Led

LOCAL ECONOMIC DEVELOPMENT
Writer
Simon Peter Gregorio
Editor
Lourdes "Didith" Mendoza
Project Management
Amihan Perez
Ateneo Center for Social Policy and Public Affairs (ACSPPA)
Technical and Editorial Team
Rene Bong Garrucho, LGSP
Mags Maglana, LGSP
Cecille Isubal, LGSP
Aser Realubit, LGSP
Myn Garcia, LGSP
The NATCCO Network
Art Direction, Cover Design & Layout
Jet Hermida
Photography
NATCCO FotoBank
LGSP PhotoLibrary
STIMULATING GROWTH
AND IMPROVING QUALITY OF LIFE
local economic development:
Local Economic Development: Stimulating Growth and Improving
Quality of Life
Service Delivery with Impact: Resource Books for Local Government
Copyright @2003 Philippines-Canada Local Government Support
Program (LGSP)
All rights reserved
The Philippines-Canada Local Government Support Program encourages
the use, translation, adaptation and copying of this material for non-
commercial use, with appropriate credit given to LGSP.
Although reasonable care has been taken in the preparation of this book,
the publisher and/or contributor and/or editor can not accept any
liability for any consequence arising from the use thereof or from any
information contained herein.
ISBN 971-8597-09-3
Printed and bound in Manila, Philippines
Published by:
Philippines-Canada Local Government Support Program (LGSP)
Unit 1507 Jollibee Plaza
Emerald Ave., 1600 Pasig City, Philippines
Tel. Nos. (632) 637-3511 to 13
www.lgsp.org.ph
Ateneo Center for Social Policy and Public Affairs (ACSPPA)
ACSPPA, Fr. Arrupe Road, Social Development Complex
Ateneo de Manila University, Loyola Heights, 1108 Quezon City
This project was undertaken with the financial support of the
Government of Canada provided through the Canadian International
Development Agency (CIDA).
A JOINT PROJECT OF
IMPLEMENTED BY
Department of the Interior
and Local Government (DILG)
National Economic and
Development Authority (NEDA)
Canadian International
Development Agency
Federation of Canadian
Municipalities (FCM)
www.fcm.ca
Agriteam Canada
www.agriteam.ca
CONTENTS
FOREWORD
ACKNOWLEDGEMENTS
PREFACE
ACRONYMS
EXECUTIVE SUMMARY
INTRODUCTION
CHAPTER 1: OVERVIEW AND RATIONALE FOR LOCAL ECONOMIC DEVELOPMENT (LED)
Overview of the Sector
Rationale for Local Economic Development (LED)
Nature of Local Economic Development (LED)D
Goals of Local Economic Development (LED)
Principles of Local Economic Development (LED)
Key Success Factors for Local Economic Development (LED)
CHAPTER 2: LGU MANDATES FOR LOCAL ECONOMIC DEVELOPMENT (LED) AND RELATED
LAWS
Local Government Code
The Social Reform and Poverty Alleviation Act
Laws on the Development of Small and Medium Enterprises (SMEs)
DILG Memorandum Circulars on Local Economic Development (LED)
CHAPTER 3: ROLE OF LGU AND OTHER STAKEHOLDERS IN LED
Regular Functions of LGUs with Consequences for Local Economic Development (LED)
Role of Other Local Economic Development (LED) Stakeholders
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37
42
S E RVI CE DE L I VE RY WI T H I MPA CT: R E S OURCE B OOKS F OR L OCA L GOVE R NME NT
CHAPTER 4: STRATEGIES TO FACILITATE LOCAL ECONOMIC DEVELOPMENT (LED)
Strategies to Facilitate Stimulating Growth and Improving Quality of Life
Ineffective Local Economic Development (LED) Strategies that the LGUs Should Avoid
Capacity Building Process for LGU-facilitated Local Economic Development (LED)
CHAPTER 5: ISSUES AND RECOMMENDATIONS REGARDING LED IMPLEMENTATION
Micro Enterprises
Small and Medium Enterprises
Local Government Units
CHAPTER 6: GOOD PRACTICES IN PROMOTING LOCAL ECONOMIC DEVELOPMENT (LED)
Formulating and Implementing a Comprehensive Local Development Program: Irosin,
Sorsogon
The Lingap Tanaw Program: Naujan, Oriental Mindoro
Investment Promotion Program: Bohol
A Municipalitys Investment and Promotion Program: Tigaon, Camarines Sur
Dalan sa Kauswagan Project: San Carlos, Negros Occidental
Breaking Financial Barriers: San Fernando, Pampanga
The City Livelihood Assistance Program: Pagadian, Zamboanga del Sur.
Pushing Development through Cooperativism: Bulacan
CHAPTER 7: REFERENCES AND TOOLS
ENDNOTES
CONTENTS
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T
he Department of the Interior and Local Government is pleased to acknowledge the latest
publication of the Philippines Canada Local Government Support Program (LGSP), Service
Delivery with Impact: Resource Books for Local Government; a series of books on eight (8)
service delivery areas, which include Shelter, Water and Sanitation, Health, Agriculture, Local Economic
Development, Solid Waste Management, Watershed and Coastal Resource Management.
One of the biggest challenges in promoting responsive and efficient local governance is to be able to
meaningfully deliver quality public services to communities as mandated in the Local Government Code.
Faced with continued high incidence of poverty, it is imperative to strengthen the role of LGUs in service
delivery as they explore new approaches for improving their performance.
Strategies and mechanisms for effective service delivery must take into consideration issues of poverty
reduction, peoples participation, the promotion of gender equality, environmental sustainability and
economic and social equity for more long- term results. There is also a need to acquire knowledge, create
new structures, and undertake innovative programs that are more responsive to the needs of the
communities and develop linkages and partnerships within and between communities as part of an
integrated approach to providing relevant and sustainable services to their constituencies.
Service Delivery with Impact: Resource Books for Local Government offer local government units and
their partners easy-to-use, comprehensive resource material with which to take up this challenge. By
providing LGUs with practical technologies, tested models and replicable exemplary practices, Service
Delivery with Impact encourages LGUs to be innovative, proactive and creative in addressing the real
problems and issues in providing and enhancing services, taking into account increased community
participation and strategic private sector/civil society organizational partnerships. We hope that in using
these resource books, LGUs will be better equipped with new ideas, tools and inspiration to make a
i S E RVI CE DE L I VE RY WI T H I MPA CT: R E S OURCE B OOKS F OR L OCA L GOVE R NME NT
FOREWORD
difference by expanding their knowledge and selection of replicable choices in delivering basic services
with increased impact.
The DILG, therefore, congratulates the Philippines-Canada Local Government Support Program (LGSP)
for this milestone in its continuing efforts to promote efficient, responsive, transparent and accountable
governance.
HON. JOSE D. LINA, JR.
Secretary
Department of the Interior and Local Government
FOREWORD
ii S E RVI CE DE L I VE RY WI T H I MPA CT: R E S OURCE B OOKS F OR L OCA L GOVE R NME NT
This publication is the result of the collaboration of the following individuals and institutions that
support the promotion of economic development by local governments in their localities.
The Local Government Support Program led by Alix Yule, Marion Maceda Villanueva and Rene "Bong"
Garrucho for providing the necessary direction and support
The National Confederation of Cooperatives (NATCCO Network), particularly Lourdes Hernandez, Mimin Aznar-
Buban and Edna Reyes for undertaking the research and roundtable discussion and preparing the technical
report which was the main reference for this resource book; and for assisting in the review of the manuscript
The World Bank Group for its Local Economic Development knowledge products (i.e., process, strategies
and tools). The World Bank supports the development of sustainable Local Economic Development
through knowledge sharing, learning activities and advisory services
Participants to the Roundtable Discussion on Enhancing the Role of LGUs in Local Economic Development
held last May 28-29, 2002 in Pasig City. Their expertise and the animated exchange of opinions helped
shape the technical report on which this publication is based:
Mayor Hector Villanueva, Socorro Banugon and Eric Laxina of Bais City, Negros Oriental; Mayor Habib
Magdar Loong and Fred Sajot of Parang, Jolo; Resti Tejido of Bohol Province; Zenaida Ramos Mai,
Arnel Oliveros, Ma. Rosette Bagayas and Bernardita Santos of Anao, Tarlac; Leonardito Plaza of Sta. Josefa,
Agusan del Sur; Fr. Edwin Saldon of Zamboanga del Norte; Ray Roquero of the League of Municipalities;
Rhea Rose Victoria of the League of Cities; Jerry Clavecillas of BSMED-DTI; Rosana Urdaneta and Myrna
Velasco of TESDA; Termizie Masahud of DTI-Tawi-Tawi; Assistant Secretary Austere Panadero, Dir. Teresita
Mistal and Anna Liza Bonaqua of DILG; Roberto Pagdanganan, Presidential Adviser on Cooperatives
iii S E RVI CE DE L I VE RY WI T H I MPA CT: R E S OURCE B OOKS F OR L OCA L GOVE R NME NT
ACKNOWLEDGEMENTS
Anne Germain of CIDA; Hideaki Hoshina of JICA; Sonia Tiong-Aquino of UP-ISSI; Zita Calugay of UP-NCPAG;
Connie Pabalan of DAP; Gemma Regina Cunanan of Ateneo School of Government; Marcia Feria-
Miranda of Punla Sa Tao Foundation; Rafael L. Coscolluela of ESKAN; Rodolfo Perez of SEED Inc.; Marian
Boquiren of SwissContact; Sixdon Macasaet of NATCCO; Rica Lane of Venture for Fund Raising; Ma. Luisa
Tumang of JEP Consultants & Trainers, Inc.; Virginia Pacunio of Touch Foundation, Inc.; Reynaldo Feria
of Planters Development Bank
LGSP Advisor Divina Luz Lopez; Managers Tess Gajo, Abe dela Calzada, Paz Christi Moneva and Victor
Ozarraga; and Officers Antonio Tantioco, Dicky Limbaga and Rizal Barandino
Cecille Isubal and Aser Realubit for providing feedback that helped ensure that the resource book offers
information that is practical and applicable to LGU needs and requirements
Amihan Perez and the Ateneo Center for Social Policy and Public Affairs for their efficient coordination
and management of the project
Lourdes "Didith" Mendoza for the excellent editorial work
Simon Peter Gregorio for effectively rendering the technical report into user-friendly material
Mags Z. Maglana for providing overall content supervision and coordination with the technical writers
Myn Garcia for providing technical and creative direction and overall supervision of the design, layout
and production
Sef Carandang, Russell Farias, Gigi Barazon and the rest of the LGSP administrative staff for providing support.
ACKNOWLEDGEMENTS
iv S E RVI CE DE L I VE RY WI T H I MPA CT: R E S OURCE B OOKS F OR L OCA L GOVE R NME NT
S
ervice Delivery with Impact: Resource Books for Local Government are the product of a series
of roundtable discussions, critical review of tested models and technologies, and case analyses
of replicable exemplary practices in the Philippines conducted by the Philippines-Canada Local
Government Support Program (LGSP) in eight (8) service sectors that local government units (LGUs) are
mandated to deliver. These include Shelter, Water and Sanitation, Health, Agriculture, Local Economic
Development, Solid Waste Management, Watershed and Coastal Resource Management.
The devolution of powers as mandated in the Local Government Code has been a core pillar of
decentralization in the Philippines. Yet despite opportunities for LGUs to make a meaningful difference
in the lives of the people by maximizing these devolved powers, issues related to poverty persist and
improvements in effective and efficient service delivery remain a challenge.
With LGSPs work in support of over 200 LGUs for the past several years came the recognition of the need
to enhance capacities in service delivery, specifically to clarify the understanding and optimize the role
of local government units in providing improved services. This gap presented the motivation for LGSP
to develop these resource books for LGUs.
Not a how to manual, Service Delivery with Impact features strategies and a myriad of proven
approaches designed to offer innovative ways for local governments to increase their capacities to better
deliver quality services to their constituencies.
Each resource book focuses on highlighting the important areas of skills and knowledge that contribute
to improved services. Service Delivery with Impact provides practical insights on how LGUs can apply
guiding principles, tested and appropriate technology, and lessons learned from exemplary cases to their
organization and in partnership with their communities.
v S E RVI CE DE L I VE RY WI T H I MPA CT: R E S OURCE B OOKS F OR L OCA L GOVE R NME NT
PREFACE
This series of resource books hopes to serve as a helpful and comprehensive reference to inspire and
enable LGUs to significantly contribute to improving the quality of life of their constituency through
responsive and efficient governance.
Philippines-Canada Local Government Support Program (LGSP)
PREFACE
vi S E RVI CE DE L I VE RY WI T H I MPA CT: R E S OURCE B OOKS F OR L OCA L GOVE R NME NT
ACRONYMS
ACSPPA Ateneo Center for Social Policy and Public Affairs
ADB Asian Development Bank
AIM Asian Institute of Management
ARC Agrarian Reform Community
ARMM Autonomous Region in Muslim Mindanao
BIPC Bohol Investment Promotion Center
BIPP Bohol Investment Promotion Program
BIPT Bohol Investment Promotion Team
BLGD Bureau of Local Government Development (DILG)
BOI Board of Investments
BOO Build-Operate-Own
BOT Build-Operate-Transfer
BRW Bureau of Rural Workers
BT Build-Transfer
CBD Central Business District (Tigaon)
CBFM Community-Based Forest Management
CBIS Community-Based Information System
CBMS Community-Based Monitoring System
CDF Countryside Development Fund
CEO City Engineering Office (LGU)
CIDA Canadian International Development Agency
CILDAP City Livelihood Development Assistance Program (Pagadian City)
CLAP Cluster Development Approach Project (LGU)
CLUP Comprehensive Land Use Plan
COA Commission on Audit
vii S E RVI CE DE L I VE RY WI T H I MPA CT: R E S OURCE B OOKS F OR L OCA L GOVE R NME NT
ACRONYMS
viii S E RVI CE DE L I VE RY WI T H I MPA CT: R E S OURCE B OOKS F OR L OCA L GOVE R NME NT
COMB Coordinating and Monitoring Body
CSOs Civil Society Organizations
DAP Development Academy of the Philippines
DAR Department of Agrarian Reform
DBM Department of Budget and Management
DBP Development Bank of the Philippines
DILG Department of the Interior and Local Government
DOH Department of Health
DOLE Department of Labor and Employment
DOST Department of Science and Technology
DPWH Department of Public Works and Highways
DSWD Department of Social Welfare and Development
DTI Department of Trade and Industry
FAPs Foreign-Assisted Projects
GAD Gender and Development
GOP Government of the Philippines
IAD Integrated Area Development Program
InFRES Infrastructure for Rural Productivity Enhancement Sector Project
IPAG Investment Promotion Advisory Group (Bohol)
IPRA Integrated Protected Resource Area
IRA Internal Revenue Allotment (LGU)
IRAP Integrated Rural Accessibility Planning
ISSI Institute for Small Scale Industries
IT information technology
KPP Kaunlaran sa Pagkakaisa Program (Bulacan)
LCEs Local Chief Executives
LDCs Local Development Councils (LGU)
LED Local Economic Development
LEDA Local Economic Development Authority
LEDP Local Entrepreneurship Development Plan
LETPA Local Economic Transformation Program Agenda
LGA Local Government Academy (DILG)
LGUs Local Government Units
LHB Local Health Board (LGU)
LPRAA Local Poverty Reduction Action Agenda
LPRAO Local Poverty Reduction Program Action Officers (LGU)
LSB Local School Board (LGU)
MAHAL, Inc. Mindoro Assistance for Human Advancement Through Linkages Inc.
MARC Municipal Agrarian Reform Council
MBN Minimum Basic Needs
MC Memorandum Circular
MDFO Municipal Development Fund Office
MFARMCs Municipal Fisheries and Aquatic Resource Management Councils
MPDO Municipal Planning and Development Officer
NATCCO National Confederation of Cooperatives
NCIP National Commission on Indigenous People
NCR National Capital Region
NCRFW National Commission on the Role of Filipino Women
NEDA National Economic and Development Authority
NIPAS National Integrated Protected Area System
PANACEA Panay, Negros and Cebu Area
PAO Public Attorneys Office
ix S E RVI CE DE L I VE RY WI T H I MPA CT: R E S OURCE B OOKS F OR L OCA L GOVE R NME NT
ACRONYMS
ACRONYMS
x S E RVI CE DE L I VE RY WI T H I MPA CT: R E S OURCE B OOKS F OR L OCA L GOVE R NME NT
PARUL Poverty Alleviation through Rural Urban Linkages (UNDP)
PBAC Pre-qualification, Bids, and Award Committees (LGU)
PCCI Philippine Chamber of Commerce & Industry
PCEDO Provincial Cooperative and Entrepreneurial Development Office (Bulacan)
PDI Parallel Drug Importation (DOH)
PESOs Public Employment Service Offices
PIDS Philippine Institute for Development Studies
PIME Planning, Implementation, Monitoring and Evaluation
PNB Philippine National Bank
PS Personnel Services (LGU)
SB Sanggunian Bayan (LGU)
SEF Special Education Fund
SERDEF Small Enterprise Research and Development Foundation (UP-ISSI)
SMEDC Small and Medium Enterprise Development Council
SMEs Small and Medium Enterprises
TESDA Technical Education Skills and Development Authority
TLRC Technology Livelihood and Resource Center
TQM Total Quality Management
UA & P University of Asia & the Pacific
UNDP United Nations Development Programme
UP University of the Philippines
ZOs Zoning Ordinances
D
iscussions on local economic development or LED have been going on in the past years among
local government circles but it has not gained momentum until now. The renewed emphasis
on poverty reduction and sustainable economic and social development has heightened its
importance and urgency.
Trends such as this pose the peril of misinterpretation. The hype and the rhetoric may be mistaken with
the substance. Focus may be given on the peripherals and not the core. Hence, this LED resource
book, while not purporting to say the last word on the subject, seeks to contribute to the discussion
on LED, and to guide the implementation of the process. This book will clearly define the goals and
principles of LED, delineate the roles of the various stakeholders, and expound on strategies that LGUs
can adopt to facilitate LED. But first a situationer.
THE ECONOMIC SECTOR IN THE PHILIPPINES
The Philippines remains a predominantly agricultural country. Majority of the countrys poor are in this
sector. Within this background, enterprises abound. Ninety one percent (91%) percent of the 494,474
enterprises in the country are micro enterprises or those with assets valued at less than PhP1.5 million.
Micro enterprises employ from one to nine workers.
Half of all the enterprises in the country are found in three areas: the National Capital Region, Southern
Luzon, and Central Luzon.
Four out of ten of these enterprises are into wholesaling and retailing. Three out of the ten are engaged
in providing social, community, and personal services. Only two out of ten are into manufacturing.
xi S E RVI CE DE L I VE RY WI T H I MPA CT: R E S OURCE B OOKS F OR L OCA L GOVE R NME NT
EXECUTIVE SUMMARY
Eight out of ten of these enterprises are organized as single proprietorship. Only one out of ten are
corporations. Many enterprises are unregistered and belong to the so-called informal economy. The
informal economy consists of many entrepreneurs or itinerant workers who are outside the official
business and worker registration system. They are not usually captured in official statistics. Mostly, they
are home-based workers, street traders and street vendors, roving or seasonal job workers on building
sites or roads; and those in between streets and home (e.g., waste collectors, push-cart boys). Many of
their business ventures in the informal economy are the tiniest of micro enterprises.
WHAT LOCAL ECONOMIC DEVELOPMENT IS
Local Economic Development or LED is the process by which actors within LGUs (barangays,
municipalities, cities, and provinces) work collectively to improve conditions for economic growth,
employment generation, and quality of life for all. The goals of LED are improved quality of life and
poverty reduction.
There are many effective approaches for LGUs to facilitate LED but the principles that underpin the
different approaches are consistently the same:
Balanced economic growth with social and gender equity, sustainability, social development, peace,
and cultural responsibility
A multi-stakeholder partnership
The private sector as the engine of employment and growth
LGU as enabler
Transparency and accountability
EXECUTIVE SUMMARY
xii S E RVI CE DE L I VE RY WI T H I MPA CT: R E S OURCE B OOKS F OR L OCA L GOVE R NME NT
LEGAL FRAMEWORK FOR LED
The legal framework for LED are expressed in laws such as the Local Government Code, the Social Reform
and Poverty Alleviation Act, laws on the development of small and medium enterprises (SMEs), laws on
the informal sector, and laws on investment. There are also a number of Department of the Interior and
Local Government (DILG) memoranda governing LED.
WHAT LGUs AND LOCAL STAKEHOLDERS CAN DO
Far from being a novelty, LED is part and parcel of the LGUs regular functions and is not separate from
them. The novelty of LED, if one can call it that, is the approach or transformed mindset by which these
functions or services are performed and delivered.
The regular functions of LGUs relating to LED include among others: policy-making and taxation
regulation, planning and budgeting, collection, storage, and dissemination of information. They are also
given the tasks of marketing and public relations/investment and enterprise promotion, public safety
and cultural heritage activities, and the provision of social and environmental services.
There are a number of strategies that LGUs and their partners can adopt to promote LED. These
strategies range from the provision and improvement of so-called hardinfrastructure (e.g., roads, bridges,
ports, industrial parks) to the enhancement of the quality of local human resources through so-called
soft services.
xiii S E RVI CE DE L I VE RY WI T H I MPA CT: R E S OURCE B OOKS F OR L OCA L GOVE R NME NT
EXECUTIVE SUMMARY
WHAT LGUs AND THEIR PARTNERS HAVE DONE
The municipalities of Irosin and Naujan are models in involving and eliciting stakeholder participation
in the LED process from planning, resource mobilization to implementation, and monitoring and
evaluation. Both are distinguished in their ability to pursue equity and social development with
economic growth and in investing in so-called soft infrastructure (e.g., health and education) to
improve the lives of their constituents.
