MANILA, JUNE 10, 2021 – Addressing financial resource inequality among local government units (LGUs), improving LGU capacity, and strengthening transparency and accountability are key to improving decentralization as the country begins to implement. implements the Mandanas decision in 2022, increasing the share of national government tax revenues transferred to local governments.
These are part of the recommendations of the Philippines Economic Update recently published by the World Bank.
Following the Mandanas Supreme Court ruling in 2018 (and upheld in 2019), the IRA is expected to increase by 55% in the 2022 budget, reaching 1.08 trillion pesos or 4.8% of gross domestic product of the country against 3.5. % of GDP in 2021.
“We see the implementation of the Mandanas decision not only as a transfer of resources, but as an opportunity to strengthen decentralization and improve the delivery of social services in the Philippines”, mentionned Ndiame Diop, World Bank Country Director of Brunei, Malaysia, Philippines and Thailand. “If this decision leads to better coordination in planning and implementation between levels of government, taking into account the capacities and needs of LGUs, it could improve the lives of people and communities, especially those who are remote from the country’s economic growth centers. “
“Local governments are on the ground and can directly feel the needs and aspirations of citizens”, Diop added. “Therefore, decentralization encourages rapid responses and a better match of government services to local needs, making governance more inclusive. This is especially true if citizens have effective channels through which their voices are heard to strengthen accountability. “
In order to mitigate the fiscal impact of transferring additional financial resources to LGUs, the national government has started to identify spending responsibilities for certain mandates to be transferred to local government.
However, some local governments have started to express concerns about their financial and technical capacity to absorb the reconverted mandates, while retaining full autonomy in the planning and management of additional resources from the Mandanas decision. Under-spending by local governments can worsen, as many local governments lack the capacity to absorb a significant increase in income.
As a result, the government faces a significant risk that the transition process could lead to a significant gap in service delivery, as a lack of coordination between national and local government and weak implementation capacity could delay implementation. transition to increased decentralization.
According to World Bank Economist Kevin Cruz, addressing the weaknesses in planning and coordination is a first step towards managing the transition and improving decentralization.
“The national government should clearly define the redeployed functions and communicate them clearly to national government agencies and local government units” mentionned Cruz. “Authorities need to ensure that the development goals of national and local governments are well aligned and that service delivery gaps are minimized, especially during this unprecedented crisis. This will require the national government and local government units to reconsider the division of labor between national government agencies and local government units as part of the redistribution of functions, while keeping fiscal and absorption capacity in mind.
Other recommendations for managing the transition due to the Mandanas decision include:
- Channel the increase in IRA into local government response efforts to COVID-19 to mitigate budget execution risks while providing much needed support to local voters;
- Provide capacity building support to local government units to improve their implementation capacity and overall service delivery;
- Address inequalities between LGUs by providing targeted support to poor local governments that lack adequate capacity and resources; and
- Strengthen the capacity of citizens to hold people to account through measures such as citizen participation in budgeting and expenditure processes; public hearings on budget information; civic monitoring of intergovernmental transfers; monitoring of local service delivery; and social audits.