15 March 2007

NPM and the Philippine LGUs

I HAVE always been a fan of Juan Mercado, and his newest gem here is not only remarkably spot on but largely coincides with our own assessment of the Philippine experience with decentralization.

I reached this conclusion -- and more -- after tracking down and reading through Balisacan, Hill and Piza's paper entitled "Regional Development Dynamics and Decentralization in the Philippines: Ten Lessons from a 'Fast Starter'" which you can download here.

Compare that with Mayor Robredo's presentation entitled "Policy Issues and Challenges in Local Governance" before a delegation of Asian NGO leaders in August 2006, and you will begin to understand why decentralization in Philippine governance that took off in 1991 is a mixed bag of neither-here-nor-there outcomes.

Let me tie that in with some of the key insights I got out of participating in the recent NPM online seminar sponsored by the Friedrich Naumann Foundation and my trip to Albay last Tuesday.

A fundamental element of the NPM philosophy is the "lean state" -- a critical approach to public management which analyzes whether the tasks of the state (1) are ones it really has to perform; (2) are being performed at the correct level; (3) can be actually be performed by others subject to its supervision; and (4) are not actually being performed, but urgently needed by the public.

In a previous post, I already identified a perverse variant of the soft budget constraint as a stumbling block to genuine local autonomy envisioned under the 1991 Local Government Code, as can be seen from the continuing misery of families dislocated by Super Typhoon Reming and the ensuing deadly lahar mudflows from Mayon four months after the event.

To that I will add the continuing phenomenon of bloated local bureaucracies, as opposed to the lean state under the NPM conception. Again, the COA audit reports, which can be accessed here, underpin this contention. In all cases, personal services budget of local governments are almost always tilted towards the 45% limit provided by the Code, maxing it out during election years.

Compare this with the 30-35% standard for labor cost in most other activities, even in public works projects, and you see what I mean. A 10% savings from an annual budget of P300-400 million, for instance, will already fund one of the permanent relocation sites identified in the P13.4-billion Bicol Rehabilitation Plan.

Why does this phenomenon persist in the Philippines? One, the stiff competition for local power -- mediated through elections which are increasingly becoming costly -- is a main driver. Applying the public choice theory, it is said that the primary duty of politicians is to get reelected. This explains why there is no incentive to cut down on production costs -- including labor, as what one normally does in business -- if that is what will guarantee reelection.

Another is the common, popular view of the state as one big welfare agency, where permanent positions in government are the safest available, practically guaranteeing a decent life to its holder. In many areas, these can even be inherited, where dependents of a retiree are prioritized in appointing replacements.

Surely, there are other factors out there, and I will encourage you to share your thoughts. But if my planned participation in the offline phase of the NPM seminar pushes through, successfully reconciling these Philippine realities with the "lean state" concept will be more than enough; the rest would be gravy.