The Province of Bohol and the town of Tigaon demonstrated how LGUs at different levels can attract
external or inward investors through a tight definition of strategies (framework for investment promotion
and land use plan), provision of incentives (Investment Code) and the creation of the requisite
structures responsible for policy formulation and implementation (Investment Promotion Center,
Livelihood Promotion Unit, Municipal Trade and Industry Board and Municipal Livelihood Council).
LGUs can also create an environment conducive to LED as San Carlos City in Negros Occidental did by
expanding physical access within the city, especially to poorer sections of the local population. San
Fernando in Pampanga also pursued a similar expansionary strategy, this time of fiscal space, to give
the city enough resources to make its physical and institutional environment friendly to LED.
These LGUs may differ in location, resource endowments and challenges but their key success factors
were the same. These success factors were sound and realistic planning; commitment to LED and
effective leadership and management of the process; continuous capability building; and an enabling
environment for LED.
EXECUTIVE SUMMARY
xiv S E RVI CE DE L I VE RY WI T H I MPA CT: R E S OURCE B OOKS F OR L OCA L GOVE R NME NT
T
his resource book introduces Local Economic Development or LED to local chief executives, rank
and file members of the local and national bureaucracy, businessmen, would-be entrepreneurs
and investors, NGOs, cooperatives and other local players. It provides basic information about
LED: its nature, principles, goals, strategies, and the issues surrounding its implementation. Stories of
some local government units (LGUs) that have succeeded in promoting it are also included to show how
local officials and local stakeholders can collaborate to jumpstart economic development in the locality.
The book is divided into seven main sections:
An Overview of LED and the Rationale for Pursuing LED
The LGUs Mandates Concerning LED and Related Laws
Roles of LGU and Other Stakeholders in LED
Strategies to Facilitate LED
Issues and Recommendations Regarding LED Implementation
Good Practices in Promoting LED
References and Tools for LED
Chapter 1: Overview and Rationale for Local Economic Development (LED). Outlines the scop scope
-- the various economic sectors and types of enterprises involved and their current situation; its nature,
goals, principles, and the key factors for successful LED. As you will discover in reading this chapter, LED
is more than just economic growth, industrial parks/zones, urbanization, high-rise buildings, malls
and the usual landmarks associated with modernity. It also discusses how LGUs are envisioned to be
an enabler or facilitator of the LED process, and at the same time, advises LGU flexibility in taking on
other roles when the situation requires.
1 S E RVI CE DE L I VE RY WI T H I MPA CT: R E S OURCE B OOKS F OR L OCA L GOVE R NME NT
INTRODUCTION
Chapter 2: LGU Mandates for LED and Related Laws. Enumerates the LGU mandates in promoting
LED and related laws that impact on the performance of these mandates.
Chapter 3: Role of LGU and Other Stakeholders in Local Economic Development (LED). Enumerates
the regular functions of the LGU and discusses the consequences of these functions in the pursuit of
LED. From the discussion, LGUs will find that LED is not something new, alien, or separate from what
they are already doing on a daily basis or what it is providing by way of services to its constituents. The
novelty of LED, if one can call it that, is the approach or transformed mindset by which these functions
or services are performed and delivered. The third chapter also discusses the various roles of other LED
stakeholders such as micro, small, medium, and large enterprises, civic and professional organizations,
cooperatives and microfinance institutions, and educational institutions.
Chapter 4: Strategies to Facilitate Local Economic Development (LED). Presents strategies that LGUs
can use to facilitate LED. The strategies range from the provision and improvement of so-called hard
infrastructure, e.g., roads, bridges, ports, and industrial parks, to the enhancement of the quality of local
human resources through so-called soft services. The chapter also explains strategies for attracting
and retaining external or inward investors and encouraging indigenous entrepreneurs to start enterprises
and to grow their existing businesses. It ends with a discussion on what strategies to avoid and the
processes for planning LGU-facilitated LED and building capacity for the LED process.
Chapter 5: Issues and Recommendations Regarding LED Implementation. Deals with issues in LED
implementation as these impact on LGUs and other LED players like micro enterprises, small and
medium enterprises. LGUs face a number of constraints in implementing LED. These constraints are:
financial, technical-managerial, lack of political will and commitment, lack of sustainability of LED
efforts, insufficient support systems for LED, conflicts between national and local governments, and issues
regarding inter-local cooperation. Some recommendations are provided.
INTRODUCTION
Chapter 6: Good Practices in Promoting Local Economic Development (LED). Contains the stories
of eight LGUs that have successfully promoted LED. More than the results, the eight cases illustrate the
use of the different LED strategies presented in the fourth chapter.
Chapter 7: References and Tools. Contains references and tools that the readers may find useful in
deepening their understanding of the issues presented in this resource book.
Some of the topics discussed in all chapters may already be familiar to some LGUs, and they may feel
justified to skip or gloss over those portions. Just the same, we recommend that they still read this
resource book in full, perhaps not in one sitting but by choosing portions that are relevant and
important for the challenge of the day. Local chief executives and elected officials may be tempted to
jump immediately to Chapter 4 on Strategies to Facilitate LED and Chapter 6, Good Practices. We urge
them to read Chapters 1 and 3 first so that they can better appreciate the context of these strategies,
the stakeholders involved, and the distinctiveness of LED from previous, and even current, economic
development philosophies and approaches.
The cases featured in Chapter 6 were designed to meet specific challenges at a particular time and context.
They may or may not be applicable to those in a different situation. They are presented here to inform
and inspire LGUs and to trigger their creativity.
This resource book is also for local entrepreneurs, chambers of commerce and local industry associations,
cooperatives, microfinance institutions, peoples organizations, non-government organizations (especially
those engaged with the informal sector and implementing livelihood projects), and agencies providing
various kinds of assistance such as capability building to LGUs. The resource book can help them to better
understand the LED process and their unique and indispensable roles in it. It can also show how their
efforts can complement or support the efforts of the LGUs they are working with.
INTRODUCTION
OVERVIEW AND RATIONALE FOR LED
CHAPTER 1
CHAPTER
1
T
his chapter explains the nature of Local Economic Development (LED), its goals and
guiding principles, the key factors or characteristics of successful LED efforts. The ultimate
outcomes of LED are improved quality of life and poverty reduction. It is guided by the
principles of growth with equity, sustainability, social development, peace, cultural responsiveness
and good governance (transparency and accountability). The private sector is the driver of
economic growth with the local government unit (LGU) ideally performing an enabling role.
Successful LED efforts are characterized by sound and realistic analysis and planning, commitment
to and effective leadership and management of the LED process, continuous capability building,
and an enabling environment for LED.
Overview of the Sector
LED encompasses primarily the economic sectors of local society agriculture, commerce, trade,
finance, manufacturing -- and all types of enterprise from micro to large enterprises. It covers both
the formal and informal sectors of the economy and extends from production and provision of goods
and services to their distribution and use by local people.
LED is often associated with industrial parks, export processing zones, high-rises, rapid urbanization,
and conversion of land from agricultural uses to commercial, residential, and industrial uses. This
certainly is LED but only one aspect of it. It is not even representative of LED considering the reality
that the Philippines remains predominantly agricultural and that ninety-one percent (91%) of the
494,474 enterprises in the country are micro enterprises. Many more enterprises are not included
in the statistics because they are unregistered and belong to the so-called informal economy. To
better understand what LED is, it is necessary to have a birds eye view of the countrys economic
structure.
OVERVIEW AND RATIONALE FOR LED
8
AGRICULTURE
Agriculture remains an important sector in Local Economic Development for two reasons:
First, most of the Philippines poor are into agriculture. Sixty-eight percent (68%) of low-income
employed workers are in the agriculture sector. Seventy-four percent (74%) of employed low-income
males and fifty-six percent (56%) of employed low-income females are in the sector. Local
Economic Development should lead to the reduction of the absolute number of people considered
poor. In turn, lifting people from poverty entails addressing the problems of low agricultural
productivity and environmental degradation while at the same time lessening peoples dependence
on the agricultural sector as their sole source of income.
Second, in times of economic slowdown, the sector provides a safety net for employment.
Between 1991 and 1993, when the Philippine economy contracted, almost half of all new
employment was generated in agriculture. Between 1994 and 1995, when the economy grew,
employment in the sector fell by two percent (2%).
For many rural LGUs, the development of the local economy means moving majority of farmers and
farm workers from less financially rewarding agricultural work to better paying employment. It would
require providing additional source of income to two out of three household heads in the agrarian
sector that have no additional source of income.
THE INFORMAL ECONOMY / SECTOR
The informal economy consists of many entrepreneurs or itinerant workers that are outside the official
business and worker registration system and therefore not usually captured in the official statistics.
Many enterprises in the informal economy are the tiniest of micro enterprises.
1 LOCAL ECONOMIC DEVELOPMENT
9
The major actors in the informal economy / sector and their characteristics are:
Home-based workers. Home-based workers usually work at home or outside the establishment
that buys their products. Just the same, they have prior agreements to supply goods or services
to the establishment. Their remuneration consists of the prices paid for their products. They
do not employ workers on a regular basis. Home-based workers are often classified under self-
employed or own account workers.
Street traders and street vendors
Itinerant or seasonal or temporary job workers on building sites or road workers
Those in between the streets and home, e.g., waste collectors, pushcart boys.
DISTRIBUTION OF ENTERPRISES BY ASSET SIZE AND EMPLOYMENT
Micro enterprises are defined by law as those businesses that employ from one to nine workers.
Micro enterprises have assets valued at less than PhP1.5 million.
Small enterprises are the second most numerous, constituting eight percent (8%) of the total. Small
enterprises employ from ten to 99 workers and assets valued between PhP1.5 million and PhP15
million.
Medium enterprises and large enterprises constitute the very narrow apex of the economy.
Medium enterprises employ from 100 to 199 workers and have assets valued between PhP15 million
and PhP60 million.
Large enterprises are those that employ 200 workers and above and have assets worth more
than PhP60 million.
OVERVIEW AND RATIONALE FOR LED 1
10
DISTRIBUTION OF ENTERPRISES BY REGION
One out of four enterprises are found in the National Capital Region (NCR). Southern Luzon
accounted for fourteen percent (14%) of the total while Central Luzon had ten percent (10%).
Southern Mindanao and the Ilocos region followed with eight (8%)and seven percent (7%) shares
of the total. The rest of the regions have shares below six percent (6%).
DISTRIBUTION OF ENTERPRISES BY INDUSTRY
Four out of ten enterprises in the country are into wholesaling and retailing. Three out of ten are
engaged in providing community, social, and personal services. Two out of ten are into
manufacturing. The remainder are involved in financing, insurance services, business services,
transportation, storage and communications, construction, mining and quarrying, and agriculture,
forestry and fishery sectors.
DISTRIBUTION OF ENTERPRISES BY OWNERSHIP STRUCTURE
Eight out of ten establishments in the Philippines are organized as single proprietorships. Only one
out of ten are private corporations. The rest are partnerships, cooperatives, and other types of
organizations.
ENTERPRISES THAT GENERATE THE MOST EMPLOYMENT AND ADD THE
HIGHEST VALUE
In generating employment, the small and medium enterprises that currently add the most jobs in
the economy are:
Restaurants and cafes
Private education services
11
Private medical and dental services
Repair of motor vehicles; and
Barber and beauty shops
At present those small and medium enterprises enterprises that add the greatest value to products
and services in terms of amount are:
Private educational services
Restaurants, cafes, etc.
Amusement and recreational services
Private medical and dental services; and
Motion picture and other entertainment services
Rationale for LED
From the above overview, it is clear that economic policies and strategies pursued in the past and
continuing on to the present have neither produced sustainable growth nor reduced poverty.
Economic policies and programs in the past have catered to the larger enterprises and have been
biased toward urban areas despite the reality that majority of Filipinos are in the rural areas and
the overwhelming majority of enterprises are micro enterprises. They have failed to address the
missing middle in the countrys economic structure.
Another reason for the lack of sustainable growth and reduction of poverty is that most economic
initiatives were centrally planned and failed to effectively mobilize local resources and structures.
Missing from the process were the active leadership of and facilitation by the local government.
The UNDP Poverty Alleviation through Rural Urban Linkages (PARUL) - LED Programme of 1997
sought to address this by promoting a facilitative approach to local economic development
through better understanding of public-private coalitions and the essentially facilitative role of
government.
1
12
Today, it is universally recognized that local government units stand at the frontlines of sustainable
economic growth and poverty reduction. The UN Habitat II Conference in 1996 declared that Local
government is the central factor in social and economic development. Experiences of pioneering
local governments like the Cebu provincial and city governments showed that LGUs are in a
privileged position and have an indispensable role in promoting economic development. The
passage of the Local Government Code in 1991 expanded this role further by providing greater space
for and powers to LGUs to pursue LED.
Today, no one doubts that economic development will invigorate and heighten local economic
activity. A more active local economy causes the LGUs tax base to expand and deepen, which in
turn leads to improved internal revenue generation and management. With prudent and effective
use of financial resources, local economic development translates to better social services for the
local citizenry.
A healthy, educated citizenry due to better social services delivery enhances the reputation of the
LGU and the image of local government officials in the country and in the international community.
This boosts their chances of attracting more investors, and politically, of continuing their stay in
office.
Nature of LED
Local Economic Development (LED) is the process by which actors within LGUs (barangays,
municipalities, cities, and provinces) work collectively with the result that there are improved
conditions for economic growth, employment generation, and quality of life for all.
2
The term local in the definition signifies that LED involves building the economic strength of a local
area to improve its economic future. This being the case, the prime movers or driving forces are
barangays, municipalities, cities, and provinces singly or collectively. LED is territorial in approach.
13
The adjective economic drives home the importance of identifying and seizing business
opportunities, supporting entrepreneurial initiatives, creating a climate friendly to investment and
business activity, and facilitating access of local products and services to markets.
The term development emphasizes that local economic development is holistic, focusing not only
on the economic dimension but also on the social, cultural, politico-administrative aspects.
Economic development is a means not an end. Economic growth is a necessary but not a sufficient
condition for development. LED is not just simply setting up large export processing zones or agro
industrial estates. It is not simply building roads, ports, and airports. The quality and direction of
growth is as important and perhaps more so than its quantity or size. Growth that destroys the
environment, or that fails to create local employment and reduce poverty is unlikely to be
sustainable in the long run. Sustainable development is at the heart of LED. This means satisfying
the needs of the present generation without sacrificing the future of succeeding ones.
LED also promotes the following:
Optimization of usually scarce resources in an area
Integration of barangay, municipal, and provincial plans and priorities with regional and
national plans from the bottom upwards;
Citizen participation and consensus building among stakeholders.
However, it is important to remember that while focused on the local, effective LED necessarily has
links to the regional, national and international levels. It is also important to remember the
difference between local and national economic development. National economic development is
concerned with setting the overarching framework and ground for the sustainable growth and overall
competitiveness of the economy through the use of policy instruments such as inflation targeting,
and/or floating the exchange rate. National economic development deals with industry wide and
inter-industry matters, while local economic development concentrates on firm, inter-firm, and cluster
dynamics. The critical levers in local economic development are, among others, land use plans,
taxation, wage setting (regional level), and the provision of infrastructure and social services.
14
Goals of LED
The immediate goals of Local Economic Development are:
Increase in cooperation and acceptance among LGUs, the private sector, and civil society
organizations (CSOs)
Effective local governance
The generation of new/improved jobs
Increasing incomes
The ultimate goals of Local Economic Development are:
Poverty reduction
Improved quality of life
Principles of LED
There are many effective approaches for LGUs to facilitate Local Economic Development but the
principles that underpin the different approaches are consistently the same:
1. Balanced Economic Growth with Social and Gender Equity, Sustainability, Peace and
Cultural Responsibility
Economic growth is not sufficient. It must be pursued in a manner that would reduce poverty,
distribute the benefits of growth equitably among the different sectors of society, and lead to better
relations between men and women.
15
It should not destroy the environment to the detriment of present and future generations. Today,
there is a growing recognition of the multiplicities of local economies existing in one country and
of the different sectors and sub-sectors even in one local economy. These so-called economies
and sub-sectors relate to each other in different ways. An important principle of LED is the
notion of balance between rural and urban development, economic growth with social development
(e.g., health and education, the economic sources of development with environmental concerns,
and women and men). One of the objectives of the UNDP PARUL-LED Programme of 1997 was to
promote a balanced pattern of rural and urban development.
LED should lead to better health and education; understanding and harmony among peoples;
recognition and respect for the diversity among cultures; and promotion of the positive values and
ways of life of different peoples residing in the barangay, municipality, city, or province.
2. LED as Multi-Stakeholder Partnership
LED is a partnership among and between government, the industry associations and private
business organizations, non-government organizations, peoples organizations, cooperatives, and
informal sector associations. Each of these actors has a role to play in Local Economic Development.
3. Private Sector as the Engine of Employment and Growth
The private sector is the engine of growth for increased employment and economic growth. It
occupies this privileged position by reason of the incentive structure in which it operates, i.e., the
creation of value for its incorporators and investors and the presence of competitors; its greater
sensitivity to market signals and movements; its relative freedom to take on risks compared to the
government bureaucracy, and its capacity to mobilize and develop resources and transform them
into different forms of capital (that is, managerial, technological). In areas where the private
sector is underdeveloped, the LGU may initially be the driver of economic growth and the provider
of employment but it must be emphasized that this role is temporary and must be transferred as
soon as the private sector is ready to assume this role.
16
4. LGU as Enabler
The envisioned role for LGUs is as an enabler and creator of an environment conducive for quality
and sustainable development through its various roles and functions. These roles and functions
and their consequences to LED is explained in greater detail below. The basic goal of an enabler
is to create a social, physical, and economic environment conducive to the development of the
locality and to structure this environment through appropriate rule-making and enforcement. In
conjunction with so-called invisible market forces and private initiative, it acts as the visible
hand in Local Economic Development, facilitating but always maintaining a prudent arms length
from the other players.
In certain situations and in certain areas, the LGUs may have to take the lead role in jumpstarting
LED. This happens when there are insufficient private or voluntary/social sector providers of a service
or when the capacities of these private or voluntary/social sector providers are inadequate. A
common example is the provision of utilities such as water and electricity that are critical to the
localitys development. The LGU may choose to directly implement, and/or own, and/or after
completion, manage the facility if the financial, technical, and managerial capacity are lacking in
the private/voluntary sector or if there are no private sector takers for the project because of the
projects risk profile (i.e., the long gestation period from conceptualization to operation, the level
of sunk costs, the long payback period, and the perceived low return from the investments.)
Another occasion for LGU intervention is in the presence of so-called market failureslike cartels
when private sector players conspire to bid up the prices of critical commodities to the peril of society,
especially the poorest. An example would be the governments Parallel Drug Importation (PDI)
program and the LGUs operation of hospital-based and barangay-based pharmacies to distribute
drugs bought through PDI.
Even then, such decisions must not be taken lightly, and all other options besides actual
implementation, ownership, management, and direct competition with the private sector should
17
be weighed carefully. It may well be that the provision of appropriate fiscal and regulatory
incentives would be sufficient to attract private investors to implement, own, and manage the project
instead. Prudence is advised here because LGUs themselves have limited resources and other equally
important concerns other than infrastructure and economic projects. Funds allotted for physical
and economic infrastructure mean less money available for social services.
Regular changes in the LGUs top leadership also do not provide the stability and focus for the
implementation of very long-term projects. The partisanship associated with electoral processes
introduces other factors which are often unfriendly to the effective implementation of economic
projects and the efficient management of public enterprise. Local Chief Executives (LCEs) and officials
have to deal with more stakeholders than private businesses do. These stakeholders jockey to shape
the political, economic, and the institutional environment to favor their interests over those of others.
The danger of co-optation is always present.
Another case for treading carefully into this area is that publicly owned and managed enterprises
often have few incentives to perform. Funds for these public enterprises are cheaply obtained
because they come from the LGU budget or from dedicated financing facilities. In many cases,
enterprise performance targets are not set, nor are allocations linked to performance and
projections. These enterprises are oftentimes successful in their attempts to shape the rules (i.e.,
policies and regulations) in their favor. The results are inefficient, heavily subsidized monopolies
that in the end stunt private sector development and increase the costs for both end-users and
taxpayers.
In summary, LGUs have to be flexible and have to be prepared to switch roles in LED if necessary.
The rule of thumb is that even when LGUs have to be the direct implementer, owner, and manager
of public economic enterprises, they have to strive to become an enabler and facilitator and
avoid stunting the growth of the private and voluntary sectors.
GOOD PRACTICES IN PROMOTING LOCAL ECONOMIC DEVELOPMENT 5
18
5. Transparency and Accountability
LED is impossible without effective local governance. And local governance is ineffective without
the principles of transparency and accountability. LGUs inspire confidence from external investors
and local businesspersons by instituting transparent, stable, and fair policies and establishing systems,
procedures, and practices that effectively exact accountability of local officials. A virtuous circle
is created by accountable and transparent governance. Effective local governance attracts and
intensifies business activities that generate jobs, increase the citizens income, and reduce poverty.
These lead to higher revenues for the LGUs, which if properly managed, translate to more and better
resources for services that enhance the quality of life of its citizens. A prosperous, healthy, and happy
citizenry boosts the reputation of the LGU and its officials, improving their chances for re-election
or for gaining higher office. Good politics make for good economics. Transparent and accountable
governance reduces the cost of doing business in the form of bribes, grease money, facilitation fees
paid to rent-seeking bureaucrats and politicians. These bribes are ultimately passed on to the
consumers in the form of higher prices.
