LED - SD with Impact

LOCAL ECONOMIC DEVELOPMENTWriterSimon Peter GregorioEditorLourdes "Didith" MendozaProject ManagementAmihan PerezAteneo Center for Social Policy and Public Affairs (ACSPPA)Technical and Editorial TeamRene “Bong’ Garrucho, LGSPMags Maglana, LGSPCecille Isubal, LGSPAser Realubit, LGSPMyn Garcia, LGSPThe NATCCO NetworkArt Direction, Cover Design & Layout Jet HermidaPhotographyNATCCO FotoBankLGSP PhotoLibrary

STIMULATING GROWTH AND IMPROVING QUALITY OF LIFE

local economic development:

Local Economic Development: Stimulating Growth and ImprovingQuality of Life Service Delivery with Impact: Resource Books for Local Government

Copyright @2003 Philippines-Canada Local Government SupportProgram (LGSP)

All rights reserved

The Philippines-Canada Local Government Support Program encouragesthe use, translation, adaptation and copying of this material for non-commercial use, with appropriate credit given to LGSP.

Although reasonable care has been taken in the preparation of this book,the publisher and/or contributor and/or editor can not accept anyliability for any consequence arising from the use thereof or from anyinformation contained herein.

ISBN 971-8597-09-3

Printed and bound in Manila, Philippines

Published by:

Philippines-Canada Local Government Support Program (LGSP) Unit 1507 Jollibee PlazaEmerald Ave., 1600 Pasig City, PhilippinesTel. Nos. (632) 637-3511 to 13www.lgsp.org.ph

Ateneo Center for Social Policy and Public Affairs (ACSPPA)ACSPPA, Fr. Arrupe Road, Social Development ComplexAteneo de Manila University, Loyola Heights, 1108 Quezon City

This project was undertaken with the financial support of theGovernment of Canada provided through the Canadian InternationalDevelopment Agency (CIDA).

A JOINT PROJECT OF

IMPLEMENTED BY

Department of the Interiorand Local Government (DILG)

National Economic andDevelopment Authority (NEDA)

Canadian InternationalDevelopment Agency

Federation of CanadianMunicipalities (FCM)

www.fcm.ca

Agriteam Canadawww.agriteam.ca

CONTENTS

FOREWORD

ACKNOWLEDGEMENTS

PREFACE

ACRONYMS

EXECUTIVE SUMMARY

INTRODUCTION

CHAPTER 1: OVERVIEW AND RATIONALE FOR LOCAL ECONOMIC DEVELOPMENT (LED)

Overview of the Sector

Rationale for Local Economic Development (LED)

Nature of Local Economic Development (LED)D

Goals of Local Economic Development (LED)

Principles of Local Economic Development (LED)

Key Success Factors for Local Economic Development (LED)

CHAPTER 2: LGU MANDATES FOR LOCAL ECONOMIC DEVELOPMENT (LED) AND RELATED

LAWS

Local Government Code

The Social Reform and Poverty Alleviation Act

Laws on the Development of Small and Medium Enterprises (SMEs)

DILG Memorandum Circulars on Local Economic Development (LED)

CHAPTER 3: ROLE OF LGU AND OTHER STAKEHOLDERS IN LED

Regular Functions of LGUs with Consequences for Local Economic Development (LED)

Role of Other Local Economic Development (LED) Stakeholders

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CHAPTER 4: STRATEGIES TO FACILITATE LOCAL ECONOMIC DEVELOPMENT (LED)

Strategies to Facilitate Stimulating Growth and Improving Quality of Life

Ineffective Local Economic Development (LED) Strategies that the LGUs Should Avoid

Capacity Building Process for LGU-facilitated Local Economic Development (LED)

CHAPTER 5: ISSUES AND RECOMMENDATIONS REGARDING LED IMPLEMENTATION

Micro Enterprises

Small and Medium Enterprises

Local Government Units

CHAPTER 6: GOOD PRACTICES IN PROMOTING LOCAL ECONOMIC DEVELOPMENT (LED)

Formulating and Implementing a Comprehensive Local Development Program: Irosin,

Sorsogon

The Lingap Tanaw Program: Naujan, Oriental Mindoro

Investment Promotion Program: Bohol

A Municipality’s Investment and Promotion Program: Tigaon, Camarines Sur

Dalan sa Kauswagan Project: San Carlos, Negros Occidental

Breaking Financial Barriers: San Fernando, Pampanga

The City Livelihood Assistance Program: Pagadian, Zamboanga del Sur.

Pushing Development through Cooperativism: Bulacan

CHAPTER 7: REFERENCES AND TOOLS

ENDNOTES

CONTENTS


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The Department of the Interior and Local Government is pleased to acknowledge the latestpublication of the Philippines Canada Local Government Support Program (LGSP), ServiceDelivery with Impact: Resource Books for Local Government; a series of books on eight (8)

service delivery areas, which include Shelter, Water and Sanitation, Health, Agriculture, Local EconomicDevelopment, Solid Waste Management, Watershed and Coastal Resource Management.

One of the biggest challenges in promoting responsive and efficient local governance is to be able tomeaningfully deliver quality public services to communities as mandated in the Local Government Code.Faced with continued high incidence of poverty, it is imperative to strengthen the role of LGUs in servicedelivery as they explore new approaches for improving their performance.

Strategies and mechanisms for effective service delivery must take into consideration issues of povertyreduction, people’s participation, the promotion of gender equality, environmental sustainability andeconomic and social equity for more long- term results. There is also a need to acquire knowledge, createnew structures, and undertake innovative programs that are more responsive to the needs of thecommunities and develop linkages and partnerships within and between communities as part of anintegrated approach to providing relevant and sustainable services to their constituencies.

Service Delivery with Impact: Resource Books for Local Government offer local government units andtheir partners easy-to-use, comprehensive resource material with which to take up this challenge. Byproviding LGUs with practical technologies, tested models and replicable exemplary practices, ServiceDelivery with Impact encourages LGUs to be innovative, proactive and creative in addressing the realproblems and issues in providing and enhancing services, taking into account increased communityparticipation and strategic private sector/civil society organizational partnerships. We hope that in usingthese resource books, LGUs will be better equipped with new ideas, tools and inspiration to make a

iS E R V I C E D E L I V E R Y W I T H I M P A C T: R E S O U R C E B O O K S F O R L O C A L G O V E R N M E N T

FOREWORD

difference by expanding their knowledge and selection of replicable choices in delivering basic serviceswith increased impact.

The DILG, therefore, congratulates the Philippines-Canada Local Government Support Program (LGSP)for this milestone in its continuing efforts to promote efficient, responsive, transparent and accountablegovernance.

HON. JOSE D. LINA, JR.SecretaryDepartment of the Interior and Local Government

FOREWORD

ii S E R V I C E D E L I V E R Y W I T H I M P A C T: R E S O U R C E B O O K S F O R L O C A L G O V E R N M E N T

This publication is the result of the collaboration of the following individuals and institutions thatsupport the promotion of economic development by local governments in their localities.

The Local Government Support Program led by Alix Yule, Marion Maceda Villanueva and Rene "Bong"Garrucho for providing the necessary direction and support

The National Confederation of Cooperatives (NATCCO Network), particularly Lourdes Hernandez, Mimin Aznar-Buban and Edna Reyes for undertaking the research and roundtable discussion and preparing the technicalreport which was the main reference for this resource book; and for assisting in the review of the manuscript

The World Bank Group for its Local Economic Development knowledge products (i.e., process, strategiesand tools). The World Bank supports the development of sustainable Local Economic Developmentthrough knowledge sharing, learning activities and advisory services

Participants to the Roundtable Discussion on Enhancing the Role of LGUs in Local Economic Developmentheld last May 28-29, 2002 in Pasig City. Their expertise and the animated exchange of opinions helpedshape the technical report on which this publication is based:

Mayor Hector Villanueva, Socorro Banugon and Eric Laxina of Bais City, Negros Oriental; Mayor HabibMagdar Loong and Fred Sajot of Parang, Jolo; Resti Tejido of Bohol Province; Zenaida Ramos Mai,Arnel Oliveros, Ma. Rosette Bagayas and Bernardita Santos of Anao, Tarlac; Leonardito Plaza of Sta. Josefa,Agusan del Sur; Fr. Edwin Saldon of Zamboanga del Norte; Ray Roquero of the League of Municipalities;Rhea Rose Victoria of the League of Cities; Jerry Clavecillas of BSMED-DTI; Rosana Urdaneta and MyrnaVelasco of TESDA; Termizie Masahud of DTI-Tawi-Tawi; Assistant Secretary Austere Panadero, Dir. TeresitaMistal and Anna Liza Bonaqua of DILG; Roberto Pagdanganan, Presidential Adviser on Cooperatives

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ACKNOWLEDGEMENTS

Anne Germain of CIDA; Hideaki Hoshina of JICA; Sonia Tiong-Aquino of UP-ISSI; Zita Calugay of UP-NCPAG;Connie Pabalan of DAP; Gemma Regina Cunanan of Ateneo School of Government; Marcia Feria-Miranda of Punla Sa Tao Foundation; Rafael L. Coscolluela of ESKAN; Rodolfo Perez of SEED Inc.; MarianBoquiren of SwissContact; Sixdon Macasaet of NATCCO; Rica Lane of Venture for Fund Raising; Ma. LuisaTumang of JEP Consultants & Trainers, Inc.; Virginia Pacunio of Touch Foundation, Inc.; Reynaldo Feriaof Planters Development Bank

LGSP Advisor Divina Luz Lopez; Managers Tess Gajo, Abe dela Calzada, Paz Christi Moneva and VictorOzarraga; and Officers Antonio Tantioco, Dicky Limbaga and Rizal Barandino

Cecille Isubal and Aser Realubit for providing feedback that helped ensure that the resource book offersinformation that is practical and applicable to LGU needs and requirements

Amihan Perez and the Ateneo Center for Social Policy and Public Affairs for their efficient coordinationand management of the project

Lourdes "Didith" Mendoza for the excellent editorial work

Simon Peter Gregorio for effectively rendering the technical report into user-friendly material

Mags Z. Maglana for providing overall content supervision and coordination with the technical writers

Myn Garcia for providing technical and creative direction and overall supervision of the design, layoutand production

Sef Carandang, Russell Fariñas, Gigi Barazon and the rest of the LGSP administrative staff for providing support.

ACKNOWLEDGEMENTS

iv S E R V I C E D E L I V E R Y W I T H I M P A C T: R E S O U R C E B O O K S F O R L O C A L G O V E R N M E N T

Service Delivery with Impact: Resource Books for Local Government are the product of a seriesof roundtable discussions, critical review of tested models and technologies, and case analysesof replicable exemplary practices in the Philippines conducted by the Philippines-Canada Local

Government Support Program (LGSP) in eight (8) service sectors that local government units (LGUs) aremandated to deliver. These include Shelter, Water and Sanitation, Health, Agriculture, Local EconomicDevelopment, Solid Waste Management, Watershed and Coastal Resource Management.

The devolution of powers as mandated in the Local Government Code has been a core pillar ofdecentralization in the Philippines. Yet despite opportunities for LGUs to make a meaningful differencein the lives of the people by maximizing these devolved powers, issues related to poverty persist andimprovements in effective and efficient service delivery remain a challenge.

With LGSP’s work in support of over 200 LGUs for the past several years came the recognition of the needto enhance capacities in service delivery, specifically to clarify the understanding and optimize the roleof local government units in providing improved services. This gap presented the motivation for LGSPto develop these resource books for LGUs.

Not a “how to manual,” Service Delivery with Impact features strategies and a myriad of provenapproaches designed to offer innovative ways for local governments to increase their capacities to betterdeliver quality services to their constituencies.

Each resource book focuses on highlighting the important areas of skills and knowledge that contributeto improved services. Service Delivery with Impact provides practical insights on how LGUs can applyguiding principles, tested and appropriate technology, and lessons learned from exemplary cases to theirorganization and in partnership with their communities.

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PREFACE

This series of resource books hopes to serve as a helpful and comprehensive reference to inspire andenable LGUs to significantly contribute to improving the quality of life of their constituency throughresponsive and efficient governance.

Philippines-Canada Local Government Support Program (LGSP)

PREFACE

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ACRONYMS

ACSPPA Ateneo Center for Social Policy and Public Affairs ADB Asian Development Bank AIM Asian Institute of Management ARC Agrarian Reform Community ARMM Autonomous Region in Muslim Mindanao BIPC Bohol Investment Promotion Center BIPP Bohol Investment Promotion Program BIPT Bohol Investment Promotion Team BLGD Bureau of Local Government Development (DILG)BOI Board of Investments BOO Build-Operate-Own BOT Build-Operate-Transfer BRW Bureau of Rural Workers BT Build-Transfer CBD Central Business District (Tigaon)CBFM Community-Based Forest Management CBIS Community-Based Information System CBMS Community-Based Monitoring System CDF Countryside Development Fund CEO City Engineering Office (LGU)CIDA Canadian International Development AgencyCILDAP City Livelihood Development Assistance Program (Pagadian City)CLAP Cluster Development Approach Project (LGU)CLUP Comprehensive Land Use Plan COA Commission on Audit

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ACRONYMS

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COMB Coordinating and Monitoring Body CSOs Civil Society Organizations DAP Development Academy of the Philippines DAR Department of Agrarian ReformDBM Department of Budget and ManagementDBP Development Bank of the Philippines DILG Department of the Interior and Local Government DOH Department of Health DOLE Department of Labor and Employment DOST Department of Science and Technology DPWH Department of Public Works and Highways DSWD Department of Social Welfare and Development DTI Department of Trade and Industry FAPs Foreign-Assisted Projects GAD Gender and Development GOP Government of the Philippines IAD Integrated Area Development Program InFRES Infrastructure for Rural Productivity Enhancement Sector Project IPAG Investment Promotion Advisory Group (Bohol)IPRA Integrated Protected Resource Area IRA Internal Revenue Allotment (LGU)IRAP Integrated Rural Accessibility Planning ISSI Institute for Small Scale Industries IT information technology KPP Kaunlaran sa Pagkakaisa Program (Bulacan)LCEs Local Chief Executives

LDCs Local Development Councils (LGU)LED Local Economic Development LEDA Local Economic Development Authority LEDP Local Entrepreneurship Development Plan LETPA Local Economic Transformation Program Agenda LGA Local Government Academy (DILG)LGUs Local Government Units LHB Local Health Board (LGU)LPRAA Local Poverty Reduction Action Agenda LPRAO Local Poverty Reduction Program Action Officers (LGU)LSB Local School Board (LGU)MAHAL, Inc. Mindoro Assistance for Human Advancement Through Linkages Inc.MARC Municipal Agrarian Reform Council MBN Minimum Basic Needs MC Memorandum CircularMDFO Municipal Development Fund Office MFARMCs Municipal Fisheries and Aquatic Resource Management Councils MPDO Municipal Planning and Development Officer NATCCO National Confederation of CooperativesNCIP National Commission on Indigenous People NCR National Capital Region NCRFW National Commission on the Role of Filipino WomenNEDA National Economic and Development Authority NIPAS National Integrated Protected Area System PANACEA Panay, Negros and Cebu AreaPAO Public Attorney’s Office

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ACRONYMS

ACRONYMS

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PARUL Poverty Alleviation through Rural Urban Linkages (UNDP)PBAC Pre-qualification, Bids, and Award Committees (LGU)PCCI Philippine Chamber of Commerce & Industry PCEDO Provincial Cooperative and Entrepreneurial Development Office (Bulacan)PDI Parallel Drug Importation (DOH)PESOs Public Employment Service Offices PIDS Philippine Institute for Development Studies PIME Planning, Implementation, Monitoring and Evaluation PNB Philippine National Bank PS Personnel Services (LGU)SB Sanggunian Bayan (LGU)SEF Special Education Fund SERDEF Small Enterprise Research and Development Foundation (UP-ISSI) SMEDC Small and Medium Enterprise Development Council SMEs Small and Medium EnterprisesTESDA Technical Education Skills and Development AuthorityTLRC Technology Livelihood and Resource CenterTQM Total Quality Management UA & P University of Asia & the Pacific UNDP United Nations Development ProgrammeUP University of the Philippines ZOs Zoning Ordinances

Discussions on local economic development or LED have been going on in the past years amonglocal government circles but it has not gained momentum until now. The renewed emphasison poverty reduction and sustainable economic and social development has heightened its

importance and urgency.

Trends such as this pose the peril of misinterpretation. The hype and the rhetoric may be mistaken withthe substance. Focus may be given on the peripherals and not the core. Hence, this LED resourcebook, while not purporting to say the last word on the subject, seeks to contribute to the discussionon LED, and to guide the implementation of the process. This book will clearly define the goals andprinciples of LED, delineate the roles of the various stakeholders, and expound on strategies that LGUscan adopt to facilitate LED. But first a situationer.

THE ECONOMIC SECTOR IN THE PHILIPPINES

The Philippines remains a predominantly agricultural country. Majority of the country’s poor are in thissector. Within this background, enterprises abound. Ninety one percent (91%) percent of the 494,474enterprises in the country are micro enterprises or those with assets valued at less than PhP1.5 million.Micro enterprises employ from one to nine workers.

Half of all the enterprises in the country are found in three areas: the National Capital Region, SouthernLuzon, and Central Luzon.

Four out of ten of these enterprises are into wholesaling and retailing. Three out of the ten are engagedin providing social, community, and personal services. Only two out of ten are into manufacturing.

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EXECUTIVE SUMMARY

Eight out of ten of these enterprises are organized as single proprietorship. Only one out of ten arecorporations. Many enterprises are unregistered and belong to the so-called “informal economy.” Theinformal economy consists of many entrepreneurs or itinerant workers who are outside the officialbusiness and worker registration system. They are not usually captured in official statistics. Mostly, theyare home-based workers, street traders and street vendors, roving or seasonal job workers on buildingsites or roads; and those in between streets and home (e.g., waste collectors, push-cart boys). Many oftheir business ventures in the informal economy are the tiniest of micro enterprises.

WHAT LOCAL ECONOMIC DEVELOPMENT IS

Local Economic Development or LED is “the process by which actors within LGUs (barangays,municipalities, cities, and provinces) work collectively to improve conditions for economic growth,employment generation, and quality of life for all.” The goals of LED are improved quality of life andpoverty reduction.

There are many effective approaches for LGUs to facilitate LED but the principles that underpin thedifferent approaches are consistently the same:

Balanced economic growth with social and gender equity, sustainability, social development, peace,and cultural responsibilityA multi-stakeholder partnershipThe private sector as the engine of employment and growthLGU as enablerTransparency and accountability

EXECUTIVE SUMMARY

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LEGAL FRAMEWORK FOR LED

The legal framework for LED are expressed in laws such as the Local Government Code, the Social Reformand Poverty Alleviation Act, laws on the development of small and medium enterprises (SMEs), laws onthe informal sector, and laws on investment. There are also a number of Department of the Interior andLocal Government (DILG) memoranda governing LED.

WHAT LGUs AND LOCAL STAKEHOLDERS CAN DO

Far from being a novelty, LED is part and parcel of the LGU’s regular functions and is not separate fromthem. The novelty of LED, if one can call it that, is the approach or transformed mindset by which thesefunctions or services are performed and delivered.

The regular functions of LGUs relating to LED include among others: policy-making and taxationregulation, planning and budgeting, collection, storage, and dissemination of information. They are alsogiven the tasks of marketing and public relations/investment and enterprise promotion, public safetyand cultural heritage activities, and the provision of social and environmental services.

There are a number of strategies that LGUs and their partners can adopt to promote LED. Thesestrategies range from the provision and improvement of so-called “hard”infrastructure (e.g., roads, bridges,ports, industrial parks) to the enhancement of the quality of local human resources through so-called“soft” services.

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EXECUTIVE SUMMARY

WHAT LGUs AND THEIR PARTNERS HAVE DONE

The municipalities of Irosin and Naujan are models in involving and eliciting stakeholder participationin the LED process from planning, resource mobilization to implementation, and monitoring andevaluation. Both are distinguished in their ability to pursue equity and social development witheconomic growth and in investing in so-called soft infrastructure (e.g., health and education) toimprove the lives of their constituents.

The Province of Bohol and the town of Tigaon demonstrated how LGUs at different levels can attractexternal or inward investors through a tight definition of strategies (framework for investment promotionand land use plan), provision of incentives (Investment Code) and the creation of the requisitestructures responsible for policy formulation and implementation (Investment Promotion Center,Livelihood Promotion Unit, Municipal Trade and Industry Board and Municipal Livelihood Council).

LGUs can also create an environment conducive to LED as San Carlos City in Negros Occidental did byexpanding physical access within the city, especially to poorer sections of the local population. SanFernando in Pampanga also pursued a similar expansionary strategy, this time of fiscal space, to givethe city enough resources to make its physical and institutional environment friendly to LED.

These LGUs may differ in location, resource endowments and challenges but their key success factorswere the same. These success factors were sound and realistic planning; commitment to LED andeffective leadership and management of the process; continuous capability building; and an enablingenvironment for LED.

EXECUTIVE SUMMARY

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This resource book introduces Local Economic Development or LED to local chief executives, rankand file members of the local and national bureaucracy, businessmen, would-be entrepreneursand investors, NGOs, cooperatives and other local players. It provides basic information about

LED: its nature, principles, goals, strategies, and the issues surrounding its implementation. Stories ofsome local government units (LGUs) that have succeeded in promoting it are also included to show howlocal officials and local stakeholders can collaborate to jumpstart economic development in the locality.

The book is divided into seven main sections:

An Overview of LED and the Rationale for Pursuing LEDThe LGU’s Mandates Concerning LED and Related Laws Roles of LGU and Other Stakeholders in LEDStrategies to Facilitate LEDIssues and Recommendations Regarding LED Implementation Good Practices in Promoting LEDReferences and Tools for LED

Chapter 1: Overview and Rationale for Local Economic Development (LED). Outlines the scop scope-- the various economic sectors and types of enterprises involved and their current situation; its nature,goals, principles, and the key factors for successful LED. As you will discover in reading this chapter, LEDis more than just economic growth, industrial parks/zones, urbanization, high-rise buildings, mallsand the usual landmarks associated with modernity. It also discusses how LGUs are envisioned to bean enabler or facilitator of the LED process, and at the same time, advises LGU flexibility in taking onother roles when the situation requires.

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INTRODUCTION

Chapter 2: LGU Mandates for LED and Related Laws. Enumerates the LGU mandates in promotingLED and related laws that impact on the performance of these mandates.

Chapter 3: Role of LGU and Other Stakeholders in Local Economic Development (LED). Enumeratesthe regular functions of the LGU and discusses the consequences of these functions in the pursuit ofLED. From the discussion, LGUs will find that LED is not something new, alien, or separate from whatthey are already doing on a daily basis or what it is providing by way of services to its constituents. Thenovelty of LED, if one can call it that, is the approach or transformed mindset by which these functionsor services are performed and delivered. The third chapter also discusses the various roles of other LEDstakeholders such as micro, small, medium, and large enterprises, civic and professional organizations,cooperatives and microfinance institutions, and educational institutions.

Chapter 4: Strategies to Facilitate Local Economic Development (LED). Presents strategies that LGUscan use to facilitate LED. The strategies range from the provision and improvement of so-called “hard”infrastructure, e.g., roads, bridges, ports, and industrial parks, to the enhancement of the quality of localhuman resources through so-called “soft” services. The chapter also explains strategies for attractingand retaining external or inward investors and encouraging indigenous entrepreneurs to start enterprisesand to grow their existing businesses. It ends with a discussion on what strategies to avoid and theprocesses for planning LGU-facilitated LED and building capacity for the LED process.

