Mindanao Economic Policy Papers 2Financing Peace and Development in Mindanaoby Ella S. Antonio

Mindanao Economic Policy PapersFINANCING PEACE AND DEVELOPMENT IN MINDANAO

By Ella S. Antonio President, Brain Trust: Knowledge and Options for Sustainable Development, Inc.

Copyright 2012 by Brain Trust: Knowledge and Options for Sustainable Development, Inc.. All rights reserved. No part of this book may be repro-duced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information and retrieval system, without permission from the publishers. Inquiries should be ad-dressed to the author c/o Brain Trust Inc., Unit 810 Medical Plaza Building, San Miguel Avenue, Ortigas Center, Pasig City 1605 (E-mail: braintrustinc.kosd@gmail.com) .

This publication was made possible through the support of AusAID. The opinions expressed herein are those of the author and do not necessarily refl ect the views of AusAID.

The Mindanao Economic Policy Papers were prepared as part of the work led by Dr. Cielito F. Habito, AusAID Adviser for Mindanao Economic Development to examine constraints to investment and economic development in Mindanao, especially in Muslim Mind-anao, and determine appropriate ways to address them. Conduct and preparation of the studies were administered by Brain Trust: Knowledge and Options for Sustainable Development Inc., and undertaken between August 2011 and July 2012. Hence, any recent developments and changes subsequent to that period would not be refl ected in the policy papers.

Mindanao Economic Policy Papers

FINANCING PEACE and DEVELOPMENTin MINDANAO

byElla S. Antonio

A publication of:

Australian Agency for International Development

Edited by Ma. Salve I. Duplito

iv

Table Of Contents

Introduction 1

National Government Budget Allocations 1 Table 1: Area Allocation of the Expenditure Program by Source 2 Figure 1: Budget Distribution by Area, 2012 3 Figure 2: Per Capita Budget Allocation by Island Group 4 Figure 3: Total Budget Appropriations Vs. Budget Appropriations Per Capita, By Region 5 Table 2: Sector Shares in Mindanao Budget By Major Island Group 7

Local Government Incomes 8 Table 3: Mindanao Local Government Income Structure By Administrative Level, 2012 9 Table 4: Income and Expenditure Pattern of Mindanao Regions 10

Official Development Assistance 11 Table 5: Outstanding ODA Commitments, By Region 12 Figure 4: Distribution of ODA LOan and Grants, By Region 13 Table 6: Distribution of ODA Loans, 2009-2010 14

Autonomous Region In Muslim Mindanao 15 Allocations for the ARMM Regional Governmeent 15 Table 7: Administration and Population Profile of ARMM 15 Table 8: ARMM Regional Government Budget Allocation By Program/Project 16 Figure 5: Budget Structure of ARMM Government, 2012 20 ARMM Allocations from NGAs and for SUCs 21 Table 9: NGAs and SUCs Allocations for ARMM, 2008-2012 21 Table 10: Major Activities Funded by Selected NGAs in ARMM, 2012 22 ARMM LGU Budgets 24 Table 11: Internal Revenue Allotments in ARMM 24 Table 12: IRA and IRA Per Capita, Mindanao Regions, 2010 25 Congressional Allocations of Legislators 25 Table 13: Congressional Allocation and Releases for ARMM LGUs 26

The Case for Affirmative Budget Action for Mindanao 26

Pursuing Affirmative Budget Action for Mindanao 27

References 28

Chapter I

Chapter II

Chapter III

Chapter IV

Chapter V

Chapter VI

Chapter VII

1

I. Introduction

People from Mindanao have long lamented what is seen as limited financial support for the island group from the national government, and see this as a major reason for its slow development. It is a common lament that the budgets for Mindanao are far less than commensurate to its contributions to the economy.

This paper reviews the historical flows and composition of financial resources to the island region to assess the empirical evidence relative to this sentiment. It also determines how funds may be mobilized and financing gaps may be filled to catalyze Mindanao’s development. Special focus is given to budgets of the Autonomous Region of Muslim Mindanao (ARMM) regional government and its component local government units, as this is where the lament is strongest.

Several categories of resources comprise the resource picture in Mindanao. National support for Mindanao comes directly in the form of government appropriations for regional programs and projects of line departments and agencies.

Also adding to the total resource picture is funding support from international development agencies and donor countries. At the same time, local government units (LGUs) receive an Internal Revenue Allotment (IRA) from the national government and could further raise local revenues using taxing powers granted them by law. Each of these major fund components is addressed below.

II. NatIoNal GoverNmeNt BudGet allocatIoNs

Mindanao’s budget allocation from Departments and others has been rapidly growing, outpacing those of Visayas and Luzon. It registered a double-digit average growth rate of 25.3% from 2008-2012 (Table 1) despite the 4.2% decline in budget allocation in 2010 as an offshoot of budget cuts in ARMM after the Maguindanao massacre.

In general, the geographical allocation and use of funds from Departments is determined at the Department level, and are disbursed and used by the regional and local offices of national government agencies (NGAs), sometimes in coordination and cooperation with LGUs.

For 2012, a total of P139.7 billion was allocated for Mindanao through the

2 National Government Budget Allocations

various regional offices of the NGAs, commissions (e.g., Commission on Elections) and state universities and colleges, which are tasked to provide services and pursue department programs and initiatives that benefit the regions. This is a substantial outlay that exceeded the incomes of LGUs. A major portion of this is usually earmarked for salaries and operations and only a modest fraction could be directly spent for development projects as the usual case in all parts of the country.

Table 1. Area Allocation of the Expenditure Program By Source, 2008-2012In billion pesos; percent

Year Mindanao Visayas Luzon Nationwide TotalDepartments and Others

2008 62.8 47.7 128.4 96.5 417.62009 78.1 58.7 157.2 131.6 520.72010 74.8 59.2 154.9 157.7 553.22011 80.8 61.5 169.9 205.4 655.02012 139.7 103.6 253.8 133.0 777.4

AGR (%) 25.3 24.1 20.0 12.8 17.0Special Purpose Funds

2008 59.2 47.2 128 23.6 2582009 72.9 55.5 144.8 46.5 319.72010 74.5 57.8 137.9 27.4 297.62011 83.2 64.5 157.5 41.7 348.12012 79.3 61.6 153.4 62.2 359.8

AGR (%) 8.1 7.2 5.0 39.3 9.3Total

2008 122.0 94.9 256.4 120.1 675.62009 151.0 114.2 302.0 178.1 840.42010 149.3 117.0 292.8 185.1 850.82011 164.0 126.0 327.4 247.1 1003.12012 219.0 165.2 407.2 195.2 1137.2

AGR (%) 16.1 15.4 12.7 16.2 14.2Source: Computed from Budget Expenditure and Source of Financing, 2008, 2009, 2010, 2011, 2012; DBM websiteTechnical Notes: To minimize distortions, (a) oversight bodies such as Congress and Office of the President (except for MEDCO in 2008 and 2009) were excluded from “Departments & Others” on the implicit assumption that these bodies serve all regions equitably, hence their budgets should not be solely accounted for in Luzon where they are located; (b) allocations for Central Offices were also excluded for the same reason; (c) State Universities and Commissions with regional offices are included; and (d) only special purpose funds that are directly allocated to the regions were included in the computations. In view of exclusions, the numbers in “Total” row of Table 1 are lower than actual allocations.