Key Success Factors for LED
1. Sound and Realistic Analysis and Planning
LED begins with a sound assessment of the opportunities and threats to the barangay, municipality,
city, and province as well as their strengths and weaknesses. . Good analysis and planning are
essential because LGU resources are limited. Without sound plans, a great deal of human and
financial resources is in danger of being wasted. Plans also have to be realistic. Too often, many plans
are actually wish listsbecause they are not based on a sober assessment of the human, logistical, and
financial capacities of the LGU, the natural and human resource endowments of the area, and the interests
of the major actors. Often in such plans, the benefits are grossly exaggerated while the costs are papered
over. Sound, realistic, and responsive planning can only be done if the LGU actively involves the major
stakeholders and treats the undertaking as a partnership and not its exclusive preserve or dominion.
19
2. Commitment to LED and Effective Leadership and Management of the Process
Genuine participation of stakeholders is the cornerstone for engendering ownership and
commitment within the barangay, municipality, city, or province over the resulting plans The LGU
must build the edifice by following through on its implementation, maximizing the use of meager
resources, effectively leading and managing the LED process, and above all remaining committed
in the face of various challenges to the construction of a prosperous, just, and harmonious
barangay, municipality, city, or province.
3. Continuous Capability Building
Effectively leading and managing the LED process require both political will and strong institutional
capacity. Strong institutions are not built overnight but are realized only through the continuous
and sufficient provision of training and capability building and of system and process improvements.
Human resources and systems development always lag behind in the march towards progress
because investments in these areas are rarely made or are the first to be sacrificed when budgets
are slashed. Politicians normally opt for those projects that are visible and yield an immediate return.
4. An Enabling Environment for Local Economic Development
A critical factor in the success of LED is a supporting and enabling environment for LED. This consists
of supporting policies and regulatory frameworks (e.g., a low-interest rate and low inflation regime
that allows entrepreneurs to borrow at reasonable rates; laws supporting joint venture arrangements,
etc.), and supporting institutions (e.g., a viable government finance and guarantee corporation).
Equally important are the introduction and enforcement of policies to protect the different
ecosystems. Agricultural productivity would suffer unless the fertility of the soil is maintained.
Denuded watersheds deprive poor upland dwellers of their sources of livelihood; threaten lowlands
with flooding; and diminish water supply.
LGU MANDATES FOR LED AND RELATED LAWS
CHAPTER 2
CHAPTER
2
L
GU mandates related to LED are expressed in various laws like the Local Government Code
and the Social Reform and Poverty Alleviation Act and Memoranda Circular of the
Department of the Interior and Local Government (DILG). In addition, LGUs have to be
conversant with laws on small and medium enterprise development.
Local Government Code
Republic Act 7160 or the Local Government Code has given the local government units (LGUs) more
power and authority to accelerate local economic development and improve the quality of life in
our communities. The following provisions are the most relevant to LED.
SEC. 16
Every local government unit shall exercise its powers which are essential to the promotion of
the general welfare. Within their respective jurisdictions, local government units shall promote
full employment among their residents
SEC. 17 (B)(2)(IX)
Public markets, slaughterhouses and other municipal enterprises.
SEC. 17 (B)(2)(XI)
Tourism facilities and other tourist attractions, including the acquisition of equipment, regulation
and supervision of business concessions, the security services for such facilities.
LGU MANDATES FOR LED AND RELATED LAWS
24
SEC. 17 (B)(3)(IX)
Investment support services, including access to credit financing
SEC. 35
Local government units may enter into joint ventures and such other cooperative arrangements
with peoples and non-governmental organizations to develop local enterprise to improve
productivity and income, diversity agriculture, spur rural industrialization and enhance the
economic and social well-being of the people.
SEC. 36
A local government unit may provide assistance to such peoples and non-governmental
organizations, for economic, socially-oriented projects to be implemented within its territorial
jurisdiction.
SEC. 109
Functions of Local Development Councils.
The Social Reform and Poverty
Alleviation Act
RA 8425 or the Social Reform and Poverty Alleviation Act stipulates that it is the declared policy
of the State "to adopt an area-based, sectoral and focused intervention to poverty alleviation wherein
every poor Filipino family shall be empowered to meet its minimum basic needs of health, food
and nutrition, water and environmental sanitation, income security, shelter and decent housing,
25
peace and order, education and functional literacy, participation in governance, and family care
and psycho-social integrity."
It mandates LGUs through the Local Development Councils (LDCs) to formulate, implement,
monitor and evaluate poverty reduction programs in their respective jurisdictions, consistent
with the poverty reduction strategy of the national government.
Laws on the Development
of Small and Medium Enterprises (SMES)
To push Local Economic Development, there is a need to craft a framework that would mold
SMEs into globally competitive enterprises. The following national policies have been legislated
to provide such framework.
MAGNA CARTA FOR SMALL ENTERPRISES (R.A. 6977)
The law provides a climate that minimizes regulations while at the same time assuring stable
operating rules. It requires close coordination between government institutions involved in SME
development and the private sector so there is coherence in both policy thrusts and implementation
of action programs. For this purpose, the Small and Medium Enterprise Development Council
(SMEDC) was created. To address the problem of access to financing, the Magna Carta requires all
lending institutions, whether public or private, to set aside at least 6% and 2%, respectively, of their
total loan portfolio for SME credit for a period of 10 years from August 12, 1997 to August 9, 2007.
KALAKALAN 20 (R.A. 6810)
Assistance is provided to countryside barangay and business enterprises through minimum
regulation, and provision of financing and other government services and assistance.
LGU MANDATES FOR LED AND RELATED LAWS 2
26
AN ACT PROVIDING ASSISTANCE TO WOMEN ENTREPRENEURS (R.A. 7882)
Government financial institutions are mandated to provide financial assistance to non-government
organizations engaged in developing women entrepreneurs engaged in manufacturing, processing,
service and trading businesses
THE OMNIBUS INVESTMENT CODE (E.O. 226)
SMEs that are engaged in the priority areas of the investment priorities plan are entitled to the
standard incentives under the code such as income tax holiday for 4-6 years, tax and duty free
importation of capital equipment, additional deduction from taxable income for labor expense,
exemption from contractors tax, unrestricted use of consigned equipment, and access to bonded
manufacturing warehouses. Additional incentives are given to SMEs that locate in less developed
areas. SMEs that are registered with the Board of Investments (BOI) may avail of technical and other
support services provided by the agency.
DILG Memorandum Circulars (MC) on LED
MC NO. 2002-48: LOCAL ECONOMIC TRANSFORMATION PROGRAM FOR LOCAL
GOVERNMENTS
The Circular articulates the economic philosophy and approach of the Arroyo Administration as
outlined in her first State-of-the-Nation Address on July 23, 2001, which are:
An economic philosophy of free enterprises by: attracting investment to create jobs and
employment; addressing long structural issues such as basic infrastructure like power,
transportation and communication; harnessing private sector participation via Build-Operate-
Transfer (BOT), Build-Transfer (BT), Build-Operate-Own (BOO) and other forms of privatization;
27
promoting fast-growing industries; streamlining operations and slashing red tape and;
harnessing our competitive edge in tourism.
The modernization of agriculture founded on social equity
A social bias to balance economic development by making microfinance a cornerstone in our
fight against poverty, among others, and
Improving moral standards and the rule of law by upholding law and order through a holistic
response consisting of political, economic and psycho-social security
In order to achieve these, paradigm shift towards good local governance is required, through the
following:
Transforming local leaders from mere administrators and political technocrats to accountable
entrepreneurial development managers
Encouraging LGUs to be more creative and innovative for excellent service delivery, and in dealing
with current and emerging challenges
Institutional reforms to strengthen linkages and coordination among LGUs, the private sectors
and other concerned sectors in the formulation and implementation of social reforms and anti-
poverty and economic development programs
Establishing mechanisms and standards that ensure transparency and accountability in local
government operations and transactions; and
Localizing consensus building mechanisms and strengthening the local special bodies
With their newfound roles as local economic managers, it is imperative for local chief executives
and other local officials and personnel to recognize their responsibility to secure the economic well
being of people in their localities. They can do this by creating an environment conducive to
growth and investment.
28
MC NO. 2002-107: ORGANIZATION AND/OR STRENGTHENING OF LOCAL
SMALL AND MEDIUM ENTERPRISE DEVELOPMENT COUNCILS (SMEDCS)
The Memorandum Circular enjoins all city and municipal mayors to organize and strengthen
their respective Small and Medium Enterprise Development Councils (SMEDCs). Cities and
municipalities without existing SMEDCs or their equivalent local councils or bodies are encouraged
to organize their respective councils. The functions of the City and Municipal SMED Councils are
as follows:
Help establish the needed environment and opportunities conducive to the growth and
development of enterprises in the locality
Recommend to the Sanggunian all policy matters affecting businesses in the locality
Formulate a Local Entrepreneurship Development Plan (LEDP) to be integrated into the Local
Development Plan and facilitate implementation of the same
Coordinate and integrate various government and private sector activities in the locality
relating to enterprise development;
Formulate, disseminate and advocate policies, principles and implementing guidelines in the
development and promotion of local enterprises and
Develop and provide appropriate services beneficial to local enterprises and entrepreneurs.
MC NO. 2002-09: IMPLEMENTATION OF THE LGU-CLUSTER DEVELOPMENT
APPROACH PROJECT (LGU-CLAP) AS A STRATEGY IN THE ADOPTION OF ONE-
VILLAGE, ONE-PRODUCT MOVEMENT
Consistent with the mandate of the Department in implementing the LGU-Cluster Development
Approach Project as a venue for the adoption of the One-Village, One-Product Movement, all
Regional Directors were directed to implement the following priority concerns until the end of
December 2002:
29
Formally organize at least one cluster per region by the end of December 2002 through
appropriate SB Resolutions and MOAs and strengthen existing clusters in Regions I, II, IV, and
VI through capacity building and alliance building with appropriate agencies and institutions
on product packaging, marketing and investments
Assign Regional/Provincial LGU-Cluster Coordinators to take charge in replicating and
strengthening the LGU-Cluster Development Project in the LGUs
Provide technical assistance in advocating the One-Village, One-Product Movement and
integrating appropriate cluster programs, projects and activities in concerned local development
plans
Allocate corresponding fund support to cluster-related activities in the regions; and
Submit semi-annual reports on the implementation of the project, starting December 2002. The
monitoring form shall be provided by BLGD (Bureau of Local Government Development) as OPR
of the project.
MC NO. 2001-172: GUIDELINES ON POVERTY REDUCTION PROGRAM FOR
LOCAL GOVERNMENTS
The Memorandum Circular enjoins all Provincial Governors, City and Municipal Mayors to formulate
their respective Local Poverty Reduction Programs using the following general guidelines:
Designation of Local Poverty Reduction Program Action Officers (LPRAO)
Program Formulation and Development
- local poverty situation analysis
Project Identification and Prioritization
Suggested Outline of the Local Poverty Reduction Program
- Local Poverty Situation
- Vision for Poverty Reduction
- Poverty Reduction Strategy
- Poverty Reduction Projects, Goals and Objectives
30
- Poverty Reduction Action Plan
- Milestones and Indicators of Achievement in Poverty Reduction
Integration of Poverty Reduction Program in the Local Development Plan
Funding Support
Monitoring and Evaluation
MC NO. 2001-109: INITIAL AREAS FOR ACTION IN THE IMPLEMENTATION OF
PROGRAMS ON POVERTY REDUCTION AND LOCAL ECONOMIC
TRANSFORMATION
The Memorandum Circular provides directives to all Local Chief Executives in implementing
Poverty Reduction and Local Economic Transformation projects.
Poverty Reduction
Designation of a Local Poverty Reduction Program Action Officer in each province, city and
municipality
Inventory of poorest families per criteria set by DILG Memorandum Circular Nos. 98-51 and 98-
54
Identification of local needs in the areas of food, shelter, employment and education per the
Presidents State of the Nation Address last July 23,2001
Utilization of the poverty reduction tools such as the Minimum Basic Needs (MBN) Approach,
Integrated Rural Accessibility Planning (IRAP) Data, Community-Based Monitoring System
(CBMS) Approach and other tools to identify target beneficiaries
Formulation of a Local Poverty Reduction Action Agenda (LPRAA) based on identified priority
needs of the locality, to be incorporated in Local Development Plan
Identification of External and Internal sources of assistance to implement identified projects in
the LPRAA
31
Local Economic Transformation
Creation or activation of a One-Stop-Shop Investment Promotion Center in each province,
city and municipality
Inventory of existing small and medium enterprises in each province, city and municipality
Identification of priority needs of the locality on small and medium enterprise development,
cluster and development areas establishment of economic zones (eco-tourism, eco-industrial
or eco-agricultural) and other economic concerns
Formulation of a Local Economic Transformation Program Agenda (LETPA) based on identified
priority needs, which shall be incorporated in Local Development Plan;
Utilization of various tools in needs identification such as Comprehensive Land Use Plan (CLUP),
studies on urban management and BOT Guideline
Identification of external and internal sources of assistance to implement projects identified in
the LETPA
All provinces, cities and municipalities are advised to submit all LPRAAs and LETPAs to the Bureau
of Local Government Development (BLGD), through the proper DILG channels.
MC NO. 2001-105: DESIGNATION OF LOCAL POVERTY REDUCTION PROGRAM
ACTION OFFICERS AND THE FUNCTIONS OF THE LPRAO
MC NO. 2002-30: GUIDELINES PRESCRIBING TIME PERIODS ON THE
ADOPTION, REVIEW AND APPROVAL OF COMPREHENSIVE AND LAND USE
PLANS (CLUPS)/ZONING ORDINANCES (ZOS) OF MUNICIPALITIES,
COMPONENT CITIES, HIGHLY URBANIZED CITIES AND PROVINCES
Gives the guidelines on scope & coverage, CLUPs in Plan Preparation stage, in Review/Approval stage,
regular updating period, technical assistance, reporting and monitoring system, sanctions and
penalties
32
MC NO. 2002-81: CREATION OF LOCAL CULTURE AND THE ARTS COUNCIL
Mandates the creation of Provincial, City/Municipal Councils for the Culture and the Arts; composition
and functions; and the role of DILG
MC NO. 95-162: INVENTORY OF LGU TOURISM, CULTURE AND THE ARTS
COUNCILS
LGUs to submit inventory to update the Directory on Local Culture and Arts Councils and Local
Tourism Councils
MC NO. 2001-19: SOLID WASTE MANAGEMENT PROGRAM IMPLEMENTATION
OF REPUBLIC ACT NO. 9003 OTHERWISE KNOWN AS THE ECOLOGICAL SOLID
WASTE MANAGEMENT ACT 2000
Outlines the composition of the Provincial and City/Municipal Waste Management Board; role of
DILG
MC NO. 2001-38: ADDENDUM TO DILG MC 2001-19 RE-IMPLEMENTATION OF
REPUBLIC ACT 9003, OTHERWISE KNOWN AS THE ECOLOGICAL SOLID WASTE
MANAGEMENT ACT OF 2000
Outlines the composition and functions of the Barangay Ecological Solid Waste Management
Committee and other related matters.
33
MC NO. 2001-48: ADDENDUM TO DILG MC 2001-19 RE-IMPLEMENTATION OF
REPUBLIC ACT 9003, OTHERWISE KNOWN AS THE ECOLOGICAL SOLID WASTE
MANAGEMENT ACT OF 2000
Gives the general characteristics and components of the Provincial, City/Municipal Solid Waste
Management Plans; role of DILG
MC NO. 2001-48: INVENTORY OF ALL SOLID WASTE DISPOSAL FACILITIES AND
SITES IN LGU
Mandates LGUs to conduct inventory of all existing and proposed solid waste disposal facilities and
sites within their areas of jurisdiction; role of DILG
JOINT MEMORANDUM (DILG, DBM, NCRFW) CIRCULAR NO. 2001-01:
GUIDELINES FOR INTEGRATING GENDER AND DEVELOPMENT (GAD) IN THE
LOCAL PLANNING AND BUDGETING SYSTEM THROUGH THE FORMULATION
OF GAD PLANS
Gives the guidelines for integrating GAD in local planning and budgeting (objectives; the GAD plan;
GAD programs, projects and activities; appropriations for GAD; implementation and monitoring
of GAD plans)
MC NO. 2002-163
Creation of Local Council for Women
ROLE OF LGU AND OTHER STAKEHOLDERS
IN LED
CHAPTER 3
CHAPTER
3
ROLE OF LGU AND OTHER STAKEHOLDERS IN LED
T
his chapter expounds on the role of LGUs and other stakeholders in facilitating LED. As will
be read in the succeeding pages, LED is not something foreign or special to what LGUs are
already doing. Rather, LED is a transformed or new mindsetof performing these regular
functions. The chapter also discusses the various roles of other LED stakeholders such as micro, small
and medium, and large enterprises, civic and professional organizations, cooperatives and
microfinance institutions, and educational institutions.
Regular Functions of
LGUS with Consequences for LED
Regular functions of LGUs have important consequences in facilitating Local Economic Development.
LGU POLICY MAKING AND TAXATION FUNCTION
Ordinances and resolutions passed by the different local legislative bodies strongly influence the
areas competitiveness and attractiveness to external investors. Local tax ordinances and incentives
strongly determine investors cost of doing business in an area and is often a factor in their
decision to locate or not. Tax breaks, rebates, grants, provision on the use of local materials and
local employment, protection measures for infant and experimental industries and innovative
enterprises can spur the learning, searching, and risk taking by local entrepreneurs, local employment,
the growth of new enterprises, and the strengthening of existing ones. Care must be taken by the
LGU not to rely exclusively on these inducements or incentives as they can encourage inefficiency
among benefiting enterprises. Zoning ordinances and local land use plans define the trajectory
and the kind of development that would prevail in the area. LGU policies help create an enabling
environment for LED.
38
REGULATORY FUNCTION
LGU regulatory policies (e.g., traffic ordinances, limitation on the number of franchises granted to
public utility vehicles like tricycles, restriction on quarrying activities, promotion of waste reduction)
limit the harmful effects of economic growth on the environment. LGU regulations can also affect
the economic operations of certain vulnerable sectors, e.g., regulations on street vendors and the
informal sector, rental fees for stalls in the public market, traffic rerouting. Simplifying the process
and upholding honest and aboveboard transactions in securing building and business permits and
in the payment of real property taxes can enhance the image of the LGU as an investment site. The
procedures should not be cumbersome, and there ought to be a single point of contact to avoid
repetition.
PLANNING AND BUDGETING
Local development plans signal to LED partners the priorities and directions of the local government
while the approved LGU budget is a testament to its resolve to see the plans through to reality. It
is also important that the plans and priorities for LED be integrated into the annual LGU investment
plan.
LGU planning and budgeting activities are venues for creating consensus, building partnership, and
promoting stakeholder ownership of Local Economic Development. A sound and realistic planning
process will allocate and define the roles of the different stakeholders in LED and establish
mechanisms for coordinating the various and diverse efforts.
COLLECTION, STORAGE, AND DISSEMINATION OF INFORMATION
LGUs, through the different offices, are also important collectors and repositories of information.
The LGU must ensure that information on the locality is accurate, systematically stored, updated,
and readily accessible to business investors. Information that the LGU must gather includes
39
population, labor force, wage rates, existing enterprises, employment opportunities, transportation
links, available lands and building, mapping information, infrastructure, and credit facilities for
businesses.
PROCUREMENT OF GOODS AND SERVICES
In many areas, especially in lower class, rural municipalities, LGUs are often the biggest employer
and one of the largest, if not the largest, consumer of goods. For all the criticism the practice has
received, the employment of casuals in the local administration or in local infrastructure projects
provides a means for people in the community, especially the less skilled and poorer members, to
earn some income. The local budget is watched by some entrepreneurs, as this influences the
fortunes of their own businesses. Transparent and fair procurement activities stimulate competition
among local businesses, and if the goods and services procured constitute a substantial sum, LGU
purchases and acquisitions can inspire the creation of new enterprises.
MARKETING AND PUBLIC RELATIONS/INVESTMENT AND ENTERPRISE
PROMOTION
Investment promotions, trade missions, job fairs, and the construction of exhibition halls and
showrooms create an awareness among potential investors of local products and match local
producers and service providers with outside buyers. By supporting their participation in
international trade fairs, LGUs provide local enterprises the opportunity to learn the latest craft and
to rub elbows with the worlds best. Hopefully, local enterprises will be inspired to become world-
class in the process.
ROLE OF LGU AND OTHER STAKEHOLDERS IN LED 3
40
MANAGEMENT OF PUBLIC ECONOMIC ENTERPRISES AND THE PROVISION OF
PHYSICAL FACILITIES
LGUs influence LED through the provision and/or management of public infrastructure like public
markets, abattoirs, transportation terminals, water and power utilities (in some provinces) and roads.
The public market is often the showcase of a city or municipality, an indicator of its status. How
competently it is managed indicates how well the city or municipality is doing. Municipal or city
policies on purchase of rights to stalls and stall rentals can facilitate or deny access to the
economically active poor of the municipality and city. Studies on investor behavior reveal that the
presence, quality and cost of critical infrastructure like water and electric utilities, communication
facilities, roads, ports, airports, and transport facilities rank high in their criteria for choosing
locations for investment.
In rural areas, the construction of farm to market roads lessens the dependence of farmers on
middlemen and allows them to capture more of the profits. This translates to cheaper prices for
consumers and more business for public market vendors. Rural public works projects are also sources
of income for the rural folk during the dry season.
These public economic enterprises lend support to local economic development. They also
generate income for the LGU. However, care must be taken that these public enterprises are
managed efficiently. In many areas, these transport terminals, public markets, and abattoirs are virtual
monopolies; in others, they are in direct competition with privately owned markets and supermarkets.
LGUs should weigh the economic costs of maintaining ownership and management of these
facilities with their public benefits. In certain instances, it may be possible for LGUs to retain
ownership but turn over management of these facilities to the private sector. This will allow LGUs
to concentrate on monitoring and enforcing sanitary standards in abattoirs and among food
handlers. The opportunities that public markets provide to the economically active poor of the
locality to sell their products are a case for retaining ownership of public markets. That space may
be absent or may be too costly for the poor to afford if public markets were privatized.