Chapter 5: Issues and Recommendations Regarding LED Implementation. Deals with issues in LEDimplementation as these impact on LGUs and other LED players like micro enterprises, small andmedium enterprises. LGUs face a number of constraints in implementing LED. These constraints are:financial, technical-managerial, lack of political will and commitment, lack of sustainability of LEDefforts, insufficient support systems for LED, conflicts between national and local governments, and issuesregarding inter-local cooperation. Some recommendations are provided.

INTRODUCTION

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Chapter 6: Good Practices in Promoting Local Economic Development (LED). Contains the storiesof eight LGUs that have successfully promoted LED. More than the results, the eight cases illustrate theuse of the different LED strategies presented in the fourth chapter.

Chapter 7: References and Tools. Contains references and tools that the readers may find useful indeepening their understanding of the issues presented in this resource book.

Some of the topics discussed in all chapters may already be familiar to some LGUs, and they may feeljustified to skip or gloss over those portions. Just the same, we recommend that they still read thisresource book in full, perhaps not in one sitting but by choosing portions that are relevant andimportant for the challenge of the day. Local chief executives and elected officials may be tempted tojump immediately to Chapter 4 on Strategies to Facilitate LED and Chapter 6, Good Practices. We urgethem to read Chapters 1 and 3 first so that they can better appreciate the context of these strategies,the stakeholders involved, and the distinctiveness of LED from previous, and even current, economicdevelopment philosophies and approaches.

The cases featured in Chapter 6 were designed to meet specific challenges at a particular time and context.They may or may not be applicable to those in a different situation. They are presented here to informand inspire LGUs and to trigger their creativity.

This resource book is also for local entrepreneurs, chambers of commerce and local industry associations,cooperatives, microfinance institutions, people’s organizations, non-government organizations (especiallythose engaged with the informal sector and implementing livelihood projects), and agencies providingvarious kinds of assistance such as capability building to LGUs. The resource book can help them to betterunderstand the LED process and their unique and indispensable roles in it. It can also show how theirefforts can complement or support the efforts of the LGUs they are working with.


INTRODUCTION

OVERVIEW AND RATIONALE FOR LED

CHAPTER 1


CHAPTER 1This chapter explains the nature of Local Economic Development (LED), its goals and

guiding principles, the key factors or characteristics of successful LED efforts. The ultimateoutcomes of LED are improved quality of life and poverty reduction. It is guided by the

principles of growth with equity, sustainability, social development, peace, cultural responsivenessand good governance (transparency and accountability). The private sector is the driver ofeconomic growth with the local government unit (LGU) ideally performing an enabling role.Successful LED efforts are characterized by sound and realistic analysis and planning, commitmentto and effective leadership and management of the LED process, continuous capability building,and an enabling environment for LED.

❙ Overview of the Sector

LED encompasses primarily the economic sectors of local society – agriculture, commerce, trade,finance, manufacturing -- and all types of enterprise from micro to large enterprises. It covers boththe formal and informal sectors of the economy and extends from production and provision of goodsand services to their distribution and use by local people.

LED is often associated with industrial parks, export processing zones, high-rises, rapid urbanization,and conversion of land from agricultural uses to commercial, residential, and industrial uses. Thiscertainly is LED but only one aspect of it. It is not even representative of LED considering the realitythat the Philippines remains predominantly agricultural and that ninety-one percent (91%) of the494,474 enterprises in the country are micro enterprises. Many more enterprises are not includedin the statistics because they are unregistered and belong to the so-called informal economy. Tobetter understand what LED is, it is necessary to have a bird’s eye view of the country’s economicstructure.

OVERVIEW AND RATIONALE FOR LED

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◗ AGRICULTURE

Agriculture remains an important sector in Local Economic Development for two reasons:

First, most of the Philippines’ poor are into agriculture. Sixty-eight percent (68%) of low-incomeemployed workers are in the agriculture sector. Seventy-four percent (74%) of employed low-incomemales and fifty-six percent (56%) of employed low-income females are in the sector. LocalEconomic Development should lead to the reduction of the absolute number of people consideredpoor. In turn, lifting people from poverty entails addressing the problems of low agriculturalproductivity and environmental degradation while at the same time lessening people’s dependenceon the agricultural sector as their sole source of income.

Second, in times of economic slowdown, the sector provides a safety net for employment.Between 1991 and 1993, when the Philippine economy contracted, almost half of all newemployment was generated in agriculture. Between 1994 and 1995, when the economy grew,employment in the sector fell by two percent (2%).

For many rural LGUs, the development of the local economy means moving majority of farmers andfarm workers from less financially rewarding agricultural work to better paying employment. It wouldrequire providing additional source of income to two out of three household heads in the agrariansector that have no additional source of income.

◗ THE INFORMAL ECONOMY / SECTOR

The informal economy consists of many entrepreneurs or itinerant workers that are outside the officialbusiness and worker registration system and therefore not usually captured in the official statistics.Many enterprises in the informal economy are the tiniest of micro enterprises.

1 LOCAL ECONOMIC DEVELOPMENT


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The major actors in the informal economy / sector and their characteristics are:

Home-based workers. Home-based workers usually work at home or outside the establishmentthat buys their products. Just the same, they have prior agreements to supply goods or servicesto the establishment. Their remuneration consists of the prices paid for their products. Theydo not employ workers on a regular basis. Home-based workers are often classified under “self-employed” or “own account workers.”Street traders and street vendorsItinerant or seasonal or temporary job workers on building sites or road workersThose in between the streets and home, e.g., waste collectors, pushcart boys.

◗ DISTRIBUTION OF ENTERPRISES BY ASSET SIZE AND EMPLOYMENT

Micro enterprises are defined by law as those businesses that employ from one to nine workers.Micro enterprises have assets valued at less than PhP1.5 million.

Small enterprises are the second most numerous, constituting eight percent (8%) of the total. Smallenterprises employ from ten to 99 workers and assets valued between PhP1.5 million and PhP15million.

Medium enterprises and large enterprises constitute the very narrow apex of the economy.Medium enterprises employ from 100 to 199 workers and have assets valued between PhP15 millionand PhP60 million.

Large enterprises are those that employ 200 workers and above and have assets worth morethan PhP60 million.

OVERVIEW AND RATIONALE FOR LED 1


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◗ DISTRIBUTION OF ENTERPRISES BY REGION

One out of four enterprises are found in the National Capital Region (NCR). Southern Luzonaccounted for fourteen percent (14%) of the total while Central Luzon had ten percent (10%).Southern Mindanao and the Ilocos region followed with eight (8%)and seven percent (7%) sharesof the total. The rest of the regions have shares below six percent (6%).

◗ DISTRIBUTION OF ENTERPRISES BY INDUSTRY

Four out of ten enterprises in the country are into wholesaling and retailing. Three out of ten areengaged in providing community, social, and personal services. Two out of ten are intomanufacturing. The remainder are involved in financing, insurance services, business services,transportation, storage and communications, construction, mining and quarrying, and agriculture,forestry and fishery sectors.

◗ DISTRIBUTION OF ENTERPRISES BY OWNERSHIP STRUCTURE

Eight out of ten establishments in the Philippines are organized as single proprietorships. Only oneout of ten are private corporations. The rest are partnerships, cooperatives, and other types oforganizations.

◗ ENTERPRISES THAT GENERATE THE MOST EMPLOYMENT AND ADD THEHIGHEST VALUE

In generating employment, the small and medium enterprises that currently add the most jobs inthe economy are:

Restaurants and cafesPrivate education services



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Private medical and dental servicesRepair of motor vehicles; andBarber and beauty shops

At present those small and medium enterprises enterprises that add the greatest value to productsand services in terms of amount are:

Private educational servicesRestaurants, cafes, etc.Amusement and recreational servicesPrivate medical and dental services; andMotion picture and other entertainment services

❙ Rationale for LED

From the above overview, it is clear that economic policies and strategies pursued in the past andcontinuing on to the present have neither produced sustainable growth nor reduced poverty.Economic policies and programs in the past have catered to the larger enterprises and have beenbiased toward urban areas despite the reality that majority of Filipinos are in the rural areas andthe overwhelming majority of enterprises are micro enterprises. They have failed to address the“missing middle” in the country’s economic structure.

Another reason for the lack of sustainable growth and reduction of poverty is that most economicinitiatives were centrally planned and failed to effectively mobilize local resources and structures.Missing from the process were the active leadership of and facilitation by the local government.The UNDP Poverty Alleviation through Rural Urban Linkages (PARUL) - LED Programme of 1997sought to address this by promoting a facilitative approach to local economic developmentthrough better understanding of public-private coalitions and the essentially facilitative role ofgovernment.1



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Today, it is universally recognized that local government units stand at the frontlines of sustainableeconomic growth and poverty reduction. The UN Habitat II Conference in 1996 declared that “Localgovernment is the central factor in social and economic development.” Experiences of pioneeringlocal governments like the Cebu provincial and city governments showed that LGUs are in aprivileged position and have an indispensable role in promoting economic development. Thepassage of the Local Government Code in 1991 expanded this role further by providing greater spacefor and powers to LGUs to pursue LED.

Today, no one doubts that economic development will invigorate and heighten local economicactivity. A more active local economy causes the LGU’s tax base to expand and deepen, which inturn leads to improved internal revenue generation and management. With prudent and effectiveuse of financial resources, local economic development translates to better social services for thelocal citizenry.

A healthy, educated citizenry due to better social services delivery enhances the reputation of theLGU and the image of local government officials in the country and in the international community.This boosts their chances of attracting more investors, and politically, of continuing their stay inoffice.

❙ Nature of LED

Local Economic Development (LED) is “the process by which actors within LGUs (barangays,municipalities, cities, and provinces) work collectively with the result that there are improvedconditions for economic growth, employment generation, and quality of life for all.”2

The term local in the definition signifies that LED involves building the economic strength of a localarea to improve its economic future. This being the case, the prime movers or driving forces arebarangays, municipalities, cities, and provinces singly or collectively. LED is territorial in approach.



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The adjective economic drives home the importance of identifying and seizing businessopportunities, supporting entrepreneurial initiatives, creating a climate friendly to investment andbusiness activity, and facilitating access of local products and services to markets.

The term development emphasizes that local economic development is holistic, focusing not onlyon the economic dimension but also on the social, cultural, politico-administrative aspects.Economic development is a means not an end. Economic growth is a necessary but not a sufficientcondition for development. LED is not just simply setting up large export processing zones or agroindustrial estates. It is not simply building roads, ports, and airports. The quality and direction ofgrowth is as important – and perhaps more so – than its quantity or size. Growth that destroys theenvironment, or that fails to create local employment and reduce poverty is unlikely to besustainable in the long run. Sustainable development is at the heart of LED. This means satisfyingthe needs of the present generation without sacrificing the future of succeeding ones.

LED also promotes the following:

Optimization of usually scarce resources in an areaIntegration of barangay, municipal, and provincial plans and priorities with regional andnational plans from the bottom upwards;Citizen participation and consensus building among stakeholders.

However, it is important to remember that while focused on the local, effective LED necessarily haslinks to the regional, national and international levels. It is also important to remember thedifference between local and national economic development. National economic development isconcerned with setting the overarching framework and ground for the sustainable growth and overallcompetitiveness of the economy through the use of policy instruments such as inflation targeting,and/or floating the exchange rate. National economic development deals with industry wide andinter-industry matters, while local economic development concentrates on firm, inter-firm, and clusterdynamics. The critical levers in local economic development are, among others, land use plans,taxation, wage setting (regional level), and the provision of infrastructure and social services.



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❙ Goals of LED

The immediate goals of Local Economic Development are:

Increase in cooperation and acceptance among LGUs, the private sector, and civil societyorganizations (CSOs)Effective local governance The generation of new/improved jobsIncreasing incomes

The ultimate goals of Local Economic Development are:

Poverty reductionImproved quality of life

❙ Principles of LED

There are many effective approaches for LGUs to facilitate Local Economic Development but theprinciples that underpin the different approaches are consistently the same:

1. Balanced Economic Growth with Social and Gender Equity, Sustainability, Peace andCultural Responsibility

Economic growth is not sufficient. It must be pursued in a manner that would reduce poverty,distribute the benefits of growth equitably among the different sectors of society, and lead to betterrelations between men and women.



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It should not destroy the environment to the detriment of present and future generations. Today,there is a growing recognition of the multiplicities of local economies existing in one country andof the different sectors and sub-sectors even in one local economy. These so-called “economies”and “sub-sectors” relate to each other in different ways. An important principle of LED is thenotion of balance between rural and urban development, economic growth with social development(e.g., health and education, the economic sources of development with environmental concerns,and women and men). One of the objectives of the UNDP PARUL-LED Programme of 1997 was “topromote a balanced pattern of rural and urban development.”

LED should lead to better health and education; understanding and harmony among peoples;recognition and respect for the diversity among cultures; and promotion of the positive values andways of life of different peoples residing in the barangay, municipality, city, or province.

2. LED as Multi-Stakeholder Partnership

LED is a partnership among and between government, the industry associations and privatebusiness organizations, non-government organizations, people’s organizations, cooperatives, andinformal sector associations. Each of these actors has a role to play in Local Economic Development.

3. Private Sector as the Engine of Employment and Growth

The private sector is the engine of growth for increased employment and economic growth. Itoccupies this privileged position by reason of the incentive structure in which it operates, i.e., thecreation of value for its incorporators and investors and the presence of competitors; its greatersensitivity to market signals and movements; its relative freedom to take on risks compared to thegovernment bureaucracy, and its capacity to mobilize and develop resources and transform theminto different forms of capital (that is, managerial, technological). In areas where the privatesector is underdeveloped, the LGU may initially be the driver of economic growth and the providerof employment but it must be emphasized that this role is temporary and must be transferred assoon as the private sector is ready to assume this role.



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4. LGU as Enabler

The envisioned role for LGUs is as an enabler and creator of an environment conducive for qualityand sustainable development through its various roles and functions. These roles and functionsand their consequences to LED is explained in greater detail below. The basic goal of an enableris to create a social, physical, and economic environment conducive to the development of thelocality and to structure this environment through appropriate rule-making and enforcement. Inconjunction with so-called invisible market forces and private initiative, it acts as the “visible”hand in Local Economic Development, facilitating but always maintaining a prudent “arm’s length”from the other players.

In certain situations and in certain areas, the LGUs may have to take the lead role in jumpstartingLED. This happens when there are insufficient private or voluntary/social sector providers of a serviceor when the capacities of these private or voluntary/social sector providers are inadequate. Acommon example is the provision of utilities such as water and electricity that are critical to thelocality’s development. The LGU may choose to directly implement, and/or own, and/or aftercompletion, manage the facility if the financial, technical, and managerial capacity are lacking inthe private/voluntary sector or if there are no private sector takers for the project because of theproject’s risk profile (i.e., the long gestation period from conceptualization to operation, the levelof sunk costs, the long payback period, and the perceived low return from the investments.)

Another occasion for LGU intervention is in the presence of so-called “market failures” like cartelswhen private sector players conspire to bid up the prices of critical commodities to the peril of society,especially the poorest. An example would be the government’s Parallel Drug Importation (PDI)program and the LGUs’operation of hospital-based and barangay-based pharmacies to distributedrugs bought through PDI.

Even then, such decisions must not be taken lightly, and all other options besides actualimplementation, ownership, management, and direct competition with the private sector should



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be weighed carefully. It may well be that the provision of appropriate fiscal and regulatoryincentives would be sufficient to attract private investors to implement, own, and manage the projectinstead. Prudence is advised here because LGUs themselves have limited resources and other equallyimportant concerns other than infrastructure and economic projects. Funds allotted for physicaland economic infrastructure mean less money available for social services.

Regular changes in the LGU’s top leadership also do not provide the stability and focus for theimplementation of very long-term projects. The partisanship associated with electoral processesintroduces other factors which are often unfriendly to the effective implementation of economicprojects and the efficient management of public enterprise. Local Chief Executives (LCEs) and officialshave to deal with more stakeholders than private businesses do. These stakeholders jockey to shapethe political, economic, and the institutional environment to favor their interests over those of others.The danger of co-optation is always present.

Another case for treading carefully into this area is that publicly owned and managed enterprisesoften have few incentives to perform. Funds for these public enterprises are “cheaply obtained”because they come from the LGU budget or from dedicated financing facilities. In many cases,enterprise performance targets are not set, nor are allocations linked to performance andprojections. These enterprises are oftentimes successful in their attempts to shape the rules (i.e.,policies and regulations) in their favor. The results are inefficient, heavily subsidized monopoliesthat in the end stunt private sector development and increase the costs for both end-users andtaxpayers.

In summary, LGUs have to be flexible and have to be prepared to switch roles in LED if necessary.The rule of thumb is that even when LGUs have to be the direct implementer, owner, and managerof public economic enterprises, they have to strive to become an enabler and facilitator andavoid stunting the growth of the private and voluntary sectors.

GOOD PRACTICES IN PROMOTING LOCAL ECONOMIC DEVELOPMENT 5


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5. Transparency and Accountability

LED is impossible without effective local governance. And local governance is ineffective withoutthe principles of transparency and accountability. LGUs inspire confidence from external investorsand local businesspersons by instituting transparent, stable, and fair policies and establishing systems,procedures, and practices that effectively exact accountability of local officials. A virtuous circleis created by accountable and transparent governance. Effective local governance attracts andintensifies business activities that generate jobs, increase the citizens’ income, and reduce poverty.These lead to higher revenues for the LGUs, which if properly managed, translate to more and betterresources for services that enhance the quality of life of its citizens. A prosperous, healthy, and happycitizenry boosts the reputation of the LGU and its officials, improving their chances for re-electionor for gaining higher office. Good politics make for good economics. Transparent and accountablegovernance reduces the cost of doing business in the form of bribes, grease money, facilitation feespaid to rent-seeking bureaucrats and politicians. These bribes are ultimately passed on to theconsumers in the form of higher prices.

❙ Key Success Factors for LED

1. Sound and Realistic Analysis and Planning

LED begins with a sound assessment of the opportunities and threats to the barangay, municipality,city, and province as well as their strengths and weaknesses. . Good analysis and planning areessential because LGU resources are limited. Without sound plans, a great deal of human andfinancial resources is in danger of being wasted. Plans also have to be realistic. Too often, many plansare actually “wish lists”because they are not based on a sober assessment of the human, logistical, andfinancial capacities of the LGU, the natural and human resource endowments of the area, and the interestsof the major actors. Often in such plans, the benefits are grossly exaggerated while the costs are paperedover. Sound, realistic, and responsive planning can only be done if the LGU actively involves the majorstakeholders and treats the undertaking as a partnership and not its exclusive preserve or dominion.



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2. Commitment to LED and Effective Leadership and Management of the Process

Genuine participation of stakeholders is the cornerstone for engendering ownership andcommitment within the barangay, municipality, city, or province over the resulting plans The LGUmust build the edifice by following through on its implementation, maximizing the use of meagerresources, effectively leading and managing the LED process, and above all remaining committedin the face of various challenges to the construction of a prosperous, just, and harmoniousbarangay, municipality, city, or province.

3. Continuous Capability Building

Effectively leading and managing the LED process require both political will and strong institutionalcapacity. Strong institutions are not built overnight but are realized only through the continuousand sufficient provision of training and capability building and of system and process improvements.Human resources and systems development always lag behind in the march towards progressbecause investments in these areas are rarely made or are the first to be sacrificed when budgetsare slashed. Politicians normally opt for those projects that are visible and yield an immediate return.

4. An Enabling Environment for Local Economic Development

A critical factor in the success of LED is a supporting and enabling environment for LED. This consistsof supporting policies and regulatory frameworks (e.g., a low-interest rate and low inflation regimethat allows entrepreneurs to borrow at reasonable rates; laws supporting joint venture arrangements,etc.), and supporting institutions (e.g., a viable government finance and guarantee corporation).Equally important are the introduction and enforcement of policies to protect the differentecosystems. Agricultural productivity would suffer unless the fertility of the soil is maintained.Denuded watersheds deprive poor upland dwellers of their sources of livelihood; threaten lowlandswith flooding; and diminish water supply.



LGU MANDATES FOR LED AND RELATED LAWS

CHAPTER 2


CHAPTER 2LGU mandates related to LED are expressed in various laws like the Local Government Code

and the Social Reform and Poverty Alleviation Act and Memoranda Circular of theDepartment of the Interior and Local Government (DILG). In addition, LGUs have to be

conversant with laws on small and medium enterprise development.

❙ Local Government Code

Republic Act 7160 or the Local Government Code has given the local government units (LGUs) morepower and authority to accelerate local economic development and improve the quality of life inour communities. The following provisions are the most relevant to LED.

◗ SEC. 16

“Every local government unit shall exercise its powers… which are essential to the promotion ofthe general welfare. Within their respective jurisdictions, local government units shall… promotefull employment among their residents…”

◗ SEC. 17 (B)(2)(IX)

“Public markets, slaughterhouses and other municipal enterprises.”

◗ SEC. 17 (B)(2)(XI)

“Tourism facilities and other tourist attractions, including the acquisition of equipment, regulationand supervision of business concessions, the security services for such facilities.”

LGU MANDATES FOR LED AND RELATED LAWS

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◗ SEC. 17 (B)(3)(IX)

“Investment support services, including access to credit financing”

◗ SEC. 35

“Local government units may enter into joint ventures and such other cooperative arrangementswith people’s and non-governmental organizations to… develop local enterprise… to improveproductivity and income, diversity agriculture, spur rural industrialization… and enhance theeconomic and social well-being of the people.”

◗ SEC. 36

“A local government unit may… provide assistance… to such people’s and non-governmentalorganizations, for economic, socially-oriented projects to be implemented within its territorialjurisdiction.”

◗ SEC. 109

“Functions of Local Development Councils.”

❙ The Social Reform and Poverty Alleviation Act

RA 8425 or the Social Reform and Poverty Alleviation Act stipulates that it is the declared policyof the State "to adopt an area-based, sectoral and focused intervention to poverty alleviation whereinevery poor Filipino family shall be empowered to meet its minimum basic needs of health, foodand nutrition, water and environmental sanitation, income security, shelter and decent housing,

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peace and order, education and functional literacy, participation in governance, and family careand psycho-social integrity."

It mandates LGUs through the Local Development Councils (LDCs) to formulate, implement,monitor and evaluate poverty reduction programs in their respective jurisdictions, consistentwith the poverty reduction strategy of the national government.

❙ Laws on the Development of Small and Medium Enterprises (SMES)

To push Local Economic Development, there is a need to craft a framework that would moldSMEs into globally competitive enterprises. The following national policies have been legislatedto provide such framework.

◗ MAGNA CARTA FOR SMALL ENTERPRISES (R.A. 6977)

The law provides a climate that minimizes regulations while at the same time assuring stableoperating rules. It requires close coordination between government institutions involved in SMEdevelopment and the private sector so there is coherence in both policy thrusts and implementationof action programs. For this purpose, the Small and Medium Enterprise Development Council(SMEDC) was created. To address the problem of access to financing, the Magna Carta requires alllending institutions, whether public or private, to set aside at least 6% and 2%, respectively, of theirtotal loan portfolio for SME credit for a period of 10 years from August 12, 1997 to August 9, 2007.

◗ KALAKALAN 20 (R.A. 6810)

Assistance is provided to countryside barangay and business enterprises through minimumregulation, and provision of financing and other government services and assistance.

LGU MANDATES FOR LED AND RELATED LAWS 2


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◗ AN ACT PROVIDING ASSISTANCE TO WOMEN ENTREPRENEURS (R.A. 7882)

Government financial institutions are mandated to provide financial assistance to non-governmentorganizations engaged in developing women entrepreneurs engaged in manufacturing, processing,service and trading businesses

◗ THE OMNIBUS INVESTMENT CODE (E.O. 226)

SMEs that are engaged in the priority areas of the investment priorities plan are entitled to thestandard incentives under the code such as income tax holiday for 4-6 years, tax and duty freeimportation of capital equipment, additional deduction from taxable income for labor expense,exemption from contractor’s tax, unrestricted use of consigned equipment, and access to bondedmanufacturing warehouses. Additional incentives are given to SMEs that locate in less developedareas. SMEs that are registered with the Board of Investments (BOI) may avail of technical and othersupport services provided by the agency.

