MEETING OF THE UCLG COMMITTEE
ON LOCAL FINANCE AND DEVELOPMENT (CLFD)
June 11 -12, 2007, Barcelona, Spain
"Challenges in Financing Local
Infrastructure in Makati City,
Philippines"
Violeta Somera Seva
Senior Advisor, Office of the Mayor
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Makati City, Philippines
MAKATI CITY PROFILE
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2000 Census: 471,379
Growth Rate: 0.4%
2007 projected population: 533,715
Daytime Population: 3.7 Million
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LAND AREA : 27.36 sq km (2,736 has)
(4.3% of Metro Manila’s land area)
Metro Manila
MAKATI
AIRPORT
• Metropolitan Manila: 17 cities and municipalities
• Makati is one of the component cities
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Metro Manila
• Governed by a policy making body called the
Metro Manila Council:
• 17 Metro Manila Mayors,
• President of the Vice Mayors League ,
• President of the Metro Manila Councilors League
• Secretaries of the national line departments with
non voting powers
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Services requiring local infrastructure
and financing
LOCAL GOVERNMENT CODE OF THE
PHILIPPINES: Devolved certain functions
and responsibilities of the national
government to LGUs
• Solid waste management
• Health services
• Social services
• Transportation and traffic management
• Water and waste water management
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But in Metro Manila…
• DPWH (Dept. of Public Works and Highways)
– roads and bridges
– Major flood control projects
• DOTC (Dept. of Transportation and Communication)
– rail based transport facilities
• MMDA (Metro Manila Development Authority)
– solid waste disposal facilities
• DepEd (Department of Education)
– School buildings
– (LGUs) Makati City build schools to augment the lack of
educational facilities
• Metro Manila Water and Sewerage
Administration
– Water and Wastewater
– privatized in favor of two concessionaires
Manila Water and Maynilad.
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Makati’s Infrastructure Requirements
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Local road construction and maintenance
Drainage
Street lighting
School buildings
Health centers
Hospitals
Barangay halls/ community centers
Public housing
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Makati 21- City Development Agenda
• Identified public infrastructure requirements of the City
for the next 5 years
• A set of strategic directions were formulated through
a series of consultation meetings with key
stakeholders:
– Business retention, promotion expansion,
privatization and redevelopment of potential
satellite business districts/ communities
– Human Resource Development and Enhancement
– Expansion of Financial resources and its Revenue
Base
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Priority programs and projects requiring financing
beyond the internal capacity of the city:
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Makati Urban Transportation Integration Program
Housing Development Program
Development of Satellite Business Districts
Development of Community Commercial Zones in the
barangays
• Urban Strip Development
• Makati Heritage Zone Project
$ 240 M = (P 11.3 Billion ) short and medium term
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Project Feasibility Studies
• These projects would initially require studies:
– market, technical, physical, environmental, organizational,
economic, and financial feasibility.
• Counterpart funding from donor agencies to secure foreign and local
experts to compose the study team.
• The best alternative financing schemes shall be explored:
– direct financing from the city budget,
– joint financing with national government agencies and
government owned or controlled corporations,
– BOT,
– joint ventures with local and foreign partners,
– bond offerings,
– long term loans from local and foreign sources and
– community corporate ownerships.
• The studies shall also explore cost recovery and income generating
possibilities .
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Bankability : Makati City
• a first class, highly urbanized city
• City assets: US$ 420 M (P20 Billion)
• Ranked third in terms of income amongst Philippines Cities
Sources of Revenue
(2006)
Tax on Business
US$ M
Percent
72.1
42%
Real Property Tax
74.7
43%
Misc. Fees & Charges
12.6
7%
Economic Enterprises
3.4
2%
Internal Revenue Allotment
9.7
6%
Borrowings
0.9
1%
Total
173.3
100%
Sources of Revenue YR 2006
Real Property
Tax; $74.7M ;
42%
Misc. Fees &
Charges;
$12.6M ; 7%
Economic
Enterprises;
$3.4M; 2%
Tax on
Business;
$72.1M ; 42%
IRA;
$9.7M ; 6%
Borrowings;
$0.9M ; 1%
• compared to other cities, Makati is not heavily dependent
on national subsidies.
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Challenges Faced in pursuit of
Makati’s Livability
• inadequacy of open spaces
• supply of housing facilities
• improve air quality
• discharge of waste water
• garbage in waterways
• severe traffic congestion
• existence of informal settlers
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Issues and Challenges Faced in Financing Urban Infrastructure
1. Inadequate local government capacity.
– lack of sufficient number of technically able staff
– Heavy reliance on consultants
2. Credit environment is not LGU friendly.
– pass on rate to LGs is high and expensive.
– Direct lending to LGs from international funding institutions is not
allowed or is constrained by national laws and regulations.
3. Home grown hedging by LGs not allowed
– stifling the potential of entrepreneurial LGs to exercise proprietary
functions.
4. Bureaucratic red tape in availing foreign loans by multifarious national
agency and bank requirements
– causing delay in project approval and implementation
5. Coordination issues on projects pursued by national agencies, private
sector and the LGs itself.
– Plans and projects have to be synchronized to avoid overlaps and
duplication to save on valuable resources .
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Recommendations and Conclusion
• Adopt innovative revenue generation and resource
mobilization schemes
– improve revenue collection,
– maximize utilization of the city’s financial resources
– tap other potential sources of funds.
• Institutional, legal and
administrative issues
have to be addressed
• LGU friendly financial
regime or environment
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Recommendations and Conclusion
1. Enhance capability of staff through capacity programs
– seminars, workshops, trainings, technical staff exchanges, city to city
cooperation, exchange of information and knowledge
2. Lobby for review and repeal or amendment of laws or regulations
that inhibit the local governments from engaging in entrepreneurial
projects.
3. Lobby for direct access of local authorities to facilities of
international funding institutions
4. Establish clear agreements to cut on bureaucratic red tape
– not only in the country but with International banking institutions and
other organizations dealing with local finance.
5. Strengthen coordination mechanisms to improve the planning and
implementation of infrastructure projects to avoid wastage of valuable
resources.
UCLG Local Finance and Development efforts: a Welcome Development
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Thank you and
Mabuhay!!!
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