Level of Urbanization

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2 Objectives Overview of urbanization and decentralization in the Philippines Implications of urbanization and decentralization on infrastructure provision Lessons learned

3 Region Level of Urbanization Philippines NCR Cordillera Adm Region Ilocos Cagayan Valley Central Luzon Southern Tagalog Bicol Western Visayas Central Visayas Eastern Visayas Western Mindanao Northern Mindanao Southern Mindanao Central Mindanao ARMM Caraga Basic sources: NSO; 1995 projections.

4 primacy of NCR has held for a long time because of... government s import substitution program concentration of public investments

5 Figure 1. High urban levels are associated with low economic growth NCR Urbanization level Central Luzon S. Mindanao Southern W. Mindanao Tagalog Ilocos C. Visayas Bicol C. Mindanao E. Visayas W. Visayas Cagayan Valley N. Mindanao 1995/ / Basic source: NSCB GRDP per capita

6 Figure 2. Urbanization has advanced but industrialization has remained largely stagnant in most regions. 60 NCR Level of industrialization Central Mindanao Southern Tagalog Central Luzon Central Visayas Northern Mindanao Western Visayas Cagayan Valley Ilocos Southern Eastern Visayas Mindanao 20 Western Mindanao Bicol Basic source: NSCB Urbanization level

7 poor connection between urbanization and industrial growth in the last few decades poor association between urbanization and economic growth

8 Greater urban dispersal is expected from... Trade liberalization BOI fiscal incentives SEZs growth corridor strategy

9 fiscal incentives unable to counter the agglomeration pull of the NCR regional development appears to be strongly influenced by trade openness and public spending on social sectors in turn, regional exports are determined by the presence of SEZs, public spending on physical infrastructure and the level of human capital (Pernia et al. 2003).

10 success of growth corridor strategy is uneven CALABARZON and NCR dominate other growth corridor regions in providing locational pull to industries some evidence of economic growth dispersal in the northern growth corridor opposite is true in South Cotabato-Davao- Zamboanga corridor and the Cagayan de Oro-Iligan corridor

11 LGU LGU LGU Rev-to- Revenue Expd LGU Expd Share Share Ratio % 11.0% 51.6% % 22.2% 35.0% % 25.6% 31.6%

12 Provinces Munis Cities % 48.3% 66.4% % 29.2% 49.8% % 22.1% 49.3%

13 IRA-to- LGU Expd IRA-to- LGU Income % 36.4% % 61.8% % 63.3%

14 Decentralization: expenditure assignment Local Government Code of devolved to LGUs primary responsibility for delivery of basic services and operation of facilities in ff areas: agricultural extension, environment management, health, social welfare services, municipal services, local infrastructure, land use planning

15 Expenditure pattern development content of LGU expenditures stagnated aggregate LGU spending on infrastructure when measured relative to GNP was fairly constant in post-code period same is true of capital expenditures of LGUs

16 distribution of development expenditures highly skewed Infra spending of provinces and municipalities (relative to GNP) fell but that of cities went up capital expenditure unevenly distributed across regions (over 2/3 of capital expd of all cities incurred by cities in 4 regions (NCR, III, IV, VII)

17 Infrastructure projects of cities Road network (Cabanatuan/Batangas) drainage waste disposal/landfill (San Fernando) water supply housing (Naga, San Carlos) basic social infrastructure, e.g.,schools (Marikina and Bulacan) economic enterprise (commercial bldgs., bus terminals)

18 Generally, infrastructure has grown proportionately with urbanization but. as evidenced by strong association between urbanization and infrastructure growth telecommunications, power and access to water have higher per capita growth as urban growth strengthens opposite is true of roads despite this, large unmet needs still evident in many sectors number of unauthorized housing settlements have increased

19 Constraints to infrastructure provision Poor local revenue mobilization low level of tax decentralization weak technical capacity poor cost recovery Institutional arrangements metropolitan arrangements LGU credit finance central-local fiscal arrangements

20 Many attempts amongst LGUs to work together... but efforts to jointly finance investments in infrastructure hampered by lack of legal character of metro agency thus, many large important urban infrastructure continue to be financed by the central government (e.g., MRT)

21 Improving access to LGU finance Easing of LGU depository bank requirement restructuring of the MDFO unbundling of loans- grant mix provision of enabling infrastructure for LGU bonds

22 Central-local arrangements matching grants program for infrastructure development for provinces and muncipalities review design of intergovernmental transfers

23 Lessons learned Importance of tax decentralization for increasing accountability need for well-designed system of intergoverntal transfers need to improve LGU access to credit finance need for an institutional framework to make metropolitan arrangements to work