❙ DILG Memorandum Circulars (MC) on LED

◗ MC NO. 2002-48: LOCAL ECONOMIC TRANSFORMATION PROGRAM FOR LOCALGOVERNMENTS

The Circular articulates the economic philosophy and approach of the Arroyo Administration asoutlined in her first State-of-the-Nation Address on July 23, 2001, which are:

An economic philosophy of free enterprises by: attracting investment to create jobs andemployment; addressing long structural issues such as basic infrastructure like power,transportation and communication; harnessing private sector participation via Build-Operate-Transfer (BOT), Build-Transfer (BT), Build-Operate-Own (BOO) and other forms of privatization;



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promoting fast-growing industries; streamlining operations and slashing red tape and;harnessing our competitive edge in tourism.The modernization of agriculture founded on social equityA social bias to balance economic development by making microfinance a cornerstone in ourfight against poverty, among others, andImproving moral standards and the rule of law by upholding law and order through a holisticresponse consisting of political, economic and psycho-social security

In order to achieve these, paradigm shift towards good local governance is required, through thefollowing:

Transforming local leaders from mere administrators and political technocrats to accountableentrepreneurial development managersEncouraging LGUs to be more creative and innovative for excellent service delivery, and in dealingwith current and emerging challengesInstitutional reforms to strengthen linkages and coordination among LGUs, the private sectorsand other concerned sectors in the formulation and implementation of social reforms and anti-poverty and economic development programsEstablishing mechanisms and standards that ensure transparency and accountability in localgovernment operations and transactions; andLocalizing consensus building mechanisms and strengthening the local special bodies

With their newfound roles as local economic managers, it is imperative for local chief executivesand other local officials and personnel to recognize their responsibility to secure the economic wellbeing of people in their localities. They can do this by creating an environment conducive togrowth and investment.



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◗ MC NO. 2002-107: ORGANIZATION AND/OR STRENGTHENING OF LOCALSMALL AND MEDIUM ENTERPRISE DEVELOPMENT COUNCILS (SMEDCS)

The Memorandum Circular enjoins all city and municipal mayors to organize and strengthentheir respective Small and Medium Enterprise Development Councils (SMEDCs). Cities andmunicipalities without existing SMEDCs or their equivalent local councils or bodies are encouragedto organize their respective councils. The functions of the City and Municipal SMED Councils areas follows:

Help establish the needed environment and opportunities conducive to the growth anddevelopment of enterprises in the localityRecommend to the Sanggunian all policy matters affecting businesses in the localityFormulate a Local Entrepreneurship Development Plan (LEDP) to be integrated into the LocalDevelopment Plan and facilitate implementation of the sameCoordinate and integrate various government and private sector activities in the localityrelating to enterprise development;Formulate, disseminate and advocate policies, principles and implementing guidelines in thedevelopment and promotion of local enterprises andDevelop and provide appropriate services beneficial to local enterprises and entrepreneurs.

◗ MC NO. 2002-09: IMPLEMENTATION OF THE LGU-CLUSTER DEVELOPMENTAPPROACH PROJECT (LGU-CLAP) AS A STRATEGY IN THE ADOPTION OF ONE-VILLAGE, ONE-PRODUCT MOVEMENT

Consistent with the mandate of the Department in implementing the LGU-Cluster DevelopmentApproach Project as a venue for the adoption of the One-Village, One-Product Movement, allRegional Directors were directed to implement the following priority concerns until the end ofDecember 2002:



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Formally organize at least one cluster per region by the end of December 2002 throughappropriate SB Resolutions and MOAs and strengthen existing clusters in Regions I, II, IV, andVI through capacity building and alliance building with appropriate agencies and institutionson product packaging, marketing and investmentsAssign Regional/Provincial LGU-Cluster Coordinators to take charge in replicating andstrengthening the LGU-Cluster Development Project in the LGUsProvide technical assistance in advocating the One-Village, One-Product Movement andintegrating appropriate cluster programs, projects and activities in concerned local developmentplansAllocate corresponding fund support to cluster-related activities in the regions; andSubmit semi-annual reports on the implementation of the project, starting December 2002. Themonitoring form shall be provided by BLGD (Bureau of Local Government Development) as OPRof the project.

◗ MC NO. 2001-172: GUIDELINES ON POVERTY REDUCTION PROGRAM FORLOCAL GOVERNMENTS

The Memorandum Circular enjoins all Provincial Governors, City and Municipal Mayors to formulatetheir respective Local Poverty Reduction Programs using the following general guidelines:

Designation of Local Poverty Reduction Program Action Officers (LPRAO)Program Formulation and Development

- local poverty situation analysisProject Identification and PrioritizationSuggested Outline of the Local Poverty Reduction Program

- Local Poverty Situation- Vision for Poverty Reduction- Poverty Reduction Strategy- Poverty Reduction Projects, Goals and Objectives



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- Poverty Reduction Action Plan- Milestones and Indicators of Achievement in Poverty Reduction

Integration of Poverty Reduction Program in the Local Development PlanFunding SupportMonitoring and Evaluation

◗ MC NO. 2001-109: INITIAL AREAS FOR ACTION IN THE IMPLEMENTATION OFPROGRAMS ON POVERTY REDUCTION AND LOCAL ECONOMICTRANSFORMATION

The Memorandum Circular provides directives to all Local Chief Executives in implementingPoverty Reduction and Local Economic Transformation projects.

Poverty Reduction

Designation of a Local Poverty Reduction Program Action Officer in each province, city andmunicipalityInventory of poorest families per criteria set by DILG Memorandum Circular Nos. 98-51 and 98-54Identification of local needs in the areas of food, shelter, employment and education per thePresident’s State of the Nation Address last July 23,2001Utilization of the poverty reduction tools such as the Minimum Basic Needs (MBN) Approach,Integrated Rural Accessibility Planning (IRAP) Data, Community-Based Monitoring System(CBMS) Approach and other tools to identify target beneficiariesFormulation of a Local Poverty Reduction Action Agenda (LPRAA) based on identified priorityneeds of the locality, to be incorporated in Local Development PlanIdentification of External and Internal sources of assistance to implement identified projects inthe LPRAA



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Local Economic Transformation

Creation or activation of a One-Stop-Shop Investment Promotion Center in each province,city and municipalityInventory of existing small and medium enterprises in each province, city and municipalityIdentification of priority needs of the locality on small and medium enterprise development,cluster and development areas establishment of economic zones (eco-tourism, eco-industrialor eco-agricultural) and other economic concernsFormulation of a Local Economic Transformation Program Agenda (LETPA) based on identifiedpriority needs, which shall be incorporated in Local Development Plan;Utilization of various tools in needs identification such as Comprehensive Land Use Plan (CLUP),studies on urban management and BOT GuidelineIdentification of external and internal sources of assistance to implement projects identified inthe LETPA

All provinces, cities and municipalities are advised to submit all LPRAAs and LETPAs to the Bureauof Local Government Development (BLGD), through the proper DILG channels.

◗ MC NO. 2001-105: DESIGNATION OF LOCAL POVERTY REDUCTION PROGRAMACTION OFFICERS AND THE FUNCTIONS OF THE LPRAO

◗ MC NO. 2002-30: GUIDELINES PRESCRIBING TIME PERIODS ON THEADOPTION, REVIEW AND APPROVAL OF COMPREHENSIVE AND LAND USEPLANS (CLUPS)/ZONING ORDINANCES (ZOS) OF MUNICIPALITIES,COMPONENT CITIES, HIGHLY URBANIZED CITIES AND PROVINCES

Gives the guidelines on scope & coverage, CLUPs in Plan Preparation stage, in Review/Approval stage,regular updating period, technical assistance, reporting and monitoring system, sanctions andpenalties



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◗ MC NO. 2002-81: CREATION OF LOCAL CULTURE AND THE ARTS COUNCIL

Mandates the creation of Provincial, City/Municipal Councils for the Culture and the Arts; compositionand functions; and the role of DILG

◗ MC NO. 95-162: INVENTORY OF LGU TOURISM, CULTURE AND THE ARTSCOUNCILS

LGUs to submit inventory to update the Directory on Local Culture and Arts Councils and LocalTourism Councils

◗ MC NO. 2001-19: SOLID WASTE MANAGEMENT PROGRAM IMPLEMENTATIONOF REPUBLIC ACT NO. 9003 OTHERWISE KNOWN AS THE ECOLOGICAL SOLIDWASTE MANAGEMENT ACT 2000

Outlines the composition of the Provincial and City/Municipal Waste Management Board; role ofDILG

◗ MC NO. 2001-38: ADDENDUM TO DILG MC 2001-19 RE-IMPLEMENTATION OFREPUBLIC ACT 9003, OTHERWISE KNOWN AS THE ECOLOGICAL SOLID WASTEMANAGEMENT ACT OF 2000

Outlines the composition and functions of the Barangay Ecological Solid Waste ManagementCommittee and other related matters.



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◗ MC NO. 2001-48: ADDENDUM TO DILG MC 2001-19 RE-IMPLEMENTATION OFREPUBLIC ACT 9003, OTHERWISE KNOWN AS THE ECOLOGICAL SOLID WASTEMANAGEMENT ACT OF 2000

Gives the general characteristics and components of the Provincial, City/Municipal Solid WasteManagement Plans; role of DILG

◗ MC NO. 2001-48: INVENTORY OF ALL SOLID WASTE DISPOSAL FACILITIES ANDSITES IN LGU

Mandates LGUs to conduct inventory of all existing and proposed solid waste disposal facilities andsites within their areas of jurisdiction; role of DILG

◗ JOINT MEMORANDUM (DILG, DBM, NCRFW) CIRCULAR NO. 2001-01:GUIDELINES FOR INTEGRATING GENDER AND DEVELOPMENT (GAD) IN THELOCAL PLANNING AND BUDGETING SYSTEM THROUGH THE FORMULATIONOF GAD PLANS

Gives the guidelines for integrating GAD in local planning and budgeting (objectives; the GAD plan;GAD programs, projects and activities; appropriations for GAD; implementation and monitoringof GAD plans)

◗ MC NO. 2002-163

Creation of Local Council for Women



ROLE OF LGU AND OTHER STAKEHOLDERS IN LED

CHAPTER 3


CHAPTER 3ROLE OF LGU AND OTHER STAKEHOLDERS IN LED

This chapter expounds on the role of LGUs and other stakeholders in facilitating LED. As willbe read in the succeeding pages, LED is not something foreign or special to what LGUs arealready doing. Rather, LED is a transformed or new “mindset”of performing these regular

functions. The chapter also discusses the various roles of other LED stakeholders such as micro, smalland medium, and large enterprises, civic and professional organizations, cooperatives andmicrofinance institutions, and educational institutions.

❙ Regular Functions of LGUS with Consequences for LED

Regular functions of LGUs have important consequences in facilitating Local Economic Development.

◗ LGU POLICY MAKING AND TAXATION FUNCTION

Ordinances and resolutions passed by the different local legislative bodies strongly influence thearea’s competitiveness and attractiveness to external investors. Local tax ordinances and incentivesstrongly determine investors’ cost of doing business in an area and is often a factor in theirdecision to locate or not. Tax breaks, rebates, grants, provision on the use of local materials andlocal employment, protection measures for infant and experimental industries and innovativeenterprises can spur the learning, searching, and risk taking by local entrepreneurs, local employment,the growth of new enterprises, and the strengthening of existing ones. Care must be taken by theLGU not to rely exclusively on these inducements or incentives as they can encourage inefficiencyamong benefiting enterprises. Zoning ordinances and local land use plans define the trajectoryand the kind of development that would prevail in the area. LGU policies help create an enablingenvironment for LED.

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◗ REGULATORY FUNCTION

LGU regulatory policies (e.g., traffic ordinances, limitation on the number of franchises granted topublic utility vehicles like tricycles, restriction on quarrying activities, promotion of waste reduction)limit the harmful effects of economic growth on the environment. LGU regulations can also affectthe economic operations of certain vulnerable sectors, e.g., regulations on street vendors and theinformal sector, rental fees for stalls in the public market, traffic rerouting. Simplifying the processand upholding honest and aboveboard transactions in securing building and business permits andin the payment of real property taxes can enhance the image of the LGU as an investment site. Theprocedures should not be cumbersome, and there ought to be a single point of contact to avoidrepetition.

◗ PLANNING AND BUDGETING

Local development plans signal to LED partners the priorities and directions of the local governmentwhile the approved LGU budget is a testament to its resolve to see the plans through to reality. Itis also important that the plans and priorities for LED be integrated into the annual LGU investmentplan.

LGU planning and budgeting activities are venues for creating consensus, building partnership, andpromoting stakeholder ownership of Local Economic Development. A sound and realistic planningprocess will allocate and define the roles of the different stakeholders in LED and establishmechanisms for coordinating the various and diverse efforts.

◗ COLLECTION, STORAGE, AND DISSEMINATION OF INFORMATION

LGUs, through the different offices, are also important collectors and repositories of information.The LGU must ensure that information on the locality is accurate, systematically stored, updated,and readily accessible to business investors. Information that the LGU must gather includes



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population, labor force, wage rates, existing enterprises, employment opportunities, transportationlinks, available lands and building, mapping information, infrastructure, and credit facilities forbusinesses.

◗ PROCUREMENT OF GOODS AND SERVICES

In many areas, especially in lower class, rural municipalities, LGUs are often the biggest employerand one of the largest, if not the largest, consumer of goods. For all the criticism the practice hasreceived, the employment of casuals in the local administration or in local infrastructure projectsprovides a means for people in the community, especially the less skilled and poorer members, toearn some income. The local budget is watched by some entrepreneurs, as this influences thefortunes of their own businesses. Transparent and fair procurement activities stimulate competitionamong local businesses, and if the goods and services procured constitute a substantial sum, LGUpurchases and acquisitions can inspire the creation of new enterprises.

◗ MARKETING AND PUBLIC RELATIONS/INVESTMENT AND ENTERPRISEPROMOTION

Investment promotions, trade missions, job fairs, and the construction of exhibition halls andshowrooms create an awareness among potential investors of local products and match localproducers and service providers with outside buyers. By supporting their participation ininternational trade fairs, LGUs provide local enterprises the opportunity to learn the latest craft andto rub elbows with the world’s best. Hopefully, local enterprises will be inspired to become world-class in the process.

ROLE OF LGU AND OTHER STAKEHOLDERS IN LED 3


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◗ MANAGEMENT OF PUBLIC ECONOMIC ENTERPRISES AND THE PROVISION OFPHYSICAL FACILITIES

LGUs influence LED through the provision and/or management of public infrastructure like publicmarkets, abattoirs, transportation terminals, water and power utilities (in some provinces) and roads.The public market is often the showcase of a city or municipality, an indicator of its status. Howcompetently it is managed indicates how well the city or municipality is doing. Municipal or citypolicies on purchase of rights to stalls and stall rentals can facilitate or deny access to theeconomically active poor of the municipality and city. Studies on investor behavior reveal that thepresence, quality and cost of critical infrastructure like water and electric utilities, communicationfacilities, roads, ports, airports, and transport facilities rank high in their criteria for choosinglocations for investment.

In rural areas, the construction of farm to market roads lessens the dependence of farmers onmiddlemen and allows them to capture more of the profits. This translates to cheaper prices forconsumers and more business for public market vendors. Rural public works projects are also sourcesof income for the rural folk during the dry season.

These public economic enterprises lend support to local economic development. They alsogenerate income for the LGU. However, care must be taken that these public enterprises aremanaged efficiently. In many areas, these transport terminals, public markets, and abattoirs are virtualmonopolies; in others, they are in direct competition with privately owned markets and supermarkets.LGUs should weigh the economic costs of maintaining ownership and management of thesefacilities with their public benefits. In certain instances, it may be possible for LGUs to retainownership but turn over management of these facilities to the private sector. This will allow LGUsto concentrate on monitoring and enforcing sanitary standards in abattoirs and among foodhandlers. The opportunities that public markets provide to the economically active poor of thelocality to sell their products are a case for retaining ownership of public markets. That space maybe absent or may be too costly for the poor to afford if public markets were privatized.



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Certain facilities are better provided by higher-level LGUs than lower level LGUs. Provinces can takeon the implementation of projects that are far beyond the capacity of individual municipalities orwhich benefit several municipalities at once. For example, in the agriculture sector, the LocalGovernment Code directs provinces to provide “agricultural extension and on-site research servicesand facilities which include the prevention and control of plant and animal pests and diseases, dairyfarms, livestock markets, animal breeding stations, and, artificial insemination centers.” Becauseof their coverage, the need to protect water sources, and the linkages that have to be establishedbetween these and the users, some irrigation facilities are better provided by provinces than byindividual municipalities/cities. Provinces can also coordinate the activities and efforts of LGUs inits jurisdiction like the function that the Zamboanga del Norte Provincial Government performedin the DDKRM (Dapitan City – Dipolog City– Katipunan – Roxas – Manukan) cluster.

◗ PUBLIC SAFETY AND CULTURAL HERITAGE ACTIVITIES

A low crime rate and a stable peace and order situation are prized by both local and external investors.More than stunning natural wonders and sceneries, peace and order is the deciding factor in thesuccess and failure of a municipality, city, or province as a tourist destination and business location.

Cultural heritage activities and facilities create a sense of community while enhancing the tourismpotentials of the LGU.

◗ PROVISION OF SOCIAL AND ENVIRONMENTAL SERVICES

Primary health and curative services, water and sanitation, and activities connected with solid wastemanagement like the promotion of waste segregation and the three R’s (reduce, re-use, recycle),are important programs for improving the well-being of the citizens. Good health leads to increasedproductivity and reduced medical expenses. Support to education like the Special EducationFund contributes to human capital formation and prepares the LGU to compete in the knowledgeeconomy, where the only sustainable competitive advantage is an educated, highly skilled, andtrainable workforce.



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There are also opportunities for local entrepreneurs in solid waste management, especially therecycling business. LGUs themselves can be entrepreneurial by striving to at least recover the costof delivering services. The Municipality of Malalag in Davao del Sur charged user fees for its healthservices. These had the salutary effects of augmenting the LGU’s budget for health and of changingthe mindset of the citizens, who as paying customers, became more demanding of the quality ofthe services they were receiving, pushing the providers to improve their performance as a result.

In summary, by the effective, efficient, and transparent performance of their regular functions, LGUsalready exert a considerable influence on Local Economic Development. The development of thelocal economy can be achieved singly and (more often) through complementation andsupplementation with same-level and higher-level LGUs. The infusion of external funds is importantbut LGUs need not wait for their arrival to start the LED process. Equally important are efforts totap “indigenous” sources of growth.

❙ Role of Other LED Stakeholders

Stakeholders are individuals, firms, and/or organizations in the public, private, civil society ornon-profit sectors who are affected and can affect the LED process. The major stakeholders are thosethat have the greatest interest and ability to contribute to the planning and implementation of theLED. Different stakeholders have different roles, and some would participate more than others.

There are numerous benefits to involving stakeholders in the LED process.

First, stakeholders bring specialized knowledge and different perspectives, thereby expanding thebreadth and depth of the LED process, particularly in the planning stage. Local communityrepresentatives are likely to be better informed about local problems and opportunities. Businessrepresentatives know better than the LGU the competitive position of the community.



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Second, stakeholders bring professional expertise, financial resources, and physical assets to theLED process.

And third, by their presence, stakeholders lend legitimacy to the LED process, and their involvementcreates ownership of the vision, mission, objectives, and strategies of LED. Ownership, in turn, makesit more likely for the stakeholders to volunteer their time, labor, and physical and financial resourcesto support LED implementation programs.

The private sector is the main engine for local employment and growth. Singly or collectively aschambers of commerce and industry associations, its task is to scan and seize opportunities, takerisks, develop markets, and create economic value. It accomplishes this better than governmentdoes because it has more at stake – the survival of the enterprise -- and has lesser constraints. Whilegovernment has a captive market for its revenues, a business has to woo, pursue, and cajole fickleconsumers to buy its products or services in the midst of cutthroat competition. It must beefficient and innovative lest it perish.

In promoting LED, the LGU has to be aware of the different kinds of enterprises and the differentroles they play.

◗ MICRO ENTERPRISES

In areas where small and medium enterprises are scarce, micro enterprises serve as incubators orseeds for growth enterprises. However, studies in other countries have shown that very fewmicro enterprises graduate to become small and medium enterprises. Because many are home-based and utilize “free” part-time family labor, they are not individually significant generators ofemployment. Collectively because of their sheer numbers, they do employ many people who wouldotherwise remain idle.



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Many micro enterprises are constrained from growing because of the limited market (the immediateneighborhood for variety stores and itinerant vendors), the limited production area (the backyardor the living room of the house), the competition caused by the low barriers of entry and exit, andat times, the short shelf life of the product (e.g., fish).

Many micro enterprises have an ad hoc character and are taken up and just as easily given updepending on the season. Thus, it is not surprising to see a vendor selling drinks and fish balls whenschools are in session and employed as a temporary construction worker when students are onsummer vacation. It is not uncommon for poor people to engage in several micro enterprises atthe same time. Micro enterprises, especially home-based enterprises run by women (e.g., backyardlivestock raising; variety stores, etc.), often start out as “sidelines” whose earnings add-on orsupplement the household’s income. Income from micro enterprises helps in beefing up a poorhousehold’s consumption and allows it to make investments in a child’s education or to improvethe house. They are important defensive measures in times of crisis, and reduce the household’svulnerability to economic shocks and risks (e.g., retrenchment of the spouse, seasonality ofdemand or supply characteristic of certain livelihoods, etc.).

Micro enterprises are an important safety valve of the economy during times of economic crises.The number of micro enterprises (and of the self-employed) expands when the formal businesssector slows down and the formal labor market contracts.

◗ SMALL AND MEDIUM ENTERPRISES

Unlike micro enterprises, small and medium enterprises not only increase the income of its ownersbut also generate employment of persons other than members of the owner’s household. Themarkets of small and medium enterprises are usually larger and more competitive. They areoften outside the locality. Entry barriers are higher; the start-up capital is larger and the requiredskills are more sophisticated. They are subject to greater regulation from the government in theareas of wages and benefits, taxes, occupational safety and health, compliance to environmentalstandards, etc.



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One of the 20 key commitments regarding economic development made during the UN HabitatII Conference in 1996 is for “economic development to focus on small and micro enterpriseparticularly those developed by women.”

◗ LARGE ENTERPRISES

Large enterprises are huge employers and investors. For this reason, they are also the largesttaxpayers and are often the heaviest users of the latest technology. Large enterprises are alsostorehouses of talent of various kinds—managerial, technical, and financial – that can be tappedfor LED.

◗ ORGANIZED BUSINESS GROUPS

Organized groups of businesses like chambers of commerce and industry associations play acrucial role in setting and enforcing quality standards, upgrading the industry’s human andtechnological resources, product development, marketing, and management training. Someindustry associations also provide business development services and broker financing to itsmembers from lending institutions.

Local guilds, craft and professional associations help create a unique LGU brand and are the alliesof LGUs in many projects like health, livelihood, and urban regeneration. For example, Angono’spainters have created a name for themselves and for the town in the local and international art scene.They are also spearheading urban regeneration efforts by bringing their art to the walls andstreets of Angono. Civic groups like the Rotary Club, Soroptimist International, Lions, Kiwanis, andJaycees are active in local beautification and greening efforts and sponsor medical missions toimpoverished areas.



