencesBalisacan, Arsenio, Sharon Piza, Dennis Mapa, Carlos Abad Santos, and Donna Odra (2010). “The Philippine Economy and Poverty During the Global Economic Crisis,” UPSE Discussion Paper No. 2010-08. Quezon City: UP School of Economics.

Brillantes, Alex, Gilbert Llanto, and Ruperto Alonzo (2012). “LGU access to official de-velopment assistance (ODA): status, issues, and concerns,” PIDS Discussion Paper Series 2010-10. Makati City: Philippine Institute for Development Studies.

Diokno, Benjamin (2012). “ Fiscal decentralization after 20 years: what have we learned? where do we go from here?,” The Philippine Review of Economics 59(1): 9-26.

Guinigundo, Diwa (2012). “Fiscal policy, public debt management and government bond markets: the case for the Philippines,” in BIS Papers No. 67 Fiscal Policy, Public Debt and Monetary Policy in Emerging Market Economies. Geneva: Bank for International Settlements.

Manasan, Rosario G. (2011). “Assessment of the Impact of the Fiscal Stimulus, Fiscal Risk and Fiscal Transparency: The Philippines”, in Ito, T. and F. Parulian (eds.), Assess-ment on the Impact of Stimulus, Fiscal Transparency and Fiscal Risk. ERIA Research Project Report 2010-01, pp.213-251. (www.eria.org/publications/research_project_reports/images/pdf/y2010/no1/

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ch6ASSESSMENT_OF_FISCAL_STIMULUS_philippines.pdf, accessed on 21 April 2013)

Sen, Amartya (2004). “Elements of a Theory of Human Rights,” Philosophy and Public Affairs 32(4): 315-356.

Sussangkarn, Chalongphob (2010). “The Chiang Mai Initiative Multilateralization: origin, development, and outlook,” ADB Working Paper Series No. 230. Tokyo: Asian Develop-ment Bank Institute.

Yap, Josef, Celia M. Reyes, and Janet S. Cuenca (2009). “Impact of the global financial and economic crisis on the Philippines,” PIDS Discussion Paper Series No. 2009-30. Makati City: Philippine Institute for Development Studies.

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Alliances of Local Governments in the PhilippinesLeave a Comment Posted by Johny S. Natad on December 14, 2011

By: Johny S. Natad© December 2011

Introduction

       Worldwide, alliance building or inter-local partnership considered as strategic importance in addressing local governments’ common issues and problems that do not respect political boundaries. Alliance of local government units (LGUs), which interchangeably referred to as inter-local cooperation has been proving to be cost effective and efficient in the delivery of services to its multi-stakeholders especially the LGUs.

       In the Philippines, inter-local cooperation of LGUs believed to be formally started after the proclamation of Republic Act No. 7160 or the Philippine Local Government Code of 1991. Many of these alliances are inspired by R.A 7160, which is also in consonance with the Philippine Constitution. The LGU alliances in the Philippines could be considered as significant mechanism in the realization of political and administrative decentralization and local autonomy in the country.

       The Philippine Fisheries Code of 1998 (Republic Act No. 8550) also requires inter-LGU alliance especially to water ecosystem that traverse political boundaries of many LGUs like lakes or seas.

     Economic development, the environmental protection and management (including ecosystem, coastal resource, tourism and landscape management), and integrated health development are the major purpose of establishing among many existing alliance of LGUs in the Philippines.

Definition

            The Wikipedia defines alliance as “a cooperation or collaboration, which aims for a synergy where each partners hopes that the benefits from the alliance will be greater than those from individual efforts”. Usually, the alliance is engaging for a particular or indefinite period and shared expenses and risks involving technology transfer and economic specialization used to achieve a common objective (“Strategic Alliance”, n.d.).

            The Origo Social Enterprise Partners (n.d.) presented the following description of partnership and alliance:

A partnership is an alliance between organizations from two or more sectors that commit themselves to working together to develop and implement a specific project. Such a partnership implies that participants are willing to

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share risks, costs and benefits, review the relationship regularly and revise the partnership as necessary.

Alliances between parties drawn for example, from businesses, government and civil society, that strategically aggregate the resources and competencies of each to resolve a specific problem/challenge.

Partnerships across different sectors of society imply transcending some of the divides between business/NGOs/governments. Interest from many governments and NGOs in working with business is quite high so the partnership model has been replacing the adversarial model.

