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Fixing Philippine Public FinanceIs Federalism the Answer?
Ronald Umali Mendoza, PhDAteneo School of Government
Two lost decades…
500
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Tradeliberalizationandimportsubstitution
Exportpromotion
Economicexpansionandprivatizationofstate-ownedenterprise
Postponementofliberalizationonsomesectorsand
increasingprotectionism
Debt– drivengrowth
Expansionofservicesectoranddeclinein
manufacturingRapideconomic
growth
Garcia Macapagal Marcos C.Aquino RamosEstrada
ArroyoAquino
Duterte
TWOFOLDINCREASEINTHEECONOMY,1960TOPRESENT
TextRationale for Decentralization
§ 1991 Local Government Code devolved substantial spending, taxing, and borrowing powers to local government units.
§ Governance closer to the people to increase efficiency and welfare gains.
§ Challenge to match resources (i.e. own source revenues and transfers) with expenditures at the LGU level.
§ Where are we now? IMPERIAL MANILA VS DYNASTIC COUNTRYSIDE
TextRevenue composition, by government level (2014)
Source: Department of Budget and Management, http://www.dbm.gov.ph/wp-content/uploads/BESF/BESF2016
82%
4%8% 6%
NationalGovernment
Provinces
Cities
Municipalities
TextGovernment Expenditure breakdown (2014)
Source: Department of Budget and Management, http://www.dbm.gov.ph/wp-content/uploads/BESF/BESF2016
18%
31%
33%
18%
82%
CentralOffice&NCRDepartments
RegionalDepartments
SpecialPurposeFunds(NetofTransferstoLGUs&DebtService)
LGUexpenditure
NationalGovernmentexpenditure
RegionalRealGDPperCapita,Philippines(2016)
13,35326,736
35,72037,26139,15339,82541,48643,10645,48449,461
63,87465,83768,64969,39075,279
94,826232,836
78,712
0 50,000 100,000 150,000 200,000 250,000
ARMMBICOL
CARAGAEASTERNVISAYASCAGAYANVALLEY
MIMAROPAREGIONWESTERNVISAYAS
ZAMBOANGAPENINSULASOCCSKSARGEN
ILOCOSNORTHERN MINDANAO
DAVAOREGIONCENTRALLUZONCENTRALVISAYAS
CARCALABARZON
NCRPHILIPPINES
RealGDPperCapita(inPhp atconstant2000prices)
Source: Philippine StatisticsAuthority
TextInequality in Human Development
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8
ThailandNCR
PhilippinesBasilan
MyanmarLanao del Sur
SuluNigeriaARMM
Tawi-tawiMaguindanao
ZimbabweAfghanistan
TextInequality in Life Expectancy
66.968.8 69.6
61.9
72.975.6 75.9
62.9
50
55
60
65
70
75
80
Philippines NCR Region I ARMM
Life
Exp
ecta
ncy (
in y
ears
) at
Birt
h 20
10-2
015 Male
Fem…
TextAverage Dynastic Share (2007 – 2016 Elections)
Position Dynastic share (in %) 2007 2010 2013 2016
Governor 69.6 82.3 86.3 81.3 Percentage increase/decrease 12.7 3.97 -5 Vice Governor 62 70.9 75 81 Percentage increase/decrease 8.87 4.11 6.01 Representative 75.3 78.7 75.3 77.5 Percentage increase/decrease 3.44 -3.46 2.25 Mayor 57.6 67.2 67.5 68.8 Percentage increase/decrease 9.6 0.3 1.3 Vice Mayor 40.6 51.2 52.6 56.9 Percentage increase/decrease 10.6 1.4 4.3
81% of Governors. 78% of Congressmen. 69% of Mayors. 57% of Vice Mayors.
Text
Violent political competition in Masbate. Four Congressmen assassinated between
1989 and 2005.
Meanwhile, 1 in 2 Filipinos in Masbate live below the poverty line…
RIZALINA SEACHON-LANETEgovernor and dynasty matriarch
ANTONIO KHOformer congressman and dynasty patriarch
53.5666 56.3266 51.3231
0.00
14.25
28.50
42.75
57.00
71.25
2006 2009 2012
Povertyincidence(%
of
popu
latio
n)
DATA SOURCE: PHILIPPINE STATISTICAL AUTHORITYPHOTO SOURCE: ABS-CBN NEWS ONLINE
TextTextDinagat Islands is dominated by Ecleo Clan, 2016 Election
ECLEO,10
VARGAS,3ABIS,2
ELUDO,2
FERMILAN,2
LLAMERA,2
LONGOS,2
LUIB,2
VILLAROSA,2
Distributionofdynastiesbasedonnumberofelectedclanmembers
Source:Authors’calculationsbasedondatadevelopedbyMendozaetal(2012;2016).
TextPolitical Dynasties Lead To Deeper Poverty
"PoliticalDynastiesandPoverty:IllustrationofMeasurementandInitialEvidenceofLinkagesinthePhilippines"OxfordDevelopmentStudies 44(2):189-201.
Mendoza,Beja,VenidaandYap(2016)examinethelinkbetweenpovertyanddynasties,usingacomprehensivedatabaseofpoliticaldynastiesinPhilippinelocalgovernmentcovering2000-2013;
CONCLUSION: More fat dynasties cause greater poverty, notably outside of Metro Manila.
Text
Source: Author’s elaboration drawing on Llanto (2012) and Manasan (2004).
Aligning Resources with Accountability:
A Proposal for a Public Finance Graduation Mechanism
HIGHINCOME
MIDDLEINCOME
LOWERINCOME
POORGOVERNANCE
BETTERGOVERNANCE
BESTGOVERNANCE
Conditional Transfers / Grants
Unconditional / Matching Grants
Debt instruments for LGUs; Municipal Bond Markets
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