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◗ COOPERATIVES AND MICROFINANCE INSTITUTIONS

Cooperatives and microfinance institutions serve as local treasuries and depositories of communitysavings. They promote a culture of frugality, discipline, trust, self and mutual help, andentrepreneurship. In many rural villages, they fill the large demand for credit from small businesspersons, many of whom are women, and farmers who are shunned by the formal financialinstitutions because of their small credit needs, lack of assets for collateral, or lack of documentationto prove ownership of land. In many rural villages, cooperative-run stores are the community’s solesource of cheap commodities.

Cooperatives and microfinance institutions are important drivers of LED because the savingsdeposits and share capital they collect from the members are re-invested in the locality and notsiphoned off and lent out to urban consumers. These investments generate additional householdincome for the borrowers and members, and in larger enterprises, local employment.

Through their social health insurance, mortuary packages, and emergency loans, cooperatives andmicrofinance institutions cushion the impact of economic shocks, personal loss, illness, and naturaldisasters on their members and borrowers. In the absence of these social protection measures, hard-hit households have no recourse but to divest themselves of critical economic assets like land andlivestock.

Cooperatives and microfinance institutions can serve as conduit and manager of LGU funds, e.g.,for livelihood projects. Cooperatives of market vendors can assist in the effective management ofthe municipal or city public market and abattoir.



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◗ NON-GOVERNMENT ORGANIZATIONS (NGOs) AND PEOPLE’S ORGANIZATIONS(POs)

NGOs and POs are known for their social innovations, organizing and mobilizing capabilities at thegrassroots-level, and participatory methods and techniques. Less burdened by hierarchies,protocols, bureaucratic constraints, and legal considerations, NGOs have the comparative advantageover LGUs in the generation of so-called social capital or “shared relations, network of trust, andmutual help mechanisms.” Using this comparative advantage to the hilt, non-governmentorganizations can perform different roles in local economic development.

NGO and PO representatives sit in the Local Development Council and other Local Special Bodieslike the Local School and Health Boards. They are critical actors in setting the overall direction ofLGU through the formulation of land use plans, local economic development and investment plans,local health plans, education activities and the utilization of the Special Education Fund (SEF).

Active collaboration with NGOs and POs can ensure that the planning process is participatory,beginning from the purok level and moving upwards to the barangay and to the municipal andcity levels, and even to the provincial level. NGOs and POs are good channels of the sentiments,needs, and views of the grassroots and disadvantaged sectors of the locality.

They can assist the LGUs in service delivery and can even be contracted to deliver certain servicesthemselves, e.g., collection of recyclable materials.

The LGU can and should utilize the social capital that people’s organizations have generated in theircommunities. POs can mobilize the people to provide voluntary labor for rural public works’projects.As in other areas, they can assist the LGU in securing the right-of-way for road, water system andirrigation projects, thereby lessening the cost and generating savings for the LGU. Many LGUs haveorganized and mobilized fisherfolk organizations to guard municipal waters and enforce localordinances or resolutions from Municipal Fisheries and Aquatic Resource Management Councils



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(MFARMCs) banning the use of destructive fishing methods and encroachment in municipalwaters by large, commercial fishing vessels.

Some non-government organizations and people’s organizations can serve as watchdogs,monitoring LGU implemented projects and providing an independent evaluation of LGU programs.NGOs sitting in the local Pre-qualification, Bids, and Award Committees (PBAC) can help protectthe integrity of the procurement process.

◗ EDUCATIONAL INSTITUTIONS

Hosting a state or private university and college can be a source of pride for an LGU. In many placesabroad, the town or city is actually built around a university, and the latter is a significant contributorto the local economy. The academe is an incubator of ideas and creators of knowledge. Apredominantly agricultural locality relies on the local agricultural college to undertake research,provide workable solutions to problems, develop, test, demonstrate, and encourage newtechnologies in crop science. In budding commercial and industrial economies, universities areoften sources of managerial talent and providers of the human resource requirements of growingbusinesses. Some universities and colleges have business resource centers that provide businessdevelopment services to sunrise industries and growing enterprises. The business developmentservices vary ranging from actual financing to technology transfer, product development, marketing,financial management, and business planning.



STRATEGIES TO FACILITATE LED

CHAPTER 4


CHAPTER 4In this chapter, some strategies that local governments could apply to facilitate local economic

development or LED are presented. The emphasis is on the word some, as the list and thedescriptions are not exhaustive. There are a number of strategies that the LGU can adopt to

facilitate Local Economic Development. They sometimes overlap. The strategies that are not mutuallyexclusive can be combined in a number of ways. In general, these strategies have to do with:

1. Formulating a local economic agenda2. Establishing a local economic development authority3. Creating and improving the environment for would-be investors4. Retaining and encouraging existing businesses to grow5. Encouraging new enterprises6. Creating a conducive environment for cooperatives7. Focusing on the formation and growth of clusters8. Targeting specific areas for regeneration and development9. Targeting disadvantaged sectors

10. Alliance building with the private sector and other LGUs

Each of these strategies is explained and discussed in this chapter. At the end of each discussion,this resource book links the strategy to Philippine laws and experiences by citing specific statutesand LGUs that have implemented the strategy or parts of it. Some of these LGUs are the subjectof case studies in Chapter 6. A number of the strategies are informed by learnings on localeconomic development gleaned and promoted by the World Bank and other internationalinstitutions.

STRATEGIES TO FACILITATE LED

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In addition, the chapter lists down ineffective LED strategies that the LGU should avoid, namely:3

1. Expensive untargeted foreign investment marketing campaigns2. Excessive reliance on grant-led investments3. Overgenerous incentives for inward investors4. Business retention subsidies5. “Low road” strategies like cheap labor and cheap capital6. Supply-driven capability building and credit programs7. Credit rationing8. Government-led retail credit projects.

Aside from the strategies that LGUs can use and should avoid, this chapter will also give a briefdescription of the capacity building process for LGU-facilitated LED.

◗ FORMULATING AND IMPLEMENTING A LOCAL ECONOMIC PLAN

Facilitating local economic development begins with the formulation of a local economic plan. Theprocess must be participatory and involve the major stakeholders of LED. Formulating the LocalEconomic Development Plan begins with an environmental scan of the opportunities and emergingtrends and the capacity of the municipality, city, and province to take advantage of the opportunities.The environmental scan should uncover the LGU’s comparative advantage. It must be said herethough that deciding on the LGU’s comparative advantage is not a once-and-for-all process buta continuing endeavor. Recent studies have shown that the discovery of an area’s comparativeadvantage is achieved less by one-shot, step-by-step planning than by an iterative process of “self-discovery”and of “searching and learning”consisting, on the one hand, of flexible planning and onthe other, of entrepreneurial risk-taking and trial and error.4

The planning process for LED should recognize the varying conditions among LGUs, especially theirdiffering physical/natural resource endowments and ecosystems, available human resources, andfinancial capacities. Planning for a rural and predominantly agricultural locality will differ from urban



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planning. Rural LGUs have an abundance of natural resources but they usually have fewer financialresources and limited capacity compared with their urban counterparts. Be this as it may, the processof the identifying and implementing an LGU-facilitated LED effort is the same. The process followsfive stages:5

1. The LGU organizes the LED effort. It identifies and organizes the stakeholders.2. The LGU and the stakeholders jointly undertake a competitive assessment using information from

the Comprehensive Land Use and other plans, and SWOT (Strengths, Weaknesses, Opportunities,and Threats) techniques, among others.

3. The LGU and the stakeholders prepare their LED strategy/ies and render them into a LED Plan.4. The LGU and the stakeholders implement the LED Plan.5. The LGU and the stakeholders monitor, review and evaluate the LED Plan

Throughout the whole process, there is constant monitoring, reviewing, gathering lessons, andproviding feedback to the planners and implementers.

The Local Economic Development Plan should contain the following:6

1. Vision Statement2. Mission Statement3. Objectives4. Performance Measurements5. Strategies and Programs 6. Organizational Structure

The Local Economic Development Plan must dovetail with the approved land use plan in targetingparticular parts of the LGU for regeneration and growth.

STRATEGIES TO FACILITATE LED 4


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Specific Philippine Context and Experiences:

DILG MC No. 2002-48: Local Economic Transformation Program for Local GovernmentsDILG MC No. 2002-30: Guidelines Prescribing Time Periods on the Adoption, Review andApproval of Comprehensive and Land Use Plans (CLUPs)/Zoning Ordinances (ZOs) ofMunicipalities, Component Cities, Highly Urbanized Cities and ProvincesThe Integrated Area Development Program of Irosin, SorsogonThe Lingap Tanaw Program of Naujan

◗ ESTABLISHING A LOCAL ECONOMIC DEVELOPMENT AUTHORITY (LEDA)

A new initiative requires a champion and new structures for implementation. Many worthyundertakings begin with a bang only to fizzle out midstream because responsibility for itsimplementation rests with not one office or person but is scattered across different offices. Evenprior to the formulation of the Local Economic Development Agenda, the LGU ought to convenea Business Development Group or LED Steering Committee under the auspices of the LocalDevelopment Council that would prepare the ground for the multisectoral planning. Members ofthe group ought to come from the major stakeholders of LED and should be conversant with thelanguage of enterprise and investment. This Business Development Group can metamorphose lateron into a full-fledged Local Economic Development Authority (LEDA).

The role of the LEDA would be to oversee the implementation of the Local Economic DevelopmentAgenda and orchestrate the efforts of the LED stakeholders.

The specific objectives of the LEDA would be to:7

1. Identify internal or indigenous resources for LED and utilize these2. Coordinate the efforts of LGU offices and major stakeholders around an agreed upon vision of

LED and the Local Economic Agenda



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3. Promote small and medium sized business and the creation of an entrepreneurial culturewithin the LGU and outside

4. Promote the municipality/city/province to facilitate investments and job generation 5. Identify the most vulnerable groups, ascertain their needs, and mobilize support for the poor’s

micro enterprises 6. Provide initial business development services to start-ups and later link them and more mature

businesses with sources of financing, technical, and managerial know-how 7. Serve as the center for business information about the LGU, fielding inquiries from prospective

investors and job-seekers, and facilitating the entry and applications of investors.


DILG MC No. 2002-107 Organization and/or Strengthening of Local Small and Medium EnterpriseDevelopment Councils (SMEDCs)Marikina City is one of the first LGUs in the country to establish its own LEDAThe Dapitan City – Dipolog City – Katipunan – Roxas and Manukan local governments inZamboanga del Norte have made the SMEDCs the “home”of their LED effort as have a numberof LGUs in the Autonomous Region in Muslim Mindanao (ARMM)

◗ CREATING AND IMPROVING AN ENVIRONMENT FRIENDLY TO WOULD-BEINVESTORS8

The strategy involves attracting direct investment into the locality from elsewhere in the countryand from other countries. Investors can be foreign companies, domestic companies, and overseasFilipino workers wanting to establish businesses for themselves or for their families upon their return.They can be large manufacturing and service companies or small and medium-scale businesses.

Attracting large manufacturing and service sector employers into communities is one of the mostdifficult, frustrating, and risky of all LED strategies. This is partly because there are far fewer



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investors than communities trying to attract them. Also, many communities are prepared to offermassive incentives to inward investors. Foreign direct investors often prefer greenfields and edge-of-the-town sites. Greenfields refer to factories and offices being built on land that until then hasnot been developed.9 These factories and offices often build with investors in mind. Greenfields areusually agricultural lands, park lands, and open spaces at the periphery of towns, cities, andmetropolises that are converted for industrial and commercial use. All over the world, greenfieldsare under tremendous pressure from urban expansion and conversion. To accommodate exportprocessing zones and industrial sites, communities often over-ride their planning policies in orderto attract investment. This brings with it environmental problems like air and water pollution andsolid waste problems. It also contributes to urban sprawl, traffic, and transportation problems. Thechallenge is to defend greenfields against indiscriminate and wanton conversion and urbanization.There are several ways to do this, among which are:

Establishing agricultural protection zones The LGU can restrict and reserve certain lands for agricultural use through local zoning ordinances.Examples of lands qualified for agricultural protection zoning are those that are extremelyproductive and that have benefited from huge investments like irrigation and farm supportfacilities.

Open space zoning Open space zoning is an LGU tool used to protect open space. Examples in the Philippines areattempts to enforce easement regulations along riverbanks and seashores. The Pasig RiverRehabilitation Project and the Marikina River Park come to mind. As the experience of these projectshow, this strategy has social consequences, primarily resulting from the resettlement of thousandsof informal settlers.



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GreenwaysGreenways are corridors of protected open space managed for conservation and recreationpurposes. Greenways follow the contours or boundaries of natural land and water features and theyserve as buffers or links between populated areas and nature reserves, parks, and areas of culturaland historical significance. Greenways halt urban sprawl and provide spaces for recreation andpromenade for urban dwellers.

The effort to attract and more importantly, retain large foreign locators in pre-established and newindustrial parks and zones in the Philippines and all over the world have generally not taken off.They have also been less successful in ensuring that Local Economic Development is sustainablein the long run. A major reason is the minimal linkages that these parks and zones establish withthe host community because of the mismatches in the skill, technology and raw materialrequirements of the foreign locators with the human and natural resource endowments of the hostcommunity. The locators also source their raw materials from elsewhere in the world, and innumerous occasions, the plant becomes a mere assembly facility. In other cases, the plant producesonly a few parts/modules and not the complete product, thereby negating the possibility ofsignificant technology transfer.

Communities that succeeded in attracting, retaining, and benefiting from industrial parks/zoneswere those that relied on their “indigenous”resources for the promotion of these parks and zones.The prudent thing to do therefore, is to carefully consider the costs and benefits of attracting inwardinvestors.

There are issues inward investors review when deciding on a location for their businesses. Someof these are a stable macro-economic climate, a stable political and regulatory environment,market access and open competition, and a welcoming environment. Inward investors alsoconsider manageable regulation and taxation systems, incentive schemes, available sites, andappropriate, available, and reliable utilities and transportation. They also review the availability of



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skilled workforce, local suppliers and resources; appropriate education, training and researchfacilities and good quality of life, especially when they bring in expatriates.

When success is achieved, the benefits can be great. Besides direct employment and an increasein the tax base and indirect employment, there are potential gains to the local community throughthe upgrading of skills of the workforce, increases in wages, and opportunities for local SMEsthat supply and buy from these investors.

Inward investment strategies are likely to be most successful when:

They form a small part of a broad LED strategyThe community has the appropriate hard and soft infrastructure in place or available to supportthe likely investmentsTargeted investments fit the competitive advantage of the receiving community. Normally asector/cluster approach is likely to be most successfulMarketing strategies are carefully prepared; budgets are appropriate; and follow-up proceduresare in placeIncentive programs that are varied but not excessive are considered, e.g., funding to help localworkers to upgrade their skillsStaff involved in attracting strategic investors have an understanding of investment needsand what their community has to offer Opportunities for local businesses are optimized through thorough after-care programs. Thismeans that when a new investor is attracted to a community every opportunity is taken, on anongoing basis, to encourage the investor to source their supplies locally, enabling supplychain advantages to be exploited locally. This is most successfully achieved through developingan investor after care program. These programs are aimed at ensuring investors are happy andthat they are given every opportunity to source their inputs from the local community.



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Possible LGU Initiatives (Programs and Projects):

1. Investing in physical (hard) infrastructure to improve the built environment. This can bedone by:

Building or improving key access roadsImproving the railway for the transport of goods and peopleDeveloping, improving, and/or expanding the local airportDeveloping, improving, and/or expanding the local portDeveloping, improving, and/or expanding industrial sites and buildingsDeveloping, improving, and/or expanding commercial sites and buildings (for shops andoffices)Increasing the availability of industrial and potable waterImproving and/or expanding the sewerage disposal systemImproving and expanding the telecommunications systemsImproving and expanding the energy systems andEnhancing the town center/business district through preservation and restoration ofheritage sites, beautification, cleanliness and solid waste management projects.

2. Developing a case for investment. Doing this would entail: Developing a professional investment portfolioData banking of business information and opportunities andMarketing and promotional activities.

3. Provision of incentive schemes by:Providing fiscal incentives like exemptions or deductions in local taxes paid and initialsubsidies to promote micro, small, and medium-sized enterprises andProviding non-fiscal incentives like investor care and investor facilitation services andstreamlined process for obtaining business permits and other local licenses.



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4. Ensuring a stable peace and order situation which can be done through the following means:Installation of crime prevention equipment like video camerasStarting an emergency hotlineIncreasing police visibility in crowded and most frequented areasInstallation of a community intelligence and security system andClearing of critical sidewalks to facilitate pedestrian movement, traffic build-ups, andopportunities for corruption.

5. Developing industrial estates, business or science parksThis type of activity is normally undertaken by the private sector because investing in servicingsites with water, electricity, and sewerage and building advance factory units (where no tenanthas yet been identified) are expensive and risky. However mayors and city managers can pavethe way by establishing a demand for such a facility and encouraging an enabling environmentwithin the local authority.

6. Encouraging investment into growth nodesAnother strategy is to identify specific areas within a city where certain types of businesses willbe encouraged to locate. A growth node may then act as the center for planned growth andemployment.

7. Encouraging investment into corridorsThese are similar to nodes but here growth is encouraged to expand from an area of promisingeconomic activity towards a more challenging area. By encouraging incremental investment, theaim is to develop an active growth corridor linking richer and poorer areas, thereby ensuring thatgrowth benefits the poor.



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Kalakalan 20 (R.A. 6810)Magna Carta for Small Enterprises (R.A. 6977)An Act Providing Assistance to Women Entrepreneurs (R.A. 7882)The Omnibus Investment Code (E.O. 226). Dalan sa Kauswagan: A Road Project of San Carlos City, Negros OccidentalBohol’s Investment Promotion ProgramThe Investment and Promotion Program of Tigaon in Camarines SurBreaking Financial Barriers in San Fernando, PampangaCebu’s Economic MiracleMariculture Park of the Island Garden City of Samal

◗ RETAINING AND ENCOURAGING EXISTING BUSINESS TO GROW10

While the previous strategy concerns attracting domestic and external businessmen to pour theirinvestments into the area, this next set of strategies concentrates on keeping those that have locatedtheir businesses within the locality.

This set also recognizes that most economic activity in the locality is likely to be generated by smalland medium sized businesses that are already established in the province, city, or municipality. Itencourages existing businesses in the area to stay and grow.


1. Establishing open, ongoing, and constructive relationships with business and industryassociations

It is vital that LGUs establish open, ongoing, and constructive relationships with business orindustry associations like the local Chamber of Commerce, groups of entrepreneurs, and even



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individual businesses. Ongoing linkages and open communication ensure that the LGU leadersare informed of issues and developments facing the business community as well as their needs.This notwithstanding, LGUs have to take care that their pro-active stance is not viewed as “meddling”or “undue government interference” in private sector affairs. It is important that LGU leaders steerclear of disputes within the Chamber of Commerce or industry association such as election of officers.LGUs must also guard that the one-to-one relationship they establish with individual entrepreneursdoes not degenerate into shaping the playing field for the sole benefit of one or a few players.

2. Business retention visits and surveysBy visiting and surveying a firm, the local leadership and the LEDA are able to identify its problems,gauge its performance, whether it is expanding or not, and determine its needs and sources of inputs.The local leadership may be able to persuade them to source more inputs locally. These visits canforestall a business from leaving the area. Business retention visits and surveys as well as the variousassistance that the LGUs can facilitate or provide can be targeted to particular industries, e.g., tourism.

3. Technical assistanceThis can include broad based management and marketing programs, training in quality andenvironmental standards, and advice through more specialized export training or research anddevelopment support. What the LGU can do here is to broker the provision of accredited, demand-led, technical assistance, paid for on a fee-for-service basis. Often these services are providedthrough one-stop business service centers, business resource centers run by universities, byforeign technical assistance, and by national government agencies like the Technical Education Skillsand Development Authority (TESDA), the Technology Livelihood and Resource Center (TLRC), andthe Department of Science and Technology (DOST).

4. Financial advice and assistanceA difficult and ever present problem for businesses is to access capital. The LGU can serve as go-between between government financial institutions like the Development Bank of the Philippines(DBP) and private lending institutions. An appropriate financial support program will be able to giveadvice and training on financial planning, access to capital and credit etc. In some cases, the LGU



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may establish small grant or loan programs to encourage small businesses to invest in moderntechnology. Great care should be taken with financing schemes run by LGUs for whatever purpose.Safeguards must be put in place to ensure fairness in the selection of borrowers and to avoid fosteringdependency and laxity among the local enterprises.

5. Public procurement policies and "buy local" campaignsThe local government, public sector organizations and larger local businesses can make theircontracts more accessible to local companies. This has to be done with laws that ensure fairpractices, transparency, and accountability in the procurement process. Initiatives can includeadjusting the size of contracts so that smaller companies may bid; encouraging and accepting bidsfrom groups of local companies; holding procurement events for local businesses; and publishinglocal business competency directories.

6. Work simplification and reduction of red rapeThe amount of permits and approvals that businesses need to obtain, and the time it takes to obtainthem, are not only expensive and time consuming, they can also be a disincentive to register intothe formal economy. A good place to start is to review existing regulations and laws, consult withstakeholders and develop a remedial plan. This involves re-engineering internal local governmentprocesses and lobbying to reduce bureaucracy in other government areas. A program to minimizethe complexity, costs and bureaucracy associated with approval processes will improve thecompetitiveness of the area.

7. Provision of sites and premisesSince LGUs and the national government are often the owners of industrial and commercial landand buildings, they can use these to encourage business investment and expansion. A goodunderstanding of the local property market should enable LGUs to plan for growth. However, fundingsuch hard infrastructure investments is a challenge. Rents and sales should provide a marketreturn for LGUs. The option of private sector intervention or partnership should always be examinedto ensure the best use of LGU resources.



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8. Big brother/sister-small brother/sister relationshipThe LGU can facilitate the linkages of larger firms with smaller enterprises into “Big brother/sister-Small brother/sister” relationships. The relationships usually involve producers and suppliers,contractors and sub-contractors. Big brother/sister and small brother/sister relationships involvethe transfer of managerial skills, technology, and machinery from the larger firm to the smallerenterprise to establish synergy and upgrade the latter’s standards to the level required by the former.Big brother/sister-Small brother/sister set-ups take their inspiration from the hugely successfulJapanese keiretsu and the principles of Total Quality Management (TQM). Where a number of smallerenterprises are linked up to a larger firm in varying supply relationship, the larger firm can bedescribed as an anchor grounding and coordinating the activities of the smaller units. This isoften seen in the relationship between a large food processing facility and the surroundingcontract growers and farmers.


Kalakalan 20 (R.A. 6810)Magna Carta for Small Enterprises (R.A. 6977)An Act Providing Assistance to Women Entrepreneurs (R.A. 7882)The Omnibus Investment Code (E.O. 226) Jewelry Production and Promotion in Meycauayan, BulacanCebu’s Economic Miracle

ENCOURAGING NEW ENTERPRISES11

Encouraging new enterprises involves providing advice, technical support, information andresources to help individuals set up their own businesses in the form of sole traders, partnerships,cooperatives, and community enterprises.



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1. Provision of finance for new businessesMicro enterprise financial support is key to enabling businesses to start up as they usually cannotaccess traditional lending institutions. Micro enterprise financing is a specialized area, andexperiences in this area are well documented. There are many examples of largely private successfulmicro enterprise support institutions, all of which need some money to start with but can becomeself-sustaining after some time through revolving funds. LGUs normally become involved in theseschemes by meeting with micro enterprise institutions to assess forms of support needed and areasand ways of collaboration. It is not advisable for LGUs to be involved in microfinance schemes asthey generally do not have the skills and resources to do this. Their role is to identify needs andencourage institutions and private sector players to intervene.

2. Provisions of micro and managed workspace This strategy provides places on and from which small businesses can trade. These places are usuallylocated in areas with a potentially large customer base. Besides the proximity to the market,these workspaces allow small businesses to share office services, equipment and security and allowthem access to business support and advice. Micro and managed workspaces help smallbusinesses overcome the stresses of start-up and growth through the provision of various formsof targeted business development and support like coaching, mentoring, and advice in finance,marketing, and management skills. The end goal is to minimize failure rate of start-ups and optimizethe development of businesses, especially those with huge potentials for growth and impact onemployment.