Partnering across sectors means that different sectors of society are open to communicate and collaborate with each other, fostering and creating more inclusive-participatory models for solving problems.

A management tool to deliver business, social and environmental development outcomes by optimizing the effectiveness of different partners’ resources core competencies.

       The alliance of Local Government Units (LGUs) have been performing vital role in contributing genuine and sustainable development. With the establishment of the alliances, the LGUs can achieve the attainment of plans with joint effort and shared agreement to solve such as environmental problems and effective delivery of prime services that resulted to influence management and achieve better human safeguard or protection (Asia Forest Network, n.d.).

Alliance and Decentralization

            This inter-local cooperation or alliances of LGUs have been contributing to the implementation of political and administrative decentralization of the government in the Philippines. The Republic Act 7160 or the 1991 Local Government Code of the Philippines generally stresses about decentralization of powers to Local Government Units. Decentralization is the “dispersion or distribution of functions and powers; specifically the delegation of power from a central authority to regional and local authorities” (Merriam-Webster, n.d). Thus, decentralization creates need for alliances. With the formation of alliance, the stakeholders can carry various outlooks, have experience and capacity into a dialogue and can take action to wide range of concerns. Alliance is a distinctive strategic position where partnership and shared engagement with planning and implementation agencies at local level which direct them to better position in policy recommendation, decision making and can bring information from the community level to the right people in the management (Asia Forest Network, n.d). The alliances are filling the vacuum left by the central government in tackling the declined upland forest and marine ecosystem and helps formulate solutions that can be addressed by the local government (Environmental Science for Social Change [ESSC], 2011).

Types of Alliances and its Purpose

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            Formation of alliance of LGUs or the inter-LGU alliances varied according to its typology: (1) the natural alliance; (2) the public-private alliance; and (3) the quasi-public alliance (Philippine Development Forum, 2010). Natural alliance is formed between LGUs for either a general or sectoral but with a common purpose of general members which motivated usually by the alliance-wide impact in the delivery of basic services and facilities that surpass local political boundaries and entailed large expenditure. This type of inter-LGU alliance retains their public character.  The public-private alliances are cooperative undertaking of organizations composed of both public (LGUs) and private sectors like NGOs, business groups, and other private entities. This alliance is usually registered with the Securities and Exchange Commission (SEC). The quasi-public alliances are natural alliances among LGUs with common objective for public service but being managed and controlled as a private corporation through a separate legal entity. This type of alliance is granted juridical personalities through the congressional legislation.

        The ESSC (2011) identified the following emerging alliance with concerned on environmental and resources management:

Alliance Location Focus

Matarino Bay Management Council

Eastern Samar

Building partnerships to improve resource management and local livelihoods

Carood Watershed Management Council Bohol

Sustaining and harmonizing local government initiatives in Carood watershed

Lanuza Bay Development Alliance

Surigao del Sur

Strengthening environmental governance through local policy formulation

Agusan Marsh Development Alliance

Agusan del Sur

Sustainable watershed management as a response to land and water problems

Bukidnon Watershed Protection and Development Council

Bukidnon Collaboration initiatives towards comprehensive landscape management and greater human security

Allah Valley Landscape Development Alliance

South Cotabato and Sultan Kudarat

Local government initiatives for protected area management

Lake Mainit Development Alliance

Agusan del Norte and Surigao del Norte

Partnership building towards sustainable management of Lake Mainit

Source: Environmental Science for Social Change, (2011)

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       These alliances are an evident that people are working together to deal with environmental issues and equitable resources management.

       The Philippine Development Forum (2010) presented the list of alliances with its membership, reason for coming together and mode of formalization.

Alliance Membership Reason for Coming Together

Mode of Formalization

IloiloAlliance for Northern Iloilo For Health Development (ANIHEAD

9 municipalities

Health Development

MOA, 2000; SEC Registration

Northern Iloilo Alliance for Coastal Development (NIACDEV)

10 municipalities

Coastal Resource Management

MOA, December 29, 1999; SEC Registration

Banate Bay Resource Management Council (BBRMCI)

3 municipalities

Coastal Resource Management

MOA, February 28, 1996

Metro Iloilo-Guimaras Economic Development Council (MIGEDC)

1 province; 1 city; 5 municipalities

Economic Development

EO No. 559, August 28, 2006

Southern Iloilo Coastal Resource Management Council (SICRMC)

5 municipalities

Coastal Resource Management

MOA, 2002; SEC Registration

Iloilo Second Integrated Area Development, Inc.