41
Certain facilities are better provided by higher-level LGUs than lower level LGUs. Provinces can take
on the implementation of projects that are far beyond the capacity of individual municipalities or
which benefit several municipalities at once. For example, in the agriculture sector, the Local
Government Code directs provinces to provide agricultural extension and on-site research services
and facilities which include the prevention and control of plant and animal pests and diseases, dairy
farms, livestock markets, animal breeding stations, and, artificial insemination centers. Because
of their coverage, the need to protect water sources, and the linkages that have to be established
between these and the users, some irrigation facilities are better provided by provinces than by
individual municipalities/cities. Provinces can also coordinate the activities and efforts of LGUs in
its jurisdiction like the function that the Zamboanga del Norte Provincial Government performed
in the DDKRM (Dapitan City Dipolog City Katipunan Roxas Manukan) cluster.
PUBLIC SAFETY AND CULTURAL HERITAGE ACTIVITIES
A low crime rate and a stable peace and order situation are prized by both local and external investors.
More than stunning natural wonders and sceneries, peace and order is the deciding factor in the
success and failure of a municipality, city, or province as a tourist destination and business location.
Cultural heritage activities and facilities create a sense of community while enhancing the tourism
potentials of the LGU.
PROVISION OF SOCIAL AND ENVIRONMENTAL SERVICES
Primary health and curative services, water and sanitation, and activities connected with solid waste
management like the promotion of waste segregation and the three Rs (reduce, re-use, recycle),
are important programs for improving the well-being of the citizens. Good health leads to increased
productivity and reduced medical expenses. Support to education like the Special Education
Fund contributes to human capital formation and prepares the LGU to compete in the knowledge
economy, where the only sustainable competitive advantage is an educated, highly skilled, and
trainable workforce.
42
There are also opportunities for local entrepreneurs in solid waste management, especially the
recycling business. LGUs themselves can be entrepreneurial by striving to at least recover the cost
of delivering services. The Municipality of Malalag in Davao del Sur charged user fees for its health
services. These had the salutary effects of augmenting the LGUs budget for health and of changing
the mindset of the citizens, who as paying customers, became more demanding of the quality of
the services they were receiving, pushing the providers to improve their performance as a result.
In summary, by the effective, efficient, and transparent performance of their regular functions, LGUs
already exert a considerable influence on Local Economic Development. The development of the
local economy can be achieved singly and (more often) through complementation and
supplementation with same-level and higher-level LGUs. The infusion of external funds is important
but LGUs need not wait for their arrival to start the LED process. Equally important are efforts to
tap indigenous sources of growth.
Role of Other LED Stakeholders
Stakeholders are individuals, firms, and/or organizations in the public, private, civil society or
non-profit sectors who are affected and can affect the LED process. The major stakeholders are those
that have the greatest interest and ability to contribute to the planning and implementation of the
LED. Different stakeholders have different roles, and some would participate more than others.
There are numerous benefits to involving stakeholders in the LED process.
First, stakeholders bring specialized knowledge and different perspectives, thereby expanding the
breadth and depth of the LED process, particularly in the planning stage. Local community
representatives are likely to be better informed about local problems and opportunities. Business
representatives know better than the LGU the competitive position of the community.
43
Second, stakeholders bring professional expertise, financial resources, and physical assets to the
LED process.
And third, by their presence, stakeholders lend legitimacy to the LED process, and their involvement
creates ownership of the vision, mission, objectives, and strategies of LED. Ownership, in turn, makes
it more likely for the stakeholders to volunteer their time, labor, and physical and financial resources
to support LED implementation programs.
The private sector is the main engine for local employment and growth. Singly or collectively as
chambers of commerce and industry associations, its task is to scan and seize opportunities, take
risks, develop markets, and create economic value. It accomplishes this better than government
does because it has more at stake the survival of the enterprise -- and has lesser constraints. While
government has a captive market for its revenues, a business has to woo, pursue, and cajole fickle
consumers to buy its products or services in the midst of cutthroat competition. It must be
efficient and innovative lest it perish.
In promoting LED, the LGU has to be aware of the different kinds of enterprises and the different
roles they play.
MICRO ENTERPRISES
In areas where small and medium enterprises are scarce, micro enterprises serve as incubators or
seeds for growth enterprises. However, studies in other countries have shown that very few
micro enterprises graduate to become small and medium enterprises. Because many are home-
based and utilize free part-time family labor, they are not individually significant generators of
employment. Collectively because of their sheer numbers, they do employ many people who would
otherwise remain idle.
44
Many micro enterprises are constrained from growing because of the limited market (the immediate
neighborhood for variety stores and itinerant vendors), the limited production area (the backyard
or the living room of the house), the competition caused by the low barriers of entry and exit, and
at times, the short shelf life of the product (e.g., fish).
Many micro enterprises have an ad hoc character and are taken up and just as easily given up
depending on the season. Thus, it is not surprising to see a vendor selling drinks and fish balls when
schools are in session and employed as a temporary construction worker when students are on
summer vacation. It is not uncommon for poor people to engage in several micro enterprises at
the same time. Micro enterprises, especially home-based enterprises run by women (e.g., backyard
livestock raising; variety stores, etc.), often start out as sidelines whose earnings add-on or
supplement the households income. Income from micro enterprises helps in beefing up a poor
households consumption and allows it to make investments in a childs education or to improve
the house. They are important defensive measures in times of crisis, and reduce the households
vulnerability to economic shocks and risks (e.g., retrenchment of the spouse, seasonality of
demand or supply characteristic of certain livelihoods, etc.).
Micro enterprises are an important safety valve of the economy during times of economic crises.
The number of micro enterprises (and of the self-employed) expands when the formal business
sector slows down and the formal labor market contracts.
SMALL AND MEDIUM ENTERPRISES
Unlike micro enterprises, small and medium enterprises not only increase the income of its owners
but also generate employment of persons other than members of the owners household. The
markets of small and medium enterprises are usually larger and more competitive. They are
often outside the locality. Entry barriers are higher; the start-up capital is larger and the required
skills are more sophisticated. They are subject to greater regulation from the government in the
areas of wages and benefits, taxes, occupational safety and health, compliance to environmental
standards, etc.
45
One of the 20 key commitments regarding economic development made during the UN Habitat
II Conference in 1996 is for economic development to focus on small and micro enterprise
particularly those developed by women.
LARGE ENTERPRISES
Large enterprises are huge employers and investors. For this reason, they are also the largest
taxpayers and are often the heaviest users of the latest technology. Large enterprises are also
storehouses of talent of various kindsmanagerial, technical, and financial that can be tapped
for LED.
ORGANIZED BUSINESS GROUPS
Organized groups of businesses like chambers of commerce and industry associations play a
crucial role in setting and enforcing quality standards, upgrading the industrys human and
technological resources, product development, marketing, and management training. Some
industry associations also provide business development services and broker financing to its
members from lending institutions.
Local guilds, craft and professional associations help create a unique LGU brand and are the allies
of LGUs in many projects like health, livelihood, and urban regeneration. For example, Angonos
painters have created a name for themselves and for the town in the local and international art scene.
They are also spearheading urban regeneration efforts by bringing their art to the walls and
streets of Angono. Civic groups like the Rotary Club, Soroptimist International, Lions, Kiwanis, and
Jaycees are active in local beautification and greening efforts and sponsor medical missions to
impoverished areas.
46
COOPERATIVES AND MICROFINANCE INSTITUTIONS
Cooperatives and microfinance institutions serve as local treasuries and depositories of community
savings. They promote a culture of frugality, discipline, trust, self and mutual help, and
entrepreneurship. In many rural villages, they fill the large demand for credit from small business
persons, many of whom are women, and farmers who are shunned by the formal financial
institutions because of their small credit needs, lack of assets for collateral, or lack of documentation
to prove ownership of land. In many rural villages, cooperative-run stores are the communitys sole
source of cheap commodities.
Cooperatives and microfinance institutions are important drivers of LED because the savings
deposits and share capital they collect from the members are re-invested in the locality and not
siphoned off and lent out to urban consumers. These investments generate additional household
income for the borrowers and members, and in larger enterprises, local employment.
Through their social health insurance, mortuary packages, and emergency loans, cooperatives and
microfinance institutions cushion the impact of economic shocks, personal loss, illness, and natural
disasters on their members and borrowers. In the absence of these social protection measures, hard-
hit households have no recourse but to divest themselves of critical economic assets like land and
livestock.
Cooperatives and microfinance institutions can serve as conduit and manager of LGU funds, e.g.,
for livelihood projects. Cooperatives of market vendors can assist in the effective management of
the municipal or city public market and abattoir.
47
NON-GOVERNMENT ORGANIZATIONS (NGOs) AND PEOPLES ORGANIZATIONS
(POs)
NGOs and POs are known for their social innovations, organizing and mobilizing capabilities at the
grassroots-level, and participatory methods and techniques. Less burdened by hierarchies,
protocols, bureaucratic constraints, and legal considerations, NGOs have the comparative advantage
over LGUs in the generation of so-called social capital or shared relations, network of trust, and
mutual help mechanisms. Using this comparative advantage to the hilt, non-government
organizations can perform different roles in local economic development.
NGO and PO representatives sit in the Local Development Council and other Local Special Bodies
like the Local School and Health Boards. They are critical actors in setting the overall direction of
LGU through the formulation of land use plans, local economic development and investment plans,
local health plans, education activities and the utilization of the Special Education Fund (SEF).
Active collaboration with NGOs and POs can ensure that the planning process is participatory,
beginning from the purok level and moving upwards to the barangay and to the municipal and
city levels, and even to the provincial level. NGOs and POs are good channels of the sentiments,
needs, and views of the grassroots and disadvantaged sectors of the locality.
They can assist the LGUs in service delivery and can even be contracted to deliver certain services
themselves, e.g., collection of recyclable materials.
The LGU can and should utilize the social capital that peoples organizations have generated in their
communities. POs can mobilize the people to provide voluntary labor for rural public works projects.
As in other areas, they can assist the LGU in securing the right-of-way for road, water system and
irrigation projects, thereby lessening the cost and generating savings for the LGU. Many LGUs have
organized and mobilized fisherfolk organizations to guard municipal waters and enforce local
ordinances or resolutions from Municipal Fisheries and Aquatic Resource Management Councils
48
(MFARMCs) banning the use of destructive fishing methods and encroachment in municipal
waters by large, commercial fishing vessels.
Some non-government organizations and peoples organizations can serve as watchdogs,
monitoring LGU implemented projects and providing an independent evaluation of LGU programs.
NGOs sitting in the local Pre-qualification, Bids, and Award Committees (PBAC) can help protect
the integrity of the procurement process.
EDUCATIONAL INSTITUTIONS
Hosting a state or private university and college can be a source of pride for an LGU. In many places
abroad, the town or city is actually built around a university, and the latter is a significant contributor
to the local economy. The academe is an incubator of ideas and creators of knowledge. A
predominantly agricultural locality relies on the local agricultural college to undertake research,
provide workable solutions to problems, develop, test, demonstrate, and encourage new
technologies in crop science. In budding commercial and industrial economies, universities are
often sources of managerial talent and providers of the human resource requirements of growing
businesses. Some universities and colleges have business resource centers that provide business
development services to sunrise industries and growing enterprises. The business development
services vary ranging from actual financing to technology transfer, product development, marketing,
financial management, and business planning.
STRATEGIES TO FACILITATE LED
CHAPTER 4
CHAPTER
4
I
n this chapter, some strategies that local governments could apply to facilitate local economic
development or LED are presented. The emphasis is on the word some, as the list and the
descriptions are not exhaustive. There are a number of strategies that the LGU can adopt to
facilitate Local Economic Development. They sometimes overlap. The strategies that are not mutually
exclusive can be combined in a number of ways. In general, these strategies have to do with:
1. Formulating a local economic agenda
2. Establishing a local economic development authority
3. Creating and improving the environment for would-be investors
4. Retaining and encouraging existing businesses to grow
5. Encouraging new enterprises
6. Creating a conducive environment for cooperatives
7. Focusing on the formation and growth of clusters
8. Targeting specific areas for regeneration and development
9. Targeting disadvantaged sectors
10. Alliance building with the private sector and other LGUs
Each of these strategies is explained and discussed in this chapter. At the end of each discussion,
this resource book links the strategy to Philippine laws and experiences by citing specific statutes
and LGUs that have implemented the strategy or parts of it. Some of these LGUs are the subject
of case studies in Chapter 6. A number of the strategies are informed by learnings on local
economic development gleaned and promoted by the World Bank and other international
institutions.
STRATEGIES TO FACILITATE LED
52
In addition, the chapter lists down ineffective LED strategies that the LGU should avoid, namely:
3
1. Expensive untargeted foreign investment marketing campaigns
2. Excessive reliance on grant-led investments
3. Overgenerous incentives for inward investors
4. Business retention subsidies
5. Low road strategies like cheap labor and cheap capital
6. Supply-driven capability building and credit programs
7. Credit rationing
8. Government-led retail credit projects.
Aside from the strategies that LGUs can use and should avoid, this chapter will also give a brief
description of the capacity building process for LGU-facilitated LED.
FORMULATING AND IMPLEMENTING A LOCAL ECONOMIC PLAN
Facilitating local economic development begins with the formulation of a local economic plan. The
process must be participatory and involve the major stakeholders of LED. Formulating the Local
Economic Development Plan begins with an environmental scan of the opportunities and emerging
trends and the capacity of the municipality, city, and province to take advantage of the opportunities.
The environmental scan should uncover the LGUs comparative advantage. It must be said here
though that deciding on the LGUs comparative advantage is not a once-and-for-all process but
a continuing endeavor. Recent studies have shown that the discovery of an areas comparative
advantage is achieved less by one-shot, step-by-step planning than by an iterative process of self-
discoveryand of searching and learningconsisting, on the one hand, of flexible planning and on
the other, of entrepreneurial risk-taking and trial and error.
4
The planning process for LED should recognize the varying conditions among LGUs, especially their
differing physical/natural resource endowments and ecosystems, available human resources, and
financial capacities. Planning for a rural and predominantly agricultural locality will differ from urban
53
planning. Rural LGUs have an abundance of natural resources but they usually have fewer financial
resources and limited capacity compared with their urban counterparts. Be this as it may, the process
of the identifying and implementing an LGU-facilitated LED effort is the same. The process follows
five stages:
5
1. The LGU organizes the LED effort. It identifies and organizes the stakeholders.
2. The LGU and the stakeholders jointly undertake a competitive assessment using information from
the Comprehensive Land Use and other plans, and SWOT (Strengths, Weaknesses, Opportunities,
and Threats) techniques, among others.
3. The LGU and the stakeholders prepare their LED strategy/ies and render them into a LED Plan.
4. The LGU and the stakeholders implement the LED Plan.
5. The LGU and the stakeholders monitor, review and evaluate the LED Plan
Throughout the whole process, there is constant monitoring, reviewing, gathering lessons, and
providing feedback to the planners and implementers.
The Local Economic Development Plan should contain the following:
6
1. Vision Statement
2. Mission Statement
3. Objectives
4. Performance Measurements
5. Strategies and Programs
6. Organizational Structure
The Local Economic Development Plan must dovetail with the approved land use plan in targeting
particular parts of the LGU for regeneration and growth.
STRATEGIES TO FACILITATE LED 4
54
Specific Philippine Context and Experiences:
DILG MC No. 2002-48: Local Economic Transformation Program for Local Governments
DILG MC No. 2002-30: Guidelines Prescribing Time Periods on the Adoption, Review and
Approval of Comprehensive and Land Use Plans (CLUPs)/Zoning Ordinances (ZOs) of
Municipalities, Component Cities, Highly Urbanized Cities and Provinces
The Integrated Area Development Program of Irosin, Sorsogon
The Lingap Tanaw Program of Naujan
ESTABLISHING A LOCAL ECONOMIC DEVELOPMENT AUTHORITY (LEDA)
A new initiative requires a champion and new structures for implementation. Many worthy
undertakings begin with a bang only to fizzle out midstream because responsibility for its
implementation rests with not one office or person but is scattered across different offices. Even
prior to the formulation of the Local Economic Development Agenda, the LGU ought to convene
a Business Development Group or LED Steering Committee under the auspices of the Local
Development Council that would prepare the ground for the multisectoral planning. Members of
the group ought to come from the major stakeholders of LED and should be conversant with the
language of enterprise and investment. This Business Development Group can metamorphose later
on into a full-fledged Local Economic Development Authority (LEDA).
The role of the LEDA would be to oversee the implementation of the Local Economic Development
Agenda and orchestrate the efforts of the LED stakeholders.
The specific objectives of the LEDA would be to:
7
1. Identify internal or indigenous resources for LED and utilize these
2. Coordinate the efforts of LGU offices and major stakeholders around an agreed upon vision of
LED and the Local Economic Agenda
55
3. Promote small and medium sized business and the creation of an entrepreneurial culture
within the LGU and outside
4. Promote the municipality/city/province to facilitate investments and job generation
5. Identify the most vulnerable groups, ascertain their needs, and mobilize support for the poors
micro enterprises
6. Provide initial business development services to start-ups and later link them and more mature
businesses with sources of financing, technical, and managerial know-how
7. Serve as the center for business information about the LGU, fielding inquiries from prospective
investors and job-seekers, and facilitating the entry and applications of investors.
DILG MC No. 2002-107 Organization and/or Strengthening of Local Small and Medium Enterprise
Development Councils (SMEDCs)
Marikina City is one of the first LGUs in the country to establish its own LEDA
The Dapitan City Dipolog City Katipunan Roxas and Manukan local governments in
Zamboanga del Norte have made the SMEDCs the homeof their LED effort as have a number
of LGUs in the Autonomous Region in Muslim Mindanao (ARMM)
CREATING AND IMPROVING AN ENVIRONMENT FRIENDLY TO WOULD-BE
INVESTORS
8
The strategy involves attracting direct investment into the locality from elsewhere in the country
and from other countries. Investors can be foreign companies, domestic companies, and overseas
Filipino workers wanting to establish businesses for themselves or for their families upon their return.
They can be large manufacturing and service companies or small and medium-scale businesses.
Attracting large manufacturing and service sector employers into communities is one of the most
difficult, frustrating, and risky of all LED strategies. This is partly because there are far fewer
56
investors than communities trying to attract them. Also, many communities are prepared to offer
massive incentives to inward investors. Foreign direct investors often prefer greenfields and edge-
of-the-town sites. Greenfields refer to factories and offices being built on land that until then has
not been developed.
9
These factories and offices often build with investors in mind. Greenfields are
usually agricultural lands, park lands, and open spaces at the periphery of towns, cities, and
metropolises that are converted for industrial and commercial use. All over the world, greenfields
are under tremendous pressure from urban expansion and conversion. To accommodate export
processing zones and industrial sites, communities often over-ride their planning policies in order
to attract investment. This brings with it environmental problems like air and water pollution and
solid waste problems. It also contributes to urban sprawl, traffic, and transportation problems. The
challenge is to defend greenfields against indiscriminate and wanton conversion and urbanization.
There are several ways to do this, among which are:
Establishing agricultural protection zones
The LGU can restrict and reserve certain lands for agricultural use through local zoning ordinances.
Examples of lands qualified for agricultural protection zoning are those that are extremely
productive and that have benefited from huge investments like irrigation and farm support
facilities.
Open space zoning
Open space zoning is an LGU tool used to protect open space. Examples in the Philippines are
attempts to enforce easement regulations along riverbanks and seashores. The Pasig River
Rehabilitation Project and the Marikina River Park come to mind. As the experience of these project
show, this strategy has social consequences, primarily resulting from the resettlement of thousands
of informal settlers.
57
Greenways
Greenways are corridors of protected open space managed for conservation and recreation
purposes. Greenways follow the contours or boundaries of natural land and water features and they
serve as buffers or links between populated areas and nature reserves, parks, and areas of cultural
and historical significance. Greenways halt urban sprawl and provide spaces for recreation and
promenade for urban dwellers.
The effort to attract and more importantly, retain large foreign locators in pre-established and new
industrial parks and zones in the Philippines and all over the world have generally not taken off.
They have also been less successful in ensuring that Local Economic Development is sustainable
in the long run. A major reason is the minimal linkages that these parks and zones establish with
the host community because of the mismatches in the skill, technology and raw material
requirements of the foreign locators with the human and natural resource endowments of the host
community. The locators also source their raw materials from elsewhere in the world, and in
numerous occasions, the plant becomes a mere assembly facility. In other cases, the plant produces
only a few parts/modules and not the complete product, thereby negating the possibility of
significant technology transfer.
Communities that succeeded in attracting, retaining, and benefiting from industrial parks/zones
were those that relied on their indigenousresources for the promotion of these parks and zones.
The prudent thing to do therefore, is to carefully consider the costs and benefits of attracting inward
investors.
There are issues inward investors review when deciding on a location for their businesses. Some
of these are a stable macro-economic climate, a stable political and regulatory environment,
market access and open competition, and a welcoming environment. Inward investors also
consider manageable regulation and taxation systems, incentive schemes, available sites, and
appropriate, available, and reliable utilities and transportation. They also review the availability of
58
skilled workforce, local suppliers and resources; appropriate education, training and research
facilities and good quality of life, especially when they bring in expatriates.
When success is achieved, the benefits can be great. Besides direct employment and an increase
in the tax base and indirect employment, there are potential gains to the local community through
the upgrading of skills of the workforce, increases in wages, and opportunities for local SMEs
that supply and buy from these investors.