National Government Budget Allocations 3

Special purpose funds (SPF) allocated to Mindanao have likewise been increasing very rapidly. The SPF, which adds to the resources fl owing into the regions, have three elements1: (a) allocations for the LGUs; (b) the Priority Development Assistance Fund (PDAF), commonly known as the Congressional “pork barrel,” and (c) the Agriculture and Fisheries Modernization Program.

The PDAF is a fi xed allocation to members of Congress for development projects of their choice in their respective districts or constituents. Mindanao was getting P1.1 billion each year from PDAF until 2010. In the last two years, the amount more than tripled to P3.9 billion annually. Assuming all are spent for and within Mindanao, PDAF represents a signifi cant addition to the monies fl owing into Mindanao for its development.

The third element formerly had a separate line item in the national budget but starting 2010, this has been subsumed under the Department of Agriculture budget, hence distributed as NGA program funds. The total SPF for Mindanao has been increasing at an average growth rate of 8.1% in the last fi ve years to reach P79.3 billion in 2012 due to the combined increases in allocations of LGUs and PDAF. Its growth rate likewise outpaces those of Luzon (5.0%) and Visayas (7.2%).

The budget share of Mindanao is already commensurate to its contribution to overall GDP. The common lament that Mindanao proportionally contributes more to the national income than what it receives from the national government through the budget is not supported by recent data. Following the analytical parameters used in Table 1, Mindanao’s share in total direct budget allocation was computed to be 19% in 2012 (Figure 1), well within the 18-20% share of Mindanao to overall GDP. This share is two percentage points higher compared to the 2010 share, refl ecting the rapid rate of increase in its direct budget allocations, which averaged 16.1% from 2008 to 2012.

Mindanao’s share is signifi cantly higher than the 15% share of Visayas, although the latter is contributing 17% to GDP. Among the three areas, Visayas should be the one lamenting about disproportionate budget sharing.

Figure 1Budget Distribution by Area, 2012Budget Distribution by Area, 2012

Source of Basic Data: BESF 2012

1 Th ere are other special purpose funds like Calamity Fund, Agrarian Reform Fund and E-Govern ment Fund but these were not included since these are not automatically distributed to all the regions and the availment of some of these are conditional.

4 National Government Budget Allocations

Per capita budget allocations further suggest that the perceived bias against Mindanao is not borne out in recent data. Nominally, Mindanao’s budget allocation is indeed far less than that of Luzon, which accounted for 36% of the total budget directly allocated to all the areas. However, the seeming wide disproportion needs to be taken in light of two major considerations.

First, Luzon has required bigger budgets for relief, repair and rehabilitation because it is far more exposed to natural calamities (particularly typhoons and fl oods) than Visayas and Mindanao. Second, Luzon covers eight regions compared to three of Visayas and six of Mindanao, and has a bigger population. The 2007 Census of Population (COP) placed Luzon’s share in population at more than half or 56.3%. It is instructive, therefore, to account for relative population counts in the equation.

Figure 2 shows that on a per capita basis, Luzon’s budget (P7,410/person) is more than 20% lower than those of Visayas (P8,990/person) and Mindanao (P8,937/person) in 2012. A closer look would suggest that Mindanao may have already been getting the biggest per capita allocation in recent years. It must be noted that the population count used in the per capita computations for Mindanao is uncharacteristically high because of the questionable population fi gures in ARMM.

In 2007, ARMM’s population growth rate was offi cially placed at 5.5%, rendering its population projections incredibly high. This rate is more than double the growth rates of all Philippine regions except for Region IV-A (3.2%). The 2010 COP has apparently corrected this anomaly.

Figure 2Per Capita Budget Allocation by Island Group

(P/person)

Source: Computed from DBM’s Budget Expenditure and Source of Financing, 2012 and NSO Census of Population, 2007. Regional population growth rates were used to project population counts.

National Government Budget Allocations 5

Luzon indeed got the bulk of the budget, whether in nominal or per capita terms, in 2008 and earlier years (Table 1 and Figure 2). Thus, Mindanao did have a reason to complain about fairness in budget allocations during this period. In recent years, however, there has been a clear restructuring of regional budget allocations as budget growth rates in Visayas and Mindanao continue to accelerate.

The restructuring is more evident at the level of the administrative regions where increases in budget allocations have been steady at both nominal and per capita basis (Figure 3). Nominally, NCR and Regions IV-A and III have been getting the lion’s share of the budget inasmuch as these are the three most-populated regions in the country.

Region III noticeably had a clear edge over almost all regions (with NCR consistently getting the highest budget) in years prior to 2011, having apparently received highest priority from the Arroyo Administration.2 This dominance of Region III has apparently waned under the Aquino Administration. In fact, it obtained the smallest increase (15.4%) in 2012. Nominally, CAR received the lowest allocation of P25.7 billion.

Figure 3Total Budget Appropriations (Million Pesos) Vs. Budget Appropriations

Per Capita (Thousand Pesos), by Region

2 Th is apparent bias for Central Luzon had prompted allegations about political motivations on the part of the President, who subsequently ran for and won a seat in the House of Representa tives, representing a district in the same region.

6 National Government Budget Allocations

Source: Computed from DBM’s Budget Expenditure and Source of Financing, 2008, 2010, 2012 and NSO Census of Population, 2007. Regional population growth rates were used to project population counts.

Allocations for Mindanao regions are of almost the same level and grew the fastest among all other regions in 2012, with Region XII recording the highest growth at 41.9%. This compensated for the lowest increase that it got in the previous year. There has been no indication of the suspected biased budget allocation within Mindanao that supposedly promotes disparity between the so-called “Two Mindanaos” (i.e. development leaders and laggards). In fact, ARMM ranks 10th among 17 regions and is getting a budget very close to Regions II, X, XI and XII.

Interestingly, NCR and CAR exchanged ranking positions when population was considered in the equation. NCR drastically dropped to 16th position while CAR took the lead (Figure 3). The budget for each person in CAR in 2012 is P15,700, more than double that per person in NCR.

Region III also dropped to third lowest position at P6,200 per person. ARMM emerged as fourth lowest, but this must be taken within the context of its questionable population fi gures. Even on per capita basis, allocations for Mindanao regions have not been quite diff erent from each other. Region XIII or Caraga had a spike but that is necessary for it to catch up with better-off regions of Mindanao.

