Poverty Reduction Strategy
in Decentralized Contexts:
Comparative Lessons in Local
Planning and Fiscal Dimensions in
the Philippines and Indonesia
Outline for Philippine and
Indonesian presentation
 Decentralization experience
 Processes for integrating planning and
budgeting
 Lessons for PRSP
 Suggested policy and institutional responses
Lessons on Local Planning
and Fiscal Dimensions
Decentralization in the Philippines
Decentralization Experience:
Political Context
 Pre-’86: centralist government;
authoritarian government; strong control
orientation (Marcosian approach was to
control power at the center)
 Post-’86: era of democratization and
‘people empowerment’; approach was to
“de-center” and to share powers
Decentralization Experience:
Legal Context
 1987 Constitution: “The state shall ensure
the autonomy of local governments.”
 Local Government Code of 1991:
devolution of national government powers
and increase in the share of local
governments in national taxes, including the
power to tax
Decentralization Experience:
Tiers of Government (Political)
National Government
City
Province
Municipality
Barangay (village)
Barangay (village)
Decentralization Experience:
Tiers of Government (Administrative)
National Government
Regional
Administration
City
Province
Municipality
Barangay (village)
Barangay (village)
Decentralization Experience:
Approach
 gradual approach: sequential and transition-
sensitive; oversight committee created to
monitor implementation of the Devolution
Masterplan
 3 phases of decentralization: changeover
phase (1992-93); transition phase (199496); and stabilization phase (1997 onwards)
Decentralization Experience:
Approach--continued
 Decentralization in two forms:
- devolution (political decentralization of
powers from national government to local
government units [LGUs], including the
power to tax)
- deconcentration (administrative delegation
from national to regional agencies)
Decentralization Experience:
Approach--continued
 Devolution of national government powers
includes public works, health, agriculture,
social welfare, certain tourism functions,
and construction of school buildings and
facilities
 Expansion of revenue generation powers of
LGUs
Processes for Integrating P&B:
Top-Down Exercise
 P&B linkage through the MTPDP and
MTPIP, as well as their regional
components
- sectoral priorities and policies in the
MTPDP are translated into discrete
programs, projects and activities (PPAs)
through the MTPIP, which are expected to
be funded in the budgeting exercise;
regional priorities compete for funding at
the national level
Processes for Integrating P&B:
Top-Down Exercise--continued
 MTEF provides a 3-year rolling
prioritization of PAPs through
- Sector Efficiency and Effectiveness
Reviews (SEER): outcomes and outputs
become bases for prioritizing and endorsing
PAPs for funding in the budget; tool for
strategic planning
- SEER has not been piloted at the regional
level
Processes for Integrating P&B:
Top-Down Exercise--continued
 Organizational Performance Indicators
Framework (OPIF): budget reform to
strengthen performance-based budgeting;
OPIF as a tool for operational planning
 OPIF is hampered by methodological
difficulty
 OPIF has not been piloted yet at the
regional level
Socio-Economic
Development Plans
Investment
Programs
MTPDP
MTPIP
National
RDIP
Regional
National Agency
Plans and Programs
RDP
Regional Agency
Plans and Programs
PDP/CDP
PDIP/CDIP
Provincial/City
Provincial
Plans and Programs
LDIP
MDP
Municipal
Municipal
Plans and Programs
Barangay
Plans and Programs
Barangay
Processes for Integrating P&B:
Bottom-Up Exercise
 De-link in the bottom-up process:
barangaymunicipality/cityprovince
region
 There is no incentive for lower LGUs to
submit upwards their plans and programs,
as aggregation at the higher LGU does not
mean funding support or inter-LGU
collaboration
Processes for Integrating P&B:
Bottom-Up Exercise--continued
 The greatest constraint for vertical
aggregation is that most LGUs do not
prepare plans at all, such that budget
priorities are political decisions of the local
chief executive
 Constraints in linking local P&B: capacity,
resources and incentives, quality of vertical
supervision and inter-LGU collaboration,
role of local chief executives (LCEs)
Lessons for PRSP: Local Poverty
Planning and Budgeting
 Anti-poverty programs (e.g., social reforma
agenda, KALAHI) are centrally driven
 Localizing anti-poverty programs remains a
challenge, specifically in getting the
commitment of LGUs to address poverty
(which is considered a long-term goal, in
contrast with the 3-year tenure of local chief
executives)
Lessons for PRSP: Local Poverty
P & B--continued
 Local P&B are heavily inclined towards
“legacy projects”, usually infra
 National methodology/approach for poverty
targeting could not be replicated at the local
level: issues of capacity, resources, differing
political priorities at the national and local
levels, differing expectations from
constituents and measurements of
performance accountability
Lessons for PRSP: Issues and
Concerns
 Need to articulate clearly the objectives of
the development plan and their
operationalization in relation with core
public administration functions
 Vertical integration of plans may not be
desirable given (a) different levels of admin
and technical proficiency for P&B, (b)
timing constraints and (c) sheer volume of
plans for aggregation
Lessons for PRSP: Issues and
Concerns
 To tighten linkage between P&B, there is a need to
prepare sector plans to guide annual programming
and budgeting
 Need for closer coordination between the national
government and LGUs for poverty reduction
measures, e.g., delivery of social reform
initiatives, implementation arrangements, etc.