Inward investment strategies are likely to be most successful when:
They form a small part of a broad LED strategy
The community has the appropriate hard and soft infrastructure in place or available to support
the likely investments
Targeted investments fit the competitive advantage of the receiving community. Normally a
sector/cluster approach is likely to be most successful
Marketing strategies are carefully prepared; budgets are appropriate; and follow-up procedures
are in place
Incentive programs that are varied but not excessive are considered, e.g., funding to help local
workers to upgrade their skills
Staff involved in attracting strategic investors have an understanding of investment needs
and what their community has to offer
Opportunities for local businesses are optimized through thorough after-care programs. This
means that when a new investor is attracted to a community every opportunity is taken, on an
ongoing basis, to encourage the investor to source their supplies locally, enabling supply
chain advantages to be exploited locally. This is most successfully achieved through developing
an investor after care program. These programs are aimed at ensuring investors are happy and
that they are given every opportunity to source their inputs from the local community.
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Possible LGU Initiatives (Programs and Projects):
1. Investing in physical (hard) infrastructure to improve the built environment. This can be
done by:
Building or improving key access roads
Improving the railway for the transport of goods and people
Developing, improving, and/or expanding the local airport
Developing, improving, and/or expanding the local port
Developing, improving, and/or expanding industrial sites and buildings
Developing, improving, and/or expanding commercial sites and buildings (for shops and
offices)
Increasing the availability of industrial and potable water
Improving and/or expanding the sewerage disposal system
Improving and expanding the telecommunications systems
Improving and expanding the energy systems and
Enhancing the town center/business district through preservation and restoration of
heritage sites, beautification, cleanliness and solid waste management projects.
2. Developing a case for investment. Doing this would entail:
Developing a professional investment portfolio
Data banking of business information and opportunities and
Marketing and promotional activities.
3. Provision of incentive schemes by:
Providing fiscal incentives like exemptions or deductions in local taxes paid and initial
subsidies to promote micro, small, and medium-sized enterprises and
Providing non-fiscal incentives like investor care and investor facilitation services and
streamlined process for obtaining business permits and other local licenses.
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4. Ensuring a stable peace and order situation which can be done through the following means:
Installation of crime prevention equipment like video cameras
Starting an emergency hotline
Increasing police visibility in crowded and most frequented areas
Installation of a community intelligence and security system and
Clearing of critical sidewalks to facilitate pedestrian movement, traffic build-ups, and
opportunities for corruption.
5. Developing industrial estates, business or science parks
This type of activity is normally undertaken by the private sector because investing in servicing
sites with water, electricity, and sewerage and building advance factory units (where no tenant
has yet been identified) are expensive and risky. However mayors and city managers can pave
the way by establishing a demand for such a facility and encouraging an enabling environment
within the local authority.
6. Encouraging investment into growth nodes
Another strategy is to identify specific areas within a city where certain types of businesses will
be encouraged to locate. A growth node may then act as the center for planned growth and
employment.
7. Encouraging investment into corridors
These are similar to nodes but here growth is encouraged to expand from an area of promising
economic activity towards a more challenging area. By encouraging incremental investment, the
aim is to develop an active growth corridor linking richer and poorer areas, thereby ensuring that
growth benefits the poor.
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Kalakalan 20 (R.A. 6810)
Magna Carta for Small Enterprises (R.A. 6977)
An Act Providing Assistance to Women Entrepreneurs (R.A. 7882)
The Omnibus Investment Code (E.O. 226).
Dalan sa Kauswagan: A Road Project of San Carlos City, Negros Occidental
Bohols Investment Promotion Program
The Investment and Promotion Program of Tigaon in Camarines Sur
Breaking Financial Barriers in San Fernando, Pampanga
Cebus Economic Miracle
Mariculture Park of the Island Garden City of Samal
RETAINING AND ENCOURAGING EXISTING BUSINESS TO GROW
10
While the previous strategy concerns attracting domestic and external businessmen to pour their
investments into the area, this next set of strategies concentrates on keeping those that have located
their businesses within the locality.
This set also recognizes that most economic activity in the locality is likely to be generated by small
and medium sized businesses that are already established in the province, city, or municipality. It
encourages existing businesses in the area to stay and grow.
1. Establishing open, ongoing, and constructive relationships with business and industry
associations
It is vital that LGUs establish open, ongoing, and constructive relationships with business or
industry associations like the local Chamber of Commerce, groups of entrepreneurs, and even
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individual businesses. Ongoing linkages and open communication ensure that the LGU leaders
are informed of issues and developments facing the business community as well as their needs.
This notwithstanding, LGUs have to take care that their pro-active stance is not viewed as meddling
or undue government interferencein private sector affairs. It is important that LGU leaders steer
clear of disputes within the Chamber of Commerce or industry association such as election of officers.
LGUs must also guard that the one-to-one relationship they establish with individual entrepreneurs
does not degenerate into shaping the playing field for the sole benefit of one or a few players.
2. Business retention visits and surveys
By visiting and surveying a firm, the local leadership and the LEDA are able to identify its problems,
gauge its performance, whether it is expanding or not, and determine its needs and sources of inputs.
The local leadership may be able to persuade them to source more inputs locally. These visits can
forestall a business from leaving the area. Business retention visits and surveys as well as the various
assistance that the LGUs can facilitate or provide can be targeted to particular industries, e.g., tourism.
3. Technical assistance
This can include broad based management and marketing programs, training in quality and
environmental standards, and advice through more specialized export training or research and
development support. What the LGU can do here is to broker the provision of accredited, demand-
led, technical assistance, paid for on a fee-for-service basis. Often these services are provided
through one-stop business service centers, business resource centers run by universities, by
foreign technical assistance, and by national government agencies like the Technical Education Skills
and Development Authority (TESDA), the Technology Livelihood and Resource Center (TLRC), and
the Department of Science and Technology (DOST).
4. Financial advice and assistance
A difficult and ever present problem for businesses is to access capital. The LGU can serve as go-
between between government financial institutions like the Development Bank of the Philippines
(DBP) and private lending institutions. An appropriate financial support program will be able to give
advice and training on financial planning, access to capital and credit etc. In some cases, the LGU
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may establish small grant or loan programs to encourage small businesses to invest in modern
technology. Great care should be taken with financing schemes run by LGUs for whatever purpose.
Safeguards must be put in place to ensure fairness in the selection of borrowers and to avoid fostering
dependency and laxity among the local enterprises.
5. Public procurement policies and "buy local" campaigns
The local government, public sector organizations and larger local businesses can make their
contracts more accessible to local companies. This has to be done with laws that ensure fair
practices, transparency, and accountability in the procurement process. Initiatives can include
adjusting the size of contracts so that smaller companies may bid; encouraging and accepting bids
from groups of local companies; holding procurement events for local businesses; and publishing
local business competency directories.
6. Work simplification and reduction of red rape
The amount of permits and approvals that businesses need to obtain, and the time it takes to obtain
them, are not only expensive and time consuming, they can also be a disincentive to register into
the formal economy. A good place to start is to review existing regulations and laws, consult with
stakeholders and develop a remedial plan. This involves re-engineering internal local government
processes and lobbying to reduce bureaucracy in other government areas. A program to minimize
the complexity, costs and bureaucracy associated with approval processes will improve the
competitiveness of the area.
7. Provision of sites and premises
Since LGUs and the national government are often the owners of industrial and commercial land
and buildings, they can use these to encourage business investment and expansion. A good
understanding of the local property market should enable LGUs to plan for growth. However, funding
such hard infrastructure investments is a challenge. Rents and sales should provide a market
return for LGUs. The option of private sector intervention or partnership should always be examined
to ensure the best use of LGU resources.
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8. Big brother/sister-small brother/sister relationship
The LGU can facilitate the linkages of larger firms with smaller enterprises into Big brother/sister-
Small brother/sister relationships. The relationships usually involve producers and suppliers,
contractors and sub-contractors. Big brother/sister and small brother/sister relationships involve
the transfer of managerial skills, technology, and machinery from the larger firm to the smaller
enterprise to establish synergy and upgrade the latters standards to the level required by the former.
Big brother/sister-Small brother/sister set-ups take their inspiration from the hugely successful
Japanese keiretsu and the principles of Total Quality Management (TQM). Where a number of smaller
enterprises are linked up to a larger firm in varying supply relationship, the larger firm can be
described as an anchor grounding and coordinating the activities of the smaller units. This is
often seen in the relationship between a large food processing facility and the surrounding
contract growers and farmers.
The Omnibus Investment Code (E.O. 226)
Jewelry Production and Promotion in Meycauayan, Bulacan
Cebus Economic Miracle
ENCOURAGING NEW ENTERPRISES
11
Encouraging new enterprises involves providing advice, technical support, information and
resources to help individuals set up their own businesses in the form of sole traders, partnerships,
cooperatives, and community enterprises.
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1. Provision of finance for new businesses
Micro enterprise financial support is key to enabling businesses to start up as they usually cannot
access traditional lending institutions. Micro enterprise financing is a specialized area, and
experiences in this area are well documented. There are many examples of largely private successful
micro enterprise support institutions, all of which need some money to start with but can become
self-sustaining after some time through revolving funds. LGUs normally become involved in these
schemes by meeting with micro enterprise institutions to assess forms of support needed and areas
and ways of collaboration. It is not advisable for LGUs to be involved in microfinance schemes as
they generally do not have the skills and resources to do this. Their role is to identify needs and
encourage institutions and private sector players to intervene.
2. Provisions of micro and managed workspace
This strategy provides places on and from which small businesses can trade. These places are usually
located in areas with a potentially large customer base. Besides the proximity to the market,
these workspaces allow small businesses to share office services, equipment and security and allow
them access to business support and advice. Micro and managed workspaces help small
businesses overcome the stresses of start-up and growth through the provision of various forms
of targeted business development and support like coaching, mentoring, and advice in finance,
marketing, and management skills. The end goal is to minimize failure rate of start-ups and optimize
the development of businesses, especially those with huge potentials for growth and impact on
employment.
3. Providing technical advice on business management
Someone establishing a business for the first time needs to know how to produce his or her
product. They must also understand finance, business planning, marketing, some aspects of the
law including employment, taxation, safety at work, environmental legislation and so on. The
provision of training and support in these areas meets a basic need and can be provided through
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one-stop shops or independent advisers. As in most areas of technical assistance, it is better for the
LGU to enable the provision of these services by the private sector rather than provide them
itself, again an issue of skills and resources. Charging for these services can be difficult, and some
agencies give a limited number of consultations and then make modest charges thereafter.
4. Supporting the establishment and implementation of formal and informal business networks
like industry associations
People learn from each other. Networks facilitate learning. Active involvement in business
networking is also important for developing a customer base, acquiring intelligence for expanding
businesses as well as developing collaborative relationships with businesses in the same sector.
5. Conducting business mentoring programs
Good practice suggests that by linking new and small business owners with established businesses,
significant benefits can result for both businesses. These need not be formal networks. In addition,
informal networks of mentors and new businesses can create further benefits by developing
supplier linkages, establishing critical mass for specialist training and so on. The LGU can establish
corporate volunteers program where large corporations can assign some of their personnel to mentor
small and medium enterprises in critical business skills like planning, product development,
quality control, developing a customer orientation, marketing, and after sales customer service.
6. Investment in soft infrastructure
This strategy involves investing in the improvement of the commercial environment for businesses.
The programs and projects that the LGU can adopt under this strategy are:
Enabling or providing skills training. In communities where enterprise has not been a key priority,
enterprise training can be provided. There is an almost universal need for information technology
(IT) skills training. E-commerce is the wave of the future. Wherever possible this should be linked
to education programs in schools. The provision of skills training should be demand-led, i.e.
training should be provided in response to the needs of the enterprises.
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Providing increased business focused education and access to education. Schools ought to better
prepare young people for the world of work. Programs can include: work ethic, information
technology, basic entrepreneurship education and sector studies where students can study key
business sectors of importance to their communities. Meanwhile adult literacy is a major
problem that needs to be addressed through LED education and outreach programs.
Supporting research and development. This can be done through collaborative projects between
businesses and institutions of higher learning. A local research fund can be established and a
graduate placement program implemented, so new graduates can pass on their skills to local
businesses.
Providing business advisory services. Depending on budgets, this service can start with one
person who points people in the right direction (e.g., to lenders and institutions providing skills
training). Clear sign posting is the key to good business advisory services. One-stop shopsare
an effective way of providing technical and financial support. Effective one-stop shops are usually
housed in one building where local businesses may access all technical support they need. The
building can also house all LGU and national agencies involved in regulating businesses.
Access to capital and finance. The one-stop shop can provide budding enterprises with information
and direction to potential sources of finance.
Supporting the development of business and trade associations. This is a basic institution building
process that can bring considerable benefits to the business community and LED efforts.
Ideally all provinces and cities should have a number of business organizations including
Chambers of Commerce, Boards of Trade etc. Also more specific groups can be supported
such as town center promotion groups, sector activities such as a tourism marketing group, an
exporters club, and a young entrepreneurs association. Most are likely to initially need some
pump-priming funding (i.e., initial funding to get the scheme started) and capacity building
support.
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Improving delivery of local government services to businesses. This is a key area as businesses are
not only the drivers of the local economy but they are also potential ambassadors. A happy
business person is the best promoter for investments in the area. All aspects of regulations,
taxation, and licensing are candidates for review to minimize cost, time, and frustration for
businesses, not to mention opportunities for corruption, while maintaining appropriate
necessary environmental and related standards.
Social inclusion strategies. The initial thrust should be to establish who and where the most
vulnerable communities are, and then develop strategies to include them. These strategies can
include, for example, education and skills training for ethnic minority communities, helping
women into/back to work, encouraging the recruitment of disabled people into the workplace,
and encouraging social activities for the very young and elderly citizens.
Crime prevention measures. These can include everything from introducing good citizenship
classes into the school curriculum to developing after-school activities to keep young people
busy. Other initiatives include drug free zones, curfews at night, training of barangay tanods
(volunteer peacekeepers), and community intelligence networks.
The Omnibus Investment Code (E.O. 226).
The City Livelihood Assistance Program of Pagadian City
Ylang-ylang Oil Industry Development in Anao, Tarlac
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CREATING AN ENVIRONMENT FAVORABLE TO COOPERATIVES
Cooperatives can be important drivers of local economic growth. To harness their potentials for
LED, LGUs must first understand the nature and principles of cooperatives to effectively work with
them. They need to understand their mandates in relation to cooperatives as stated in the Local
Government Code and the Cooperative Development Code. As a start, the LGUs can help
cooperatives by improving processes in the issuance of licenses and other business-related
permits. They can simplify the accreditation processes for civil society and private sector
organizations to enable cooperatives to participate in local governance. LGUs can also explore the
possibility of setting up an appropriate structure to support cooperatives like a Municipal
Cooperative Office, a Local Cooperative Council, and a Cooperative Resource Center.
Pushing Development through Cooperativism in Bulacan
CLUSTER AND/OR SECTOR DEVELOPMENT
12
Recent studies have shown that businesses do not develop in isolation but in clusters, and often
these clusters arise from a distinctive resource, physical and human, from unique demand
conditions, and from the presence of supportive industries, institutions, and policies. This being
so, LGU efforts should focus on identifying and supporting emergent and fast-growing clusters of
enterprise and shepherding them to serve larger and larger markets. Cluster development
means that LED initiatives are concentrated on encouraging and supporting inter-firm collaboration,
institutional development and support in targeted business sectors. These sectors are those that
offer the most local economic development potential.
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1. Developing broker and network agencies
Special attention can be paid to encourage local people engaged in the same cluster to meet
together to enable business development opportunities. This can include encouraging local
fishermen and fish processors to meet and exchange ideas on improving facilities and adding more
value to their products, so they would all benefit. Another example could be to start a craft
network. The network can jointly market their goods, and then start inter-trading with each other,
building synergies in the process.
2. Supporting joint research
Institutions of higher learning can undertake research that can benefit everyone in the cluster. One
example of this would be to undertake research on minimizing losses from post-harvest losses of
agricultural products.
3. Developing cluster focused public procurement and local purchasing agreements
The public sector is often the largest buyer in a city, and as such, there are opportunities to enable
local businesses to participate in public biddings more easily. It is often difficult for small businesses,
in a cluster or not, to bid for large government contracts. A cluster initiative here can include
developing a food supplier network to supply government catering needs. A logical cluster
development initiative is to encourage suppliers of basic food products to enter into some form
of food processing. Cluster development activities can then move on to transportation, storage and
packaging of food products. From there it is likely businesses can start retailing and producing
processed foods for the private sector.
4. Providing cluster specific information
One of the most effective ways of developing a cluster is to gather information about businesses
and institutional support systems in the cluster and then share them. Thereafter, with a small amount
of effort, supplier linkages can be developed.
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5. Developing cluster related marketing efforts
Once a cluster has been identified and it starts developing, there are opportunities to promote it
and attract supporting investment as well as promoting external business opportunities for
cluster members.
6. Developing demand-led skills and education training programs
Clusters have common needs. When a number of businesses express their needs, it is more likely
that training or education will be provided. A lone voice is not likely to be taken seriously.
DILG MC No. 2002-09 Implementation of the LGU-Cluster Development Approach Project
(LGU-CLAP) as a Strategy in the Adoption of One-Village, One-Product Movement
Jewelry Production and Promotion in Meycauayan, Bulacan
AREA TARGETING FOR REGENERATION AND DEVELOPMENT
13
Area targeting means that strategies are developed to address specific site or small area LED issues.
While most LED initiatives can be targeted at specific locations, area targetingexamines a specific
area within a municipality to address a specific territorial problem such as a redundant factory,
declining shopping area, slum, etc. These areas need special attention and measures.
Regeneration strategies are targeted at communities that have normally suffered from structural
change, perhaps a major industry closing or a rural area in decline or a town center suffering from
neglect and crime. The implementation of effective regeneration programs and the tackling of social
and economic disadvantage represent two of the major challenges facing contemporary policy
makers. Regeneration strategies go some way to meet these challenges. They use all the tools
available but because an area is in need of regeneration, specific, community focused and often
highly targeted policy responses are usually needed.
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Regeneration strategies are likely to be the most challenging, the most expensive, and most
prolonged program that an LGU is likely to undertake.
1. Town center enhancement schemes
These can include a wide range of initiatives including developing a business partnership,
marketing the town center, undertaking surveys and upgrading the physical environment, and
targeting investment, etc. A vital and vibrant town center is the heart of an areas ability to become
competitive.
2. Derelict site reclamation programs
Many traditional industries were housed on large sites. They occupied large buildings and
frequently, sites were considerably contaminated. As a first step in most regeneration programs
major issues need to be tackled. Decisions need to be made on whether buildings can be effectively
reused, how much contamination needs to be cleared and what after-use programs need to be
established. None of this is easy or cheap. But contaminated sites, besides being a danger to
local communities, are never likely to be bought by reputable employers. A comprehensive
brownfield reclamation program needs to be established within the LED strategy to address this.
Brownfield is a general term used for sites that have been developed in the past for industrial and
military uses, which may or may not have been contaminated by military and industrial wastes.
Brownfield development is often a recourse for communities to maintain tax revenue and
employment after the departure of the original locator or investor. But it can be very costly and
entails a number of activities. These include an initial survey of sites, identification of the severity
of pollution, identification of ownership, prioritizing reclamation, finding funds for it, developing
after-use programs and ensuring that regulatory systems encourage reclamation.
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3. Adaptation of disused buildings
In some instances redundant buildings are still adaptable for further use such as for a managed
workspace that can be owned by either the public or private sector. Some buildings may benefit
from splitting into smaller workspaces. Some of the most historic buildings are often the hardest
to reclaim. However, this should not stop efforts to save all buildings of historic or architectural
importance.
4. Industrial and commercial site preparation
In most regeneration programs there will be a need to develop some land for incoming and
expanding businesses. To accommodate these most effectively, it is better to have some sites serviced
with basic infrastructure at the outset. If this is not possible, there should at least be some
assessment of the likely costs and the time needed to install basic infrastructure. Since the costs
are likely to be significant, partnerships with the private sector are most desirable.
5. Retraining of redundant workers
This is a serious problem in communities that are undergoing structural readjustment. The likely
target populations will be older men and women who have clearly defined skills sets. The challenge
is to ensure that skills trainings are provided on a demand-led basis.
6. Job search and employment outreach
Redundant workers often encounter difficulties finding a new job. This is due to their lack of basic
job search skills. Public employment service offices (PESOs) such as those that the Department of
Labor and Employment are promoting among LGUs can be very effective in helping them find job
opportunities. They also benefit new graduates and new entrants to the workforce. The PESOs can
offer services from seminars on building personal confidence, resume writing, interview skills to
projects matching the unemployed with potential employers.
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7. Street scene enhancement programs
Rapid improvements can be made with programs to improve the street scene. These may include
closing streets to traffic and installing pedestrian friendly street furniture, planting trees and
installing new pavements. More modest schemes include painting shops, installing attractive
street lighting and benches, encouraging shop owners to install more attractive overnight shutters,
and sponsoring hanging basket competitions. Local businesses can be encouraged to pay for some
of these initiatives.
8. Public park and play provision
In addition to improving the environment, improved parks and play facilities are likely to reduce
the risk of juvenile delinquency, smoking, and drug addiction. In crowded areas, LGUs may
designate certain areas as traffic free zones where children can play safely.
9. Entrepreneurship training and SME support programs
The city's mainstream programs can be adjusted to meet specific needs of vulnerable groups like
women. Local delivery of services can also be helpful.
10. Community confidence building
This can cover many projects such as promoting local success stories, encouraging the community
to develop its own newsletter, and developing the arts and domestic crafts.
11. Crime and safety measures
These measures include a wide range of activities from increased policing, installation of closed
circuit television, increased bus services at night, neighborhood watch schemes, and street lighting
projects.
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DILG MC No. 2002-81: Creation of Local Culture and the Arts Council
DILG MC No. 95-162: Inventory of LGU Tourism, Culture & the Arts Councils
DILG MC No. 2001-19: Solid Waste Management Program Implementation of Republic Act No.
