Philippines: Designing a Local Government Enhancement Fund
Martínez-Vazquez, Jorge; Liu, Yongzheng |
Abstract
The main transfer instrument from the central government to local government units (LGUs) in the Philippines, the internal revenue allotment, has been criticized for: its inability to equalize sufficiently, especially regarding the poorer municipalities and provinces, and its funds not having been spent efficiently. For some time, LGUs have petitioned the Government of the Philippines to expand the funding of the IRA. However, there appears to be ample consensus that any additional funding needs to be distributed in a manner that addresses the design flaws of the IRA. In this paper, options for the design of a possible new transfer, the Fiscal Equity and Expenditure Performance Fund, separate from the IRA, are outlined. Such design faces four major challenges: (i) how to define the origin and computation of the additional funding, (ii) how to divide the additional funding among the different groups of LGUs (provinces, cities, municipalities, and barangays), (iii) what formula to use for the distribution of the additional funds for qualifying LGUs in each particular group of LGUs, and (iv) how to ensure that LGUs will use the additional funds to improve their service delivery performance. The transfer mechanism suggested as a result offers a bridge toward the eventual review and reform of the IRA.
Citation
Martínez-Vazquez, Jorge; Liu, Yongzheng. Philippines: Designing a Local Government Enhancement Fund. © Asian Development Bank. http://hdl.handle.net/11540/1310. License: CC BY 3.0 IGO.Keywords
Governance
Corporate Governance Reform
Governance Approach
Governance Quality
Public Sector Projects
Public Sector Reform
Government
Institutional Framework
Public Administration
Business Ethics
Political Leadership
Public enterprises
Public finance
Government
Political obligation
Public management
Government accountability
Transparency in government
Political ethics
Government spending policy
Government services
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