The sector distribution patterns in the budgets of the three island groups have been quite similar. The top priority sector, the social sector, has consistently been the single-biggest recipient of budget funds as shown in Table 2. Education, i.e., DepEd and state universities and colleges (SUCs), accounts for 71% - 86% of the social sector budget in 2012. The share range (94% - 96%) was even higher in 2008. Social welfare was just about

National Government Budget Allocations 7

12.2% (Luzon) to 23.5% (Mindanao) of the social budget. However, it grew phenomenally from P224.2 milllion to P18.2 billion for Mindanao and P138.5 million to P9.7 billion for Visayas between 2008 and 2012 due to the Pantawid Pamilyang Pilipino Program (4Ps).

Table 2 suggest that Mindanao has been getting lower budgets for the social sector compared to Luzon and Visayas; but only because of a booking issue3. The ARMM Regional Government (ARG) was included in the politics and governance sector but as shown in section VI below, the social sector actually accounts for 65.2% of the ARG budget. In fact, the budget structure of ARG is consistent with those of the island groups. The booking of the ARG and the Mindanao Development Authority (MinDA) budgets under the politics and governance sector is caused the rather high share of this sector in the Mindanao budget. Both agencies are unique to Mindanao.

The infrastructure sector comes next to the social sector in terms of budget share. Due to the booking issue, the sector is actually getting much more than reflected in Table 2. The infrastructure budget is tucked in several items such as in PDAF, which is counted in special purpose funds (SPF), the ARG budget for which some P2.1 billion for infrastructure development is included (see section VI-A paragraph 22), and projects of other sector agencies (e.g. DAR, DA, DepEd, etc.).

Table 2. Sector Shares in Mindanao Budget By Major Island GroupIn Percent

Sector2008 2012

Luzon Visayas Mindanao Luzon Visayas Mindanao

Economic 1.6 1.8 2.1 6.5 6.5 8.3

Social 34.0 33.2 25.6 38.5 40.0 35.5

Infrastructure 13.9 11.7 13.5 12.4 12.3 10.0

Environment 1.1 0.9 1.1 1.3 1.2 1.3

Politics & Governance 1.6 1.8 8.8 2.5 2.1 8.1

Budget & Finance 1.2 0.8 0.8 1.1 0.7 0.6

Special Purpose Funds 1.3 0.9 1.0 3.1 1.9 1.8

Allocation to LGUs 45.3 48.7 47.1 34.6 35.3 34.4

3 The construction of Table 2 was already complicated as it is. Breaking up and redistributing agency budgets were not resorted to since these will further complicate the process, and the purpose of the Table, which is to show a general pattern, has already been achieved.

8 Local Government Incomes

The sectors consist of the following: Economic: DAR, DA, DTI, DOST, DOLE, DOT, AFMA; Social: DepEd, DOH, DSWD, SUCs; Infrastructure: DPWH, DOTC; Environment: DENR; Budget & Finance: DBM, DOF, NEDA; Politics & Governance: DILG, DOJ, CSC, COA, Comelec, MinDA, ARMM; and SPF: PDAF, Gov’t. Corp.

Among the sectors, only the economic sector exhibited significant expansion in budget share in 2012 compared to 2008. The expansion is across the board although Mindanao has a slight edge due to the ARG’s budget for economic development . The expansion has proceeded while maintaining, even expanding, the share of the social sector. The three items in the bottom of Table 2 were included to complete the budget picture. Worth noting is the Allocation to LGUs or IRA, which accounts for the substantial portions of the budgets of the major island groups.

III. local GoverNmeNt INcomes

Mindanao also obtains resources through the local governments. The Local Government Code (LGC) of 1991 granted the LGUs a significant degree of fiscal autonomy. It empowered LGUs to generate their own resources and provided them wide latitude to use funds. LGUs can source their income from (a) tax and non-tax revenues, (b) share from national government in the forms of IRA and share in the proceeds of use of national wealth (e.g., geothermal resources, natural gas) falling within the LGU’s jurisdiction, (c) extraordinary receipts mainly in the form of official development assistance (ODA), (d) loans, and (e) inter-local transfers. On top of all these, LGUs also benefit from Congressional allocations, special programs such as the Department of Education’s School Building Program, the Calamity Fund, and other special purpose funds.

Mindanao LGUs’ dependence on transfers from national government appear to have eased. Through the years, even long after the grant of fiscal autonomy under the LGC, LGUs have been highly dependent on national government as the dominant component of their incomes has remained to be the Share from National Government, of which the IRA accounts for 99% (Table 3).

The IRA continues to be the one main source of income especially for provinces and municipalities (barangays are 100% IRA dependent). This dependence compromises their advocacy to exercise self-determination, especially over their budgets and expenditures.4 This situation is not unique to Mindanao; in fact, it is more the norm especially among provinces and municipalities nationwide. Nonetheless, in the last three years, there have been significant drops in dependence on IRA among the three levels. Provinces recorded the highest drop of 19.7 points while the cities had the lowest drop of 11.6 percentage points. The smaller drop in cities could be due to the entry of a new city and the natural tendency to slow down local generation of income once the tax base has been saturated.

4 One might of course argue that LGUs’ IRA simply returns to them revenues from national taxes that were paid by taxpayers within their jurisdiction, and thus are rightfully theirs, thereby justifying (at least partially) their IRA dependence.

Local Government Incomes 9

Table 3. Mindanao Local Government Income Structure By Administrative Level, 2012

Income Source

Province (PMillion)

Share to Total

(%)

Municipality (P Million)

Share to Total

(%)

Cities (P Million)

Share to Total

(%)

Total (P Million)

Local Sources 2012 2009

2,9481,788

12.710.3

3,0892,421

10.910.0

7,1555,347

25.610.7

13,1929,555

Tax Revenue 621 21.1 1,271 41.1 4,574 63.9 6,466Non-Tax Revenue 2,327 78.9 1,819 58.9 2,581 36.1 6,727

Shares from National Tax 14,846 64.2 21,011 74.0 15,711 56.2 51,568

IRA 2012 2009

14,81514,591

64.183.8

20,90220,948

73.686.5

15,63813,302

55.967.5

51,35548,741

Extraordinary Receipts/Aids 131 0.6 61 0.2 61 0.2 253

Loans 400 1.7 32 0.1 235 0.8 667

Total Income 23,123 100 28,402 100 27,973 100 79,498Source: BESF, 2009 and 2012 (processed)

Mindanao cities have attained some level of fiscal autonomy and have reduced their dependence on national government to about 56.2% of their incomes. The drive (or pressure) to self-generate incomes has been heightened by the desire to develop faster and compensate for the declining allocations resulting from the rapidly increasing number of cities in the country that must share a fixed total allocation.

Cities have managed to offset this reduction and, on average, made themselves 25.6% self-sufficient through aggressive collection of local fees and taxes. Collected taxes helped in development efforts and these eventually lead to further expansion of their tax bases.

The provinces and municipalities are still struggling in this regard. While the municipalities lowered their dependence on IRA by 12.9 percentage points, their ability to generate incomes from local sources and become self-sufficient, on average, has remained low at 10.9% and virtually unchanged from 10.0% in 2009 (Table 3). Majority of municipalities have low tax bases due to limited economic activity, and they are unable to maximize tax generation from these already-limited tax bases.