9003 otherwise known as the Ecological Solid Waste Management Act 2000
DILG MC No. 2001-38: Addendum to DILG MC 2001-19 Re-Implementation of Republic Act 9003,
otherwise known as the Ecological Solid Waste Management Act of 2000
DILG MC No. 2001-48: Inventory of All Solid Waste Disposal Facilities and Sites in LGU
Marikina City
Manila City
TARGETING DISADVANTAGED GROUPS
14
Targeting disadvantaged groups involves designing programs and projects addressing the needs
of vulnerable and marginalized groups such as ethnic minority groups, the urban poor, women,
redundant workers, the long-term unemployed, and out-of-school youths.
1. Language training
This is a key issue where there are groups of foreign workers and minority communities. Outreach
programs are often successful here.
2. Skills retraining and job placement programs
Skills retraining should be done following a demand led approach. It is a waste of time and
resources retraining individuals in skill areas for which there is no or little employment opportunities.
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3. Raising educational achievement
This is usually an issue for an entire city, but specific communities may be in need of extra support.
4. Enterprise training
Many disadvantaged groups have both high unemployment and a large proportion of workers in
the informal sector. Basic training in terms of business management, finance and marketing can
have a significant impact on these communities.
If as the statistics show that less than ten percent (10%) of rural household heads had enterprise
as an option, then there exist opportunities for farmers, farm workers, and rural residents to start
farm-related and off-farm enterprises to supplement the low income derived from agricultural work.
LGUs can assist entrepreneurial rural folks find and take advantage of opportunities in businesses
such as food processing, handicraft making, sewing, etc.
5. Women into employment and self-employment programs
This includes confidence building projects, crches, and after-school clubs.
6. Micro enterprise lending programs
This addresses the need of disadvantaged groups to start and continue enterprises of their own.
7. Work experience and teacher/pupil placement schemes
These schemes involve students working for short periods of time in businesses to gain work
experience and a work ethic. Teachers can also do this by giving students a better understanding
of workplace requirements.
8. Developing mentor programs
Mentor programs can be done informally. More experienced business people mentor upstarts in
the basics of starting and sustaining an enterprise.
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9. Health and wellness awareness programs
It is usually the most disadvantaged that suffer from poor health and unsanitary living conditions.
Poor health affects an individuals and a communitys productivity. Health awareness programs can
target specific, high-risk communities such as those at risk for water-borne and mosquito-borne
diseases such as malaria and Japanese encephalitis.
10. Development of community resource centers
The purpose of these centers is to gather and coordinate information and services to meet the needs
of a local community. Since transport is often a problem, and since many individuals do not like
to go into official lookingbuildings, community centers can provide an ideal place to meet local
needs. Buildings do not need to be sophisticated; the most important element is to make sure the
people are customer-friendly and have an understanding of the services that are available. Services
can include everything from health care, education services, business advice, and play areas for
children. In the Philippines, barangay halls, health centers, and day care centers often serve these
functions.
R.A. 8425: The Social Reform and Poverty Alleviation Act
DILG MC No. 2001-109, Initial Areas for Action in the Implementation of Programs on Poverty
Reduction and Local Economic Transformation
DILG MC No. 2001-105: Designation of Local Poverty Reduction Program Action Officers and the
Functions of the LPRAO
DILG MC No. 2001-172, Guidelines on Poverty Reduction Program for Local Governments
Joint (DILG, DBM, NCRFW) MC No. 2001-01.Guidelines for Integrating Gender and Development
(GAD) in the Local Planning and Budgeting System through the Formulation of GAD Plans
DILG MC No. 2002-163. Creation of Local Council for Women
The Lingap Tanaw Program of Naujan
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ALLIANCE BUILDING WITH THE PRIVATE SECTOR AND/OR OTHER LGUS
The cluster approach not only applies to businesses but also among LGUs and between LGUs and
the private sector.
1. Common facilities like roads, hospitals, colleges and universities, research and training facilities,
post-harvest, solid waste management, water supply and sanitation.
2. Environmental conservation programs like protection of watersheds, coastal resources, and other
natural resources vital for sustainable development.
3. Area products and tourism marketing campaigns by bundling the different sites into a common
package tour.
4. Joint venture arrangements with the private sector like Build Operate-Transfer arrangements
for roads, city and municipal ports, housing projects.
DILG MC No. 2001-109, Initial Areas for Action in the Implementation of Programs on Poverty
Reduction and Local Economic Transformation
DILG MC No. 2002-09 Implementation of the LGU-Cluster Development Approach Project
(LGU-CLAP) as a Strategy in the Adoption of One-Village, One-Product Movement
DILG MC No. 2002-48: Local Economic Transformation Program for Local Governments
Investment Program of Bohol
Pigcawayan-Alamada-Libungan-Midsayap-Aleosan (PALMA) Complex common heavy equipment
project for infrastructure development
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Ineffective LED Strategies
that LGUS Should Avoid
Unfortunately there are countless examples of strategies and projects that have failed to achieve
local economic development. Some of these are:
Expensive untargeted foreign direct investment marketing campaigns
Untargeted foreign direct investment marketing campaigns are a waste of human and financial
resources. Crafting a message meant for all and sundry is communicating with no one. It also comes
across as indecisive. Segment the market. Know the type of investors you wish to attract, identify
their needs, motives, and preferences, and position the LGU accordingly.
Supply-led training programs
Supply-led training programs, as the name implies, are driven by the providers perceptions of what
businesses need and what donors are willing and want to fund. In contrast, demand led programs
are those that employers have expressed a need for.
Supply-led training programs run the danger of training people in skills for which employment is
scarce or even non-existent. With their nose on the market, business persons know better than
bureaucrats what skills their employees should have and should develop.
Excessive reliance on grant-led investments
Grant-led investments hamper the development of the discipline required to compete in the
market. There are few incentives to channel them to the most efficient and effective uses because
they come cheaply or for free. Grant-led investments are most useful in functional areas where social
returns are high but the payback periods are longer, such as human resource development,
education, and social services.
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Over generous financial incentives for inward investors
Over generous financial incentives for inward investors consist of tax rebates, special import
permits with exemptions from or reduction of normal duties, protection against competition, and
preferential credit arrangements. While these incentives may attract investors in the short-run, these
can lead to protectionism with its negative effects of laxity and inefficiency and overall decline in
industry competitiveness. These not only deprive the LGU of revenue but can also breed considerable
resentment among local businesses that do not enjoy the same benefits.
Business retention subsidies
Paying firms to stay in the area despite the fact that the financial viability of their operations is at
risk sends a wrong signal to the business sector. It encourages firms to become inefficient and to
delay biting the bullet or to fix their operations.
Relying on "low road" techniques like cheap labor and capital
Cheap labor and capital can reap rewards in the short-term but in the long run, the strategy is
unsustainable. Other countries, provinces, and cities can lower their labor costs, causing competition
to become a race to the bottom rather than a stimulus to reach for the top. Cheap labor ultimately
causes unrest and often leads to the use of child labor. Instead of reducing cost, the aim of
enterprises is to create greater social and economic value through productivity-enhancing
measures like provision for better education, incentives for continuous innovation, and the creative
use of technology. Early in its development, Singapore compelled companies to innovate by
mandating an automatic increase in wages every year.
Government conceived, controlled and directed financing strategies, e.g., credit rationing
for certain sectors and industries
Historically, credit rationing has never worked. Despite the Agri-Agra law directing banks to lend
a portion of their portfolio to Philippine agriculture, the sector remains starved of financing,
despite the obvious high demand. The reasons for this state of affairs range from the unique risks
faced by farmers, e.g., susceptibility to the elements, the fluid and uncertain property rights
81
regime caused by well-meaning land reform programs to the incentive structure for rural lending.
Rather than credit rationing, governments time is better spent getting the incentives right
rather than issuing laws that are difficult to enforce in the first place. Credit cannot be made to flow
by decree anymore than one can order the water to flow uphill. One has to inquire whether the
traditional banking sector with its large overhead is the institution best positioned to deliver
financing to farmers. There is also the matter of increasing investor and lender confidence in the
sector by improving the credit-worthiness of farmers.
Government agencies implementing retail credit projects
The record of government agencies directly implementing credit projects in the field is dismal, to
say the least. Government is not a credible lender. It is bedeviled by concerns other than
straightforward business objectives. Regular changes in leadership do not give it the stability
required of a financing institution. If government is to be involved in lending projects, it should at
the most act as a wholesaler, never a retailer of credit.
Supply-led credit programs offering loans at below cost-recovery rates
Supply-led credit programs offering loans at below cost-recovery rates are unsustainable. They
encourage non-repayment and risky behavior on the part of both retailers and borrowers. For obvious
reasons, people pay the most expensive loans first, and since the loans come cheaply, they are liable
to use it for less productive purposes. The supply-led credit programs of the 1970s made the rural
banks lazy in mobilizing savings and lax in approving loan applications. Studies have also
shown that the loans went to the richer farmers than to the poorer ones, thereby aggravating an
already iniquitous situation.
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CAPACITY BUILDING
PROCESS FOR LGU-FACILITATED LED
LGUs need to develop their capacity to facilitate and see the LED process through. The effective
capacity building for LED follows a four-stage process:
1. Establishing consensus among and between LGUs and the stakeholders about the need to
improve the local economic situation and economic-related local governance.
2. Improving the institutional capacity and strengthening organizations to undertake local
economic development initiatives.
3. Improving LGU economic development-related systems, structures, mechanisms, and procedures.
4. Institutionalizing capacity through assessment and incorporation of lessons.
ISSUES AND RECOMMENDATIONS REGARDING
LED IMPLEMENTATION
CHAPTER 5
CHAPTER
5
T
his chapter deals with issues in LED implementation and corresponding recommendations.
The issues are those facing micro enterprises, small and medium enterprises, and LGUs. LGUs
face a number of constraints in implementing LED. These constraints are: financial, technical-
managerial, lack of political will and commitment, lack of sustainability of LED efforts, insufficient
support systems for LED, conflicts between national and local governments, and inter-local
cooperation.
Micro enterprises
Nine out of ten enterprises in the country are micro enterprises run by an estimated 4.7 million
entrepreneurs. Of this number, thirty percent (30%) of them are in growth-oriented micro
enterprises while seventy percent (70%) are in so-called survival or livelihood activities such as
vending, raising animals, and farming. Micro enterprises need financing. Those in growth enterprises
require skills in product costing, development, and marketing. Those in the informal economy require
security of tenure and protection from harassment and mulcting law enforcers.
Small and Medium Enterprises
Many of the SMEs in the Philippines are relatively young. A 1989 ADB-ERDC study showed that while
small and medium entrepreneurs were more highly educated than the average person in the society
(community) they come from, they are in clear need of technical training in such areas as accounting,
financial analysis and product design preparation.
15
ISSUES AND RECOMMENDATIONS REGARDING
LED IMPLEMENTATION
86
There is also the issue of global competitiveness. SMEs are apprehensive of the adverse effects of
trade and investment liberalization, resulting in the free flow of trade and investment across
national borders. In an open market, only the big corporations are expected to survive due to their
ability to access market information and technical and management know-how.
The following are recommended measures on SME development:
Facilitate access to sources of funds by simplifying tedious credit requirements
Assure access and transfer of appropriate technology through the establishment of adequate
support structures and creation and promotion of an environment conducive to the viability
of SMEs
Intensify and expand programs for training in entrepreneurship
Conduct periodic review of government incentives to ensure their responsiveness to the SME
sector
Promote linkages between large and small enterprises by encouraging establishment of
common service facilities
Encourage private sector partnership through joint ventures and equity investments
Local Government Units
The ability of LGUs to perform its many roles to promote LED is affected by a number of constraints:
financial, technical, political, policy, the insufficiency of support systems, and the difficulty in
getting LGUs to cooperate among themselves and between them and the central government.
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FINANCIAL CONSTRAINTS
Dependence on the Internal Revenue Allotment (IRA)
Many LGUs, especially municipal governments in the rural areas classified from fourth to sixth class,
are heavily dependent on the Internal Revenue Allotment (IRA) for their continued operation. With
the IRA spent on personnel services (PS) and daily operations, there is practically nothing left for
locally funded projects that would promote local economic development. This has also prevented
LGUs from putting up the required equity in foreign-assisted projects (FAPs) and from financing
studies required by grant and loan facilities like feasibility studies.
Financial constraints or barriers can be addressed by the two broad strategies of increasing income
and reducing cost. In the next chapter, the Municipality of San Fernando in Pampanga shows how
an LGU can combine these two strategies to get itself out of the red.
Limited tax base and business activity
Rural-based LGUs cannot generate large revenues even with the broader taxing powers granted
them by the Local Government Code because of a small and narrow tax base and limited business
activity in the area. The problem is compounded by out-migration (the so-called brain and
brawn drain) from the poorer areas to the more urbanized towns and cities.
Retention by the national government of the more profitable sources of taxes
The national government still retains the more profitable sources of taxes such as income taxes,
customs duties, transportation levies and franchises.
Lack of financial support for devolved functions
LGUs continue to struggle to finance functions and facilities devolved to them by the Local
Government Code. The lack of financial support from the central government has overloaded the
LGUs limited budget.
ISSUES AND RECOMMENDATIONS REGARDING LED IMPLEMENTATION 5
88
IRA sharing formula
The sharing formula for the IRA works to the disadvantage of LGUs with small populations and land
area. Provinces also get equal shares with cities despite the former being saddled with the
management of provincial hospitals.
TECHNICAL AND MANAGEMENT CONSTRAINTS
Limited technical capacity within the LGU and in their area
Many LGUs have limited internal technical capacity to plan and implement development programs
and projects. The lack of financially and technically qualified contractors in the area has made them
reluctant to avail of credit facilities such as the LGU Private Infrastructure Development Facility of
the Land Bank of the Philippines.
In the next chapter, San Carlos City in Negros Occidental shows how LGUs can surmount the
perennial lack of technical capacity in the locality.
Limited managerial capacity
LGU-owned economic enterprises like public markets, slaughterhouses, and/or conference/lodging
facilities are not managed efficiently because of the lack of professional, competent, and highly
trained managers.
Lack of administrative support personnel like financial and monitoring staff have also affected the
LGUs capacity to absorb grant and loan proceeds. Aside from slow releases by national government
offices and agencies like the Bureau of Treasury, Department of Budget and Management, and the
Municipal Development Fund Office (MDFO), disbursements of many foreign assisted projects where
LGUs have substantial participation are held up because of the LGUs delayed submission of the
required monthly physical accomplishment reports and final audited reports.
89
LACK OF POLITICAL WILL AND COMMITMENT
While a number of LGUs have well prepared and sound economic plans, many of these remain
unimplemented. Many projects remain on paper because the local chief executives do not want
to implement them because of political considerations. Projects with long-term impact are
shelved in favor of short-term, highly visible projects.
LACK OF SUSTAINABILITY OF LOCAL ECONOMIC DEVELOPMENT PROGRAMS
AND INITIATIVES
Short-term limits
Constitutional provisions limiting the terms of elected local government officials to three years
threaten the sustainability of local economic development programs and initiatives. For a first-
term elected local chief executive, it is said that the first year is usually a time of learning and
adjustment, the second year, for starting projects, and the third is for preparations for the next
election. With hardly any time to warm their seats and elections looming large even after the previous
one has just been concluded, local officials prioritize the implementation of highly-visible projects
with immediate results over longer-gestating ones that may have lasting impact. Uncertainty over
the next set of local officials also prompts investors to adopt a wait-and-see attitude a year before
local and national elections.
Changing set of local officials
Sharing of resources between and among participating local units in the program is difficult to sustain
because of the changing set of elective officials.
Political partisanship and the lack of continuity of plans and programs
However worthy, plans, economic programs and initiatives started by one administration are
often discontinued or shelved by its rival once the latter gains power. Political partisanshipat the
local level also affects the accreditation, participation of NGOs, POs, or cooperatives, and the
90
private sector in local governance. Partnerships between the LGU, civil society, and the private sector
are jeopardized by the change in local political leadership.
Political patronage
The operational effectiveness and efficiency of the LGUs economic enterprises are affected by the
need to reward members and followers of the winning party or cabal. Casuals are hired and
unqualified party hacks are appointed to managerial positions.
Lack of funds and capability of LGUs
Though beneficiaries acknowledge the positive impact of the subprojects, concerns remain about
their sustainability because of the lack of funds, if not the capability of LGUs for infrastructure
operation and maintenance, and the lack of social preparation to ensure project
sustainability/ownership.
INSUFFICIENT SUPPORT SYSTEMS FOR LOCAL ECONOMIC DEVELOPMENT
Lack of resources in the Department of Trade and Industry (DTI)
Despite its mandate to provide the necessary support system to local bodies, field reports indicate
that DTI does not extend the needed assistance to many LGUs because of its lack of human
resources in the field.
Provincial offices do not have enough staff to link up with LGUs in the preparation of project feasibility
studies, baseline studies, marketing, promotion of products, managerial & entrepreneurial skills
development and in the conduct of fora and seminars on investments opportunities.
DTI is constrained by the lack of resources at the regional and provincial levels to engage in a far
more active and sustained effort in economic promotional activities.
91
Be this as it may, the DTI and the LGUs can partner with each to work around this problem, as the
Municipality of Tigaon in Camarines Sur demonstrated, discussed in the next chapter.
Lack of well-established linkages between NEDA and the LGUs
NEDA through its regional development staff and offices also provides technical assistance to LGUs
in the area of local development planning and investment programming. The extension of such
kind of assistance is wanting. NEDAs technical people are located at the regional centers. The agency
does not have well-established linkages with local government units at the provincial/city/
municipal levels.
Lack of coordination among different agencies offering related or similar services
Different national government agencies operate in the same jurisdiction offering related or similar
services such as credit, infrastructure, enterprise development assistance, etc. Lack of coordination
among these agencies, duplication in the services offered, and at times competing programs
and services cause confusion among the LGUs and dissipate scarce resources.
Examples are the conflicts arising from the implementation of the Integrated Protected Resource
Area (IPRA), National Integrated Protected Area System (NIPAS), and the Community-Based Forest
Management (CBFM) within project areas under the jurisdiction of the National Commission on
Indigenous People (NCIP). The issuance of land tenure instruments within project areas, which have
been transferred to the NCIP by the IPRA law, was deferred due to the absence of clear guidelines
on the working relationship between NCIP and DENR in these areas. The involvement of multi-
sectoral stakeholders representing various interests slowed decision making on various aspects of
project implementation due to mismatch of counterpart resources, varying perspectives and
expectations, and different levels of capacity among stakeholders.
Effective stakeholder participation need not be so elusive if the LGU is determined to get everyone
on board. In the next chapter, the Municipality of Irosin in Sorsogon during the term of Mayor Eddie
Dorotan is presented as a model for social participation, cooperation, and coordination among the
different government, non-government, and peoples organizations in the locality.
92
CONFLICTS BETWEEN THE NATIONAL AND LOCAL GOVERNMENTS
Existing Government of the Philippines (GOP) policies that limit grants to LGUs to fifty percent (50%)
of the total infrastructure cost has hampered the implementation of projects involving cost-
sharing arrangements between the national government and the LGUs. One example is the
Infrastructure for Rural Productivity Enhancement Sector Project (InFRES). LGUs are also awaiting
the final turnover of completed civil works projects to them by the national government.
LGUs and the national government, specifically the Department of Public Works and Highways
(DPWH), are at odds over which agency will ultimately be responsible for the countrys roads. LGUs
are also batting for a reclassification of roads from the present system based on jurisdiction
(national, provincial, city/municipal, barangay) to purpose (collection roads, line haul roads, and
distribution roads).
INTER-LOCAL COOPERATION AMONG LOCAL GOVERNMENTS
Clustered development and inter-local cooperation among local governments have not taken off
as expected for the following reasons:
Changing set of local government officials
Problems of leadership (who should assume the leadership in the local area? Who should
assume the lead role for economic planning among the cooperating local governments?
Should the local government that has more financial resources assume the lead role?)
Concerns that less financially capable local governments would not be on equal footing with
those of richer local governments in terms of decision-making.
Local political rivalries (inter-local cooperation is hampered by local political rivalries and
factionalism)
GOOD PRACTICES IN PROMOTING LOCAL
ECONOMIC DEVELOPMENT
CHAPTER 6
6
The following are eight good practices in promoting Local Economic Development (LED). There
are certainly many more but these were chosen to illustrate the use of the different LED strategies
discussed in the previous chapter.
GOOD PRACTICES IN PROMOTING LOCAL
ECONOMIC DEVELOPMENT
CHAPTER
96
FORMULATING AND IMPLEMENTING A COMPREHENSIVE LOCAL
DEVELOPMENT PROGRAM : IROSIN, SORSOGON
The Irosin experience is an exemplar in stakeholder participation in the
formulation, implementation, monitoring, and evaluation of the Local
Economic Agenda. It illustrates the five steps of the Planning Process for LGU-
facilitated LED and embodies all principles of and the factors for successful
Local Economic Development.
PROFILE
Irosin is one of the municipalities of the province of Sorsogon. It has 28 barangays spread
over irregular, rolling to mountainous terrain. Its land area of 15,880 hectares is devoted
mainly to agriculture. Irosin is the main producer of rice, citrus fruits and abaca in the
province. Coconut, vegetables, cassava and sweet potatoes are also major products. Its
population in 1994 was about 40,000. Agriculture employs almost seventy percent (70%)
of its workforce.
SITUATION PRIOR TO THE PROGRAM
Before 1992, Irosin was a depressed fifth-class municipality burdened by a festering
Communist rebellion. It was infamous as a center for jueteng(or numbers game). Wealth
was concentrated in a few landowners and Chinese entrepreneurs, while the underprivileged
majority earned small, seasonal incomes from farming. Malnutrition afflicted seventy
percent (70%) of schoolchildren in 1992.
