Poverty Reduction Strategy in Decentralized Contexts:

Comparative Lessons in Local Planning and Fiscal Dimensions in the Philippines and Indonesia

Outline for Philippine and Indonesian presentation Decentralization experience Processes for integrating planning and

budgeting Lessons for PRSP Suggested policy and institutional responses

Lessons on Local Planning and Fiscal Dimensions

Decentralization in the Philippines

Decentralization Experience: Political Context Pre-’86: centralist government;

authoritarian government; strong control orientation (Marcosian approach was to control power at the center)

Post-’86: era of democratization and ‘people empowerment’; approach was to “de-center” and to share powers

Decentralization Experience: Legal Context 1987 Constitution: “The state shall ensure

the autonomy of local governments.” Local Government Code of 1991:

devolution of national government powers and increase in the share of local governments in national taxes, including the power to tax

Decentralization Experience: Tiers of Government (Political)

National Government

City Province

Municipality

Barangay (village) Barangay (village)

Decentralization Experience: Tiers of Government (Administrative)

National Government

City Province

Municipality

Barangay (village) Barangay (village)

Regional Administration

Decentralization Experience: Approach gradual approach: sequential and transition-

sensitive; oversight committee created to monitor implementation of the Devolution Masterplan

3 phases of decentralization: changeover phase (1992-93); transition phase (1994-96); and stabilization phase (1997 onwards)

Decentralization Experience: Approach--continued Decentralization in two forms:

- devolution (political decentralization of powers from national government to local government units [LGUs], including the power to tax)

- deconcentration (administrative delegation from national to regional agencies)

Decentralization Experience: Approach--continued Devolution of national government powers

includes public works, health, agriculture, social welfare, certain tourism functions, and construction of school buildings and facilities

Expansion of revenue generation powers of LGUs

Processes for Integrating P&B: Top-Down Exercise P&B linkage through the MTPDP and

MTPIP, as well as their regional components

- sectoral priorities and policies in the MTPDP are translated into discrete programs, projects and activities (PPAs) through the MTPIP, which are expected to be funded in the budgeting exercise; regional priorities compete for funding at the national level

Processes for Integrating P&B: Top-Down Exercise--continued MTEF provides a 3-year rolling

prioritization of PAPs through- Sector Efficiency and Effectiveness

Reviews (SEER): outcomes and outputs become bases for prioritizing and endorsing PAPs for funding in the budget; tool for strategic planning

- SEER has not been piloted at the regional level

Processes for Integrating P&B: Top-Down Exercise--continued Organizational Performance Indicators

Framework (OPIF): budget reform to strengthen performance-based budgeting; OPIF as a tool for operational planning

OPIF is hampered by methodological difficulty

OPIF has not been piloted yet at the regional level

MTPDP MTPIP

National Agency Plans and Programs

RDP RDIP

ProvincialPlans and Programs

PDP/CDP PDIP/CDIP

BarangayPlans and Programs

MDP LDIP

MunicipalPlans and Programs

National

Regional

Provincial/City

Municipal

Socio-EconomicDevelopment Plans

InvestmentPrograms

Regional Agency Plans and Programs

Barangay

Processes for Integrating P&B: Bottom-Up Exercise De-link in the bottom-up process:

barangaymunicipality/cityprovince region

There is no incentive for lower LGUs to submit upwards their plans and programs, as aggregation at the higher LGU does not mean funding support or inter-LGU collaboration

Processes for Integrating P&B: Bottom-Up Exercise--continued The greatest constraint for vertical

aggregation is that most LGUs do not prepare plans at all, such that budget priorities are political decisions of the local chief executive

Constraints in linking local P&B: capacity, resources and incentives, quality of vertical supervision and inter-LGU collaboration, role of local chief executives (LCEs)

Lessons for PRSP: Local Poverty Planning and Budgeting Anti-poverty programs (e.g., social reforma

agenda, KALAHI) are centrally driven Localizing anti-poverty programs remains a

challenge, specifically in getting the commitment of LGUs to address poverty (which is considered a long-term goal, in contrast with the 3-year tenure of local chief executives)

Lessons for PRSP: Local Poverty P & B--continued Local P&B are heavily inclined towards

“legacy projects”, usually infra National methodology/approach for poverty

targeting could not be replicated at the local level: issues of capacity, resources, differing political priorities at the national and local levels, differing expectations from constituents and measurements of performance accountability

Lessons for PRSP: Issues and Concerns Need to articulate clearly the objectives of

the development plan and their operationalization in relation with core public administration functions

Vertical integration of plans may not be desirable given (a) different levels of admin and technical proficiency for P&B, (b) timing constraints and (c) sheer volume of plans for aggregation

Lessons for PRSP: Issues and Concerns To tighten linkage between P&B, there is a need

to prepare sector plans to guide annual programming and budgeting

Need for closer coordination between the national government and LGUs for poverty reduction measures, e.g., delivery of social reform initiatives, implementation arrangements, etc.