10 Local Government Incomes

Borrowings and Extraordinary Receipts and Aids have not been tapped significantly. Provinces have borrowed or availed of external financing more than cities and municipalities. Their total borrowing accounts for 60% (P400 million) of total LGU loan. Borrowing especially from the public (e.g. through municipal bonds flotation) has not been done by many LGUs for a number of reasons including the lack of information or knowledge on external borrowing, low capability to contract loans and perfect the transactions, and limited income to amortize the loan. Long-term loans are also discouraged by the fact that local chief executives have limited tenure (of three years per term up to three terms)5.

Mindanao LGUs generally report surpluses every year (as do most LGUs nationwide). Mindanao LGUs mostly report expendi tures that are less than their revenues for the year (Table 4). Region XI reported the highest average provincial surplus of P1.7 billion for 2008-2012. This is largely due to Davao Oriental’s surplus of P4 million in 2008. Bukidnon also had two consecutive years of very high surpluses, also likely due to borrowing, thus the high surplus of Region X. Basilan, Tawi-Tawi, and South Cotabato are also provinces with high reported levels of surplus.

Eighteen out of 27 cities recorded surpluses in 2012. Region XII cities registered the biggest surpluses because all its cities have been earning more but not spending as much. General Santos and Koronadal cities have been the highest contributors at 45.4% and 40.6%, respectively. Region XI has comparatively moderate surplus despite some cities’ very high surpluses like Davao City (P1.1 billion) and Panabo City (P547 million). The extremely high deficit (P1.8 billion) incurred by Tagum City in 2012 pulled the total down.

Municipalities of ARMM failed to spend P3.3 billion or 43.2% of their incomes during 2008-2012. This is a substantial amount that could have sped up development in the region. On the other hand, Region X municipalities together reported a deficit of P1.2 billion in 2012.

Table 4. Income and Expenditure Pattern of Mindanao RegionsAverage for 2008-2012, In P Million

Region IX X XI XII XIII ARMM

Provinces in Mindanao

Income 3,173 5,763 4,520 3,884 3,345 4,464

Expenditures 2,650 4,482 2,834 3,448 3,058 3,692

Surplus (Deficit) 523 1,281 1,687 436 287 772

% of Income 16.5 22.2 37.3 11.2 8.6 17.3

5 A case in point is the proposed P300-million loan for development projects from Land Bank, which was disapproved by the Lamitan City Council, allegedly because the Mayor could not be held accountable for the loan since his 3-term service is about to end.

Local Government Incomes 11

Municipalities in Mindanao

Income 4,224 5,134 4,844 5,422 5,649 7,665

Expenditures 3,755 6,343 3,505 4,550 3,896 4,350

Surplus (Deficit) 469 (1,208) 1,339 872 1,752 3,315

% of Income 11.1 (23.5) 27.6 16.1 31.0 43.3

Cities in Mindanao

Income 4,345 6,560 7,244 4,811 2,223 515

Expenditures 3,536 5,645 6,692 2,823 2,003 408

Surplus (Deficit) 808 915 552 1,988 220 107

% of Income 18.6 13.9 7.6 41.3 9.9 20.8 Source: Bureau of Local Government Finance

These patterns suggest that funding levels have not been the most limiting constraint to Mindanao development, especially at the local level. LGUs’ weak financial management capabilities need to be deliberately addressed. The income-expenditure patterns suggest that most LGUs possess much elbowroom to mobilize resources. They also indicate that Mindanao LGUs can accomplish much more from available resources, but must improve systems and processes to speed up use of funds. The last point applies to national government too because of systemic delays in budget releases.

Iv. offIcIal developmeNt assIstaNce

ODA has been a prominent funding source for Mindanao. It appears to be a common sentiment in Mindanao that ODA, in the form of both loans and technical assistance, is essential to peace and development.6 The sentiment is that national government has not been providing adequate budgetary allocations to Mindanao; hence, the donor community needs to fill the gap. Indeed, ODA has been prominently funding infrastructure development, capacity building, income-generating activities, and others.

Outstanding ODA commitments to Mindanao amounted to $68.3 million in grants (as of June 2011) and $375.1 million in loans (as of 2010) (Table 5). These amounts do not include projects that have multi-regional (e.g., Agrarian Reform Communities Development Project and Kalahi CIDSS Poject) and nationwide (e.g. Social Protection Support Project) coverage7. ARMM is the biggest recipient of ODA in Mindanao. The

6 This is a common view that came out during consultations for the Mindanao 2020 Peace and Development Framework Plan.

7 The actual amount of ODA going to Mindanao or any specific area at any one time is extremely difficult to determine from available data. Among other reasons, the bulk of ODA projects covers the whole country or transcends regions, wherein the allocation for each region or area is not clearly specified. Also, most projects are designed for multi-year implementation, and the budget or expenses for a particular

12 Official Development Assistance

loan component is funding the ARMM Social Fund for Peace and Development, which mainly supports infrastructure development. The grant component covers six projects on education, health, investment promotion, and election modernization.

Table 5. Outstanding ODA Commitments, by Region(US$ million; percent)

Area Grants(As of June 2011)

Loans(As of Dec 2010) Total Share

Luzon 138.5 3,197.70 3,336.20 27.0

Visayas 12.2 186.8 199.00 1.6

Mindanao 68.3 375.1 443.4 3.6

Region X 7.0 125.9 132.9

Region XII 7.8 7.8

Region XIII 5.0 5.0

ARMM 48.5 91.2 139.7

Mindanao-Wide 158 158.0 Multi-Regional 840.3 917.1 1,757.40 14.2Nationwide 985.1 5,386.10 6,371.20 51.6Unspecified Region 246.1 246.10 2.0Total 2285.5 10,063 12,348.30 100.0NEDA caveats: The figures are in net commitments, i.e. only signed loan/grant is counted (no pipeline).The “stock” concept is applied, i.e. amounts booked are total commitments, not inflows. This means that delays are not reflected and could distort the volume accruing to a region in a certain year.

Source: NEDA

The biggest loan ($125.2 million) is incurred by Region X to fund two projects: Laguindingan Airport Development Project ($92.2 million), and Metro Iligan Regional Infrastructure Development Project ($33.7 million). The region also has grant projects such as the Camiguin Coastal Resource Management. Caraga received grant money for projects that include Agusan River Basin Integrated Water Resources Management and Comprehensive Pilot Intervention Plan Against Gender Violence.

More than half of ODA went to nationwide projects while more than a quarter went to Luzon. Figure 4 provides a visual presentation of the ODA structure as presented in Table 5. The ODA shares of Mindanao and Visayas pale in comparison with that of Luzon. All island groups benefit from nationwide, multi-regional and unspecified projects but the

year are not readily computable and available, hence the stock concept is resorted to.

Official Development Assistance 13

lack of regional disaggregation prevents determination of their relative shares in these components. In 2010, Region III’s ODA share was highest, surpassing that of NCR (Table 6). These two regions are the ones bloating the share of Luzon.