5 municipalities

Economic Development

MOA, July 8, 1997; SEC Registration, March 7, 2007

Negros OccidentalSouthern Negros Coastal Development Management Council (SNCDMC)

1 city; 2 municipalities

Coastal Resource Management

EO 1996; MOA, October 6, 2005

Central Negros Council for Coastal Development (CENECCORD)

1 city; 6 municipalities

Coastal Resource Management

MOA, January 26, 2005

Northern Negros 5 cities; 3 Coastal MOA, 2000

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Alliance Membership Reason for Coming Together

Mode of Formalization

Aquatic Resources Management and Advisory Council (NNARMAC)

municipalities Resource Management

Oriental NegrosSta. Bayabas Inter-Local Health Zone (ILHZ)

1 city; 2 municipalities

Health Per EO 205, 2008

AntiqueLibertad, Pnadan, Sebaste and Culasi Bay Wide Management Council (LIPASECU)

4 municipalities

Coastal Resource Management

MOA, October 3, 1997; SEC Registration

Coasthaven 4 municipalities

Coastal Resource Management

MOA, October 15, 2007

CebuCamotes Sea Resource Management Council (CSRMC)

1 city; 4 municipalities

Coastal Resource Management

MOA, May 2, 2007

Southeast Cebu Coastal Resource Management Council (SCCRMC)

7 municipalities

Coastal Resource Management

MOA, April 19, 2005

BoholMaribojoc Bay Integrated Resource Management (MBEMO)

1 city; 4 municipalities

Coastal Resource Management

MOA, 2005; EO 23 series of 2005, December 20, 2005

Abatan River Development Management Council (ARDMC)

5 municipalities

River Management, Ecotourism development

EO No. 19, November 19, 2005

PaDaYon Bohol Marine Triangle Management Council (PADAYON)

3 municipalities

Environmental Protection

MOA, June 7, 2007; EO No 22 Series of 2004, September 7,

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Alliance Membership Reason for Coming Together

Mode of Formalization

2008; SEC Registration, June 7, 2006

Eastern SamarAlliance of Seven 7

municipalitiesCoastal Resource Management

MOA, 2005

Borongan Inter-Local Health Zone

5 municipalities (6 RHUs)

Integrated Health Services

Per EO 2005, 2008

MindanaoLanuza Bay Development Alliance (LBDA)

7 municipalities

Economic Development

MOA, 2004*

PPALMA Alliance (PPALMA)

7 municipalities; 1 province

Economic Development

MOA, 2004**

Lake Mainit Development Alliance (LMDA)

2 provinces; 8 municipalities

Lake Management

MOA, March 1999

Mt. Kitanglad Range PAMB

8 municipalities

Environmental Protection

Camarines SurMetro Naga Development Council (MNDC)

1 city; 14 municipalities

Economic Development

MOA, April 23, 1993; EO No. 102, June 18, 1993

Partido Development Administration (PDA)

10 municipalities

Economic Development

RA No. 7820, November 18, 1994; RA No. 8989, December 31, 2000

Source: Critical Ingredients in Building and Sustaining Inter-Local Cooperation (pp.20-21)

       The Philippine Development Forum (2009) reveals that the institutional, financial and legal aspects are the crucial and interrelated elements of the alliance building as manifested in the publication entitled “Critical Ingredients in Building and Sustaining Inter-Local Cooperation”. The institutional aspects largely deals with the purpose and with the structures and system while involves minimally in resources. Legal aspects essentially deal with structure, system and

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resources while also link with purpose. Resources are the main concern on financial aspects to attain the purpose but also take into account the structure and system.

Legal basis on Alliance formation

       The legal basis on the formation of alliance can be specifically defined in the Philippine Constitution of 1987, the Local Government Code of 1991, the Philippine Fisheries Code of 1998, the Memorandum of Agreement entered into by concerned LGUs, the Executive Orders, and other relevant laws. The 1987 Constitution of the Republic of the Philippines Article X. Section 13 states that “Local government units may group themselves, consolidate or coordinate their efforts, services, and resources for purposes commonly beneficial to them in accordance with law.”