 MTEF to provide operational linkage between
P&B
Suggested Policy and
Institutional Responses
 On planning
- no need to replicate national planning processes at
the local level, given the diversity of LGUs in
terms of preparedness and resources
- Bottom-up integration may only be relevant up to
the tier where supervision is relevant;
programs/projects not funded in lower level LGUs
may be submitted upwards for consideration by
the supervising LGU
Suggested Policy and
Institutional Responses
 On expenditure programming
- ideally, P&B should reside in one institution
- Weak linkage of P&B is traced to poor
revenue forecasting; MTEF should be
responsive in terms of revenue forecasting
- Local level: not an issue of weak linkage
between P&B, but the lack of plans
Suggested Policy and
Institutional Responses
 On monitoring
- unclear monitoring systems under a
decentralized government
- Performance monitoring not done at the
local level, except in locales where civil
society is strong (e.g., Cebu City)
Lessons on Local Planning
and Fiscal Dimensions
Decentralization in Indonesia
Decentralization Experience:
Political Context
 highly centralist government; strong control
orientation (Soeharto approach was to
control power at the center)
 2001: decentralization policy was adopted
Decentralization Experience:
Legal Context
 Law No. 22/1999 on Regional Governance
 Law No. 25/1999 on Financial Balance
between Central and Regional Governments
Decentralization Experience:
Approach
 “big bang” approach: service delivery is the
responsibility of sub-national units;
financing the cost of sub-national service
delivery remains to be a key issue
Decentralization Experience:
Approach--continued
 Decentralization covers:
- service delivery
- inter-governmental transfers and the power
to tax
Decentralization Experience:
Structures of Local Governments
 Autonomous provinces
 Districts located in rural areas
 Municipalities/cities (located in urban
areas)
 Sub-districts within municipalities and
cities
 Villages in rural and urban areas
Processes for Integrating P&B:
Top-Down Exercise
 institutional: role of Bappenas (National
Development Planning Board)
 Issuance of the Propenas containing the
development priorities
 Convening of development coordination meetings
to thresh out central and regional government
issues
 Preparation of 5-year national and regional plans
and the annual “implementation” plans
Processes for Integrating P&B:
Top-Down Exercise--continued
 The most important planning document at
the national and regional levels is the annual
plan, which is approved by the Legislature
 Formulation of the Propeda, Renstrada and
Repetada provides linkage between
planning and budgeting, and the national
and regional governments
Processes for Integrating P&B:
Bottom-Up Exercise
 Formulation of the annual budget follows
the bottom-up approach
 Repetada is drawn from the aspirations and
priorities of people at the village, district
and city levels, which are prioritized by the
Bappeda across local governments
Decentralization Opportunities at
the Transition Stage
 Capability-building for local officials re
participatory planning
 Adopting a holistic approach to planning to
include, revenue generation and M&E
 simplifying planning processes, including
the modules for training
 Incorporating poverty targeting in future
planning exercises
Decentralization Opportunities at
the Transition Stage--continued
 Improving coordination mechanisms
between the central and local government
units
Lessons for PRSP: Local Poverty
Planning and Budgeting
 Budgeting is still highly centralized, with
local budgeting still being set at the central
level through the MoHA
 Need for transparency in budget allocation,
including the prioritization process (MTEF
is not implemented yet)
Lessons for PRSP: Local Poverty
P & B--continued
 In the transition from a centralized to a
decentralized government, institutional
responsibilities across government
ministries and government levels should be
defined
 Local P&B need to be reviewed in
consonance with the requirements of
genuine decentralization and autonomy
Lessons for PRSP: Local Poverty
P & B--continued
 P&B linkage in Indonesia should consider:
(a) prioritization process at each level, (b)
performance-based budgeting, (c) adoption
of the MTEF
Suggested Policy and
Institutional Responses
 On planning
- bottom-up integration may only be relevant
up to the tier where supervision is relevant
- At lower government tiers, projects which
they cannot fund, may be raised to higher
government tiers
- Capacity building on planning approaches
needs to be holistic
Suggested Policy and
Institutional Responses
 On expenditure programming
- Need to address institutional fragmentation;
BAPPENAS can be invited to sit in the Budget
Committee
- Greater attention needed on agency/ ministry plans
and the listing of priority programs and projects
for inclusion into the expenditure program
- Weak P&B linkage may also be attributed to poor
revenue forecasting
- Unconditional grants (IRA and DAU) should be
allocated at the discretion of lower level LGUs,
with minimal conditions at the center
Suggested Policy and
Institutional Responses
 On monitoring
- unclear monitoring systems under a
decentralized government
- Need to heighten civil society engagement
on local performance monitoring
End of Presentation
Thank you.