Poverty Reduction Strategy in Decentralized Contexts:

1
Poverty Reduction Strategy in Decentralized
Contexts

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

2
Outline for Philippine and Indonesian presentation

• Decentralization experience
• Processes for integrating planning and budgeting
• Lessons for PRSP
• Suggested policy and institutional responses

3
Lessons on Local Planning and Fiscal Dimensions

• Decentralization in the Philippines

4
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

5
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

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Decentralization Experience Tiers of Government
(Political)
National Government
City
Province
Municipality
Barangay (village)
Barangay (village)
7
Decentralization Experience Tiers of Government
(Administrative)
National Government
Regional Administration
City
Province
Municipality
Barangay (village)
Barangay (village)
8
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)

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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)

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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

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Processes for Integrating PB Top-Down Exercise

• PB 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

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Processes for Integrating PB 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

13
Processes for Integrating PB 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

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Socio-Economic Development Plans
Investment Programs
National
MTPDP
MTPIP
National Agency Plans and Programs
RDP
RDIP
Regional
Regional Agency Plans and Programs
PDP/CDP
Provincial/City
PDIP/CDIP
Provincial Plans and Programs
Municipal
MDP
LDIP
Municipal Plans and Programs
Barangay Plans and Programs
Barangay
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Processes for Integrating PB Bottom-Up Exercise

• De-link in the bottom-up process
  barangay?municipality/city?province? 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

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Processes for Integrating PB 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 PB capacity,
  resources and incentives, quality of vertical
  supervision and inter-LGU collaboration, role of
  local chief executives (LCEs)

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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)

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Lessons for PRSP Local Poverty P B--continued

• Local PB 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

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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 PB, (b) timing
  constraints and (c) sheer volume of plans for
  aggregation

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Lessons for PRSP Issues and Concerns

• To tighten linkage between PB, 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 PB

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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

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Suggested Policy and Institutional Responses

• On expenditure programming
• ideally, PB should reside in one institution
• Weak linkage of PB is traced to poor revenue
  forecasting MTEF should be responsive in terms
  of revenue forecasting
• Local level not an issue of weak linkage between
  PB, but the lack of plans

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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)

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Lessons on Local Planning and Fiscal Dimensions

• Decentralization in Indonesia

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Decentralization Experience Political Context

• highly centralist government strong control
  orientation (Soeharto approach was to control
  power at the center)
• 2001 decentralization policy was adopted

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Decentralization Experience Legal Context

• Law No. 22/1999 on Regional Governance
• Law No. 25/1999 on Financial Balance between
  Central and Regional Governments

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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

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Decentralization Experience Approach--continued

• Decentralization covers
• - service delivery
• - inter-governmental transfers and the power to
  tax

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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

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Processes for Integrating PB 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

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Processes for Integrating PB 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

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Processes for Integrating PB 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

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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 ME
• simplifying planning processes, including the
  modules for training
• Incorporating poverty targeting in future
  planning exercises

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Decentralization Opportunities at the Transition
Stage--continued

• Improving coordination mechanisms between the
  central and local government units

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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)

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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 PB need to be reviewed in consonance with
  the requirements of genuine decentralization and
  autonomy

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Lessons for PRSP Local Poverty P B--continued

• PB linkage in Indonesia should consider (a)
  prioritization process at each level, (b)
  performance-based budgeting, (c) adoption of the
  MTEF

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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

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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 PB 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

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Suggested Policy and Institutional Responses

• On monitoring
• unclear monitoring systems under a decentralized
  government
• Need to heighten civil society engagement on
  local performance monitoring

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End of Presentation
Thank you.