3. Providing technical advice on business managementSomeone establishing a business for the first time needs to know how to produce his or herproduct. They must also understand finance, business planning, marketing, some aspects of thelaw including employment, taxation, safety at work, environmental legislation and so on. Theprovision of training and support in these areas meets a basic need and can be provided through



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one-stop shops or independent advisers. As in most areas of technical assistance, it is better for theLGU to enable the provision of these services by the private sector rather than provide themitself, again an issue of skills and resources. Charging for these services can be difficult, and someagencies give a limited number of consultations and then make modest charges thereafter.

4. Supporting the establishment and implementation of formal and informal business networkslike industry associations

People learn from each other. Networks facilitate learning. Active involvement in businessnetworking is also important for developing a customer base, acquiring intelligence for expandingbusinesses as well as developing collaborative relationships with businesses in the same sector.

5. Conducting business mentoring programsGood practice suggests that by linking new and small business owners with established businesses,significant benefits can result for both businesses. These need not be formal networks. In addition,informal networks of mentors and new businesses can create further benefits by developingsupplier linkages, establishing critical mass for specialist training and so on. The LGU can establishcorporate volunteers program where large corporations can assign some of their personnel to mentorsmall and medium enterprises in critical business skills like planning, product development,quality control, developing a customer orientation, marketing, and after sales customer service.

6. Investment in soft infrastructure This strategy involves investing in the improvement of the commercial environment for businesses.The programs and projects that the LGU can adopt under this strategy are:

Enabling or providing skills training. In communities where enterprise has not been a key priority,enterprise training can be provided. There is an almost universal need for information technology(IT) skills training. E-commerce is the wave of the future. Wherever possible this should be linkedto education programs in schools. The provision of skills training should be demand-led, i.e.training should be provided in response to the needs of the enterprises.



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Providing increased business focused education and access to education. Schools ought to betterprepare young people for the world of work. Programs can include: work ethic, informationtechnology, basic entrepreneurship education and sector studies where students can study keybusiness sectors of importance to their communities. Meanwhile adult literacy is a majorproblem that needs to be addressed through LED education and outreach programs.

Supporting research and development. This can be done through collaborative projects betweenbusinesses and institutions of higher learning. A local research fund can be established and agraduate placement program implemented, so new graduates can pass on their skills to localbusinesses.

Providing business advisory services. Depending on budgets, this service can start with oneperson who points people in the right direction (e.g., to lenders and institutions providing skillstraining). Clear sign posting is the key to good business advisory services. “One-stop shops”arean effective way of providing technical and financial support. Effective one-stop shops are usuallyhoused in one building where local businesses may access all technical support they need. Thebuilding can also house all LGU and national agencies involved in regulating businesses.

Access to capital and finance. The one-stop shop can provide budding enterprises with informationand direction to potential sources of finance.

Supporting the development of business and trade associations. This is a basic institution buildingprocess that can bring considerable benefits to the business community and LED efforts.Ideally all provinces and cities should have a number of business organizations includingChambers of Commerce, Boards of Trade etc. Also more specific groups can be supportedsuch as town center promotion groups, sector activities such as a tourism marketing group, anexporters’ club, and a young entrepreneur’s association. Most are likely to initially need some“pump-priming” funding (i.e., initial funding to get the scheme started) and capacity buildingsupport.



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Improving delivery of local government services to businesses. This is a key area as businesses arenot only the drivers of the local economy but they are also potential ambassadors. A happybusiness person is the best promoter for investments in the area. All aspects of regulations,taxation, and licensing are candidates for review to minimize cost, time, and frustration forbusinesses, not to mention opportunities for corruption, while maintaining appropriatenecessary environmental and related standards.

Social inclusion strategies. The initial thrust should be to establish who and where the mostvulnerable communities are, and then develop strategies to include them. These strategies caninclude, for example, education and skills training for ethnic minority communities, helpingwomen into/back to work, encouraging the recruitment of disabled people into the workplace,and encouraging social activities for the very young and elderly citizens.

Crime prevention measures. These can include everything from introducing “good citizenship”classes into the school curriculum to developing after-school activities to keep young peoplebusy. Other initiatives include drug free zones, curfews at night, training of barangay tanods(volunteer peacekeepers), and community intelligence networks.


Kalakalan 20 (R.A. 6810)Magna Carta for Small Enterprises (R.A. 6977)An Act Providing Assistance to Women Entrepreneurs (R.A. 7882)The Omnibus Investment Code (E.O. 226). The City Livelihood Assistance Program of Pagadian CityYlang-ylang Oil Industry Development in Anao, Tarlac



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◗ CREATING AN ENVIRONMENT FAVORABLE TO COOPERATIVES

Cooperatives can be important drivers of local economic growth. To harness their potentials forLED, LGUs must first understand the nature and principles of cooperatives to effectively work withthem. They need to understand their mandates in relation to cooperatives as stated in the LocalGovernment Code and the Cooperative Development Code. As a start, the LGUs can helpcooperatives by improving processes in the issuance of licenses and other business-relatedpermits. They can simplify the accreditation processes for civil society and private sectororganizations to enable cooperatives to participate in local governance. LGUs can also explore thepossibility of setting up an appropriate structure to support cooperatives like a MunicipalCooperative Office, a Local Cooperative Council, and a Cooperative Resource Center.


Pushing Development through Cooperativism in BulacanYlang-ylang Oil Industry Development in Anao, TarlacThe City Livelihood Assistance Program of Pagadian City

◗ CLUSTER AND/OR SECTOR DEVELOPMENT12

Recent studies have shown that businesses do not develop in isolation but in clusters, and oftenthese clusters arise from a distinctive resource, physical and human, from unique demandconditions, and from the presence of supportive industries, institutions, and policies. This beingso, LGU efforts should focus on identifying and supporting emergent and fast-growing clusters ofenterprise and shepherding them to serve larger and larger markets. Cluster developmentmeans that LED initiatives are concentrated on encouraging and supporting inter-firm collaboration,institutional development and support in targeted business sectors. These sectors are those thatoffer the most local economic development potential.



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1. Developing broker and network agenciesSpecial attention can be paid to encourage local people engaged in the same cluster to meettogether to enable business development opportunities. This can include encouraging localfishermen and fish processors to meet and exchange ideas on improving facilities and adding morevalue to their products, so they would all benefit. Another example could be to start a craftnetwork. The network can jointly market their goods, and then start inter-trading with each other,building synergies in the process.

2. Supporting joint research Institutions of higher learning can undertake research that can benefit everyone in the cluster. Oneexample of this would be to undertake research on minimizing losses from post-harvest losses ofagricultural products.

3. Developing cluster focused public procurement and local purchasing agreementsThe public sector is often the largest buyer in a city, and as such, there are opportunities to enablelocal businesses to participate in public biddings more easily. It is often difficult for small businesses,in a cluster or not, to bid for large government contracts. A cluster initiative here can includedeveloping a food supplier network to supply government catering needs. A logical clusterdevelopment initiative is to encourage suppliers of basic food products to enter into some formof food processing. Cluster development activities can then move on to transportation, storage andpackaging of food products. From there it is likely businesses can start retailing and producingprocessed foods for the private sector.

4. Providing cluster specific informationOne of the most effective ways of developing a cluster is to gather information about businessesand institutional support systems in the cluster and then share them. Thereafter, with a small amountof effort, supplier linkages can be developed.



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5. Developing cluster related marketing effortsOnce a cluster has been identified and it starts developing, there are opportunities to promote itand attract supporting investment as well as promoting external business opportunities forcluster members.

6. Developing demand-led skills and education training programsClusters have common needs. When a number of businesses express their needs, it is more likelythat training or education will be provided. A lone voice is not likely to be taken seriously.


DILG MC No. 2002-09 Implementation of the LGU-Cluster Development Approach Project(LGU-CLAP) as a Strategy in the Adoption of One-Village, One-Product MovementYlang-ylang Oil Industry Development in Anao, TarlacJewelry Production and Promotion in Meycauayan, Bulacan

◗ AREA TARGETING FOR REGENERATION AND DEVELOPMENT13

Area targeting means that strategies are developed to address specific site or small area LED issues.While most LED initiatives can be targeted at specific locations, “area targeting”examines a specificarea within a municipality to address a specific territorial problem such as a redundant factory,declining shopping area, slum, etc. These areas need special attention and measures.

Regeneration strategies are targeted at communities that have normally suffered from structuralchange, perhaps a major industry closing or a rural area in decline or a town center suffering fromneglect and crime. The implementation of effective regeneration programs and the tackling of socialand economic disadvantage represent two of the major challenges facing contemporary policymakers. Regeneration strategies go some way to meet these challenges. They use all the toolsavailable but because an area is in need of regeneration, specific, community focused and oftenhighly targeted policy responses are usually needed.



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Regeneration strategies are likely to be the most challenging, the most expensive, and mostprolonged program that an LGU is likely to undertake.


1. Town center enhancement schemesThese can include a wide range of initiatives including developing a business partnership,marketing the town center, undertaking surveys and upgrading the physical environment, andtargeting investment, etc. A vital and vibrant town center is the heart of an area’s ability to becomecompetitive.

2. Derelict site reclamation programsMany traditional industries were housed on large sites. They occupied large buildings andfrequently, sites were considerably contaminated. As a first step in most regeneration programsmajor issues need to be tackled. Decisions need to be made on whether buildings can be effectivelyreused, how much contamination needs to be cleared and what after-use programs need to beestablished. None of this is easy or cheap. But contaminated sites, besides being a danger tolocal communities, are never likely to be bought by reputable employers. A comprehensivebrownfield reclamation program needs to be established within the LED strategy to address this.Brownfield is a general term used for sites that have been developed in the past for industrial andmilitary uses, which may or may not have been contaminated by military and industrial wastes.Brownfield development is often a recourse for communities to maintain tax revenue andemployment after the departure of the original locator or investor. But it can be very costly andentails a number of activities. These include an initial survey of sites, identification of the severityof pollution, identification of ownership, prioritizing reclamation, finding funds for it, developingafter-use programs and ensuring that regulatory systems encourage reclamation.



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3. Adaptation of disused buildingsIn some instances redundant buildings are still adaptable for further use such as for a managedworkspace that can be owned by either the public or private sector. Some buildings may benefitfrom splitting into smaller workspaces. Some of the most historic buildings are often the hardestto reclaim. However, this should not stop efforts to save all buildings of historic or architecturalimportance.

4. Industrial and commercial site preparationIn most regeneration programs there will be a need to develop some land for incoming andexpanding businesses. To accommodate these most effectively, it is better to have some sites servicedwith basic infrastructure at the outset. If this is not possible, there should at least be someassessment of the likely costs and the time needed to install basic infrastructure. Since the costsare likely to be significant, partnerships with the private sector are most desirable.

5. Retraining of redundant workersThis is a serious problem in communities that are undergoing structural readjustment. The likelytarget populations will be older men and women who have clearly defined skills sets. The challengeis to ensure that skills trainings are provided on a demand-led basis.

6. Job search and employment outreachRedundant workers often encounter difficulties finding a new job. This is due to their lack of basicjob search skills. Public employment service offices (PESOs) such as those that the Department ofLabor and Employment are promoting among LGUs can be very effective in helping them find jobopportunities. They also benefit new graduates and new entrants to the workforce. The PESOs canoffer services from seminars on building personal confidence, resume writing, interview skills toprojects matching the unemployed with potential employers.



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7. Street scene enhancement programsRapid improvements can be made with programs to improve the street scene. These may includeclosing streets to traffic and installing pedestrian friendly street furniture, planting trees andinstalling new pavements. More modest schemes include painting shops, installing attractivestreet lighting and benches, encouraging shop owners to install more attractive overnight shutters,and sponsoring hanging basket competitions. Local businesses can be encouraged to pay for someof these initiatives.

8. Public park and play provisionIn addition to improving the environment, improved parks and play facilities are likely to reducethe risk of juvenile delinquency, smoking, and drug addiction. In crowded areas, LGUs maydesignate certain areas as traffic free zones where children can play safely.

9. Entrepreneurship training and SME support programsThe city's mainstream programs can be adjusted to meet specific needs of vulnerable groups likewomen. Local delivery of services can also be helpful.

10. Community confidence buildingThis can cover many projects such as promoting local success stories, encouraging the communityto develop its own newsletter, and developing the arts and domestic crafts.

11. Crime and safety measuresThese measures include a wide range of activities from increased policing, installation of closedcircuit television, increased bus services at night, neighborhood watch schemes, and street lightingprojects.



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DILG MC No. 2002-81: Creation of Local Culture and the Arts Council DILG MC No. 95-162: Inventory of LGU Tourism, Culture & the Arts Councils DILG MC No. 2001-19: Solid Waste Management Program Implementation of Republic Act No.9003 otherwise known as the Ecological Solid Waste Management Act 2000DILG MC No. 2001-38: Addendum to DILG MC 2001-19 Re-Implementation of Republic Act 9003,otherwise known as the Ecological Solid Waste Management Act of 2000 DILG MC No. 2001-48: Inventory of All Solid Waste Disposal Facilities and Sites in LGU Marikina CityManila City

◗ TARGETING DISADVANTAGED GROUPS14

Targeting disadvantaged groups involves designing programs and projects addressing the needsof vulnerable and marginalized groups such as ethnic minority groups, the urban poor, women,redundant workers, the long-term unemployed, and out-of-school youths.


1. Language trainingThis is a key issue where there are groups of foreign workers and minority communities. Outreachprograms are often successful here.

2. Skills retraining and job placement programsSkills retraining should be done following a demand led approach. It is a waste of time andresources retraining individuals in skill areas for which there is no or little employment opportunities.



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3. Raising educational achievementThis is usually an issue for an entire city, but specific communities may be in need of extra support.

4. Enterprise trainingMany disadvantaged groups have both high unemployment and a large proportion of workers inthe informal sector. Basic training in terms of business management, finance and marketing canhave a significant impact on these communities.

If as the statistics show that less than ten percent (10%) of rural household heads had enterpriseas an option, then there exist opportunities for farmers, farm workers, and rural residents to startfarm-related and off-farm enterprises to supplement the low income derived from agricultural work.LGUs can assist entrepreneurial rural folks find and take advantage of opportunities in businessessuch as food processing, handicraft making, sewing, etc.

5. Women into employment and self-employment programsThis includes confidence building projects, crèches, and after-school clubs.

6. Micro enterprise lending programsThis addresses the need of disadvantaged groups to start and continue enterprises of their own.

7. Work experience and teacher/pupil placement schemesThese schemes involve students working for short periods of time in businesses to gain workexperience and a work ethic. Teachers can also do this by giving students a better understandingof workplace requirements.

8. Developing mentor programsMentor programs can be done informally. More experienced business people mentor upstarts inthe basics of starting and sustaining an enterprise.



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9. Health and wellness awareness programsIt is usually the most disadvantaged that suffer from poor health and unsanitary living conditions.Poor health affects an individual’s and a community’s productivity. Health awareness programs cantarget specific, high-risk communities such as those at risk for water-borne and mosquito-bornediseases such as malaria and Japanese encephalitis.

10. Development of community resource centersThe purpose of these centers is to gather and coordinate information and services to meet the needsof a local community. Since transport is often a problem, and since many individuals do not liketo go into “official looking”buildings, community centers can provide an ideal place to meet localneeds. Buildings do not need to be sophisticated; the most important element is to make sure thepeople are customer-friendly and have an understanding of the services that are available. Servicescan include everything from health care, education services, business advice, and play areas forchildren. In the Philippines, barangay halls, health centers, and day care centers often serve thesefunctions.


R.A. 8425: The Social Reform and Poverty Alleviation Act DILG MC No. 2001-109, Initial Areas for Action in the Implementation of Programs on PovertyReduction and Local Economic TransformationDILG MC No. 2001-105: Designation of Local Poverty Reduction Program Action Officers and theFunctions of the LPRAODILG MC No. 2001-172, Guidelines on Poverty Reduction Program for Local Governments Joint (DILG, DBM, NCRFW) MC No. 2001-01.Guidelines for Integrating Gender and Development(GAD) in the Local Planning and Budgeting System through the Formulation of GAD Plans DILG MC No. 2002-163. Creation of Local Council for WomenThe City Livelihood Assistance Program of Pagadian City The Lingap Tanaw Program of Naujan



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◗ ALLIANCE BUILDING WITH THE PRIVATE SECTOR AND/OR OTHER LGUS

The cluster approach not only applies to businesses but also among LGUs and between LGUs andthe private sector.


1. Common facilities like roads, hospitals, colleges and universities, research and training facilities,post-harvest, solid waste management, water supply and sanitation.

2. Environmental conservation programs like protection of watersheds, coastal resources, and othernatural resources vital for sustainable development.

3. Area products and tourism marketing campaigns by bundling the different sites into a commonpackage tour.

4. Joint venture arrangements with the private sector like Build Operate-Transfer arrangementsfor roads, city and municipal ports, housing projects.


DILG MC No. 2001-109, Initial Areas for Action in the Implementation of Programs on PovertyReduction and Local Economic TransformationDILG MC No. 2002-09 Implementation of the LGU-Cluster Development Approach Project(LGU-CLAP) as a Strategy in the Adoption of One-Village, One-Product MovementDILG MC No. 2002-48: Local Economic Transformation Program for Local GovernmentsInvestment Program of BoholPigcawayan-Alamada-Libungan-Midsayap-Aleosan (PALMA) Complex common heavy equipmentproject for infrastructure development



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❙ Ineffective LED Strategiesthat LGUS Should Avoid

Unfortunately there are countless examples of strategies and projects that have failed to achievelocal economic development. Some of these are:

Expensive untargeted foreign direct investment marketing campaigns Untargeted foreign direct investment marketing campaigns are a waste of human and financialresources. Crafting a message meant for all and sundry is communicating with no one. It also comesacross as indecisive. Segment the market. Know the type of investors you wish to attract, identifytheir needs, motives, and preferences, and position the LGU accordingly.

Supply-led training programs Supply-led training programs, as the name implies, are driven by the provider’s perceptions of whatbusinesses need and what donors are willing and want to fund. In contrast, demand led programsare those that employers have expressed a need for.

Supply-led training programs run the danger of training people in skills for which employment isscarce or even non-existent. With their nose on the market, business persons know better thanbureaucrats what skills their employees should have and should develop.

Excessive reliance on grant-led investments Grant-led investments hamper the development of the discipline required to compete in themarket. There are few incentives to channel them to the most efficient and effective uses becausethey come cheaply or for free. Grant-led investments are most useful in functional areas where socialreturns are high but the payback periods are longer, such as human resource development,education, and social services.



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Over generous financial incentives for inward investors Over generous financial incentives for inward investors consist of tax rebates, special importpermits with exemptions from or reduction of normal duties, protection against competition, andpreferential credit arrangements. While these incentives may attract investors in the short-run, thesecan lead to protectionism with its negative effects of laxity and inefficiency and overall decline inindustry competitiveness. These not only deprive the LGU of revenue but can also breed considerableresentment among local businesses that do not enjoy the same benefits.

Business retention subsidies Paying firms to stay in the area despite the fact that the financial viability of their operations is atrisk sends a wrong signal to the business sector. It encourages firms to become inefficient and todelay “biting the bullet” or to fix their operations.

Relying on "low road" techniques like cheap labor and capital Cheap labor and capital can reap rewards in the short-term but in the long run, the strategy isunsustainable. Other countries, provinces, and cities can lower their labor costs, causing competitionto become a race to the bottom rather than a stimulus to reach for the top. Cheap labor ultimatelycauses unrest and often leads to the use of child labor. Instead of reducing cost, the aim ofenterprises is to create greater social and economic value through productivity-enhancingmeasures like provision for better education, incentives for continuous innovation, and the creativeuse of technology. Early in its development, Singapore compelled companies to innovate bymandating an automatic increase in wages every year.

Government conceived, controlled and directed financing strategies, e.g., credit rationingfor certain sectors and industriesHistorically, credit rationing has never worked. Despite the Agri-Agra law directing banks to lenda portion of their portfolio to Philippine agriculture, the sector remains starved of financing,despite the obvious high demand. The reasons for this state of affairs range from the unique risksfaced by farmers, e.g., susceptibility to the elements, the fluid and uncertain property rights



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regime caused by well-meaning land reform programs to the incentive structure for rural lending.Rather than credit rationing, government’s time is better spent getting the “incentives” rightrather than issuing laws that are difficult to enforce in the first place. Credit cannot be made to flowby decree anymore than one can order the water to flow uphill. One has to inquire whether thetraditional banking sector with its large overhead is the institution best positioned to deliverfinancing to farmers. There is also the matter of increasing investor and lender confidence in thesector by improving the credit-worthiness of farmers.

Government agencies implementing retail credit projectsThe record of government agencies directly implementing credit projects in the field is dismal, tosay the least. Government is not a credible lender. It is bedeviled by concerns other thanstraightforward business objectives. Regular changes in leadership do not give it the stabilityrequired of a financing institution. If government is to be involved in lending projects, it should atthe most act as a wholesaler, never a retailer of credit.

Supply-led credit programs offering loans at below cost-recovery rates Supply-led credit programs offering loans at below cost-recovery rates are unsustainable. Theyencourage non-repayment and risky behavior on the part of both retailers and borrowers. For obviousreasons, people pay the most expensive loans first, and since the loans come cheaply, they are liableto use it for less productive purposes. The supply-led credit programs of the 1970s made the ruralbanks lazy in mobilizing savings and lax in approving loan applications. Studies have alsoshown that the loans went to the richer farmers than to the poorer ones, thereby aggravating analready iniquitous situation.



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❙ CAPACITY BUILDING PROCESS FOR LGU-FACILITATED LED

LGUs need to develop their capacity to facilitate and see the LED process through. The effectivecapacity building for LED follows a four-stage process:

1. Establishing consensus among and between LGUs and the stakeholders about the need toimprove the local economic situation and economic-related local governance.

2. Improving the institutional capacity and strengthening organizations to undertake localeconomic development initiatives.

3. Improving LGU economic development-related systems, structures, mechanisms, and procedures.4. Institutionalizing capacity through assessment and incorporation of lessons.



ISSUES AND RECOMMENDATIONS REGARDINGLED IMPLEMENTATION

CHAPTER 5


CHAPTER 5This chapter deals with issues in LED implementation and corresponding recommendations.

The issues are those facing micro enterprises, small and medium enterprises, and LGUs. LGUsface a number of constraints in implementing LED. These constraints are: financial, technical-

managerial, lack of political will and commitment, lack of sustainability of LED efforts, insufficientsupport systems for LED, conflicts between national and local governments, and inter-localcooperation.

❙ Micro enterprises

Nine out of ten enterprises in the country are micro enterprises run by an estimated 4.7 millionentrepreneurs. Of this number, thirty percent (30%) of them are in growth-oriented microenterprises while seventy percent (70%) are in so-called survival or livelihood activities such asvending, raising animals, and farming. Micro enterprises need financing. Those in growth enterprisesrequire skills in product costing, development, and marketing. Those in the informal economy requiresecurity of tenure and protection from harassment and mulcting law enforcers.

❙ Small and Medium Enterprises

Many of the SMEs in the Philippines are relatively young. A 1989 ADB-ERDC study showed that “whilesmall and medium entrepreneurs were more highly educated than the average person in the society(community) they come from, they are in clear need of technical training in such areas as accounting,financial analysis and product design preparation.” 15

ISSUES AND RECOMMENDATIONS REGARDINGLED IMPLEMENTATION

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There is also the issue of global competitiveness. SMEs are apprehensive of the adverse effects oftrade and investment liberalization, resulting in the free flow of trade and investment acrossnational borders. In an open market, only the big corporations are expected to survive due to theirability to access market information and technical and management know-how.