Figure 4Distribution of ODA Loan and Grants, by Region

(In percent)

Source: NEDA

A closer examination of the numbers indicates that the area distribution of ODA does not necessarily depict an accurate picture of regional shares in ODA benefits. There are several reasons why Luzon’s share in the total ODA package appears high:

o A substantial part of Luzon’s allocation is accounted for by requirements of implementing agencies or project management offices (PMO), which are largely based in Manila. These are credited entirely to Luzon even if the projects have nationwide coverage and the benefits accrue to all three islands. Unfortunately, obtaining data on regional shares from the amounts that went to PMOs is extremely difficult and tedious.

o Population is a major factor in ODA distribution. The Luzon to Mindanao ODA allocation ratio in 2009 dropped from 6.5 to 1 to 2.8 to 1 when population was considered. If costs of PMOs were excluded from the calculations, ODA distribution among the three island groups would not be as heavily skewed.

o Not surprisingly, NCR has been receiving a big portion of ODA because of the higher demands of its bigger population and area coverage. However, Region III is an outlier having received a glaringly disproportionate share of ODA compared to all regions nationwide. This has been attributed to the high level of

14 Official Development Assistance

priority accorded to the region by the Arroyo Administration. Such preferential treatment is not expected to persist under the new administration.

Government estimates that Mindanao has received around 8% of total ODA in recent years. NEDA estimates8 show that the share of ODA going to Mindanao was 8% in 2007 while the average share was 7.7% from 2004-2007. It further estimated that the share of Mindanao in the Medium-Term Public Investment Program, 2006-2010 amounting to P139.8 billion spread over six years was 8%. This amount excludes national projects that benefit Mindanao.

Table 6. Distribution of ODA Loans, 2009-2010(US$ million; percent)

2009 2010Coverage Area Amount Share to Total Amount Share to Total

CAR 36.6 0.38 36.6 0.36I 266.2 2.76 192.2 1.91

III 1,150.5 11.94 1,217.5 12.10IV 26.3 0.27 401.3 3.99

IV – A 93.0 0.97 102.3 1.02NCR 1,355.1 14.06 1,179.0 11.72

V 25.0 0.26 23.0 0.23Luzon-Wide 75.2 0.78 45.8 0.45

VI 122.2 1.27 124.4 1.24VII 65.5 0.68 - -VIII 56.8 0.59 62.4 0.62

Visayas-Wide 72.2 0.75X 92.2 0.96 125.9 1.25XI 25.0 0.26 - -XII 47.2 0.49 - -

ARMM 60.5 0.63 91.2 0.91Mindanao-Wide 241.8 2.51 158.0 1.57Multi-Regional 878.4 9.11 917.1 9.11Nationwide 4,947.6 51.34 5,386.1 53.52Total Loans 9,637.2 100.00 10,063 100.0

Source: 18th ODA Portfolio Review, NEDA (2009); NEDA (2010)

LGUs’ ability to avail of ODA have perennially faced a number of issues. In many cases, lack of capability in various aspects of project development and implementation is the foremost challenge. Other common ODA-related problems are: (a) weakness in planning and identification of programs and projects, (b) weakness in project proposal development,

8 Paper presented by RD Lourdes Lim of NRO XI in the Mindanao Working Group Conference in November 2009 in Davao City.

Autonomous Region In Muslim Mindanao 15

and (c) inability to put up required counterpart funds. Implementation issues are usually project-specific but the most common are lack of capabilities to address implementation bottlenecks and delays, cost over-runs, right-of-way problems and coordination problems. Overall, these translate to weak absorptive capacity for ODA, the oft-cited reason for Mindanao ODA shares that are lower than desired.

v. autoNomous reGIoN IN muslIm mINdaNao

A. Allocations for the ARMM Regional Government

ARMM consists of five provinces with varying income classes, hosting one city, 116 municipalities and 2,488 barangays. As of 2007, ARMM registered a population of over four million (Table 7). Population is a key determinant of budget, particularly in the determination of the Internal Revenue Allotment, for which it carries a 50% weight. Budgetary allocations for ARMM consist of an allocation for the regional government, regional allocations by NGAs designated for ARMM, special purpose funds such as PDAF, and transfers to LGUs, mainly in the form of IRA. This section reviews each of these major budget categories for ARMM.

Table 7. Administration and Population Profile of ARMM

Province Income Class City Municipality Barangay Population

(2007)Basilan 3rd 1 11 210 408,520Lanao del Sur 1st 1 39 1,159 1,138,544Maguindanao 1st - 36 506 1,273,715Sulu 2nd - 19 410 849,670Tawi-Tawi 3rd - 11 203 450,346

Total 2 116 2,488 4,120,795Source: National Statistics Office

The direct appropriation for the ARMM regional government (ARG) has been rapidly growing by about 10% per year in last seven years despite recorded declines in 2008 and 2010 (Table 8). The latter was due to (a) financial programming and implementation issues of multi-year projects; and (b) the after effects of the Maguindanao massacre in November 2009, which included the implication of the ARMM Governor and consequent review of the budget of the Office of the Governor. This second issue was also a major reason for the cut in the appropriation for General Administration and Support Services9.

9 Consists of (a) Regional Legislative Services and (b) Office of the Regional Governor including the Special Purpose Funds for the Regional Governor and Vice-Governor; share of ARMM and concerned LGUs from national taxes, fees and charges and taxes imposed on natural resources within ARMM; and the share of the national government from its collection of internal revenue taxes within ARMM.

Table 8. ARMM Regional Government Budget Allocation by Program/Project(In thousand pesos)

ITEM 2005 2007 2008 2009 2010 2011 2012

A. Programs 5,527,112 6,966,696 7,212,352

8,264,890

8,341,727 9,240,815 10,059,567

I. General Administration and Support 557,129 927,870 1,304,342 1,234,146

1,042,514 806,270 860,235

II. Planning& Monitoring (RPDO) 12,994 13,884 23,491 21,400 19,833 21,529 23,160

III. Operations 4,956,989

6,024,942 5,884,519

7,009,344

7,279,380 8,413,016 9,176,172

1. Regional Legislative Services 87,056 90,124 90,371 98,935 121,416 125,608 134,184

2. Sector Programs and Projects 4,869,933 5,922,818 5,794,148 6,910,409

7,157,964 8,287,408 9,041,988

a. HLURB 6,477 6,841 6,900 6,826 7,265 7,423 7,759 b. OSSC- Socio-Eco & Culture Development 10,129 10,790 11,930 12,469 12,671 14,007 15,193

c. Education (RDepEd, RTESDA, RCHED, RDOST) 3,529,116 4,069,530 4,148,769

4,996,047

5,193,993 6,216,026 6,795,919

d. Provision of health services (RDOH) 413,815 471,153 473,866 561,301 572,171 677,178 720,704

ITEM 2005 2007 2008 2009 2010 2011 2012

e. Social Welfare (RDSWD) 61,112 80,418 76,930 116,799 86,929 93,699 99,747

Total Social Sector 4,020,649 4,638,732 4,718,395 5,693,442 5,873,029 7,008,333 7,639,322