MTEF to provide operational linkage between P&B

Suggested Policy and Institutional Responses On planning- no need to replicate national planning processes at

the local level, given the diversity of LGUs in terms of preparedness and resources

- Bottom-up integration may only be relevant up to the tier where supervision is relevant; programs/projects not funded in lower level LGUs may be submitted upwards for consideration by the supervising LGU

Suggested Policy and Institutional Responses On expenditure programming- ideally, P&B should reside in one

institution- Weak linkage of P&B is traced to poor

revenue forecasting; MTEF should be responsive in terms of revenue forecasting

- Local level: not an issue of weak linkage between P&B, but the lack of plans

Suggested Policy and Institutional Responses On monitoring- unclear monitoring systems under a

decentralized government- Performance monitoring not done at the

local level, except in locales where civil society is strong (e.g., Cebu City)

Lessons on Local Planning and Fiscal Dimensions

Decentralization in Indonesia

Decentralization Experience: Political Context highly centralist government; strong control

orientation (Soeharto approach was to control power at the center)

2001: decentralization policy was adopted

Decentralization Experience: Legal Context Law No. 22/1999 on Regional Governance Law No. 25/1999 on Financial Balance

between Central and Regional Governments

Decentralization Experience: Approach “big bang” approach: service delivery is the

responsibility of sub-national units; financing the cost of sub-national service delivery remains to be a key issue

Decentralization Experience: Approach--continued Decentralization covers:

- service delivery

- inter-governmental transfers and the power to tax

Decentralization Experience: Structures of Local Governments Autonomous provinces Districts located in rural areas Municipalities/cities (located in urban

areas) Sub-districts within municipalities and

cities Villages in rural and urban areas

Processes for Integrating P&B: Top-Down Exercise institutional: role of Bappenas (National

Development Planning Board) Issuance of the Propenas containing the

development priorities Convening of development coordination meetings

to thresh out central and regional government issues

Preparation of 5-year national and regional plans and the annual “implementation” plans

Processes for Integrating P&B: Top-Down Exercise--continued The most important planning document at

the national and regional levels is the annual plan, which is approved by the Legislature

Formulation of the Propeda, Renstrada and Repetada provides linkage between planning and budgeting, and the national and regional governments

Processes for Integrating P&B: Bottom-Up Exercise Formulation of the annual budget follows

the bottom-up approach Repetada is drawn from the aspirations and

priorities of people at the village, district and city levels, which are prioritized by the Bappeda across local governments

Decentralization Opportunities at the Transition Stage Capability-building for local officials re

participatory planning Adopting a holistic approach to planning to

include, revenue generation and M&E simplifying planning processes, including

the modules for training Incorporating poverty targeting in future

planning exercises

Decentralization Opportunities at the Transition Stage--continued Improving coordination mechanisms

between the central and local government units

Lessons for PRSP: Local Poverty Planning and Budgeting Budgeting is still highly centralized, with

local budgeting still being set at the central level through the MoHA

Need for transparency in budget allocation, including the prioritization process (MTEF is not implemented yet)

Lessons for PRSP: Local Poverty P & B--continued In the transition from a centralized to a

decentralized government, institutional responsibilities across government ministries and government levels should be defined

Local P&B need to be reviewed in consonance with the requirements of genuine decentralization and autonomy

Lessons for PRSP: Local Poverty P & B--continued P&B linkage in Indonesia should consider:

(a) prioritization process at each level, (b) performance-based budgeting, (c) adoption of the MTEF

Suggested Policy and Institutional Responses On planning- bottom-up integration may only be relevant

up to the tier where supervision is relevant - At lower government tiers, projects which

they cannot fund, may be raised to higher government tiers

- Capacity building on planning approaches needs to be holistic

Suggested Policy and Institutional Responses On expenditure programming- Need to address institutional fragmentation;

BAPPENAS can be invited to sit in the Budget Committee

- Greater attention needed on agency/ ministry plans and the listing of priority programs and projects for inclusion into the expenditure program

- Weak P&B linkage may also be attributed to poor revenue forecasting

- Unconditional grants (IRA and DAU) should be allocated at the discretion of lower level LGUs, with minimal conditions at the center

Suggested Policy and Institutional Responses On monitoring- unclear monitoring systems under a

decentralized government- Need to heighten civil society engagement

on local performance monitoring

End of Presentation

Thank you.