The following are recommended measures on SME development:

Facilitate access to sources of funds by simplifying tedious credit requirementsAssure access and transfer of appropriate technology through the establishment of adequatesupport structures and creation and promotion of an environment conducive to the viabilityof SMEsIntensify and expand programs for training in entrepreneurshipConduct periodic review of government incentives to ensure their responsiveness to the SMEsectorPromote linkages between large and small enterprises by encouraging establishment ofcommon service facilitiesEncourage private sector partnership through joint ventures and equity investments

❙ Local Government Units

The ability of LGUs to perform its many roles to promote LED is affected by a number of constraints:financial, technical, political, policy, the insufficiency of support systems, and the difficulty ingetting LGUs to cooperate among themselves and between them and the central government.



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◗ FINANCIAL CONSTRAINTS

Dependence on the Internal Revenue Allotment (IRA)Many LGUs, especially municipal governments in the rural areas classified from fourth to sixth class,are heavily dependent on the Internal Revenue Allotment (IRA) for their continued operation. Withthe IRA spent on personnel services (PS) and daily operations, there is practically nothing left forlocally funded projects that would promote local economic development. This has also preventedLGUs from putting up the required equity in foreign-assisted projects (FAPs) and from financingstudies required by grant and loan facilities like feasibility studies.

Financial constraints or barriers can be addressed by the two broad strategies of increasing incomeand reducing cost. In the next chapter, the Municipality of San Fernando in Pampanga shows howan LGU can combine these two strategies to get itself out of the red.

Limited tax base and business activityRural-based LGUs cannot generate large revenues even with the broader taxing powers grantedthem by the Local Government Code because of a small and narrow tax base and limited businessactivity in the area. The problem is compounded by out-migration (the so-called brain andbrawn drain) from the poorer areas to the more urbanized towns and cities.

Retention by the national government of the more profitable sources of taxesThe national government still retains the more profitable sources of taxes such as income taxes,customs duties, transportation levies and franchises.

Lack of financial support for devolved functionsLGUs continue to struggle to finance functions and facilities devolved to them by the LocalGovernment Code. The lack of financial support from the central government has overloaded theLGUs’ limited budget.

ISSUES AND RECOMMENDATIONS REGARDING LED IMPLEMENTATION 5


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IRA sharing formula The sharing formula for the IRA works to the disadvantage of LGUs with small populations and landarea. Provinces also get equal shares with cities despite the former being saddled with themanagement of provincial hospitals.

◗ TECHNICAL AND MANAGEMENT CONSTRAINTS

Limited technical capacity within the LGU and in their area Many LGUs have limited internal technical capacity to plan and implement development programsand projects. The lack of financially and technically qualified contractors in the area has made themreluctant to avail of credit facilities such as the LGU Private Infrastructure Development Facility ofthe Land Bank of the Philippines.

In the next chapter, San Carlos City in Negros Occidental shows how LGUs can surmount theperennial lack of technical capacity in the locality.

Limited managerial capacityLGU-owned economic enterprises like public markets, slaughterhouses, and/or conference/lodgingfacilities are not managed efficiently because of the lack of professional, competent, and highlytrained managers.

Lack of administrative support personnel like financial and monitoring staff have also affected theLGU’s capacity to absorb grant and loan proceeds. Aside from slow releases by national governmentoffices and agencies like the Bureau of Treasury, Department of Budget and Management, and theMunicipal Development Fund Office (MDFO), disbursements of many foreign assisted projects whereLGUs have substantial participation are held up because of the LGUs’ delayed submission of therequired monthly physical accomplishment reports and final audited reports.



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◗ LACK OF POLITICAL WILL AND COMMITMENT

While a number of LGUs have well prepared and sound economic plans, many of these remainunimplemented. Many projects remain on paper because the local chief executives do not wantto implement them because of political considerations. Projects with long-term impact areshelved in favor of short-term, highly visible projects.

◗ LACK OF SUSTAINABILITY OF LOCAL ECONOMIC DEVELOPMENT PROGRAMSAND INITIATIVES

Short-term limits Constitutional provisions limiting the terms of elected local government officials to three yearsthreaten the sustainability of local economic development programs and initiatives. For a first-term elected local chief executive, it is said that the first year is usually a time of learning andadjustment, the second year, for starting projects, and the third is for preparations for the nextelection. With hardly any time to warm their seats and elections looming large even after the previousone has just been concluded, local officials prioritize the implementation of highly-visible projectswith immediate results over longer-gestating ones that may have lasting impact. Uncertainty overthe next set of local officials also prompts investors to adopt a wait-and-see attitude a year beforelocal and national elections.

Changing set of local officialsSharing of resources between and among participating local units in the program is difficult to sustainbecause of the changing set of elective officials.

Political partisanship and the lack of continuity of plans and programsHowever worthy, plans, economic programs and initiatives started by one administration areoften discontinued or shelved by its rival once the latter gains power. “Political partisanship”at thelocal level also affects the accreditation, participation of NGOs, POs, or cooperatives, and the



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private sector in local governance. Partnerships between the LGU, civil society, and the private sectorare jeopardized by the change in local political leadership.

Political patronage The operational effectiveness and efficiency of the LGU’s economic enterprises are affected by theneed to reward members and followers of the winning party or cabal. Casuals are hired andunqualified party hacks are appointed to managerial positions.

Lack of funds and capability of LGUs Though beneficiaries acknowledge the positive impact of the subprojects, concerns remain abouttheir sustainability because of the lack of funds, if not the capability of LGUs for infrastructureoperation and maintenance, and the lack of social preparation to ensure projectsustainability/ownership.

◗ INSUFFICIENT SUPPORT SYSTEMS FOR LOCAL ECONOMIC DEVELOPMENT

Lack of resources in the Department of Trade and Industry (DTI)Despite its mandate to provide the necessary support system to local bodies, field reports indicatethat DTI does not extend the needed assistance to many LGUs because of its lack of humanresources in the field.

Provincial offices do not have enough staff to link up with LGUs in the preparation of project feasibilitystudies, baseline studies, marketing, promotion of products, managerial & entrepreneurial skillsdevelopment and in the conduct of fora and seminars on investments opportunities.

DTI is constrained by the lack of resources at the regional and provincial levels to engage in a farmore active and sustained effort in economic promotional activities.



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Be this as it may, the DTI and the LGUs can partner with each to work around this problem, as theMunicipality of Tigaon in Camarines Sur demonstrated, discussed in the next chapter.

Lack of well-established linkages between NEDA and the LGUsNEDA through its regional development staff and offices also provides technical assistance to LGUsin the area of local development planning and investment programming. The extension of suchkind of assistance is wanting. NEDA’s technical people are located at the regional centers. The agencydoes not have well-established linkages with local government units at the provincial/city/municipal levels.

Lack of coordination among different agencies offering related or similar services Different national government agencies operate in the same jurisdiction offering related or similarservices such as credit, infrastructure, enterprise development assistance, etc. Lack of coordinationamong these agencies, duplication in the services offered, and at times competing programsand services cause confusion among the LGUs and dissipate scarce resources.

Examples are the conflicts arising from the implementation of the Integrated Protected ResourceArea (IPRA), National Integrated Protected Area System (NIPAS), and the Community-Based ForestManagement (CBFM) within project areas under the jurisdiction of the National Commission onIndigenous People (NCIP). The issuance of land tenure instruments within project areas, which havebeen transferred to the NCIP by the IPRA law, was deferred due to the absence of clear guidelineson the working relationship between NCIP and DENR in these areas. The involvement of multi-sectoral stakeholders representing various interests slowed decision making on various aspects ofproject implementation due to mismatch of counterpart resources, varying perspectives andexpectations, and different levels of capacity among stakeholders.

Effective stakeholder participation need not be so elusive if the LGU is determined to get everyoneon board. In the next chapter, the Municipality of Irosin in Sorsogon during the term of Mayor EddieDorotan is presented as a model for social participation, cooperation, and coordination among thedifferent government, non-government, and people’s organizations in the locality.



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◗ CONFLICTS BETWEEN THE NATIONAL AND LOCAL GOVERNMENTS

Existing Government of the Philippines (GOP) policies that limit grants to LGUs to fifty percent (50%)of the total infrastructure cost has hampered the implementation of projects involving cost-sharing arrangements between the national government and the LGUs. One example is theInfrastructure for Rural Productivity Enhancement Sector Project (InFRES). LGUs are also awaitingthe final turnover of completed civil works projects to them by the national government.LGUs and the national government, specifically the Department of Public Works and Highways(DPWH), are at odds over which agency will ultimately be responsible for the country’s roads. LGUsare also batting for a reclassification of roads from the present system based on jurisdiction(national, provincial, city/municipal, barangay) to purpose (collection roads, line haul roads, anddistribution roads).

◗ INTER-LOCAL COOPERATION AMONG LOCAL GOVERNMENTS

Clustered development and inter-local cooperation among local governments have not taken offas expected for the following reasons:

Changing set of local government officialsProblems of leadership (who should assume the leadership in the local area? Who shouldassume the lead role for economic planning among the cooperating local governments?Should the local government that has more financial resources assume the lead role?) Concerns that less financially capable local governments would not be on equal footing withthose of richer local governments in terms of decision-making. Local political rivalries (inter-local cooperation is hampered by local political rivalries andfactionalism)



GOOD PRACTICES IN PROMOTING LOCALECONOMIC DEVELOPMENT

CHAPTER 6


6The following are eight good practices in promoting Local Economic Development (LED). Thereare certainly many more but these were chosen to illustrate the use of the different LED strategiesdiscussed in the previous chapter.

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FORMULATING AND IMPLEMENTING A COMPREHENSIVE LOCALDEVELOPMENT PROGRAM : IROSIN, SORSOGON

The Irosin experience is an exemplar in stakeholder participation in theformulation, implementation, monitoring, and evaluation of the LocalEconomic Agenda. It illustrates the five steps of the Planning Process for LGU-facilitated LED and embodies all principles of and the factors for successfulLocal Economic Development.

PROFILE

Irosin is one of the municipalities of the province of Sorsogon. It has 28 barangays spreadover irregular, rolling to mountainous terrain. Its land area of 15,880 hectares is devotedmainly to agriculture. Irosin is the main producer of rice, citrus fruits and abaca in theprovince. Coconut, vegetables, cassava and sweet potatoes are also major products. Itspopulation in 1994 was about 40,000. Agriculture employs almost seventy percent (70%)of its workforce.

SITUATION PRIOR TO THE PROGRAM

Before 1992, Irosin was a depressed fifth-class municipality burdened by a festeringCommunist rebellion. It was infamous as a center for “jueteng”(or numbers game). Wealthwas concentrated in a few landowners and Chinese entrepreneurs, while the underprivilegedmajority earned small, seasonal incomes from farming. Malnutrition afflicted seventypercent (70%) of schoolchildren in 1992.



Contact InformationOffice of the MunicipalMayor Irosin, SorsogonTel: (056) 804-5021

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DESCRIPTION OF THE PROGRAM/STRATEGY

The situation started to change with the election of Eddie Dorotan as Mayor in 1992. Mayor Dorotanspearheaded the Irosin Integrated Area Development Program (IAD). The program incorporated a widerange of interventions, not just infrastructure or economic projects, for the holistic development of thearea and the community.

The IAD sprung from a Multi-Sectoral Development Planning Workshop that Mayor Dorotan convenedimmediately upon assuming office to map out the vision, mission and development strategy of themunicipality. The workshop set the overall framework and direction for the implementation of the IADprogram which was translated into the local development plan for 1992-1995. The plan addressed theproblems of poverty, powerlessness and poor access to basic services through the key strategies oflivelihood promotion through agrarian reform, environmental development and agro-basedindustrialization; people empowerment through strengthening and networking of the POs, NGOs andcooperatives; and improvement of basic services in health, social welfare, and public works.

The program was participatory in nature with coordinated efforts from POs, NGOs, cooperatives, the LGUand national line agencies at all of the program’s stages – from planning to implementation to evaluation.The participatory process made the municipality’s entire citizenry stakeholders and allowed a high levelof integration among players not usually achieved in other local development plans. The majorbeneficiaries were the farmers who comprised the majority of Irosin’s population. The program reconciledthe often competing demands of social equity, economic growth and environmental protection, thusmobilizing support from multiple constituencies. Government and non-government actors wereempowered to pursue their mandates and programs within the context of creating synergy for localdevelopment.



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HOW WAS THE PLANNING PROCESS DONE?

The mayor kept track of the program through a year-round planning, implementation, monitoringand evaluation (PIME) cycle:

JanuaryMeetings with different line agency and local departments to evaluate the previous year’s performanceand plan for the year ahead.Mayor Dorotan gave his annual Ulat sa Bayan or “State of the Town Address”with the outputs of themeetings as bases.

February to DecemberMonthly coordinators’ meeting with all line agency heads, barangay chairpersons and even headsof support agencies like the fire department, police, etc. Monthly meetings were also held with variouslocal bodies such as the Municipal Agrarian Reform Council (MARC), Local Health Board (LHB) andLocal School Board (LSB). This promoted inter-agency coordination.

JunePlanning for the next year started.

JulyProject proposals of the different departments and agencies were finished.· The DBM informed themunicipality of its IRA for the following year. The Mayor knew how much money was available andhow much was still required.

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AugustThe Municipal Budget Office received agency/department budget proposals.

OctoberThe Sanggunian Bayan (SB) received the consolidated budget proposals for the formal budgethearings and eventual passage of the appropriations ordinance.

HOW WAS FUNDING FOR IROSIN’S IAD PROGRAM OBTAINED?

Funds were mobilized from various sources to finance the IAD program:

Mayor Dorotan convinced then DAR Secretary Ernesto Garilao to declare the entire municipality ofIrosin as an agrarian reform community (ARC). As an ARC, Irosin was able to access PhP30 million inDAR resource allocations from 1992 to 1996. Funds were sourced from the Countryside Development Fund of Albay Congressman BonifacioGillego as well as from contributions of various senators such as Raul Roco and Gloria Macapagal-Arroyo. A Dutch funding agency, CEBEMO, contributed PhP10 million for the promotion of agri-basedindustrialization.The Department of Social Welfare and Development (DSWD) allocated PhP1 million each to threebarangays in Irosin in connection with its CIDSS project.The municipal government’s IRA and other local resources were other sources of funds. MayorDorotan was successful in raising local revenues from an overdraft of PhP740,000 in 1992 to P23 millionin 1997. The increase was largely due to more efficient and honest fiscal management as well as anew Municipal Tax Code which improved revenue mobilization.



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HOW WAS PEOPLE’S PARTICIPATION INSTITUTIONALIZED IN THE IAD PROGRAM?

People’s participation was a core principle underlying the IAD program. The Multi-Sectoral DevelopmentPlanning Workshop set the stage for continuing participation and consultation with the peoplethroughout Mayor Dorotan’s term. Monthly meetings were regularly convened with concernedagencies/departments and local special bodies. The ordinary citizen was involved in activities such as“clean-up day”every Wednesday and “exercise day”every Friday. A broad range of training was providedto improve the capability of POs and cooperatives in value formation, leadership, basic management,finance and accounting, and various livelihood skills. The People’s Center, a building which now housesthe offices of NGOs, POs and cooperatives was constructed as part of the municipal government’scommitment to NGO/PO participation.

WHAT WERE THE RESULTS OF THE PROGRAM?

Within the period 1992 to 1997, Irosin was transformed from a depressed, insurgency ridden-5th-classmunicipality to a progressive, peaceful 4th class municipality that emphasized social equity, socialparticipation, and environmental sustainability.The Irosin IAD program was a Galing Pook awardee in 1994, while Mayor Dorotan was awarded theOutstanding Young Filipino Award for Community Development in 1995.

Source: Joel Pagsanghan, “Irosin Integrated Area Development: A Best Practice in Agricultural Development,” in Local Governments in thePhilippines: Four Best Practices in Service Delivery, ed. by Fernando T. Aldaba et al., Ateneo Center for Social Policy and Public Affairs,1998.

Irosin, Sorsogon

THE LINGAP TANAW PROGRAM: NAUJAN, ORIENTAL MINDORO

The Lingap Tanaw program is distinguished by its investment in so-calledsoft infrastructure, targeting certain disadvantaged groups through creditand micro enterprise support, and by implementing LED with stakeholderparticipation.

PROFILE

Naujan has the largest land area among all the municipalities in the provinceof Oriental Mindoro. It also has the second largest population with 75,726 in 1996. Its totalarea of 52,800 hectares is devoted largely to agriculture, with palay accounting for sixtyone percent (61%) of the total agricultural area. Other crops cultivated in the municipalityare citrus, coconut, corn, bananas, coffee and black pepper. Naujan became a first classmunicipality in 1996.


The lack of social, educational and health facilities was a real problem for the municipality.Medical services could not reach many of the rural barangays and were badly in need ofimprovement. Drinking water was obtained from underground sources. Toilet facilities wereinadequate. There was a shortage of dwelling units. The number of high schools forstudents was inadequate. The delivery of services was hampered by the lack of professionalhuman resources and trained volunteers.

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Contact InformationOffice of the MunicipalMayor Naujan, OrientalMindoro Telefax: (043) 208-3479

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DESCRIPTION OF THE STRATEGY/PROGRAM

Lingap Tanaw (Caring View) program was conceptualized, planned and implemented by the municipalgovernment of Naujan under the administration of Mayor Nelson Melgar. Its strategy was to reach outand link with former residents of Naujan and involve them in the development effort of the municipalgovernment.

The linkaging efforts led to the founding of the Mindoro Assistance for Human Advancement ThroughLinkages (MAHAL, Inc.), a non-government organization that provided assistance to the community. Themayor was one of the incorporators of the NGO.

THE PROGRAM HAD THE FOLLOWING COMPONENTS

Lingap sa Barangay

This component was aimed at improving the economic conditions of the barangays by providingopportunities for residents to start livelihood projects as a means to generate additional income. It alsoattempted to build the capacities of barangays through the provision of financial, managerial, technicaland marketing assistance by the municipal government in cooperation with MAHAL, Inc., whichmanaged the project.

The component included the establishment of a community-based information system (CBIS) using theminimum basic needs (MBN) approach as a planning tool.

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Micro enterprise development and financial assistance

The program adopted the micro enterprise development approach in the implementation of thelivelihood program. Its long-term objective was to develop the capabilities of the POs to plan and managetheir own livelihood program. Members of the associations and cooperatives recognized by MAHAL andthe municipal government received financial assistance in the form of loans. These were paid back throughthe associations. Both MAHAL and the POs put up counterpart funds equivalent to thirty percent (30%)of the municipal fund accessed.

Kalusugan Sa Barangay

Health education and services were provided to the barangays through this component. Projectactivities included training of barangay health workers on the use of herbal medicines, medical responseto common epidemics, implementation of a family planning campaign program, monitoring andocular visitations, and the active promotion of herbal medicines. The municipal government linked upwith the Department of Health (DOH) and Plan International. It bought a mobile clinic from a grant itreceived from Plan International.

The Lingap Tanaw Klinika

This component was managed jointly by the municipal government and the Naujan Women’s Club andvarious groups of Naujeños living outside the town. The program addressed the need for a local clinicin the town. At that time, one had to go to Calapan, which is 32 kilometers away from Naujan, for a medicalconsultation. Doctors were offered incentives to practice in Naujan including free office space, lower feeswithout any imposed deductions from the municipal government, and a nurse-secretary who would bepaid by the Women’s Club.




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HOW WAS THE PROGRAM MANAGED?

The municipal government created a coordinating and monitoring body (COMB) to coordinate andmonitor the program components and project activities of the Lingap Tanaw program. Representativesfrom the LGU, NGA, NGOs, and POs were members of the COMB.

WHAT WERE THE RESULTS OF THE LINGAP TANAW PROGRAM?

Institutionalization of people’s participation

Lingap Tanaw was able to institutionalize people participation in barangay planning. Barangays havealso gained capabilities in gathering and analyzing information necessary to planning, networking, projectimplementation, monitoring and evaluation.

Expansion of assets and sources of income

Individual beneficiaries were able to gain additional sources of income. One PO was able to acquire a3.6 hectare land which it paid for from rentals of a thresher it purchased. A core housing project for 27families was put up in the acquired land. Another PO was able to establish a revolving fund used for loanswere given to members.

Expansion of service area through the MBN approach

The Kalusugan sa Barangay program reached fifty five (55) out of the seventy (70) barangays in Naujanusing the MBN approach.


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Establishment of a community hospital

The Klinika program was able to serve 1,240 patients after its first year of operation. The program wasable to convince medical doctors to practice in Naujan instead of in Calapan, the provincial capital. Acommunity hospital was also established.

WHAT WERE THE ISSUES FACED BY THE PROGRAM?

The sustainability of Lingap Tanaw was threatened when a new administration took over in 1998. It hadpriorities other than the program. The Municipal staff members who had been involved in the programwere assigned to other projects. Moreover, the collaboration between MAHAL and the municipalgovernment weakened.

Source:“The Lingap Tanaw Program of Naujan,” The Changing Role of the Local Governments under a Decentralized State: Some Cases inPhilippine Local Governance, Perla E. Legaspi. 2001.




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INVESTMENT PROMOTION PROGRAM: PROVINCE OF BOHOL

Bohol illustrated a number of LED principles and strategies: effectivestakeholder participation and mobilization both within and outside theprovince; sound and realistic competitive assessment resulting in a clearinvestment direction and LED strategies; the establishment of a LocalEconomic Development group, (i.e., BIPC and the Livelihood PromotionUnit); the development of a professional investment portfolio; an effectiveinvestment marketing campaign; an incentive scheme for would be investors;and the pursuit of growth with equity, sustainability and culturalresponsiveness as shown in the importance given to both inward investors

and existing businesses.

PROFILE

Bohol, the tenth largest island in the country, is located between Cebu and Leyte islandsin the Visayas. It is the second most populous province in Region VII with nearly a millionresidents in 1995.


Poverty and lack of opportunities in the province have forced many young Boholanos toseek greener pastures in the more developed regions of the country and in foreign lands.With population as a criterion for computing the IRA, provinces experiencing out-migrationlike Bohol are not likely to see their share in national taxes grow as rapidly as others.



Contact InformationOffice of the ProvincialGovernorBohol ProvinceTel: (038) 411-3300 Fax: (038) 411-4821Website:www.bohol.gov.ph

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The provincial leadership under former Governor Rene Relampagos initiated the Bohol InvestmentPromotion Program (BIPP). The overall objective of the program was to promote Bohol as an investmentand tourist destination. The strategies that would lead to the achievement of the objectives were:

The provision of timely and appropriate business and financial advice to the province and municipalitiesInvolvement of citizens in policy formulation on investment promotion; and The establishment and maintenance of an information base critical to the formulation of policies andtechnical assistance.

The Investment Promotion Program had the following components:

Framework for Investment Promotion

Consultation workshops were held to determine the types of investments the communities and localgovernment preferred given the strengths and weaknesses of the province. The product of theworkshops was the Framework for Investment Promotion. Three sectors were considered the drivers ofthe province’s economic growth, namely: Eco-cultural tourism, agro-industrialization and lightmanufacturing.

The Bohol Investment Promotion Center (BIPC)

The Governor created a Bohol Investment Promotion Team (BIPT), which later became the BoholInvestment Promotion Center (BIPC). The BIPC facilitated immediate assistance to investors in settingup their projects and facilities in the province.



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The Livelihood Promotion Unit

The Livelihood Promotion Unit was created under the BIPC in March 2000, as the provincial government’sway of responding to the livelihood needs of small existing and would-be entrepreneurs. The unitestablished linkages with national line agencies and NGOs, initiated the establishment of a databank,conducted multi-sectoral convergence workshops on livelihood and eco-tourism development, andlaunched an annual traditional food festival and business matching for village-based food processors.