       Likewise, the Local Government Code of the Philippines emphasizes the general provision of local government as declared in the Constitution. Under the Local Government Code’s Book I General Provisions, Title One, Article Three, Section 33 provides the Cooperative Undertakings among Local Government Units.

Local government units may, through appropriate ordinances, group themselves, consolidate, or coordinate their efforts, services, and resources for purposes commonly beneficial to them. In support of such undertakings, the local government units involved may, upon approval by the sanggunian concerned after a public hearing conducted for the purpose, contribute funds, real estate, equipment, and other kinds of property and appoint or assign personnel under such terms and conditions as may be agreed upon by the participating local units through Memoranda of Agreement.

       With the joint undertakings of the inter-LGU alliance, the basic legal instrument used to initiate such is the Memorandum of Agreement (MOA). Encarta Dictionary defines a “memorandum” (n.d) as “summary of legal agreement: a written statement summarizing the terms of a contract or a similar legal transaction”.  It serves as the formal agreement among involving LGUs and binds them to adhere the cooperative undertakings of the alliance. The MOA provides for the agreed roles and responsibilities and the details on the focus programs of the alliance. Osorio (2010) defined MOA as “the basic legal instrument used to initiate an inter-LGU alliance. The MOA serves as the formal agreement involving 2 or more LGUs whereby each become obligated to the other with reciprocal rights to demand of what is promised by each respectively. The MOA binds the LGUs to adhere to the alliance’s cooperative undertakings. To formally organize an alliance. Local Chief Executives (LCEs) of participating LGUs are required to sign a MOA” (p.24)

       Based on the Memorandum of Agreement (1999) of Lake Mainit Development Alliance (LMDA) signed and entered into by 2 provincial LGUs of Surigao del Norte and Agusan del Norte, 8 municipal LGUs (town of Alegria, Mainit, Tubod and Sison in Surigao del Norte, and municipalities of Kitcharao, Jabonga, Santiago and Tubay in Agusan del Norte) and government line agencies (e.g. NEDA, DA, DENR, BFAR, DOT, PIA) of Lake Mainit Development Alliance in March 1999 declares the (1) formation of the alliance, (2) purpose, (3) benefits to the LGUs, (4) LMDA board, (5) Project Management Office, (6) responsibilities of the parties, (7) trust fund, (8) transitory provisions, (9) amendments, (10) effectivity.

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       A MOA formally creating the Metro Naga Development Council (MNDC) was signed by the 13 LGUs – Naga, Bombon, Calabanga, Camaligan, Canaman, Gainza, Magarao, Milaor, Minalabac, Pamplona, Pasacao, Pili and San Fernando on April 23, 1993.  The municipalities of Bula and Ocampo joined the MNDC through a MOA with the then existing members of the Council in July 1997. The LCEs of the 15 member-LGUs comprise the Council’s Executive Committee. In charge of the administrative operations of the Council is its Project Development Unit (PDU) headed by the MNDC Executive Director. The unit is likewise primarily responsible for the implementation of the Council’s programs, projects and activities (Sacendoncillo, 2007).

       Pigcawayan-Alamada-Libungan-Midsayap-Aleosan Alliance popularly known as PALMA was formalize the establishment of the Alliance on August 07, 2000 during the signing of a Memorandum of Agreement (MOA) was signed by and between the five municipal governments of PALMA and the Provincial Government of Cotabato (PALMA Alliance, n.d.). As inspired by PALMA, the Southwestern Ligawasan Alliance of Municipalities or SLAM was officially created on June 25th, 2008. A MOA was signed between the four municipalities of Maguindanao namely Paglat, Datu Paglas, Sultan sa Barongis and General S.K. Pendatun committing to their participation in SLAM and defining roles and responsibilities. (Southwestern Ligawasan Alliance of Municipalities (SLAM), n.d.)

       Illana Bay Regional Alliance in Region 9 (IBRA-9) composed of 8 LGUs signed a new Memorandum of Agreement (MOA) last December 13, signifying their renewed commitment to protect the Illana Bay. Mayors of Tukuran, Tabina, Dinas, Labangan, Tungawan, Dimataling and San Pablo; and the city of Pagadian and the provincial governor of Zamboanga del Sur signed the MOA. (“Alliance of LGUs”, n.d.)