Contact Information
Office of the Municipal
Mayor
Irosin, Sorsogon
Tel: (056) 804-5021
97
DESCRIPTION OF THE PROGRAM/STRATEGY
The situation started to change with the election of Eddie Dorotan as Mayor in 1992. Mayor Dorotan
spearheaded the Irosin Integrated Area Development Program (IAD). The program incorporated a wide
range of interventions, not just infrastructure or economic projects, for the holistic development of the
area and the community.
The IAD sprung from a Multi-Sectoral Development Planning Workshop that Mayor Dorotan convened
immediately upon assuming office to map out the vision, mission and development strategy of the
municipality. The workshop set the overall framework and direction for the implementation of the IAD
program which was translated into the local development plan for 1992-1995. The plan addressed the
problems of poverty, powerlessness and poor access to basic services through the key strategies of
livelihood promotion through agrarian reform, environmental development and agro-based
industrialization; people empowerment through strengthening and networking of the POs, NGOs and
cooperatives; and improvement of basic services in health, social welfare, and public works.
The program was participatory in nature with coordinated efforts from POs, NGOs, cooperatives, the LGU
and national line agencies at all of the programs stages from planning to implementation to evaluation.
The participatory process made the municipalitys entire citizenry stakeholders and allowed a high level
of integration among players not usually achieved in other local development plans. The major
beneficiaries were the farmers who comprised the majority of Irosins population. The program reconciled
the often competing demands of social equity, economic growth and environmental protection, thus
mobilizing support from multiple constituencies. Government and non-government actors were
empowered to pursue their mandates and programs within the context of creating synergy for local
development.
Irosin, Sorsogon
98
HOW WAS THE PLANNING PROCESS DONE?
The mayor kept track of the program through a year-round planning, implementation, monitoring
and evaluation (PIME) cycle:
January
Meetings with different line agency and local departments to evaluate the previous years performance
and plan for the year ahead.
Mayor Dorotan gave his annual Ulat sa Bayan or State of the Town Addresswith the outputs of the
meetings as bases.
February to December
Monthly coordinators meeting with all line agency heads, barangay chairpersons and even heads
of support agencies like the fire department, police, etc. Monthly meetings were also held with various
local bodies such as the Municipal Agrarian Reform Council (MARC), Local Health Board (LHB) and
Local School Board (LSB). This promoted inter-agency coordination.
June
Planning for the next year started.
July
Project proposals of the different departments and agencies were finished. The DBM informed the
municipality of its IRA for the following year. The Mayor knew how much money was available and
how much was still required.
Irosin, Sorsogon
99
August
The Municipal Budget Office received agency/department budget proposals.
October
The Sanggunian Bayan (SB) received the consolidated budget proposals for the formal budget
hearings and eventual passage of the appropriations ordinance.
HOW WAS FUNDING FOR IROSINS IAD PROGRAM OBTAINED?
Funds were mobilized from various sources to finance the IAD program:
Mayor Dorotan convinced then DAR Secretary Ernesto Garilao to declare the entire municipality of
Irosin as an agrarian reform community (ARC). As an ARC, Irosin was able to access PhP30 million in
DAR resource allocations from 1992 to 1996.
Funds were sourced from the Countryside Development Fund of Albay Congressman Bonifacio
Gillego as well as from contributions of various senators such as Raul Roco and Gloria Macapagal-
Arroyo.
A Dutch funding agency, CEBEMO, contributed PhP10 million for the promotion of agri-based
industrialization.
The Department of Social Welfare and Development (DSWD) allocated PhP1 million each to three
barangays in Irosin in connection with its CIDSS project.
The municipal governments IRA and other local resources were other sources of funds. Mayor
Dorotan was successful in raising local revenues from an overdraft of PhP740,000 in 1992 to P23 million
in 1997. The increase was largely due to more efficient and honest fiscal management as well as a
new Municipal Tax Code which improved revenue mobilization.
Irosin, Sorsogon
100
HOW WAS PEOPLES PARTICIPATION INSTITUTIONALIZED IN THE IAD PROGRAM?
Peoples participation was a core principle underlying the IAD program. The Multi-Sectoral Development
Planning Workshop set the stage for continuing participation and consultation with the people
throughout Mayor Dorotans term. Monthly meetings were regularly convened with concerned
agencies/departments and local special bodies. The ordinary citizen was involved in activities such as
clean-up dayevery Wednesday and exercise dayevery Friday. A broad range of training was provided
to improve the capability of POs and cooperatives in value formation, leadership, basic management,
finance and accounting, and various livelihood skills. The Peoples Center, a building which now houses
the offices of NGOs, POs and cooperatives was constructed as part of the municipal governments
commitment to NGO/PO participation.
WHAT WERE THE RESULTS OF THE PROGRAM?
Within the period 1992 to 1997, Irosin was transformed from a depressed, insurgency ridden-5th-class
municipality to a progressive, peaceful 4th class municipality that emphasized social equity, social
participation, and environmental sustainability.
The Irosin IAD program was a Galing Pook awardee in 1994, while Mayor Dorotan was awarded the
Outstanding Young Filipino Award for Community Development in 1995.
Source:
Joel Pagsanghan, Irosin Integrated Area Development: A Best Practice in Agricultural Development, in Local Governments in the
Philippines: Four Best Practices in Service Delivery, ed. by Fernando T. Aldaba et al., Ateneo Center for Social Policy and Public Affairs,
1998.
Irosin, Sorsogon
THE LINGAP TANAW PROGRAM: NAUJAN, ORIENTAL MINDORO
The Lingap Tanaw program is distinguished by its investment in so-called
soft infrastructure, targeting certain disadvantaged groups through credit
and micro enterprise support, and by implementing LED with stakeholder
participation.
PROFILE
Naujan has the largest land area among all the municipalities in the province
of Oriental Mindoro. It also has the second largest population with 75,726 in 1996. Its total
area of 52,800 hectares is devoted largely to agriculture, with palay accounting for sixty
one percent (61%) of the total agricultural area. Other crops cultivated in the municipality
are citrus, coconut, corn, bananas, coffee and black pepper. Naujan became a first class
municipality in 1996.
The lack of social, educational and health facilities was a real problem for the municipality.
Medical services could not reach many of the rural barangays and were badly in need of
improvement. Drinking water was obtained from underground sources. Toilet facilities were
inadequate. There was a shortage of dwelling units. The number of high schools for
students was inadequate. The delivery of services was hampered by the lack of professional
human resources and trained volunteers.
101
Contact Information
Mayor
Naujan, Oriental
Mindoro
Telefax: (043) 208-3479
102
DESCRIPTION OF THE STRATEGY/PROGRAM
Lingap Tanaw (Caring View) program was conceptualized, planned and implemented by the municipal
government of Naujan under the administration of Mayor Nelson Melgar. Its strategy was to reach out
and link with former residents of Naujan and involve them in the development effort of the municipal
government.
The linkaging efforts led to the founding of the Mindoro Assistance for Human Advancement Through
Linkages (MAHAL, Inc.), a non-government organization that provided assistance to the community. The
mayor was one of the incorporators of the NGO.
THE PROGRAM HAD THE FOLLOWING COMPONENTS
Lingap sa Barangay
This component was aimed at improving the economic conditions of the barangays by providing
opportunities for residents to start livelihood projects as a means to generate additional income. It also
attempted to build the capacities of barangays through the provision of financial, managerial, technical
and marketing assistance by the municipal government in cooperation with MAHAL, Inc., which
managed the project.
The component included the establishment of a community-based information system (CBIS) using the
minimum basic needs (MBN) approach as a planning tool.
Naujan, Oriental Mindoro
103
Micro enterprise development and financial assistance
The program adopted the micro enterprise development approach in the implementation of the
livelihood program. Its long-term objective was to develop the capabilities of the POs to plan and manage
their own livelihood program. Members of the associations and cooperatives recognized by MAHAL and
the municipal government received financial assistance in the form of loans. These were paid back through
the associations. Both MAHAL and the POs put up counterpart funds equivalent to thirty percent (30%)
of the municipal fund accessed.
Kalusugan Sa Barangay
Health education and services were provided to the barangays through this component. Project
activities included training of barangay health workers on the use of herbal medicines, medical response
to common epidemics, implementation of a family planning campaign program, monitoring and
ocular visitations, and the active promotion of herbal medicines. The municipal government linked up
with the Department of Health (DOH) and Plan International. It bought a mobile clinic from a grant it
received from Plan International.
The Lingap Tanaw Klinika
This component was managed jointly by the municipal government and the Naujan Womens Club and
various groups of Naujeos living outside the town. The program addressed the need for a local clinic
in the town. At that time, one had to go to Calapan, which is 32 kilometers away from Naujan, for a medical
consultation. Doctors were offered incentives to practice in Naujan including free office space, lower fees
without any imposed deductions from the municipal government, and a nurse-secretary who would be
paid by the Womens Club.
104
HOW WAS THE PROGRAM MANAGED?
The municipal government created a coordinating and monitoring body (COMB) to coordinate and
monitor the program components and project activities of the Lingap Tanaw program. Representatives
from the LGU, NGA, NGOs, and POs were members of the COMB.
WHAT WERE THE RESULTS OF THE LINGAP TANAW PROGRAM?
Institutionalization of peoples participation
Lingap Tanaw was able to institutionalize people participation in barangay planning. Barangays have
also gained capabilities in gathering and analyzing information necessary to planning, networking, project
implementation, monitoring and evaluation.
Expansion of assets and sources of income
Individual beneficiaries were able to gain additional sources of income. One PO was able to acquire a
3.6 hectare land which it paid for from rentals of a thresher it purchased. A core housing project for 27
families was put up in the acquired land. Another PO was able to establish a revolving fund used for loans
were given to members.
Expansion of service area through the MBN approach
The Kalusugan sa Barangay program reached fifty five (55) out of the seventy (70) barangays in Naujan
using the MBN approach.
105
Establishment of a community hospital
The Klinika program was able to serve 1,240 patients after its first year of operation. The program was
able to convince medical doctors to practice in Naujan instead of in Calapan, the provincial capital. A
community hospital was also established.
WHAT WERE THE ISSUES FACED BY THE PROGRAM?
The sustainability of Lingap Tanaw was threatened when a new administration took over in 1998. It had
priorities other than the program. The Municipal staff members who had been involved in the program
were assigned to other projects. Moreover, the collaboration between MAHAL and the municipal
government weakened.
Source:
The Lingap Tanaw Program of Naujan, The Changing Role of the Local Governments under a Decentralized State: Some Cases in
Philippine Local Governance, Perla E. Legaspi. 2001.
106
INVESTMENT PROMOTION PROGRAM: PROVINCE OF BOHOL
Bohol illustrated a number of LED principles and strategies: effective
stakeholder participation and mobilization both within and outside the
province; sound and realistic competitive assessment resulting in a clear
investment direction and LED strategies; the establishment of a Local
Economic Development group, (i.e., BIPC and the Livelihood Promotion
Unit); the development of a professional investment portfolio; an effective
investment marketing campaign; an incentive scheme for would be investors;
and the pursuit of growth with equity, sustainability and cultural
responsiveness as shown in the importance given to both inward investors
and existing businesses.
PROFILE
Bohol, the tenth largest island in the country, is located between Cebu and Leyte islands
in the Visayas. It is the second most populous province in Region VII with nearly a million
residents in 1995.
Poverty and lack of opportunities in the province have forced many young Boholanos to
seek greener pastures in the more developed regions of the country and in foreign lands.
With population as a criterion for computing the IRA, provinces experiencing out-migration
like Bohol are not likely to see their share in national taxes grow as rapidly as others.
Contact Information
Office of the Provincial
Governor
Bohol Province
Tel: (038) 411-3300
Fax: (038) 411-4821
Website:
www.bohol.gov.ph
107
The provincial leadership under former Governor Rene Relampagos initiated the Bohol Investment
Promotion Program (BIPP). The overall objective of the program was to promote Bohol as an investment
and tourist destination. The strategies that would lead to the achievement of the objectives were:
The provision of timely and appropriate business and financial advice to the province and municipalities
Involvement of citizens in policy formulation on investment promotion; and
The establishment and maintenance of an information base critical to the formulation of policies and
technical assistance.
The Investment Promotion Program had the following components:
Framework for Investment Promotion
Consultation workshops were held to determine the types of investments the communities and local
government preferred given the strengths and weaknesses of the province. The product of the
workshops was the Framework for Investment Promotion. Three sectors were considered the drivers of
the provinces economic growth, namely: Eco-cultural tourism, agro-industrialization and light
manufacturing.
The Bohol Investment Promotion Center (BIPC)
The Governor created a Bohol Investment Promotion Team (BIPT), which later became the Bohol
Investment Promotion Center (BIPC). The BIPC facilitated immediate assistance to investors in setting
up their projects and facilities in the province.
Bohol
108
The Livelihood Promotion Unit
The Livelihood Promotion Unit was created under the BIPC in March 2000, as the provincial governments
way of responding to the livelihood needs of small existing and would-be entrepreneurs. The unit
established linkages with national line agencies and NGOs, initiated the establishment of a databank,
conducted multi-sectoral convergence workshops on livelihood and eco-tourism development, and
launched an annual traditional food festival and business matching for village-based food processors.
The Bohol Investment Code
The Bohol Investment Code was drafted to provide a guide on fiscal and non-fiscal incentives available
to investors.
HOW WAS THE PROGRAM FINANCED?
The program was financed from various sources and had a budget of PhP280 million in 1999.
HOW DID CIVIL SOCIETY AND THE PRIVATE SECTOR PARTICIPATE IN THE PROGRAM?
The series of workshops were attended by various sectors in the province, including NGOs, POs,
cooperatives, and the private sector. Governor Rene Relampagos also formed the multi-sectoral Bohol
Investment Promotion Advisory Group (IPAG). The IPAG met once a month and was frequently called upon
to represent the province in meetings and events relating to investment promotion.
Bohol
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WHAT WERE THE RESULTS OF THE BOHOL INVESTMENT PROMOTION PROGRAM?
By 1999, there were seven local governments, 19 prospective investors, 25 provincial leaders, and about
5000 information seekers who directly benefited from the program.
From 1998 to 2001, 20 projects were targeted as long-term beneficiaries of the program. The projects
were expected to generate PhP2.5 billion in investments and 3000 jobs.
An increasing number of investors have registered with the BIPC. There were 10 in 1997; 14 in 1998;
and 19 in 1999.
The gathering of some 500 Boholanos around the world in 1999 generated a monthly dollar
remittance of $3.5 million through the PNB Bohol branch, a big increase over the average monthly
remittance of PhP1 million previously.
The program has been replicated in the provinces of Palawan, Negros Oreintal, Siquijor, Ilocos Sur,
and Northern Samar.
Source:
Investment Promotion Program: Province of Bohol, Kaban Galing: Transforming the Local Economy, 2001 edition.
Bohol
110
A MUNICIPALITYS INVESTMENT AND PROMOTION PROGRAM: TIGAON,
CAMARINES SUR
On a smaller scale, Tigaon attempted what Bohol did with certain additions.
First, its investment promotion program was a joint undertaking between a
national government agency (DTI) and the municipal government.
Second, its investment promotion was anchored on a land use plan with a
specific area targeted to be the driver of LED, the central business district.
PROFILE
Tigaon is located in the eastern part of the province of Camarines Sur. It has 23 barangays
and an estimated population of 43,500 in 2000. Basically an agricultural town, Tigaons
produce includes palay, corn, coconut, vegetables, fish and other marine products. The town
used to be known internationally as a producer of high quality abaca fiber. However, the
supply of the fiber has declined over the years.
In 1993, the towns economy was moving slowly, if not stagnant. There were few commercial
establishments and no commercial banks to facilitate business transactions in the area.
Contact Information
Mayor
Tigaon, Camarines Sur
Telefax: (054) 452-3127
111
The Municipal Trade and Industry Investment Board
Through the advice of the DTI, the municipal government created the Municipal Trade and Investment
Board. This served as the mechanism for program implementation. The board was chaired by the
mayor and had the Municipal Planning and Development Officer (MPDO) as secretary. Representatives
from the DTI, the Public Attorneys Office (PAO), the Philippine National Bank (PNB) and the State
Prosecutor assigned in Tigaon sat on the Board or served as technical advisers.
The Investment Code
The Sangguniang Bayan passed an Investment Code that spelled out the types of business enterprises
eligible for incentives and the kinds of incentives and privileges to be given. The Code gave priority to
labor generating enterprises, enterprises established in less developed areas of the municipality as
determined by the Investment Board, manufacturing enterprises which uses new locally available
materials, manufacturing or processing plants, tourism-oriented, service oriented and pioneering
enterprises and power and water resource development enterprises.
The Investment Forum
Prospective investors, including businessmen from Naga City and other parts of the Bicol Region and
Metro Manila, owners of idle lots classified as commercial land in the towns poblacion, and foreigners
were invited to the forum. The head of the German Investment Group was the forums Guest of Honor.
Representatives from financial institutions such as the DBP, LBP and PNB also attended the forum to
respond to queries of prospective investors who had problems in getting financing.
112
The Central Business District Plan
At the start of the program, the MPDO prepared a socio-economic profile of the municipality as a
basis for determining strengths and potentials of the area. The following year, the municipal government
came up with its comprehensive land use plan. The plan allocated land area for commercial, residential,
industrial, agricultural, institutional and other special uses. The plan also classified areas for conservation
and protection, settlement, and infrastructure.
At the center of the plan is the Central Business District (CBD) that would serve as the focal point of trade,
cultural, entertainment and government activity in the area. Tigaons strategic location made it a good
CBD site for the third district of Camarines Sur, which is the seat of the third district government center.
The CBD plan had the following components:
warehouses
food terminal
cold storage facilities
bus terminal
commercial center
The Municipal Livelihood Council
The Municipal Livelihood Council was established through an executive order. This was in line with the
municipalitys thrust to promote socio-economic development in the area through the implementation
of livelihood projects that would generate income for the community residents.
113
The municipal government of Tigaon allocated around PhP150,000 for the investment promotion
program. This was apparently insufficient particularly in the conduct of a series of investment fora to attract
prospective investors.
As a result of the investment forum, several business establishments were put up in the municipality.
However, these were just small commercial establishments.
WHAT WERE THE CHALLENGES ENCOUNTERED?
Lack of infrastructure facilities
Tigaon lacked infrastructure facilities. Commercial banks, hotels, restaurants, office spaces and a
presentable public market edifice were absent, discouraging businessmen from setting up larger
economic enterprises in the area.
Competition from other municipalities
The nearby town of Goa had many establishments and was a factor in discouraging businessmen from
pouring more investments in Tigaon. Also, unlike those in Goa, lot owners in Tigaon were not very receptive
to the idea of putting up commercial buildings on their land.
Source:
The Business and Investment Program of Tigaon,The Changing Role of the Local Governments Under a Decentralized State:
Some Cases in Philippine Local Governance, Perla E. Legaspi, 2001.
114
DALAN SA KAUSWAGAN PROJECT: SAN CARLOS CITY, NEGROS
OCCIDENTAL
San Carlos Citys LED strategy sought to create an environment conducive
to local economic development by expanding physical access to hitherto
remote portions of the city. It is an example of the creative and local
procurement of labor and equipment needed by the project.
PROFILE
San Carlos City in Negros Occidental is located in the northeastern part of
Negros Island. It is strategically located with respect to four of the most
important regional centers of the so-called PANACEA (Panay, Negros and
Cebu area) islands of the Visayas. The city is central to the Cebu-Negros-
Guimaras-Panay growth corridor envisioned to spur socio-economic development for
the four Western and Central Visayas islands.
The city had a population of 101,429 in 1995. It has 18 barangays, six of which are urban;
two coastal; two in nearby Refugio island; and eight mountain/upland barangays. Majority
of its land area, (67%) of 42,186 hectares, is devoted to agriculture and its dominant crops
include sugarcane, rice, corn, coconut, legumes, vegetables and root crops, fruit trees, coffee
and ipil-ipil. More than twenty-one (21%) percent of the citys land area has been classified
as protected forest area.
Contact Information
Office of the City Mayor
San Carlos City
F.C. Ledesma Ave., San Carlos
City, Negros Occidental
Tel: (034) 312-5112
Fax: (034) 312-5113
Email: scc-no@mozcom.com
Website:
www.sancarloscity.gov.ph
115
SITUATION PRIOR TO THE PROJECT
Residents of upland barangays of the citys upland barangays had to endure long, arduous trips to bring
their produce to the poblacion. The absence of good roads also made it difficult for government to deliver
needed services to the far-flung communities.
DESCRIPTION OF THE PROJECT/STRATEGY
When Mayor Rogelio Debulgado assumed office in 1992, a series of consultations with barangay
officials drew the consensus that only through the construction of an all-weather gravel road could the
traditional problems of the communities be strategically addressed. Even then, there was skepticism about
the feasibility of constructing such a road given that parts of the proposed road (about 3 km.) were steep
and made of solid rock.
When finished, the road network would have a total distance of 42 kilometers, covering five of the citys
eight upland barangays. The road would comprise an integral part of the Negros Cross-Island Link, a
flagship project of the national government that sought to reduce the distance between Bacolod and
San Carlos cities from 146 km to 86 km and cut travel time in half.
HOW WAS THE PROJECT FINANCED?
San Carlos City utilized its budget surplus amounting to more than PhP50 million to finance the project.
In 1996, when the entire stretch of the road network had became passable, then President Ramos
committed PhP100 million from his discretionary funds for the cementing of a large stretch of the road.
This was followed by various contributions from Congress: PhP5 million from the Countryside
Development Fund (CDF) of Rep. Julio Ledesma of the first district of Negros Occidental for cementing
San Carlos City, Negros Occidental
116
of the road; PhP8.3 million from the Countryside Development Fund of Sen. Alberto Romulo for bridge
construction across a stretch of the road; and PhP1 million from the CDF of then Sen. Gloria Macapagal-
Arroyo for dynamite blasting of a road stretch that still needed widening.