The Bohol Investment Code

The Bohol Investment Code was drafted to provide a guide on fiscal and non-fiscal incentives availableto investors.

HOW WAS THE PROGRAM FINANCED?

The program was financed from various sources and had a budget of PhP280 million in 1999.

HOW DID CIVIL SOCIETY AND THE PRIVATE SECTOR PARTICIPATE IN THE PROGRAM?

The series of workshops were attended by various sectors in the province, including NGOs, POs,cooperatives, and the private sector. Governor Rene Relampagos also formed the multi-sectoral BoholInvestment Promotion Advisory Group (IPAG). The IPAG met once a month and was frequently called uponto represent the province in meetings and events relating to investment promotion.

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WHAT WERE THE RESULTS OF THE BOHOL INVESTMENT PROMOTION PROGRAM?

By 1999, there were seven local governments, 19 prospective investors, 25 provincial leaders, and about5000 information seekers who directly benefited from the program.From 1998 to 2001, 20 projects were targeted as long-term beneficiaries of the program. The projectswere expected to generate PhP2.5 billion in investments and 3000 jobs. An increasing number of investors have registered with the BIPC. There were 10 in 1997; 14 in 1998;and 19 in 1999.The gathering of some 500 Boholanos around the world in 1999 generated a monthly dollarremittance of $3.5 million through the PNB Bohol branch, a big increase over the average monthlyremittance of PhP1 million previously.The program has been replicated in the provinces of Palawan, Negros Oreintal, Siquijor, Ilocos Sur,and Northern Samar.

Source:“Investment Promotion Program: Province of Bohol,” Kaban Galing: Transforming the Local Economy, 2001 edition.



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A MUNICIPALITY’S INVESTMENT AND PROMOTION PROGRAM: TIGAON,CAMARINES SUR

On a smaller scale, Tigaon attempted what Bohol did with certain additions.

First, its investment promotion program was a joint undertaking between anational government agency (DTI) and the municipal government.

Second, its investment promotion was anchored on a land use plan with aspecific area targeted to be the driver of LED, the central business district.

PROFILE

Tigaon is located in the eastern part of the province of Camarines Sur. It has 23 barangaysand an estimated population of 43,500 in 2000. Basically an agricultural town, Tigaon’sproduce includes palay, corn, coconut, vegetables, fish and other marine products. The townused to be known internationally as a producer of high quality abaca fiber. However, thesupply of the fiber has declined over the years.


In 1993, the town’s economy was moving slowly, if not stagnant. There were few commercialestablishments and no commercial banks to facilitate business transactions in the area.



Contact InformationOffice of the MunicipalMayor Tigaon, Camarines Sur Telefax: (054) 452-3127

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The Municipal Trade and Industry Investment Board

Through the advice of the DTI, the municipal government created the Municipal Trade and InvestmentBoard. This served as the mechanism for program implementation. The board was chaired by themayor and had the Municipal Planning and Development Officer (MPDO) as secretary. Representativesfrom the DTI, the Public Attorney’s Office (PAO), the Philippine National Bank (PNB) and the StateProsecutor assigned in Tigaon sat on the Board or served as technical advisers.

The Investment Code

The Sangguniang Bayan passed an Investment Code that spelled out the types of business enterpriseseligible for incentives and the kinds of incentives and privileges to be given. The Code gave priority tolabor generating enterprises, enterprises established in less developed areas of the municipality asdetermined by the Investment Board, manufacturing enterprises which uses new locally availablematerials, manufacturing or processing plants, tourism-oriented, service oriented and pioneeringenterprises and power and water resource development enterprises.

The Investment Forum

Prospective investors, including businessmen from Naga City and other parts of the Bicol Region andMetro Manila, owners of idle lots classified as commercial land in the town’s poblacion, and foreignerswere invited to the forum. The head of the German Investment Group was the forum’s Guest of Honor.Representatives from financial institutions such as the DBP, LBP and PNB also attended the forum torespond to queries of prospective investors who had problems in getting financing.



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The Central Business District Plan

At the start of the program, the MPDO prepared a socio-economic profile of the municipality as abasis for determining strengths and potentials of the area. The following year, the municipal governmentcame up with its comprehensive land use plan. The plan allocated land area for commercial, residential,industrial, agricultural, institutional and other special uses. The plan also classified areas for conservationand protection, settlement, and infrastructure.

At the center of the plan is the Central Business District (CBD) that would serve as the focal point of trade,cultural, entertainment and government activity in the area. Tigaon’s strategic location made it a goodCBD site for the third district of Camarines Sur, which is the seat of the third district government center.

The CBD plan had the following components: warehouses food terminal cold storage facilitiesbus terminal commercial center

The Municipal Livelihood Council

The Municipal Livelihood Council was established through an executive order. This was in line with themunicipality’s thrust to promote socio-economic development in the area through the implementationof livelihood projects that would generate income for the community residents.


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The municipal government of Tigaon allocated around PhP150,000 for the investment promotionprogram. This was apparently insufficient particularly in the conduct of a series of investment fora to attractprospective investors.


As a result of the investment forum, several business establishments were put up in the municipality.However, these were just small commercial establishments.

WHAT WERE THE CHALLENGES ENCOUNTERED?

Lack of infrastructure facilities

Tigaon lacked infrastructure facilities. Commercial banks, hotels, restaurants, office spaces and apresentable public market edifice were absent, discouraging businessmen from setting up largereconomic enterprises in the area.

Competition from other municipalities

The nearby town of Goa had many establishments and was a factor in discouraging businessmen frompouring more investments in Tigaon. Also, unlike those in Goa, lot owners in Tigaon were not very receptiveto the idea of putting up commercial buildings on their land.

Source:“The Business and Investment Program of Tigaon,”The Changing Role of the Local Governments Under a Decentralized State:Some Cases in Philippine Local Governance, Perla E. Legaspi, 2001.




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“DALAN SA KAUSWAGAN” PROJECT: SAN CARLOS CITY, NEGROSOCCIDENTAL

San Carlos City’s LED strategy sought to create an environment conduciveto local economic development by expanding physical access to hithertoremote portions of the city. It is an example of the creative and localprocurement of labor and equipment needed by the project.

PROFILE

San Carlos City in Negros Occidental is located in the northeastern part ofNegros Island. It is strategically located with respect to four of the mostimportant regional centers of the so-called PANACEA (Panay, Negros andCebu area) islands of the Visayas. The city is central to the Cebu-Negros-

Guimaras-Panay growth corridor envisioned to spur socio-economic development forthe four Western and Central Visayas islands.

The city had a population of 101,429 in 1995. It has 18 barangays, six of which are urban;two coastal; two in nearby Refugio island; and eight mountain/upland barangays. Majorityof its land area, (67%) of 42,186 hectares, is devoted to agriculture and its dominant cropsinclude sugarcane, rice, corn, coconut, legumes, vegetables and root crops, fruit trees, coffeeand ipil-ipil. More than twenty-one (21%) percent of the city’s land area has been classifiedas protected forest area.



Contact InformationOffice of the City MayorSan Carlos CityF.C. Ledesma Ave., San CarlosCity, Negros OccidentalTel: (034) 312-5112Fax: (034) 312-5113 Email: [email protected]:www.sancarloscity.gov.ph

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SITUATION PRIOR TO THE PROJECT

Residents of upland barangays of the city’s upland barangays had to endure long, arduous trips to bringtheir produce to the poblacion. The absence of good roads also made it difficult for government to deliverneeded services to the far-flung communities.

DESCRIPTION OF THE PROJECT/STRATEGY

When Mayor Rogelio Debulgado assumed office in 1992, a series of consultations with barangayofficials drew the consensus that only through the construction of an all-weather gravel road could thetraditional problems of the communities be strategically addressed. Even then, there was skepticism aboutthe feasibility of constructing such a road given that parts of the proposed road (about 3 km.) were steepand made of solid rock.

When finished, the road network would have a total distance of 42 kilometers, covering five of the city’seight upland barangays. The road would comprise an integral part of the Negros Cross-Island Link, aflagship project of the national government that sought to reduce the distance between Bacolod andSan Carlos cities from 146 km to 86 km and cut travel time in half.

HOW WAS THE PROJECT FINANCED?

San Carlos City utilized its budget surplus amounting to more than PhP50 million to finance the project.

In 1996, when the entire stretch of the road network had became passable, then President Ramoscommitted PhP100 million from his discretionary funds for the cementing of a large stretch of the road.This was followed by various contributions from Congress: PhP5 million from the CountrysideDevelopment Fund (CDF) of Rep. Julio Ledesma of the first district of Negros Occidental for cementing



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of the road; PhP8.3 million from the Countryside Development Fund of Sen. Alberto Romulo for bridgeconstruction across a stretch of the road; and PhP1 million from the CDF of then Sen. Gloria Macapagal-Arroyo for dynamite blasting of a road stretch that still needed widening.

The city government also signed an agreement with the European-funded Agrarian Support Project ofthe Department of Agrarian Reform (DAR) for the financing of an auxiliary nine-kilometer gravel roadfor agrarian reform beneficiaries that fed into the main road.

HOW WAS THE PROJECT IMPLEMENTED?

Direct administration of the project

To minimize costs and possible loss of funds due to graft and corruption, the city government decidedto implement the infrastructure project by itself. The City Engineering Office (CEO) was upgraded in termsof personnel and equipment. The CEO staff was beefed up and the city government decided to procuresome of the equipment needed. The officials believed that the purchase would be beneficial to the citybecause the equipment could be used in future infrastructure projects and could be leased out to privatecontractors, other LGUs and even to the DPWH for income generation.

Leasing of equipment

The city government also decided to lease the other heavy equipment that could not be purchased. Thisdeviated from the usual practice authorized by the Commission on Audit (COA), which was the purchaseof equipment or the contracting out of projects. New guidelines were developed by regional COApersonnel as leasing was a new arrangement.


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Contracting an engineering consultant

Recognizing its technical limitations, the city government contracted the engineering design of the projectto a private engineering firm that submitted the winning bid for the work. Negotiating a reduction inthe contract price, more than half was trimmed from the bid amount, realizing additional savings for theproject. The engineering contract provided for a strategic “technology transfer”provision whereby thecontractor would consciously transfer its expertise in engineering design to the local engineers.

Project management

Mayor Debulgado exercised general supervision and control over the project. The City Engineer’sOffice (CEO) devised the Program of Work based on the design and the recommendation of theengineering consultant. The Planning and Development Office monitored the project and provided theMayor regular reports in consultation with the Project Engineer. The city council enacted ordinances suchas appropriations and equipment leasing guidelines necessary to the project.

Regular meetings between the city officials and the consultant were held to identify emerging problemssuch as project slippage. Towards the middle of the project, through the transfer of technology, technicalmonitoring and evaluation were taken over by the CEO.

Barangay participation

Barangay officials assisted in securing right-of-way agreements with affected landowners and becamede facto extensions of the mayor’s office in monitoring the project and assuring the proper utilizationof labor. They also provided suggestions on necessary deviations in the approved engineering plan, basedon actual concerns raised by their respective constituencies. Regular consultations were held betweenbarangay officials, the mayor and project engineer to explore local concerns to the fullest.




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Employment of local human resources

A total of 2000 residents were hired as laborers at PhP200 daily, comparably higher than Metro Manilarates at the time of the project. The net effect was that city resources remained in the hands of residents,with the money presumably circulating within the city and spurring further economic activity.

WHAT WERE THE RESULTS OF THE PROJECT?

Increased agricultural production

About 15,000 hectares, covering five of the city’s upland barangays, are now being serviced by the roadnetwork. The road improved farmers’access to essential farm inputs, while at the same time allowed cityagricultural extension workers to service the hinterlands, bringing with them new technologies andsupport services. The road also improved access of farmers to new and larger markets for their products.These factors have spurred greater production, increasing average yields per crop and even increasesin land area planted. Because of better production, farmers’ incomes increased. Also, the road reducedtransport costs for the farmers’ products.

Increased Economic Activity

Market day activities, a strong indicator of rural economies, have improved substantially and thevolume of trade has increased. Commerce and trade to and from the city have also improved. Publictransport has expanded its routes with the rise in the volume of travels.


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Improved Service Delivery

More sitios have been given access to electricity as well as clean water.The City Health Office has been serving an increasing number of patients.Increase in school enrollment prompting additional requests for classrooms and educational facilities.The City Social Welfare and Health Office increased the volume of its livelihood assistance to qualifiedbeneficiaries.The City Agricultural Office has assisted more farmers in crop diversification and improving their yieldof traditional crops such as rice and corn.Peace and order have markedly improved in the upland areas with the drop in rebel-related incidents.

Environmental Impact

Because of the road network, the City has been able to more effectively implement its environmentalmanagement program. As a result of improved access to the uplands, the City Agricultural Office hasbeen very active in implementing an ambitious reforestation program for the Negros Forest Reserve,as well as aggressive tree-planting along the whole road route.

Source:Alan G. Alegre, “Dalan sa Kauswagan Road Project of San Carlos City, Negros Occidental: A Case Study in Growth-InducingInfrastructure,” Local Governments in the Philippines: Four Best Practices in Service Delivery, ed. by Fernando T. Aldaba et. al., AteneoCenter for Social Policy and Public Affairs, 1998.




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BREAKING FINANCIAL BARRIERS: SAN FERNANDO, PAMPANGA

San Fernando, Pampanga is a good example of how the local economy canbe brought back on track after being derailed by a natural calamity. Thesignificant lesson is the re-tooling of the LGU to become more efficient inincreasing its internally generated revenues. Viability allowed the LGU toinvest in hard infrastructure and inspired local and external businessmen tostart and expand their businesses in San Fernando.

PROFILE

San Fernando is the capital of the province of Pampanga. It is also the center of Region III,Central Luzon. The municipality has 34 barangays and had a population of 198,110 in 1998.The larger part (38%) of its total land area of 6,834 hectares is devoted to agriculture. SanFernando is predominantly a residential-commercial town. It has about 4,000 commercialand industrial establishments in the area such as banks, lending institutions, hotels,garment factories, and supermarkets and groceries. San Fernando is a first class municipality.


San Fernando was among many Pampanga municipalities adversely affected by theeruption of Mt. Pinatubo and the lahar flows and flooding that followed. In 1995, it hada fund overdraft of nearly PhP17 million and was deep in debt. San Fernando owedprivate contractors of various infrastructure projects some PhP8 million and had unpaidelectricity, telephone, and water bills amounting to PhP8 million. It failed to remit to thenational government some PhP35 million of shared taxes.



Contact InformationOffice of the City Mayor San Fernando City,Pampanga Tel: (045) 961-2424Fax: (045) 961-5022

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To address its dire fiscal situation, the municipal government under Mayor Rey Aquino started the“Breaking Financial Barriers” program in 1996. The main thrust of the program was to generate morefinancial resources for the municipal government to pay its outstanding obligations and to financeprograms and projects aimed at realizing its six-point mission statement. The six elements of themission statement are:

Conversion of the town into a component cityRehabilitation of the barangays adversely affected by lahar and floodingIndustrialization of the agricultural sector and other “traditional industries”Development of more industrial and commercial establishments Maintenance of a clean and healthy environment for the citizens Creation of an atmosphere of peace and a sense of unity among the citizens

The Breaking Financial Barriers Strategy adopted a two-pronged approach of:

Reducing municipal expenditure and enhancing efficiency andImproving tax collection

WHAT COST-SAVING AND EFFICIENCY ENHANCING MEASURES DID SAN FERNANDOADOPT?

To reduce expenditures and to increase efficiency, Mayor Rey Aquino adopted the following measures:

Termination of the services of more than 200 casuals whose services were no longer neededRegulation of the use of water, electricity, telephone, and office supplies



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Installation of a bundy clock and monitoring in most officesComputerization and networking of systems on accounting and finance, civil registry system, payrolland personnel system, real property taxes and business licenses; and Creation of a Special Project Operations Unit under the Office of the Municipal Engineer to implementinfrastructure projects at cost lower than those of the DPWH

HOW DID SAN FERNANDO INCREASE TAX COLLECTION?

San Fernando improved the collection of taxes through a number of measures:

Creation of a special unit, the Tax Enforcement Unit, in the Municipal Treasurer’s Office to intensifythe collection of taxes.

The unit has three sections: cash, assessment, and inspection. Its staff came from the differentdepartments of the bureaucracy.

Tax mapping

A survey of individuals and establishments doing business or engaged in trade in the municipality wasdone. The survey resulted in a databank of taxpayers that classified the list of establishments and identifiedwhich establishment was paying the right amount of municipal taxes.

Regular dialogues with the business sector

Mayor Rey Aquino held regular dialogues with the business sector to discuss the problems and concernsaffecting the business sector. He also solicited suggestion on how the operations of the municipalitycan be improved further.


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Recognition rites for the Top Fifty taxpayers

Every year during his term, the municipal government honored the top fifty taxpayers in January in publicrecognition rites.

WHAT WERE THE CHALLENGES FACED BY THE PROGRAM?

San Fernando faced many challenges in the implementation of its program.

Changes in the systems and procedures drew resistance from members of the local bureaucracy. Themunicipal government was also criticized because of the termination of employees. Resistance fadedwhen the employees adjusted to the changes. Initially, there was also strong resistance to the taxmapping from the community, most especially from the business sector. Private contractors who didnot welcome the creation of the Special Project Operations Unit also criticized the municipal government.The Unit lessened the market for their services.

WHAT WERE THE RESULTS OF BREAKING FINANCIAL BARRIERS?

By the end of 1997, San Fernando’s financial operation was no longer in the red. The creation of a SpecialOperations Unit was supposed to have reduced the cost of infrastructure by as much as thirty percent (30%).Savings generated and the improved tax revenues allowed the municipal government to acquire newheavy equipment worth PhP6 million. These were used for accomplishing various infrastructure projectsamounting to more than PhP7 million.

Source:“The Municipality of San Fernando: Breaking Financial Barriers,” The Changing Role of the Local Government Under a DecentralizedState: Some Cases in Philippine Local Governance, Perla E. Legaspi, 2001.




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THE CITY LIVELIHOOD ASSISTANCE PROGRAM: PAGADIAN CITY,ZAMBOANGA DEL SUR

Pagadian City targeted disadvantaged sectors (e.g., farmers and fisherfolk) inits City Livelihood Assistance Program.

PROFILE

Pagadian was the former capital town of the province of Zamboanga del Sur.It was converted into a chartered city in 1969 by virtue of R. A. 5478. The city’s economyis basically agricultural, with about fifty-five percent (55%) of its land area of 33,380hectares devoted to agriculture and thirty-seven percent (37%) to forestry. Pagadian’spopulation in 1998 was about 137, 223.


Rice, corn and coconut were planted in approximately 18,000 hectares of the city’s land.Despite the large hectarage planted, production had not met the requirements of the city’spopulace due to the “underutilization of the cropping potentials of the vast rainfedportions of the agricultural land.”The low fishery output had likewise been attributed to“poor storage, distribution and marketing systems.”

DESCRIPTION OF THE PROGRAM

Recognizing the role of the agricultural sector in the economy, the city governmentdecided to make it the driving force for the city’s development. The city government, under



Contact InformationOffice of the City Mayor Pagadian City Telefax: (062) 214-1986

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the leadership of the late Mayor Benjamin Arao, decided to adopt some strategies that would increaseagricultural output. The strategies included:

Production of high value crops, livestock and timber trees provision of infrastructure support services provision of capital or loans to farmers and fisherfolk adoption of the “Plant Now Pay Later” scheme

These strategies were consolidated under the City Livelihood Development Assistance Program orCILDAP. As of this writing, CILDAP has undergone two phases.The city government under the administration of Mayor Joaquin Pajares, launched CILDAP Phase II inresponse to the clamor of the non-agricultural cooperatives to participate in the program. Under PhaseII, qualified non-agricultural cooperatives such as consumer, credit, and multi-purpose cooperatives couldavail of soft loans of up to PhP100,000.

The program provided a package of technologies to the farmers. It included the provision of loans, partof which was in the form of farm inputs such as barbwires and fertilizers.

CILDAP had three components:

Infrastructure Development Agricultural Development Cooperative Development



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HOW WAS THE CITY LIVELIHOOD ASSISTANCE PROGRAM (CILDAP) MANAGED?

The city administration created the CILDAP management committee to serve as an advisory body onthe technical, administrative and supervisory aspects of all projects. The committee also assisted in thegeneral implementation of the program. Its involvement included approval of the purchase of farm inputsand stocks by a cooperative’s member-borrower and collection of loan repayments from the cooperativetreasurer.

The committee met monthly to discuss general operations, plans, problems, loan applications and otherissues and problems related to the program. It also kept records of CILDAP fund transactions and loanpayments for programming of loan funds to a cooperative.

WHAT WERE THE RESULTS OF CILDAP?

Reforestation of denuded areas

Through the “Plant Now, Pay Later scheme” of the program, almost 30,000 mango seedlings, 574marang seedlings, and 15 durian seedlings, which the city government acquired as DA loan or bydirect purchase, were distributed to farmers. The objective was to reforest watershed and forest areasof the city while providing income to farmers.

Cooperative development

Since its inception, the program has reached out to a large number of farmers and fisherfolk throughthe cooperatives. Ninety-one (91) cooperatives and 1, 629 farmers have availed of loans, which involvedthe cultivation of 1,021 hectares. This represents about 5.7% of the total land area planted with rice, cornand coconut.


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Support facilities and services

The program has been able to establish some support facilities and services for the farmers andfisherfolk. The city government has established its plant nursery and fish hatchery for tilapia. It has putup a training center for farmers. It has constructed 15 mini water reservoirs to provide continuoussupply of water to the farmers. The reservoirs can also serve as fishponds.

Infrastructure facilities

As of 1999, around ninety percent (90%) of all city roads have been concreted. Drainage systems andspillways have also been improved resulting in improvements in farm productivity.

Agricultural development

Part of the program implementation is the provision of improved farming technology to the farmers.The sloping agricultural land technology or SALT was provided under CILDAP Phase II. Under Phase I,the City Agriculturist Office (CAO) had acquired 12 Brahman bulls, swine, goats, and chickens to upgradebreeding stock and increase farm productivity.

WHAT WERE THE ISSUES FACED BY THE PROGRAM?

Loan repayment

Maximum rate of loan repayment was around 68%. Repayment rate in other sectors did not evenreach 50 percent. Repayment of loans to fisherfolk for purchase of bancas (boats) was a problem.




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Institutionalization of cooperatives

Problems such as behavior, competence, passive attitude, resistance to change and lack of managementcapability of cooperative officials have affected the operation of some cooperatives.

Marketing of produce and products

The cooperatives are envisioned to be the marketing arm of the farmers and fisherfolk. Being youngorganizations, however, they are not yet technically and financially capable of marketing the productsof their members to other provinces.

Source:‘The City Livelihood Development Assistance Program of Pagadian City,” The Changing Role of the Local Government Under aDecentralized State: Some Cases in Philippine Local Governance, Perla E. Legaspi, 2001.


PUSHING DEVELOPMENT THROUGH COOPERATIVISM: PROVINCE OFBULACAN

Bulacan’s local economic development is anchored on its local enterprisesand cooperatives. The province is a model of starting with indigenousentrepreneurs, supporting and promoting sector or cluster development,encouraging new local enterprises, and targeting disadvantaged groups.

PROFILE

Bulacan is a first class province in the Central Luzon region. It has 24municipalities and 568 barangays. It has a total land area of 2,638 squarekilometers.

DESCRIPTION OF THE PROGRAM

The Kaunlaran sa Pagkakaisa Program or KPP (Development Through Unity Program) waslaunched in August 1986 to revitalize the cooperative movement in Bulacan. Its directbeneficiaries included farmers engaged in rice, poultry, livestock, fruit and vegetableproduction; fishermen engaged in small to medium scale aquaculture production and shorefishing; women engaged in food processing, sari-sari store operations, sewing and fashionaccessory production; small entrepreneurs engaged in cottage industries and medium scalemanufacturing; and skilled workers engaged in or operating their own repair shops,furniture manufacturing, metalworking, pyrotechnic production, goldsmith operation, etc.