       Aside from MOA, there are other legal instruments used in the formation of alliance like Executive Orders (EO), Special Order, Memorandum Order and the Republic Acts. Some LGU alliance have been created or supported by Executive Orders signed by the President or by the Provincial Governor (GTZ, 2009). Based on the Philippine Constitution, the President can create councils or other similar bodies as stated in Article X Section13.

The President shall provide for the regional development council or other similar bodies composed on local government officials, regional heads of departments and other government offices, and representatives form 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.

      The MNDC establishment was further bolstered by the Executive Order (EO) No. 102 issued on June 18, 1993 providing for its powers and functions, and an initial budget for its operating expenses. (Sacendoncillo, 2007). The EO added representatives from line agencies with offices in Camarines Sur and pegged at 25% (one-fourth) the representation of the private sector (Metro Naga Development Council, n.d.).

       Executive Order 559 (2006) created the Metro-Iloilo Guimaras Economic Development Council or MIGEDC composed of 8 LGUs like Iloilo City, Municipalities of Oton, San Miguel, Pavia, Leganes, and Sta. Barbara, and the provinces of Ilioilo and Guimaras.

       The Bukidnon Watershed Protection and Development Council (BWPDC) was created through Memorandum Order 270.   The Council is mandated to generate policies and guidelines

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and coordinated all programs and projects concerning watershed management in the entire province (Pasicollan, Pualo and Pasicolan, Simplicia, 2005). The BWPDC is composed of all mayors, DENR, DA, DAR, NAPOCOR, NIA, academic and research institutions, NGOs, POs, and religious and business sectors. (The Bukidnon Experience, n.d.)

       Alliance of LGUs can also be created through an organic act of the Congress stipulating detailed powers and responsibilities and providing the necessary funds under the General Appropriation Act (Osorio, 2010). The popular alliance of LGU with the Act of Congress is the Lake Laguna Development Authority (LLDA) and the Partido Development Administration (PDA). LLDA was established under Republic Act No. 4850 or An Act Creating the Laguna Lake Development Authority in July 18, 1966 as amended by Presidential Decree No. 813 October 17, 1975. The LLDA member LGUs covers 14 cities and 47 municipalities within the provinces of Laguna, Rizal, Batangas, Cavite, Quezon and Metro Manila (LLDA, 2007). The RA 7820 created the PDA in 1994 with the member of 10 municipalities in Camarines Sur rationalizes the integrated and coordinated approach for the development of the covering regions and districts in order to draw alongside with develop regions and districts within of Camarines Sur (Osorio, 2010).

       Republic Act No. 8550 or the Philippine Fisheries Code of 1998 provides the development and conservation of the fishes and aquatic resources. Article 1, Section 16 of the said Act states that:

The management of the contiguous fishy resources such as bays which straddle several municipalities, cities or provinces, shall be done in an integrated manner, and shall not be based on political subdivisions of municipal waters in order to facilitate the management of a single resource system. The LGUs which share or boarder such resources may group themselves and coordinate with each other to achieve the objectives of integrated fishery resources management. The Integrated Fisheries and Aquatic Resources Management Councils (IFARMCs) established under Section76 of this Code shall serve the venue for close collaboration among LGUs in the management of contiguous resources.

        With RA 8550 as the basis, inter-LGU is a key to sustain integrated fishery resources. Five adjoining municipalities of Hindang, Hilongos, Baybay, Bato and Matalom in Western Leyte agreed to form alliance through IFARMC which was manifested by signing of MOA among Local Chief Executives (LCEs) in April 2002. This alliance aimed to an integrated management of a common fishery ground used by the majority of fishfolk in Western Leyte, Camotes Sea (Savaris, 2004).

       Illana Bay Regional Alliance in Region 9 (IBRA-9) composed of 8 LGUs signed a new Memorandum of Agreement (MOA) last December 13, signifying their renewed commitment to protect the Illana Bay. Mayors of Tukuran, Tabina, Dinas, Labangan, Tungawan, Dimataling and San Pablo; and the city of Pagadian and the provincial governor of Zamboanga del Sur signed the MOA (“Alliance of LGUs”, n.d.).

       In the successful operation of an alliance, financial stability and sustainability is a very critical concern. Thus, the alliance must have the ability to generate funds essentially required to perform its responsibility and implement the projects of the alliance. The member LGU varies on their annual contribution to the alliance. They may agree to contribute an annual minimum

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amount. Some also agree to contribute certain percent of their 20% Internal Revenue Allocation (IRA). The MOA entered into by member LGUs stipulated provisions pertaining to financial obligation of the members to the alliance (Ferrer, 2010). The MNDC Memorandum of Agreement, April 23, 1993 specify that the source of financing the Council program shall be sourced from the contributions of the members equivalent to at least 2% of their annual Economic Development Fund  (Sacendoncillo, 2007).