Growth Rate (%) for Social Sector 15.4 1.7 20.7 3.2 19.3 9.0 f. RDAFAR - Agriculture and Agra Reform 282,456 346,859 389,222 413,718 432,175 432,653 469,842

g. Environment & Natural Resources (RDENR) 137,069 164,545 167,539 192,137 194,658 210,683 227,496

h. Tourism, Trade, Industry & Investment (RDTTII) 55,135 65,885 67,571 74,386 76,163 83,050 90,662

i. Industrial Peace, Workers Welfare, Employment (DOLE) 17,376 23,265 26,561 31,246 31,652 36,591 39,034

j. Promotion & Development of Cooperatives (RCDA) 6,420 10,560 12,523 13,527 17,520 15,399 16,231

Total Economic Sector 498,456 611,114 663,416 725,014 752,168 778,376 843,265

Growth Rate (%) for Economic Sector 22.6 8.6 9.3 3.7 3.5 8.3

k. Transportation and Communication 11,280 16,302 19,387 22,774 22,687 24,880 27,335

l. Infrastructure (RDPWH) 273,757 312,837 316,641 380,738 420,697 375,215 429,640

Total Infrastructure Sector 285,037 329,139 336,028 403,512 443,384 400,095 456,975

ITEM 2005 2007 2008 2009 2010 2011 2012

Growth Rate (%) for Infrastructure Sector 15.5 2.1 20.1 9.9 -9.8 14.2

m. Assist to LGUs (RDILG) 65,791 76,145 76,309 88,441 89,383 100,604 111,426

Growth Rate (%) for Governance Sector 15.7 0.2 15.9 1.1 12.6 10.8

B. Projects 1,164,111 1,677,619 1,119,100 1,184,067 943,362 1,938,823 1,658,140

I. Locally-Funded: Public Works (DPWH) 650,000 650,000 650,000 1,000,000 865,000 1,000,000 1,000,000

II. FAPs: ARMM Social Fund for P&D 514,111 1,027,619 469,100 184,067 78,362 938,823 658,140

Growth Rate (%) for Projects 44.1 -33.3 5.8 -20.3 105.5 14.5

TOTAL APPROPRIATION (GAA) 6,691,223

8,644,315 8,331,452 9,448,957 9,285,089 11,179,638 11,717,707

Growth Rate (%) 29.21 -3.6 13.4 -1.7 20.4 4.8

Sources: General Appropriations Act, 2005, 2007, 2008, 2009, 2010, 2011, 2012; BESF, 2009, 2010, 2011, 2012

Autonomous Region In Muslim Mindanao 19

Meanwhile, the 2012 BESF indicated a proposed appropriation for the ARMM government of P12.5 billion but the actual appropriation as reflected in the GAA10 is P11.7 billion. This means an increase of 4.8% even after a double-digit increase of 20.4% in 2011. The normalization of operations and compensation of deferred activities in 2010 more than doubled (105.5%) the budget for the Project category and increased the budget for Programs by P900 million (10.8%) in 2011.

The allocations for all sectors have been growing rapidly. The budget increase is distributed across all items of the ARG budget with the infrastructure sector getting the lion’s share and growing the fastest on average in last seven years. Infrastructure is directly funded through ARG’s infrastructure agencies and local and foreigh-assisted projects. Altogether, ARMM’s infrastructure budget for 2012 reached P2.1 billion, which represents a 33.2% increase from that of 2011. The projects of National Government Agencies (NGAs) such as DPWH, contribute further to this amount through projects.

The growth in the social sector has been steady and averaged 10% in the last seven years. All sub-sectors follow the same trend except for social welfare, which has been erratic as it covers intermittent events such as armed operations that result in displacement of people. The economic sector trails a bit behind but still rapid at around 8%. It’s biggest component (56%) is agriculture and agrarian reform, which sustains its upward trend throughout the years despite internal problems. The budget for local governance through the Regional DILG has also increased steadily at 8%.

The social sector accounts for the bulk of the Programs budget11 (84%) and the Program and Project budgets (70.3%) while the economic sector gets very little as shown in Table 7 and Figure 5. This deliberate support for the health, education, housing, social welfare and culture development through the budget is important and warranted.

ARMM provinces have been among those with worst social conditions, thus giving priority to and investing more in human resources are strategic policies and interventions for peace and development. However, given the need for more fundamental approaches to address poverty sustainably in the autonomous region, higher budgets for the economic and environment sectors would be required to stimulate ARMM’s economy, create jobs and sustainably uplift the lives of the people.

The economic sector, which already included management of environment and natural

10 The allocations reflected in the Budget Expenditure and Sources of Financing are usually adjusted by Congress before it is approved and turned into the GAA. Also, budgets are sometimes adjusted within a year and the adjustments are reflected in the BESF documents for the succeeding years. All these result in differences in budgets quoted or reported in literature.

11 Excluded Regional Legislative Services and ARMM Social Fund in the computations since these cater to all sectors and are indivisible.

20 Autonomous Region In Muslim Mindanao

resources, only accounts for 6.6% of the total ARG budget and 7.7% of the Programs budget in 2012. The structure changes when the budget for projects (ARMM Social Fund) which are dominantly for infrastructure development, are taken into account. Infrastructure share increases to 19% and social sector share drops to 70.3%.

Figure 5 Budget Structure of ARMM Government, 2012

Program Budget Program Budget

Program and Project Budget Program and Project Budget

Source: GAA, 2012

Autonomous Region In Muslim Mindanao 21

B. ARMM Allocations from NGAs and for SUCs

Contributions of NGAs to ARMM rose dramatically in the last two years. Like other regions, the autonomous region effectively receives additional budget support through allocations from national departments and agencies, commissions and state universities and colleges. These augment the lump sum appropriations for the ARG reflected in Table 8 above, and form a substantial part of the total resource picture for the autonomous region.

In past years, only a few such national agencies allotted distinct shares for ARMM on the assumption that the ARG’s allocation was already taking care of their areas of concern. Still others undertake their projects for ARMM through other adjacent regions (IX, X, XII). Lately, there have been conscious efforts among the NGAs to provide distinct allocations for ARMM, thus resulting in dramatic increases of 703% and 460% in 2011 and 2012 (Table 9).

