Decentralization gets the needed boost with the Mandanas ruling
MANILA – The World Bank believes addressing inequality in financial resources among local government units (LGUs), improving the capacity of LGUs, and enhancing transparency and accountability are important requirements in improving decentralization as the Philippines begins to implement the Mandanas Ruling next year. The ruling increases the share of national tax revenue transferred to local governments.
These are included in the recommendations of the recently released Philippines Economic Update by the World Bank.
The Mandanas Ruling issued by the Supreme Court in 2019 and confirmed in 2019, the Internal Revenue Allotment are programmed to increase by 55 percent in the 2022 budget, amounting to P1.08 trillion or 4.8 percent of the country’s gross domestic product compared to the 3.5 percent of GDP this year.
“We look at the implementation of the Mandanas Ruling not just as a transfer of resources but an opportunity to strengthen decentralization and improve the social service delivery in the Philippines,” said Ndiame Diop, World Bank Country Director for Brunei, Malaysia, Philippines and Thailand.
He added if the ruling leads to better coordination in planning and implementation across levels of government, taking into account the capacity and needs of LGUs, it could improve the lives of people and communities especially those that are far from the country’s economic growth centers.
“Local governments are on the ground and can directly feel citizen’s needs and aspirations,” Diop further said. Decentralization, according to the World Bank official, encourages prompt responses and better matching of government services to local needs, making governance more inclusive. This would be effective if citizens have effective channels where their voices are heard to further enhance accountability.
To reduce the fiscal impact due to the transfer more financial resources to LGUs, the national government has started to identify spending responsibilities for select devolved mandates to be transferred back to local government.
It was also reported some local governments started to raise concerns regarding their financial and technical capacity to absorb re-devolved mandates, while maintaining full autonomy in planning and managing the additional resources from the Mandanas Ruling. Underspending by local governments may worsen, as many local governments do not have the capacity to absorb a significant increase in revenues.
The government faces a significant risk that the transition process could lead to a large gap in service delivery, as a lack of coordination between the national and local government and weak implementation capacity could delay the transition to increased decentralization.
World Bank economist Kevin Cruz, addressing weaknesses in planning and coordination is a first step towards managing the transition and improving decentralization.
“The national government should clearly define re-devolved functions and communicate these clearly to both national government agencies and local government units,” said Cruz.
He added the government needs to ensure that the development goals of the national government and local governments are well-aligned or in-synch and that service delivery gaps are minimized during the COVID-19 pandemic.
“This will require the national government and local government units to review the division of labor between the national and local government units to review the division of labor between the national government agencies and local government units in re-devolving functions while keeping fiscal and absorptive capacity in mind,” he further explained. (Melo M. Acuña)
Batangas Governor Hermilando Ingco Mandanas. He served as Representative from 2004 to 2013 and authored the bill that became a law increasing the share of local government units from the revenues collected by the national governments. (Batangas Province Website file photo)