       Memorandum of Agreement signed by members of LMDA stipulate the Trust Fund provision which states that:

The two provinces to this MOA shall initially contribute Php150,000.00 each while the different municipalities shall contribute the amount of Php50,000.00 each to the trust fund. All subsequent contributions of the LGUs are based on the approved work and financial plan and all monies sourced by the alliance shall likewise form part of the trust fund.

       As also stipulated in MOA, each mayor agreed to initially provide a monthly contribution of Php15,000.00 to a common SLAM fund. When the alliance activities began to show up, the contribution later raised to Php25,000.00. Such fund will be used to shore up the development projects of the alliance and its Project Management Office operations (SLAM, n.d.)

       The RA 4850 (1966) clearly specify that the LLDA’s operating expenses with the sum of One Million Pesos (Php1,000,000) is appropriated annually for rive (5) years from the general fund of the National Government.

Common Issues and Problem in Alliance Operation

       The Asia Forest Network (n.d.) cited the hindering feature of weak alliance, which are the difficulties in securing commitment; lack in funding, human resources and technical knowledge; low level of involvement from local government personnel due to little flexibility; conflicting laws or different interpretation of issues; need for local champions; and quandaries over legal identity and structure. LLDA (2007) is still faced with institutional, technical and financial hindrances that will take more than persuasion to resolve despite the growing partnership.

       It is remarkable that the common fund generated from member LGU of Alliance are not enough to ensure significant impact given the fact that alliance need to sustain its hired personnel.  There is very little budget or no amount is left to finance the significant project or services of the alliance. Thus, there is a need for the alliance to access grants and other forms of supports to augment the contribution of the members. Possible sources of grants and supports are the provincial and national government, national line agencies, grants from lawmakers, international funding agency and grants from foundations, NGOs and private sector (Ferrer, 2010).

       The experience of alliances shows that the generous and most committed members financially sustain the alliance. The member LGUs may remit the whole amount at one time or make installment payments until the whole amount is paid. Unfortunately, there are common experiences of existing alliances showing the delays or no remittance of contribution (Ferrer, 2010).  Member LGU contributions are not enough to sustain the operation of the alliance since there are LGUs who did not contributed regularly. Changes in LGU direction of priorities might

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hamper the operation of alliance especially when newly elected Local Chief Executives (LCEs) set their main agenda and concerns to their respective LGUs that may or may not complement the overall achievement of the alliance. Modification of new LCEs priorities may create fear in the continuity of the implementation of the identified projects (Gidacan & Harting, 2008).

       A clear statement regarding the schedule of remittance of contribution to be incorporated in MOA or other legal instruments is of significant. There are only few alliances that clearly define the schedule of payment in MOA. Reminders are very important through official written notice of payments or verbal reminders. In most alliance, peer pressure is considered successful strategy wherein members can make prompt payments if other members did it (Ferrer, 2010).

Sustaining Alliance: The Pooling of Resources and its Impact

       In spite of this problems encountered, the alliance continually delivered their mandate through networking and accessing of funds (Gidacan & Harting, 2008). The pooled fund can also be used by alliance as leverage in accessing external fund and supports especially as form part of its counterpart.

       Aside from the Common Fund, the MNDC practices resource complementation and maintains a Common Fund that is from individual contributions of the member-LGUs, and other sources accessed from the appropriation from the national government and assistance extended by local and foreign donors. MNDC also pool human resources. A Project Development Unit that is composed of 5 individuals – 2 Project development officers; 1 Administrative and Finance Officer and 2 Support personnel—that manages the operation of the Council. Officers/employees of member LGUs are at times assigned to assist the members of this unit in the implementation of the MNDC’s programs and activities. The Council also maintains an office at Naga City and maintains an Equipment Pool to facilitate the use of equipment and machinery of its member-LGUs. (Sacendoncillo, 2007)

       Sharing and pooling of fund and human resources is significant in LMDA’s operation. Members the two provincial and 8 municipal LGUs afforded to allocate their meager annual budget for the operationalization of alliance. Each LGU and member stakeholders delegated one technical staff to become a member of the LMDA- Technical Working Group. (Gidacan & Harting, 2008)

       The shared fund and the regular payment of contribution by member LGUs will ensure timely implementation of activities which promotes achievements of alliance goal. Likewise the pooled fund can also be used by alliance as leverage in accessing external fund and supports especially as form part of its counterpart (Ferrer, 2010).