Table 9. NGAs and SUCs Allocations for ARMM, 2008-2012(In P million)

National Department/SUC 2008 2009 2010 2011 2012

Department of Agrarian Reform 173

Department of Agriculture 514

Department of Education 2,652

Department of Health 263

Department of Labor & Employment 14Department of Public Works and Highways 691

Department of Social Welfare & Development 4,205

Department of Environment & Natural Resources 18 15 15 17 15

Department of Finance 17 18 18Department of Interior and Local Government 88 94 97 104 707

Department of Transportation & Communications 11 137 216

National Economic and Development Authority 21 23 21 22 25

Civil Service Commission 16 18 16

Commission on Audit 77 77 77 77 67

Commission on Elections 6 13 13 71 70

State Universities and Colleges 1,729 1,869

22 Autonomous Region In Muslim Mindanao

Total Departments 221 359 256 2,056 11,516

Growth Rate (%) 62.4 (28.7) 703.1 460.1

ARMM Regional Government2 8,614 9,795 9,827 11,853 12,469

Over-all Total 8,835 10,153 10,084 13,909 23,985

Growth Rate (%) 14.9 (0.7) 37.9 72.4Source: BESF, 2012

The biggest and one of the most recent contributors is DSWD, which allocated P4.2 billion in 2012. The other new and significant contributors are DepEd (P2.6 billion), DOH (P263 million), and DPWH (P691 million). Meanwhile, the six SUCs in ARMM are expected to receive P1.9 billion in 2012, representing an 8.1% increase from the 2011 amount.

Table 10 lists activities of the NGAs for which contributions to ARMM are first recorded in 2012. It must be noted that some of these activities were already being provided in past years, but were counted in allocations of either their central offices or neighboring regional offices (i.e., Regions IX, X or XII). Still others are allocations for entirely new projects and activities.

An example is the allocation from DSWD of more than P3.5 billion for the Pantawid Pamilyang Pilipino Program (4Ps), the second highest allocation (next to Region V) among the country’s regions. DSWD is also providing substantial amounts for internally displaced persons in the Food for Work (P345 million), and shelter under the PAMANA program (P230 million).

Table 10. Major Activities Funded by Selected NGAs in ARMM, 2012(In million pesos)

Department AllocationsAllocation per NEP Allocation

Allocation Total per BESF

Department of Agrarian Reform 163,675 172,732

Requirements of CARP 163,675

Department of Agriculture 525,515 513,690

Repair and construction of Farm to Market Roads 212,922

Irrigation Projects in Lanao del Sur - Malaig, Rugnan, Karigongan 172,850

Tandubas & Parangan Irrigation Projects, Tawi Tawi 133,618

Department of Education 2,381,692 2,651,677

Autonomous Region In Muslim Mindanao 23

DepEd Computerization Program 88,432

Basic Education Madrasah 85,000

School Based Management Installation and Support 25,924

Kindergarten Education for all Children 61,089

Mass Production of Science and Mathematics Equipment 26,915

Funds for new teaching & non teaching positions, 2010-2012 280,615

Lump sum for purchase of textbooks/instructional materials 125,137

Governmentt assistance to students and teachers in private education 251,218

Lump sum Basic Educational Facilities, office & IT equipment 1,392,278

Others (Multigrade schools; Quick response; Training; SPED) 36,200

Department of Health 334,652 263,253

Doctors to the Barrios and Rural Health Practice Program 102,670

Health Facilities Enhancement Program 158,582

Direct service to Sulu Sanitarium (counted in Region IX) 12,066

Service to Amal Pakpak Medical Center (counted in Region X) 61,334

Department of Interior and Local Government 651,920 707,233

Implementation and monitoring of PAMANA 270,000

Provision of potable water supply 252,000

Philippine national and regional Police operations 129,920

Department of Social Welfare and Development 4,204,560 4,204,560

Pantawid Pamilya-CCT (2nd to highest budget) 3,507,539

Supplemental Feeding Program 82,882

Food for work for IDPs 345,287

24 Autonomous Region In Muslim Mindanao

Social Pension for Indigent Filipino Senior Citizen 38,377

PAMANA (Pillar I) IDPs modified Shelter Project 230,000

TOTAL 4,057,454 4,308,585Sources: BESF, 2012 and National Expenditure Program, 2012 (see footnote #13)

The issue in ARMM is no longer the level of allocated funds, but the mechanism for providing the budget. Proponents for the legally mandated autonomy for ARMM argue that all budgetary resources allocated to ARMM must be put entirely under the control and supervision of the ARG. That is, coursing allocations for ARMM initiatives and projects through NGAs is seen as a violation of its mandated autonomy.

The policy issue, then, is whether the P9.6 billion for ARMM proposed to be coursed through NGAs in the 2012 budget (P11.5 billion if SUCs are included) should be put under the control of the ARG, together with the proposed P12.5 billion budget allocation for the ARG, thereby asserting full fiscal autonomy for the region. However, this would likely raise questions on absorptive capacity and accountability, which must be satisfactorily addressed if full fiscal autonomy is to be effected in ARMM.

C. ARMM LGU Budgets

On average, all levels of local government in ARMM registered increases in IRA from 2008-2011. The increases were most rapid among cities (9.1%) and barangays (7.7%). The IRA for all ARMM LGUs reached P14.2 billion in 2012. This represents a 4.7% decline from the allotment of P14.6 billion in the previous year (Table 11). The IRA for cities ballooned by 85.4% in 2012 due to the finality of Lamitan City’s cityhood. For the same reason, the IRAs of provinces, municipalities and barangays dropped as the IRA of Lamitan City was reclassified under Cities.

Table 11. Internal Revenue Allotments in ARMM(In million pesos)

LGU 2008 2009 2010 2011 2012 Average Growth Rate (%)

Provinces 3,214 3,834 4,014 4,352 4,152 7.0Cities 243 304 331 355 658 9.1Municipalities 5,707 6,109 6,413 6,951 6,614 3.9Barangays 2,111 2,509 2,670 2,944 2,802 7.7Total 11,275 12,756 13,428 14,602 14,216 4.1

Source: BESF, 2009, 2010, 2011, 2012

Autonomous Region In Muslim Mindanao 25

Questionable population statistics in ARMM put into question a per capita analysis of the ARMM budget. Fifty percent of IRA is based on population, hence the increase in ARMM’s IRA may largely be attributed to increased population, which was reported to have grown at an annual rate of 5.5% per year from 2000-2007 (NSO). Using the indicated growth rate, the 2007 population (4,120,795) is projected to have reached 5.4 million (Table 12) in 2012. At this population level, IRA per capita is placed at P2,630, the second lowest in Mindanao (Table 12). Given doubts on the veracity of the 5.5% population growth rate reported for the region, the per capita income based on IRA in ARMM could be higher.

Table 12. IRA and IRA Per Capita, Mindanao Regions, 2010

IRA, 2012(In P million)

Projected Population3

(In thousand) IRA/capita

(P)

ARMM 14,216 5,376 2,644

Region IX 11,178 3,537 3,160

Region X 14,811 4,294 3,449

Region XI 12,962 4,524 2,865

Region XII 12,176 4,313 2,823

CARAGA 9,946 2,440 4,076 Source: BESF, 2012; Census of Population, 2007

D. Congressional Allocations of Legislators

Further adding to the budgets of ARMM LGUs is the Congressional allocations of legislators, but their use has not been maximized in ARMM. This annual allocation is P70 million per Congressional District and Partylist Representative, and P200 million per Senator. Commonly known as the Congressional “pork barrel,” it is officially known as the Priority Developent Assistance Fund12 (PDAF) although it actually is tapped and released in three forms: (a) as PDAF (see definition in footnote 15); (b) as financial subsidy to to LGUs (FSLGU) to fund priority programs and projects; and (c) regular lump sum allocation placed under DPWH that for infrastructure projects. Each Congressional District is allocated P30 million for “soft” projects (PDAF and FSLGU) and P40 million for “hard” (infrastructure projects). Having eight districts, ARMM has automatic annual allocation of P560 million.

