Letter from Cebu (16) ”Is the Philippines a centralized or decentralized country?”

　Before coming to Cebu, I asked one question to a former Japanese Ambassador to the Philippines, “Is the Philippine decentralized like the United States?” I posed this question because I thought that the Philippines was under the strong influence of the United States during the American colonial period from 1898 to 1946, so the Philippines may have adopted the American Federal system. The former Ambassador replied without hesitation or reservation, “the Philippines is centralized.” So, I arrived in Cebu with a notion that “the Philippines is a centralized country.” Here, the definitions of “Centralized” and “Decentralized” are not the ones used in political science or public administration. It rather stems from our practical needs of diplomatic activities, that is, whether we only need to deal with the central government of the receiving country or we need to follow the moves of local governments as well.
 
　However, my experience in the last ten months has shaken this notion. I cannot explain what I experienced in detail. But, based on my observation, the power of local governments in the Philippines is far stronger than that of local governments in Japan. I saw the differences in the appointment of chiefs of police headquarters in cities and provinces, the presentation of opinion as to where a regional headquarters should be placed, and the presentation of opinion as to where national roads and bridges should be built. I started wondering “Is the Philippines really centralized?”
 
　This question loomed larger when I had a talk with an official of the Department of Environment and Natural Resources Region 7. He explained, “The budget for solid waste management is no longer allocated to our Regional office because of the Devolution in 2021. It is directly distributed to about 130 Local Government Units in Region 7.” In my own perception, it implied that something that undermines the proper function of the central government, but at the same time, doesn’t contribute to improving the functions of LGUs seemed to be going on.
 

 

　What I have found after my amateurish research is that the power relations between the central government and local governments are undergoing a significant change over the last three years. First, everybody knows that the former President Marcos (1965-1986) consolidated his power, and the country was largely centralized during his period, especially after the introduction of the martial law in 1969. In 1986, the former President Marcos fled the country after the Edsa (People’s Power) Revolution. Then, President Corazōn Aquino introduced the 1987 Constitution. This Constitution is designed to prevent the dictatorship from reviving. It prohibits the re-election of the President, and it also provide that the state shall ensure the autonomy of local governments, and call for the enactment of a local government code. The Local Government Code of 1991 gives power to Local Government Units (LGUs), including the power to plan and implement their development programs, and to create their own source of revenue and to levy taxes, fees and charges.

　Local autonomy and Decentralization were declared in the 1987 Constitution and the 1991 Local Government Code. However, in reality, neither local autonomy nor de-centralization have been realized partly due to the shortage of budget. Furthermore, most LGUs relied most of the revenue (70-80% for provinces and towns, and about 50% for cities) on the Internal Revenue Allocation (IRA) provided by the central Government. Eventually, the central Government exerted influence over LGUs.
 
　The Mandanas-Garcia Supreme Court Ruling in July 2018 (final and executory in April 2019) has changed this situation. The Supreme Court granted the Mandanas-Garcia petition, declaring as unconstitutional the phrase “internal revenue” appearing in Section 284 of the Local Government Code of 1991. As such, the Supreme Court ordered the deletion of the said phrase. The Supreme Court ruled that the determination of the just share of the LGUs should not be based solely on national internal revenue taxes but on all national taxes. This decision significantly increased the tax base on which the share of the LGUs is computed from, and thus strengthened fiscal decentralization. The fiscal implication of the ruling is said to be about 929.04 billion pesos, equivalent to a 37.89% increase from the Fiscal Year 2021 IRA shares of LGUs. On the other hand, this will significantly diminish the fiscal resources available to the central Government.
 
　In June 2021, President Rodrigo Duterte signed Executive Order No. 138 that orders the “Full Devolution of Certain Functions of the Executive Branch to Local Governments”, following the Mandanas-Garcia Supreme Court Ruling. According to the list of programs, activities and projects for discontinuance per FY 2021 General Appropriations Act, 66 functions of 14 Government Agencies and other organization will be devolved to the LGUs. Significant services that will be devolved from the central Government are as follows; Agricultural Services (Department of Agriculture); Local Infrastructure Services (Department of Education); Natural Resources Management Services (Department of Environment and Natural Resources); Revenue Mobilization Services (Department of Finance); Health Services (Department of Health); Maintenance of Peace and Order (Department of Interior and Local Government); Employment Facilitation (Department of Labor and Employment); Local Infrastructure Services (Department of Public Works and Highways); and Housing Services (National Housing Agency). This devolution process started in 2022, and was supposed to be completed by 2024. (This 2024 deadline was extended to 2027 by the Marcos Administration.)
 
　In Japan, decentralization reforms have been promoted since 1993. Omnibus Decentralization Act was enacted in 1999, as a result, administrative function imposed upon local governments by the central government were eliminated. Under the second decentralization that started in 2006, Act on Promotion of Decentralization was enacted, and obligations of local governments were relaxed and local governments were allowed to make proposals to change national rules for them to fulfill their duties in an efficient and effective manner. These reforms are based on a principle that what local governments can do should be done by the local governments”. I suppose that not many Japanese oppose this basic principle.
 
　There were concerns within Japan about the negative impact of the decentralization. One is that the decentralization may widen the gap among local governments, and the other is that local governments become too powerful that they may not coordinate with the national policy. The former concern was addressed in a form of the local allocation tax. The tax nationally collected will be distributed to financially weak local governments to reduce the gap among the local governments. The latter concern is addressed with national control systems. For example, in the case of new local tax, local government that hopes to introduce a new type of local tax, must consult with the tax payer first, and then needs to consult with the Minister of Interior and Communication, and get the Minister’s approval.
 
　I am not so sure whether such control measures are incorporated in the Philippines system. If not, local governments will be able to create as many local taxes as they like. I am afraid that foreign investors, including Japanese, may have a hard time to cope with this new type of local tax.
 
　What this amounts to is that local autonomy and decentralization stipulated in the 1987 Constitution was finally materialized about 25 years after its enactment. I welcome any comment from experts on this article, since this topic requires expertise and special knowledge.