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Contact InformationOffice of the ProvincialGovernor Capitol Compound,Malolos, BulacanTelefax: (044) 791-0208Email:[email protected]:www.bulacan.gov.ph

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The Program had the following components:

Training

Cooperative leaders and managers were given training on coop and financial management, accountingand bookkeeping. Cooperatives were also assisted in generating more capital through savingsmobilization.

Environmental Protection

The program was concerned with tree planting and cleanliness, waste management, dredging ofcreeks, resuscitation of dying rivers, and the utilization of Bulacan’s natural resources and pollutionprevention.

WHO OR WHAT OFFICE MANAGED THE PROGRAM?

The program was managed and supervised by the Provincial Cooperative and EntrepreneurialDevelopment Office (PCEDO), a department directly under the provincial governor.

The Bulacan provincial government linked with other sectors and agencies in the implementation of theprogram. The DTI conducted training for the KPP’s beneficiaries, found markets for the cooperative’sproducts, and provided technical assistance in program development and operation. The Land Bankof the Philippines, the National Manpower and Youth Council, the Department of Agriculture, theDepartment of Agrarian Reform, Department of Environment and Natural Resources, the CooperativeDevelopment Authority, and the Department of the Interior and Local Government provided financialand technical assistance.

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Financial and technical assistance was provided by the Land Bank of the Philippines; National Manpowerand Youth Council; Department of Agriculture; Department of Agrarian Reform; Department ofEnvironment and Natural Resources; Cooperative Development Authority and Department of theInterior and Local Government.

The DTI conducted trainings for the KPP’s beneficiaries, found markets for the cooperatives’ products,and provided technical assistance in program development and operation.


Increase in the number of cooperatives

The number of registered cooperatives in the province increased by sixty-five percent (65%).

Increase in the total assets of the cooperatives

From 1985-1993, total assets of the cooperatives increased from PhP24.2 million to PhP1.2 billion,attesting to the capability of cooperatives to mobilize savings and build up capital.

Increase in loans

Income generated by the cooperatives supported its credit programs. From 1986 to 1992, productionloans amounted to PhP2.5 billion, providential loans totaled PhP125 million while emergency loansamounted to PhP94 million.



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Increase in sales

In 1993, cooperatives engaged in the sale of agricultural products earned a total of PhP450 million. Coopsengaged in the supply of production inputs had total sales amounting to PhP193 million for the sameyear. Seventy-nine (79) food and non-food coops earned a gross income of PhP41 million.

Promotion of gender equity

By 1993, there were 26 women’s cooperatives, nine of which were KPP-funded. More women tookpositions of leadership in the cooperatives including those of chairperson, board member, treasurer andsecretary.

Reduction in poverty incidence

Average family income in the province increased to PhP7,869 in 1991 from P3,436 in 1985. On the otherhand, poverty incidence decreased from 21% in 1985 to 17.9% in 1991.

Source:“Pushing Development through Cooperativism” Kaban Galing: Transforming the Local Economy, 2001 edition.

REFERENCES AND TOOLS

CHAPTER 7


CHAPTER 7❙ REFERENCES

◗ CONFERENCE PROCEEDINGS

Marcia Feria Miranda. “LGU, Inc. Developing Local Economies by Sustaining Local Enterprises.” Punlasa Tao Foundation. Paper presented at the Roundtable Discussion on “Enhancing the Role ofLocal Government Units (LGUs) in Local Economic Development (LED),” Astoria Hotel, Pasig City,28-29 May 2002.

◗ JOURNALS

“Economic Focus: Finding your niche: The discovery of poor countries’ industrial strengths is a matterof trial and error.” In The Economist. March 1-7, 2003, p.70

◗ CASEBOOKS

Joel Pagsanghan. “Irosin Integrated Area Development: A Best Practice in Agricultural Development,”in Local Governments in the Philippines: Four Best Practices in Service Delivery, ed. by FernandoT. Aldaba et al. Ateneo Center for Social Policy and Public Affairs. Quezon City. 1998.

Perla E. Legaspi. “The Lingap Tanaw Program of Naujan.” in The Changing Role of the LocalGovernments under a Decentralized State: Some Cases in Philippine Local Governance. n.p., 2001.

“Investment Promotion Program: Province of Bohol.” in Kaban Galing: Transforming the LocalEconomy, edited by Simon Peter Gregorio, n.p., n.d. 2001 edition.

REFERENCES AND TOOLS

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Perla E. Legaspi . “The Business and Investment Program of Tigaon.” The Changing Role of the LocalGovernments Under a Decentralized State: Some Cases in Philippine Local Governance. n.p., 2001. Alan G. Alegre, “Dalan sa Kauswagan Road Project of San Carlos City, Negros Occidental: A CaseStudy in Growth-Inducing Infrastructure” Local Governments in the Philippines: Four Best Practicesin Service Delivery, ed. by Fernando T. Aldaba et. al., Ateneo Center for Social Policy and Public Affairs.Quezon City. 1998.

Perla E. Legaspi. “The Municipality of San Fernando: Breaking Financial Barriers.” The Changing Roleof the Local Government Under a Decentralized State: Some Cases in Philippine Local Governance.n.p. . 2001.

Perla E. Legaspi. ‘The City Livelihood Development Assistance Program of Pagadian City.” The ChangingRole of the Local Government Under a Decentralized State: Some Cases in Philippine LocalGovernance. n.p., 2001.

“Pushing Development through Cooperativism” Kaban Galing: Transforming the Local Economy.edited by Simon Peter Gregorio, n.p.,2001.

◗ LIST OF REFERENCE MATERIALS ON LOCAL ECONOMIC AND ENTERPRISEDEVELOPMENT

Asian Development Bank (ADB)

1. FGU Consulting, Improvement of SME Development Policies and Programs: Philippines, ADB, 1990.

Scope: Macro-economic issues; industrial structure; impact of past policies on SME development; currentpolicy; disincentives for SMEs; recommendations; financing issues; linkage mechanism issues; existinglinkages; legislation for linkage mechanism; recommendations for a linkage mechanism



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2. Business Development Services: A Framework for Analysis, ADB, 19963. Good Practices in Marketing for Micro and Small Enterprise Products: Cases from Latin America,

ADB, 1999

Asian Institute of Management (AIM)

1. Ramon Mercado Lim, A Reorientation of the Assistance Strategies of the Small and Medium ScaleEnterprises / A Review and Assessment of the TLRC, AIM-Management Research Report, Mastersin Development Management, 1991

Scope: Analysis of SME internal and external environment; SME problems and needs; analysis of SMEopportunities and threats; review of TLRC organizational structure and SME assistance strategies;recommendations for TLRC SME strategic instruction

2. Victoria S. Licuanan, “Management Development and Training for SMEs: Prospects for RegionalCooperation and Collaboration,”The Asian Manager Magazine, June 1989

Scope: Proposes increased regional cooperative focusing on management development and trainingthrough exchange of experiences, training materials, training methodologies and training perspectiveand prospective collaboration in SME research

3. Victor S. Limlingan, “Legal Structures to Liberalize Markets: The Philippine Experience,”The AsianManager Magazine, 1990

Scope: Liberalizing local markets; elimination/Streamlining the bureaucracy through RA 6810Kalakalan 20

REFERENCES AND TOOLS 7


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4. Tarrin Nimmanahae Minah, “Organizing for Entrepreneurship,” The Asian ManagerMagazine, March 1990

Scope: Organizational aspects that encourage entrepreneurship in/on large companies

5. Quintin Tan, “Growing Pains of SMEs in the Philippines,”The Asian Manager Magazine, September1997

Scope: Discussed the contribution of informal sectors, CBBs, cottages industries to the economy aswell as SME needs and problems; government assistance and programs for SMEs and the problemsof implementation and resulting policy changes; identifies the learnings gained in policy making andimplementation.

6. Brua Koppel, APO-IEDP Seminar on Structural Adjustment and Policy Reform: Impacts on Smalland Medium Enterprises in Asian Economics, APO-IEDP, 1990

Scope: Resource Papers on: Structural Adjustment Policy Reform and Impact on SMEs in AsianEconomic Experience; Issues and Lessons on SMEs in Asian Economics; Developing Government/PrivateSector Coordination for SME Promotion in Periods of Economic Adjustment. Discussion of issues on:Relationship between Policy Reform and SMEs; Relationship between Macroeconomic Policy Reformand Sector Policies; Macro-micro Private Sector Dialogues, Policy Reform and SMEs

Bureau of Rural Workers (BRW), SEA Consultants, Inc.

1. BRW, Promotion of Rural Employment thru Self-Employment and Entrepreneurship Development(PRESEED) Program, BRW, 1997

Scope: Ways on how to help the rural workers through the initial provision of technical and financialassistance/resources to enable them to generate and operate self-sustaining enterprises in thecountryside



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Department of the Interior and Local Government (DILG)

1. Local Government Development Foundation and Federation of Canadian Municipalities,Dissemination of Best practices in Local Governance, LOGODEF, 2001

Scope: Presents research findings of best practices study; profiles 36 agencies and institutionsincluded in the study; includes case studies of local governance dissemination programs

Department of Labor and Employment (DOLE)

1. Mario Lamberte, Impact of Special Credit and Guarantee Programs for SMEs on Employment andProductivity, DOLE

Scope: Exhibit of SMEs access to bank credit; SME lending and guarantee programs and its impacton employment and productivity

Department of Trade and Industry (DTI)

1. Small Business Handbook, BSMBD, 1996

Scope: Shaping the climate for SMEs; Situationer: SMEs in the Philippines; growing Philippine SMEs;features; facing the future

2. Programs and Services for Cottage, Small and Medium Enterprises, BSMBD, October1993 (updated)

Scope: A compilation of the different agencies involved in assisting the small business sector in thefollowing areas: Technology/Production; Marketing; Training; Regulatory/Incentives; InstitutionalDevelopment



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3. Priority Industry of the following sectors: a. Electronics b. Metals c. Leathergoods d. Carrageenan and seaweeds e. Garments and Textiles f. Processed Food g. Furniture h. Marine Products i. Holiday Décor j. Decorative Ceramics k. Footwear l. Basketware m. Jewelry n. Information Technology Service o. Construction Service p. Professional Consultancy Service

DTI-BETP Philtins, 1997 (updated)

Scope: Industry profile; export performance; top industry exporter; industry associationactivities/projects for industry promotion

Development Academy of the Philippines (DAP)

1. Salem Sethuraman, Technology and Small Enterprise Development

Scope: Technological change in SE; factors constraining technological change at the enterpriselevel; policies to promote research and development in SE



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2. John Petrof, Small Enterprises and Economic Development

Scope: Development-related problems and small business; imports and small enterprises; smallenterprises and the government

3. S. Theocharides and A. Tolentino, Integrated Strategies for Small Enterprise Development: A PolicyPaper, ILO

Scope: Enabling policy environment; economic and business potentialities; strengthening existing smallenterprises

4. Measuring Good Governance in the Philippines, ed. by Magdalena L. Mendoza

Development Bank of the Philippines (DBP)

1. RH & H Consult, Ramboll Hanneman and Hojlun, Sectoral Studies on:

a. Canned Preserved Fish b. Spinning & Weaving c. Canned/Preserved Fruits and Vegetables d. Cocoa, Chocolate and Sugar Confectionery e. Electrical Appliances and Housewares f. Veneer and Plywood g. Plastic Products h. Fabricated Metals



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Cross Subsectoral Issues and Concerns, DBP, 1994

Scope: Framework of the subsector; industrial and market structure; supply and end structure;environmental issues; training-related issues; macroeconomic setting; SWOT analysis; product/marketstrategies; recommendations and action; plans; summaries of analysis of the 8s sectors; externalconditions; strategy for breaking the deadlock; cross subsectoral and relationship linkages;product/market strategies of the 8 subsectors

Local Government Academy (LGA)

1. Kaban Galing: Striving for Local Governance, No. 1, 2001 Edition

Scope: Presents cases focused mainly on the internal systems, processes, and procedures thatunderpin an LGU’s day-to-day operations and its delivery of basic services.

2. Kaban Galing: Managing the Environment, No.2, 2001 Edition

Scope: Presents cases of how LGUs have managed different ecosystems of air, water, land and builtenvironment.

3. Kaban Galing: Transforming the Local Economy, No. 3, 2001 Edition

Scope: Presents cases on how local governments can finance economic transformation; solve debtproblems and produce a surplus; transform local economies through infrastructure development;develop indigenous industries; and use sustainable integrated area development.



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4. Kaban Galing: Promoting Excellence in Urban Governance, No.5, 2001 Edition

Scope: Presents internally focused studies that look within the LGU itself, its processes and procedures.Initiatives on actual programs implemented by the LGUs are showcased.

National Economic and Development Authority (NEDA)

1. Center for Advanced Philippine Studies, Impact Assessment of National Livelihood Program: MainReport (Vol. I), NEDA, May 1993

Scope: Overview of livelihood program; survey of both beneficiaries and providers of livelihoodprograms; impact of livelihood programs

Philippine Chamber of Commerce & Industry (PCCI)

1. Juanita C. Viray and Gilbert M. Llanto, Development and Growth of SMEs, Confederation ofAsia-Pacific Chambers of Commerce and Industry, 1993.

Scope: Recommendations for SME development including: human resource development;technological capability development; infrastructural and advisory services; financial assistance;marketing and market development; fiscal assistance; administrative simplification; and rationalizationof macro policies.

2. Macro Policies and Interventions for Small Enterprise in the Philippines, Appropriate TechnologyInternational and International Development Research Center, .1991

Scope: Structure of SE and the impact of the macro-policy environment; recommendations on:trade & industrial policy; monetary and credit policy; fiscal policy; labor policy; and regulatory policy.



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3. Gwendolyn R. Tecson, The Effects of Trade and Industrialization Policy on SE: Analysis andProposals for Legislative Action

Scope: Situation of SE; Philippine trade and industrial policy environment and Micro, Cottage, Smalland Medium Enterprise (MCSME) growth; impact of specific macroeconomic policies on SMEs; andpolicy suggestions for legislative action.

4. Mario B. Lamberto, Small Enterprise Promotion Policy and Legislative Agency: Focus on MonetaryPolicy, Finance and Credit Program

Scope: Assessment of current monetary and credit policies; assessment of bills pending in Congress;policy recommendations and legislative agenda

5. Milwida M. Guevarra, Fiscal Policy on the Development of Small Enterprises – An Assessment andProposals for Policy Directions

Scope: Problem and its setting; taxation and SE; expenditure policies to promote the growth of SEs

6. Dante B. Canlas, Labor Policies and their Impacts on Cottage, Small and Medium-Scale Enterprises

Scope: Distribution of firms by size; employment generation by class size; labor costs; minimumwage legislation; human resource development programs

7. Direct Regulatory Control Policies and Their Role in Small Enterprise Development in thePhilippines: Analysis and Recommendations

Scope: Overall assessment of direct regulatory controls; recommendations; review of existing laws& regulations; decentralization and deregulation; simplification of procedures



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Philippine Institute for Development Studies (PIDS)

1. Ma. Lucila Lapos, Growth & Dynamics of Small and Microenterprises: Does Finance Matter?(Working Paper), PIDS, August 1991

Scope: Definition of microenterprise; Phil. Experience in microenterprise development; governmentpolicies and programs; financial and technical assistance

2. Richard L. Meyer, Supporting Rural Non-Farm Enterprises: What can be Learned from DonorPrograms?, PIDS, 1992

Scope: Donor experiences; sustainability of donor programs; role of small-scale enterprises

3. Cesar G. Saldana, Denise B. Pineda, Gilbert M. Llanto, and F. C. Gunaru, Liberalization in DirectedCredit Programs for SMEs.

Scope: Alternative development financing; policies for SMEs; features of directed SME Credit Programs;capacity of PFI to Finance SME Growth

Small Enterprise Research and Development Foundation (SERDEF)/ University of thePhilippines - Institute for Small Scale Industries (UPISSI)

1. UPISSI, A Study on Financial Intermediation for Small and Medium Enterprises in 7 Regions ofthe Philippines, 1992

Scope: Survey of financial institutions lending policies and schemes; financial management; practicesof SMEs



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2. UPISSI, Impact Study for the Project Development of Entrepreneurs for Cottage, Small andMedium Industries, 1990

Scope: Specific target groups were identified in developing the section growth of the CSMI sector

3. UPISSI, A Study on Capital/Labor Ratios and Financial Ratios of Small and Medium Industries, 1982

Scope: Data on capital/labor ratios and financial ratios of SMEs for IGLF survey results showingfinancial ratios by area, by asset size and by industry groups

University of Asia & the Pacific (UA&P)

1. R. Quesada and Joseph Sy-changco, Sources of Credit for Small Business and the InformalSector, UA & P

Scope: Government guarantee programs; the role of NGOs and PVOs

2. Cottage, Small and Medium-Scale Business Lingering Issues and Prospects Under the NewGovernment.

Scope: Growth and equity; financial sourcing; subcontracting; sourcing of raw materials; institutionalexports

3. Eight Major Issues Facing Small Business in the Philippines, UA&P

Scope: Removal of sales tax exemptions; alleged anomalies in government purchases fromcottage producers; difficulties in securing financial assistance; limits to tax exemptions onraw materials imported by registered cottage producers; lack of common service facilities; problemsof technology transfer; confusion about what is "small" business; government intervention inmarketing



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4. R. Quesada, The State of Small and Medium-Scale Business in the Philippines, UA&P

Scope: 5 options for large Firms and SMEs; influx of SMEs

5. R. Quesada and Enrico Basilio, Opportunities in APEC for Philippine SMEs, UA&P

Scope: Impact of APEC on SMEs; APEC SME Action

6. R. Quesada and Francis Xavier Vicente, Kalakalan 20: Is it Worth the Debate?,UA&P

Scope: The components; the Italian Model

7. R. Quesada, E. Basilio et al, Evaluation of the Impact of the Small and Medium Enterprise Credit(SMEC) Projects on its SME Beneficiaries in the Countryside, PBSP, 1004

Scope: Effectivity of the financing project to SME development

8. E. L. Basilio and J. M. Chua, Telecommunications SMEs and Regional Development (Parts I & II),Economic Policy Papers, UA&P, 1997

Scope: SMEs and regional development; barriers to SME growth; economic impact oftelecommunication on SME & regional development; slow roll out of landlines; interconnectionissue; pricing; servicing of unprofitable areas; cloning; adapting to technological development;remembering the regions

REFERENCES


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9. Enrico L. Basilio, Can Our SMEs be Globally Competitive? (A Look at the Proposed Bills on SMEs),UA&P, 1995

Scope: Review of the following Philippine Bills: SB 1283 –Amendment to RA 6977; HB 2737 –Reorganizing GFSME; HB 4805 – SMEX Bill; HB 1217, 2472 & 2566; Reestablishment of Kalakalan 20

UP School of Economics

1. G. Tecson, L. Valconel and C. Nunez, “The Role of Small and Medium Scale Industries in theIndustrial Development of the Philippines,”The Role of Small and Medium Scale ManufacturingIndustries in Industrial Development Experience of Selected Asian Countries, Economic andDevelopment Resource Center/ Asian Development Bank, 1990, pp. 313-423.

Scope: Contribution of SMIs to output growth and employment generation; external constraint to SMIdevelopment; the functioning of SMIs; evaluation of SMI; Performance: success and failure; existingSMI-promotion policies; policy recommendations

University of the Philippines Library System

1. Perla E. Legaspi, The Changing Role of the Local Governments Under a Decentralized State: SomeCases in Philippine Local Governance, 2001

Scope: Enabling role of local governments; the local government code; selected local governmentexperiences

2. Perla E. Legaspi, “The Role of LGUs in the Management of Fisheries/Aquatic Resources: Some PolicyIssues and Proposals,” Local Government in the Philippines, A Book of Readings, Vol. II, ed. byProserpina Domingo Tapales, Jocelyn C. Curesma, Wilhelmina L. Labo



149

Scope: Codal provisions pertinent to the management of fisheries/aquatic resources; managingfisheries/aquatic resources at the local level, problems encountered in codal implementation

3. Perla E. Legaspi et al, Local economic promotion in the Philippines, Local Government Center andGerman International Foundation for International Development, 1996

Scope: Overview of local government in the Philippines; local government and economic promotion;local experiences in economic promotion

4. United Nations Center for Regional Development, Local Governance and Local EconomicDevelopment: Capability-Building, ed. by Josefina S. Edralin, 1996

Scope: Findings of a research project on Local Government and the new Community Governance; casestudies on intermediate-sized or secondary cities in Asia (found in countries of China, Indonesia,Malaysia, Philippines, Sri Lanka) and Latin America (Argentina and Brazil)

5. Local Governments in the Philippines: Four Best practices in Service delivery, Ateneo Center forSocial Policy and Public Affairs, 1998

Scope: Case studies of LGU experiences in service delivery

6. Rolando M. Acosta et al, Local Government Capacity Building Handbook, Local GovernmentDevelopment Foundation and Bureau of Local Government Supervision, DILG, 1991

Scope: Decentralization and local government capability building; designing/packaging/negotiatinglocal government capability project; project implementation; developing local government capabilityindicators

REFERENCES


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7. Fernando C. Fajardo, Population and Development Integration in Local Planning, IntegratedPopulation and Development Planning Project, NEDA, 1994

8. Cesar B. Umali Jr., Pathways to Decentralization: A Decade of LRM Project Innovations in People-Centered Development, NEDA, 1991

9. Decentralization: Examining and Maximizing Decentralization Efforts of the Philippine Government,NEDA, 1990

10. Gilberto M. Llanto, Making Rural Credit Work: Lessons from the Local Resource ManagementProject, NEDA

11. Industrial Metabolism: Restructuring for Sustainable Development, ed. by Robert U. Ayres andUdo E. Simonis, United Nations Press, 1994

World Bank

1. LED: A Primer

2. Pamphlet on Strategic Planning Process

3. The Role of Local Economic Development Agencies

4. Guidelines in Drawing up a Terms of Reference for Information Collection for a LED Strategy

5. Doing a Competitive Assessment: The Approach of the Club du Sahel and the MunicipalDevelopment Program




ENDNOTES

1http://www.parul-led.or.id/e_overview.htm

2Takes off from the discussion in http://www.worldbank.org/urban/led/implementing.html

3Economic Focus: Finding your niche: The discovery of poor countries' industrial strengths is amatter of trial and error," in The Economist, March 1-7, 2003, p.70

4Takes off from the discussion in http://www.worldbank.org/urban/led/planning.html

5Local Economic Transformation Program and Local Solid Waste Management Program. Bureauof Local Government Development - Department of the Interior and Local Government 2002.p.40.

6 Takes off from the discussion in http://www.worldbank.org/urban/led/promoting.html

7Takes off from the discussion in http://www.worldbank.org/html/fpd/urban/led/glossary.html

8Takes off from the discussion in http://www.worldbank.org/urban/led/local_business.html

9Takes off from the discussion in http://www.worldbank.org/urban/led/new_enterprises.html

10Takes off from the discussion in http://www.worldbank.org/urban/led/cluster.html

11Takes off from the discussion in http://www.worldbank.org/urban/led/area_targeting.html

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12Takes off from the discussion in http://www.worldbank.org/urban/led/disadvantaged.html

13Marcia Feria Miranda. "LGU, Inc. Developing Local Economies by Sustaining Local Enterprises."Punla sa Tao Foundation. Paper presented at the Roundtable Discussion on "Enhancing the Roleof Local Government Units (LGUs) in Local Economic Development (LED)," Astoria Hotel, PasigCity, 28-29 May 2002.



Documents

LED - SD with Impact