Unfortunately, while this allocation is a clear source of funds for the development of LGUs, its use has not been maximized, as shown in Table 13. Data on actual releases in 2010 and 2011 show that the funds were at best only partially used. In fact, as of March 22, 2012, there has been no reported release for ARMM LGUs.

12 PDAF is defined as lump sum appropriation to fund priority development programs and projects, both “soft” (e.g. scholarship, medical assistance, livelihood, etc.) and “hard” (e.g. roads, public markets, multi-purpose buildings, etc.).

26 The Case For Affirmative Budget Action For Mindanao

Of the five ARMM provinces, only Tawi-Tawi used its Congressional allocations fully. There could be a number of reasons for this situation such as (a) inability to develop proposals to maturity; (b) unfinished projects; (c) unliquidated funds to trigger other releases; (d) lack of counterpart funds, (e) political considerations of legislators, etc. Congressional allocations of Partylist representatives and Senators further add to these development funds, but these are highly dependent on their preferences, priorities and political affiliations.

Table 13. Congressional Allocation and Releases for ARMM LGUs (In Million Pesos)

Province (No. of District)

Annual Alloca-

tion

Actual Releases, 2010 Actual Releases, 2011

PDAF FSLGU DPWH Total PDAF FSLGU DPWH Total

Basilan (1) 70 15 15 40 70 55 - - 55

Lanao del Sur (2) 140 30 45 25 100 - - - -

Maguindanao (2) 140 38.5 6.5 20 65 - - - -

Sulu (2) 140 5 25 60 90 123.5 - - 123.5

Tawi Tawi (1) 70 15 20 35 70 70 - - 70Source: BESF, 2011 and 2012 vI. the case for affIrmatIve BudGet actIoN for mINdaNao

Affirmative budget action for Mindanao is better justified on the basis of greater need, rather than hinged on a now questionable perceived bias against the island region. There are substantial resources available for the development of Mindanao, and, should there be shortfalls, a wide scope exists for increasing incomes and mobilizing external resources.

Closer examination of the data does not lend strong support to the assertion that Mindanao as an island group is at a disadvantage in budgetary and ODA allocations, particularly in recent years. Notwithstanding the above, the case remains strong for affirmative budget action for Mindanao at this time, given (1) its dismal human development and poverty status relative to the rest of the country, (2) requirements for reconstruction and rehabilitation of war-damaged communities and (3) the need to address the continuing lag in infrastructure. These conditions have come about not so much out of inordinate budget neglect, but primarily due to the region’s history of violent conflict combined with faulty governance.

The oft-lamented budget bias against Mindanao or between the “Two Mindanaos” is no longer upheld by recent budget data. Mindanao has lately been receiving a share of the national budget commensurate to its contribution to overall GDP. There had indeed been clear bias in regional budget allocations, but it was in favor of Region III and to the detriment of most regions including those in Luzon. The attribution of central office budgets entirely to Luzon has also contributed to the perceived bias. Furthermore, the

Pursuing Affirmative Budget Action For Mindanao 27

observation that most LGUs report perennial budget surpluses undermines the argument that inadequate budgets hamper development efforts in Mindanao. In most cases, the more telling constraint appears to lie in weak absorptive capacities and capabilities in local development planning, program/project formulation, and financial management, including local revenue mobilization.

The perceived budget bias against ARMM is also not apparent in historical data. In fact, the data suggest that ARMM has been getting an aggregate level of financial resources higher than it could handle for the region’s development. The real issue in past years had been in the way budget allocations for ARMM were coursed through and handled by national line agencies, in direct contravention of the region’s mandated autonomy. While the reasons for this had been apparent, it is high time that ARMM, an autonomous region for well over two decades, be given effective control and supervision over this budget, and have the leeway to undertake its own budgeting based on its own needs and priorities. Such faithful upholding of ARMM’s legally mandated autonomy is more feasible and acceptable now that clear indications of strengthening governance is being manifested in the regional leadership.

vII. pursuING affIrmatIve BudGet actIoN for mINdaNao

Affirmative budget action means increasing the budget and making it work for the development of Mindanao and the uplifment of the quality of lives of Mindanawons. This requires concerted action from various levels of government and relevant stakeholders. Specifically, this requires that the following be undertaken:

o National government through the Department of Budget and Management and Congress of the Philippines must provide extraordinary budget interventions to lagging regions of Mindanao. This must be based on clear analysis of Mindanao’s needs and support assets and mechanisms, and calibrated against its ability to absorb and manage additional funds.

o National Government must enable MinDA to effectively exercise its authority and play its roles through a level of budgetary resources that is commensurate to its mandated functions, and a capacity building program that will help it transition towards the agency called for by the MinDA Law.

o National Government, MinDA, NEDA and other relevant agencies must work together to make budgeting, budget management, budget monitoring and evaluation, and budget accountability systems and mechanisms more effective and responsive.

o MinDA, NEDA, other relevant agencies and concerned LGUs must undertake a continuing thrust toward self-reliance that would build LGU capacities for generating local revenues, and formulate budgets that they can manage and

28 Pursuing Affirmative Budget Action For Mindanao

put to work for their localities and people. This would entail prior investments in improvement of local capacities for development management – including in planning, program and project formulation, fiscal management and monitoring & evaluation. These are vital prerequisites for the infusion of additional budgetary resources for Mindanao.

o For ARMM, the National Government, through DBM and relevant NGAs, must uphold a policy of granting full fiscal autonomy to the ARG. Among other things, national goverment must cease the practice of coursing funds and projects for ARMM through NGAs in neighboring regions. This needs to be accompanied by the tightening of systems and procedures, development of accountability mechanisms, and capacity building programs as suggested above. Full fiscal autonomy must go hand-in-hand with fiscal responsibility and accountability; it is now incumbent on the interim regional leadership to demonstrate convincingly that these can indeed go together in ARMM.

References

Department of Budget and Management www.dbm.gov.ph

1. General Appropriations Act, 2008, 2009, 2010, 20112. Budget Expenditure and Source of Funds, 2008, 2009, 2010, 2011, 20123. National Expenditure Program, 2010, 2011, 2012

Department of Finance, Bureau of Local Government Financewww.blgf.gov.ph

4. Statement of income and Expenditures, 2007, 2008, 2009

National Statistics Officewww.nso.gov.ph

5. Population by Region, 2007

(Footnotes)1 Covers a two-year period (2005-2007). Data for 2006 are not readily available.2 Data come from BESF because, unlike the GAA, it has a Table that presents a regional breakdown. The totals differ from those in the GAA as may be noted in Table 7. 3 Population projection used NSO-computed average population growth rate for each region