       Pooling of resources is so significant in PALMA. Aleosan town Mayor Cabaya, who once was chair of PALMA, proudly updated the ARMM mayors about the PALMA accomplishment of on construction of 281.45 kilometers farm to market roads with a total cost of P8.47 million, through their pooled efforts. With PALMAs shared experience, Mayors of SLAM learned that this strategy was also being applied to pursue similar development program concerning environmental protection and health (SLAM, n.d.).

       The combined resources and putting up on their own road-building crew, PALMA is currently maintains two construction fleets, each consisting of a bulldozer, a grader, three to four dump trucks and a compacter. The alliance has opened and repaired of farm-to-market roads that

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give benefits to their 145 barangays. It helps increased farming incomes and reduced transportation costs. This made PALMA won as one of the Galing Pook in 2007 for innovative governance practices (Contreras, 2008)

       Likewise the pooling of resources in two provinces of South Cotabato and Sultant Kudarat now forming the Allah Valley Landscape Development Alliance (AVLDA) has also garnered Galing Pook Award for 2008. With the multi sectoral cooperation among 19 Barangays, 1 banking institution, 2 water districts, 2 electric cooperatives, 2 mining companies, 1 agro-industrial company, 4 agricultural cooperatives, 4 NGOs and 2 civic groups the Riparian Zone Revegetation program has able to accomplished planting of 15,000 bamboo hills in a 30-kilometer stretch at the banks of major rivers. “The AVLDA also pursued the construction of dikes at critical sections of the rivers and the re-channelling of water flow to save prime lands, settlements and infrastructure facilities. Other projects include the Reforestation and Upstream Resource Management (RURM) program which aimed to improve forest land cover, reduce river siltation and provide livelihood opportunities to upland dwellers” (Allah Valley, n.d.). Provinces of Sultan Kudarat and South Cotabato showed how the involvement of their different LGUs concerning livelihood and sustaining major environmental task working together with inter-government and other multi-sector (Mindanews, 2009)

       In IBRA-13, the gains from collective efforts of inter regional bay-wide collaboration for resource management and fishery law enforcement has been significantly manifested. “Inter-LGU cooperation has been helping settle differences between municipalities, specifically in facilitating dialogues on coastal terminal points (CTPs) which determine municipal water boundaries, a contentious issue among adjoining towns. In 2005, a total of 29 apprehensions were reported by the Maritime Police, with violations ranging from fishing in municipal waters with no permits to the use of illegal fishing methods.” (“Concerted effort” par.12).

       Inter-local government collaborative approach has brought about meaningful development in the northern part of Iloilo especially on the areas of health and coastal resource management.   “These alliances subsequently attracted the interest of funding agencies that have found value in supporting development initiatives undertaken by allied local government units.  This synergistic modality implies greater assurance of success, fund management efficiency, and also a greater number of people benefiting from the initiatives”. (Latoza, 2010, par. 5).

       LLDA (2007) find that the benefits achieved from the partnership overflow to the 13 million residents living in the Laguna de Bay watershed.

Insights Gained

Based on the above-related literature, the following are the insights gained about the inter-LGU alliance in the Philippines:

The alliance building or inter-local cooperation allows local government units to deal with environmental management and socio-economic agenda not covered by national government programs as part of the decentralization.

Resources can be maximized and augmented to share out with resources and ecosystems those cross-political or administrative boundaries.

Alliances also allow the local government units to raise and improve priorities and plans to higher planning authorities (i.e. provincial, regional and national government)

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The alliance permit the organization of LGUs and their LCEs based on a common cause, (e.g. geographical proximity, common needs, similar passion, similar problems, has borne very good results). Alliance served as the venue for Local Chief Executives (LCEs) support each other, share-learning experiences in informal meetings, complement each other’s strengths, and exert a pressure on other LCEs and communities to participate in similar reforms.

Other organizations have benefited from building alliances in the implementation of their programs. Alliances have been demonstrating to be cost-effective to scale up programs.

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