The city government also signed an agreement with the European-funded Agrarian Support Project of
the Department of Agrarian Reform (DAR) for the financing of an auxiliary nine-kilometer gravel road
for agrarian reform beneficiaries that fed into the main road.
HOW WAS THE PROJECT IMPLEMENTED?
Direct administration of the project
To minimize costs and possible loss of funds due to graft and corruption, the city government decided
to implement the infrastructure project by itself. The City Engineering Office (CEO) was upgraded in terms
of personnel and equipment. The CEO staff was beefed up and the city government decided to procure
some of the equipment needed. The officials believed that the purchase would be beneficial to the city
because the equipment could be used in future infrastructure projects and could be leased out to private
contractors, other LGUs and even to the DPWH for income generation.
Leasing of equipment
The city government also decided to lease the other heavy equipment that could not be purchased. This
deviated from the usual practice authorized by the Commission on Audit (COA), which was the purchase
of equipment or the contracting out of projects. New guidelines were developed by regional COA
personnel as leasing was a new arrangement.
117
Contracting an engineering consultant
Recognizing its technical limitations, the city government contracted the engineering design of the project
to a private engineering firm that submitted the winning bid for the work. Negotiating a reduction in
the contract price, more than half was trimmed from the bid amount, realizing additional savings for the
project. The engineering contract provided for a strategic technology transferprovision whereby the
contractor would consciously transfer its expertise in engineering design to the local engineers.
Project management
Mayor Debulgado exercised general supervision and control over the project. The City Engineers
Office (CEO) devised the Program of Work based on the design and the recommendation of the
engineering consultant. The Planning and Development Office monitored the project and provided the
Mayor regular reports in consultation with the Project Engineer. The city council enacted ordinances such
as appropriations and equipment leasing guidelines necessary to the project.
Regular meetings between the city officials and the consultant were held to identify emerging problems
such as project slippage. Towards the middle of the project, through the transfer of technology, technical
monitoring and evaluation were taken over by the CEO.
Barangay participation
Barangay officials assisted in securing right-of-way agreements with affected landowners and became
de facto extensions of the mayors office in monitoring the project and assuring the proper utilization
of labor. They also provided suggestions on necessary deviations in the approved engineering plan, based
on actual concerns raised by their respective constituencies. Regular consultations were held between
barangay officials, the mayor and project engineer to explore local concerns to the fullest.
118
Employment of local human resources
A total of 2000 residents were hired as laborers at PhP200 daily, comparably higher than Metro Manila
rates at the time of the project. The net effect was that city resources remained in the hands of residents,
with the money presumably circulating within the city and spurring further economic activity.
WHAT WERE THE RESULTS OF THE PROJECT?
Increased agricultural production
About 15,000 hectares, covering five of the citys upland barangays, are now being serviced by the road
network. The road improved farmers access to essential farm inputs, while at the same time allowed city
agricultural extension workers to service the hinterlands, bringing with them new technologies and
support services. The road also improved access of farmers to new and larger markets for their products.
These factors have spurred greater production, increasing average yields per crop and even increases
in land area planted. Because of better production, farmers incomes increased. Also, the road reduced
transport costs for the farmers products.
Increased Economic Activity
Market day activities, a strong indicator of rural economies, have improved substantially and the
volume of trade has increased. Commerce and trade to and from the city have also improved. Public
transport has expanded its routes with the rise in the volume of travels.
119
Improved Service Delivery
More sitios have been given access to electricity as well as clean water.
The City Health Office has been serving an increasing number of patients.
Increase in school enrollment prompting additional requests for classrooms and educational facilities.
The City Social Welfare and Health Office increased the volume of its livelihood assistance to qualified
beneficiaries.
The City Agricultural Office has assisted more farmers in crop diversification and improving their yield
of traditional crops such as rice and corn.
Peace and order have markedly improved in the upland areas with the drop in rebel-related incidents.
Environmental Impact
Because of the road network, the City has been able to more effectively implement its environmental
management program. As a result of improved access to the uplands, the City Agricultural Office has
been very active in implementing an ambitious reforestation program for the Negros Forest Reserve,
as well as aggressive tree-planting along the whole road route.
Source:
Alan G. Alegre, Dalan sa Kauswagan Road Project of San Carlos City, Negros Occidental: A Case Study in Growth-Inducing
Infrastructure, Local Governments in the Philippines: Four Best Practices in Service Delivery, ed. by Fernando T. Aldaba et. al., Ateneo
Center for Social Policy and Public Affairs, 1998.
120
BREAKING FINANCIAL BARRIERS: SAN FERNANDO, PAMPANGA
San Fernando, Pampanga is a good example of how the local economy can
be brought back on track after being derailed by a natural calamity. The
significant lesson is the re-tooling of the LGU to become more efficient in
increasing its internally generated revenues. Viability allowed the LGU to
invest in hard infrastructure and inspired local and external businessmen to
start and expand their businesses in San Fernando.
PROFILE
San Fernando is the capital of the province of Pampanga. It is also the center of Region III,
Central Luzon. The municipality has 34 barangays and had a population of 198,110 in 1998.
The larger part (38%) of its total land area of 6,834 hectares is devoted to agriculture. San
Fernando is predominantly a residential-commercial town. It has about 4,000 commercial
and industrial establishments in the area such as banks, lending institutions, hotels,
garment factories, and supermarkets and groceries. San Fernando is a first class municipality.
San Fernando was among many Pampanga municipalities adversely affected by the
eruption of Mt. Pinatubo and the lahar flows and flooding that followed. In 1995, it had
a fund overdraft of nearly PhP17 million and was deep in debt. San Fernando owed
private contractors of various infrastructure projects some PhP8 million and had unpaid
electricity, telephone, and water bills amounting to PhP8 million. It failed to remit to the
national government some PhP35 million of shared taxes.
Contact Information
San Fernando City,
Pampanga
Tel: (045) 961-2424
Fax: (045) 961-5022
121
To address its dire fiscal situation, the municipal government under Mayor Rey Aquino started the
Breaking Financial Barriers program in 1996. The main thrust of the program was to generate more
financial resources for the municipal government to pay its outstanding obligations and to finance
programs and projects aimed at realizing its six-point mission statement. The six elements of the
mission statement are:
Conversion of the town into a component city
Rehabilitation of the barangays adversely affected by lahar and flooding
Industrialization of the agricultural sector and other traditional industries
Development of more industrial and commercial establishments
Maintenance of a clean and healthy environment for the citizens
Creation of an atmosphere of peace and a sense of unity among the citizens
The Breaking Financial Barriers Strategy adopted a two-pronged approach of:
Reducing municipal expenditure and enhancing efficiency and
Improving tax collection
WHAT COST-SAVING AND EFFICIENCY ENHANCING MEASURES DID SAN FERNANDO
ADOPT?
To reduce expenditures and to increase efficiency, Mayor Rey Aquino adopted the following measures:
Termination of the services of more than 200 casuals whose services were no longer needed
Regulation of the use of water, electricity, telephone, and office supplies
San Fernando, Pampanga
122
Installation of a bundy clock and monitoring in most offices
Computerization and networking of systems on accounting and finance, civil registry system, payroll
and personnel system, real property taxes and business licenses; and
Creation of a Special Project Operations Unit under the Office of the Municipal Engineer to implement
infrastructure projects at cost lower than those of the DPWH
HOW DID SAN FERNANDO INCREASE TAX COLLECTION?
San Fernando improved the collection of taxes through a number of measures:
Creation of a special unit, the Tax Enforcement Unit, in the Municipal Treasurers Office to intensify
the collection of taxes.
The unit has three sections: cash, assessment, and inspection. Its staff came from the different
departments of the bureaucracy.
Tax mapping
A survey of individuals and establishments doing business or engaged in trade in the municipality was
done. The survey resulted in a databank of taxpayers that classified the list of establishments and identified
which establishment was paying the right amount of municipal taxes.
Regular dialogues with the business sector
Mayor Rey Aquino held regular dialogues with the business sector to discuss the problems and concerns
affecting the business sector. He also solicited suggestion on how the operations of the municipality
can be improved further.
123
Recognition rites for the Top Fifty taxpayers
Every year during his term, the municipal government honored the top fifty taxpayers in January in public
recognition rites.
WHAT WERE THE CHALLENGES FACED BY THE PROGRAM?
San Fernando faced many challenges in the implementation of its program.
Changes in the systems and procedures drew resistance from members of the local bureaucracy. The
municipal government was also criticized because of the termination of employees. Resistance faded
when the employees adjusted to the changes. Initially, there was also strong resistance to the tax
mapping from the community, most especially from the business sector. Private contractors who did
not welcome the creation of the Special Project Operations Unit also criticized the municipal government.
The Unit lessened the market for their services.
WHAT WERE THE RESULTS OF BREAKING FINANCIAL BARRIERS?
By the end of 1997, San Fernandos financial operation was no longer in the red. The creation of a Special
Operations Unit was supposed to have reduced the cost of infrastructure by as much as thirty percent (30%).
Savings generated and the improved tax revenues allowed the municipal government to acquire new
heavy equipment worth PhP6 million. These were used for accomplishing various infrastructure projects
amounting to more than PhP7 million.
Source:
The Municipality of San Fernando: Breaking Financial Barriers, The Changing Role of the Local Government Under a Decentralized
State: Some Cases in Philippine Local Governance, Perla E. Legaspi, 2001.
124
THE CITY LIVELIHOOD ASSISTANCE PROGRAM: PAGADIAN CITY,
ZAMBOANGA DEL SUR
Pagadian City targeted disadvantaged sectors (e.g., farmers and fisherfolk) in
its City Livelihood Assistance Program.
PROFILE
Pagadian was the former capital town of the province of Zamboanga del Sur.
It was converted into a chartered city in 1969 by virtue of R. A. 5478. The citys economy
is basically agricultural, with about fifty-five percent (55%) of its land area of 33,380
hectares devoted to agriculture and thirty-seven percent (37%) to forestry. Pagadians
population in 1998 was about 137, 223.
Rice, corn and coconut were planted in approximately 18,000 hectares of the citys land.
Despite the large hectarage planted, production had not met the requirements of the citys
populace due to the underutilization of the cropping potentials of the vast rainfed
portions of the agricultural land.The low fishery output had likewise been attributed to
poor storage, distribution and marketing systems.
DESCRIPTION OF THE PROGRAM
Recognizing the role of the agricultural sector in the economy, the city government
decided to make it the driving force for the citys development. The city government, under
Contact Information
Pagadian City
Telefax: (062) 214-1986
125
the leadership of the late Mayor Benjamin Arao, decided to adopt some strategies that would increase
agricultural output. The strategies included:
Production of high value crops, livestock and timber trees
provision of infrastructure support services
provision of capital or loans to farmers and fisherfolk
adoption of the Plant Now Pay Later scheme
These strategies were consolidated under the City Livelihood Development Assistance Program or
CILDAP. As of this writing, CILDAP has undergone two phases.
The city government under the administration of Mayor Joaquin Pajares, launched CILDAP Phase II in
response to the clamor of the non-agricultural cooperatives to participate in the program. Under Phase
II, qualified non-agricultural cooperatives such as consumer, credit, and multi-purpose cooperatives could
avail of soft loans of up to PhP100,000.
The program provided a package of technologies to the farmers. It included the provision of loans, part
of which was in the form of farm inputs such as barbwires and fertilizers.
CILDAP had three components:
Infrastructure Development
Agricultural Development
Cooperative Development
Pagadian City, Zamboanga del Sur
126
HOW WAS THE CITY LIVELIHOOD ASSISTANCE PROGRAM (CILDAP) MANAGED?
The city administration created the CILDAP management committee to serve as an advisory body on
the technical, administrative and supervisory aspects of all projects. The committee also assisted in the
general implementation of the program. Its involvement included approval of the purchase of farm inputs
and stocks by a cooperatives member-borrower and collection of loan repayments from the cooperative
treasurer.
The committee met monthly to discuss general operations, plans, problems, loan applications and other
issues and problems related to the program. It also kept records of CILDAP fund transactions and loan
payments for programming of loan funds to a cooperative.
WHAT WERE THE RESULTS OF CILDAP?
Reforestation of denuded areas
Through the Plant Now, Pay Later scheme of the program, almost 30,000 mango seedlings, 574
marang seedlings, and 15 durian seedlings, which the city government acquired as DA loan or by
direct purchase, were distributed to farmers. The objective was to reforest watershed and forest areas
of the city while providing income to farmers.
Cooperative development
Since its inception, the program has reached out to a large number of farmers and fisherfolk through
the cooperatives. Ninety-one (91) cooperatives and 1, 629 farmers have availed of loans, which involved
the cultivation of 1,021 hectares. This represents about 5.7% of the total land area planted with rice, corn
and coconut.
127
Support facilities and services
The program has been able to establish some support facilities and services for the farmers and
fisherfolk. The city government has established its plant nursery and fish hatchery for tilapia. It has put
up a training center for farmers. It has constructed 15 mini water reservoirs to provide continuous
supply of water to the farmers. The reservoirs can also serve as fishponds.
Infrastructure facilities
As of 1999, around ninety percent (90%) of all city roads have been concreted. Drainage systems and
spillways have also been improved resulting in improvements in farm productivity.
Agricultural development
Part of the program implementation is the provision of improved farming technology to the farmers.
The sloping agricultural land technology or SALT was provided under CILDAP Phase II. Under Phase I,
the City Agriculturist Office (CAO) had acquired 12 Brahman bulls, swine, goats, and chickens to upgrade
breeding stock and increase farm productivity.
WHAT WERE THE ISSUES FACED BY THE PROGRAM?
Loan repayment
Maximum rate of loan repayment was around 68%. Repayment rate in other sectors did not even
reach 50 percent. Repayment of loans to fisherfolk for purchase of bancas (boats) was a problem.
128
Institutionalization of cooperatives
Problems such as behavior, competence, passive attitude, resistance to change and lack of management
capability of cooperative officials have affected the operation of some cooperatives.
Marketing of produce and products
The cooperatives are envisioned to be the marketing arm of the farmers and fisherfolk. Being young
organizations, however, they are not yet technically and financially capable of marketing the products
of their members to other provinces.
Source:
The City Livelihood Development Assistance Program of Pagadian City, The Changing Role of the Local Government Under a
Decentralized State: Some Cases in Philippine Local Governance, Perla E. Legaspi, 2001.
PUSHING DEVELOPMENT THROUGH COOPERATIVISM: PROVINCE OF
BULACAN
Bulacans local economic development is anchored on its local enterprises
and cooperatives. The province is a model of starting with indigenous
entrepreneurs, supporting and promoting sector or cluster development,
encouraging new local enterprises, and targeting disadvantaged groups.
PROFILE
Bulacan is a first class province in the Central Luzon region. It has 24
municipalities and 568 barangays. It has a total land area of 2,638 square
kilometers.
DESCRIPTION OF THE PROGRAM
The Kaunlaran sa Pagkakaisa Program or KPP (Development Through Unity Program) was
launched in August 1986 to revitalize the cooperative movement in Bulacan. Its direct
beneficiaries included farmers engaged in rice, poultry, livestock, fruit and vegetable
production; fishermen engaged in small to medium scale aquaculture production and shore
fishing; women engaged in food processing, sari-sari store operations, sewing and fashion
accessory production; small entrepreneurs engaged in cottage industries and medium scale
manufacturing; and skilled workers engaged in or operating their own repair shops,
furniture manufacturing, metalworking, pyrotechnic production, goldsmith operation, etc.
129
Contact Information
Office of the Provincial
Governor
Capitol Compound,
Malolos, Bulacan
Telefax: (044) 791-0208
Email:
governor@mozcom.com
Website:
www.bulacan.gov.ph
130
The Program had the following components:
Training
Cooperative leaders and managers were given training on coop and financial management, accounting
and bookkeeping. Cooperatives were also assisted in generating more capital through savings
mobilization.
Environmental Protection
The program was concerned with tree planting and cleanliness, waste management, dredging of
creeks, resuscitation of dying rivers, and the utilization of Bulacans natural resources and pollution
prevention.
WHO OR WHAT OFFICE MANAGED THE PROGRAM?
The program was managed and supervised by the Provincial Cooperative and Entrepreneurial
Development Office (PCEDO), a department directly under the provincial governor.
The Bulacan provincial government linked with other sectors and agencies in the implementation of the
program. The DTI conducted training for the KPPs beneficiaries, found markets for the cooperatives
products, and provided technical assistance in program development and operation. The Land Bank
of the Philippines, the National Manpower and Youth Council, the Department of Agriculture, the
Department of Agrarian Reform, Department of Environment and Natural Resources, the Cooperative
Development Authority, and the Department of the Interior and Local Government provided financial
and technical assistance.
Bulacan
131
Financial and technical assistance was provided by the Land Bank of the Philippines; National Manpower
and Youth Council; Department of Agriculture; Department of Agrarian Reform; Department of
Environment and Natural Resources; Cooperative Development Authority and Department of the
Interior and Local Government.
The DTI conducted trainings for the KPPs beneficiaries, found markets for the cooperatives products,
and provided technical assistance in program development and operation.
Increase in the number of cooperatives
The number of registered cooperatives in the province increased by sixty-five percent (65%).
Increase in the total assets of the cooperatives
From 1985-1993, total assets of the cooperatives increased from PhP24.2 million to PhP1.2 billion,
attesting to the capability of cooperatives to mobilize savings and build up capital.
Increase in loans
Income generated by the cooperatives supported its credit programs. From 1986 to 1992, production
loans amounted to PhP2.5 billion, providential loans totaled PhP125 million while emergency loans
amounted to PhP94 million.
Bulacan
132
Increase in sales
In 1993, cooperatives engaged in the sale of agricultural products earned a total of PhP450 million. Coops
engaged in the supply of production inputs had total sales amounting to PhP193 million for the same
year. Seventy-nine (79) food and non-food coops earned a gross income of PhP41 million.
Promotion of gender equity
By 1993, there were 26 womens cooperatives, nine of which were KPP-funded. More women took
positions of leadership in the cooperatives including those of chairperson, board member, treasurer and
secretary.
Reduction in poverty incidence
Average family income in the province increased to PhP7,869 in 1991 from P3,436 in 1985. On the other
hand, poverty incidence decreased from 21% in 1985 to 17.9% in 1991.
Source:
Pushing Development through Cooperativism Kaban Galing: Transforming the Local Economy, 2001 edition.
REFERENCES AND TOOLS
CHAPTER 7
CHAPTER
7
REFERENCES
CONFERENCE PROCEEDINGS
Marcia Feria Miranda. LGU, Inc. Developing Local Economies by Sustaining Local Enterprises. Punla
sa Tao Foundation. Paper presented at the Roundtable Discussion on Enhancing the Role of
Local Government Units (LGUs) in Local Economic Development (LED), Astoria Hotel, Pasig City,
28-29 May 2002.
JOURNALS
Economic Focus: Finding your niche: The discovery of poor countries industrial strengths is a matter
of trial and error. In The Economist. March 1-7, 2003, p.70
CASEBOOKS
Joel Pagsanghan. Irosin Integrated Area Development: A Best Practice in Agricultural Development,
in Local Governments in the Philippines: Four Best Practices in Service Delivery, ed. by Fernando
T. Aldaba et al. Ateneo Center for Social Policy and Public Affairs. Quezon City. 1998.
Perla E. Legaspi. The Lingap Tanaw Program of Naujan. in The Changing Role of the Local
Governments under a Decentralized State: Some Cases in Philippine Local Governance. n.p., 2001.
Investment Promotion Program: Province of Bohol. in Kaban Galing: Transforming the Local
Economy, edited by Simon Peter Gregorio, n.p., n.d. 2001 edition.
REFERENCES AND TOOLS
136
Perla E. Legaspi . The Business and Investment Program of Tigaon. The Changing Role of the Local
Governments Under a Decentralized State: Some Cases in Philippine Local Governance. n.p., 2001.
Alan G. Alegre, Dalan sa Kauswagan Road Project of San Carlos City, Negros Occidental: A Case
Study in Growth-Inducing Infrastructure Local Governments in the Philippines: Four Best Practices
in Service Delivery, ed. by Fernando T. Aldaba et. al., Ateneo Center for Social Policy and Public Affairs.
Quezon City. 1998.
Perla E. Legaspi. The Municipality of San Fernando: Breaking Financial Barriers. The Changing Role
of the Local Government Under a Decentralized State: Some Cases in Philippine Local Governance.
n.p. . 2001.
Perla E. Legaspi. The City Livelihood Development Assistance Program of Pagadian City. The Changing
Role of the Local Government Under a Decentralized State: Some Cases in Philippine Local
Governance. n.p., 2001.
Pushing Development through Cooperativism Kaban Galing: Transforming the Local Economy.
edited by Simon Peter Gregorio, n.p.,2001.
LIST OF REFERENCE MATERIALS ON LOCAL ECONOMIC AND ENTERPRISE
DEVELOPMENT
Asian Development Bank (ADB)
1. FGU Consulting, Improvement of SME Development Policies and Programs: Philippines, ADB, 1990.
Scope: Macro-economic issues; industrial structure; impact of past policies on SME development; current
policy; disincentives for SMEs; recommendations; financing issues; linkage mechanism issues; existing
linkages; legislation for linkage mechanism; recommendations for a linkage mechanism
137
2. Business Development Services: A Framework for Analysis, ADB, 1996
3. Good Practices in Marketing for Micro and Small Enterprise Products: Cases from Latin America,
ADB, 1999
Asian Institute of Management (AIM)
1. Ramon Mercado Lim, A Reorientation of the Assistance Strategies of the Small and Medium Scale
Enterprises / A Review and Assessment of the TLRC, AIM-Management Research Report, Masters
in Development Management, 1991
Scope: Analysis of SME internal and external environment; SME problems and needs; analysis of SME
opportunities and threats; review of TLRC organizational structure and SME assistance strategies;
recommendations for TLRC SME strategic instruction
2. Victoria S. Licuanan, Management Development and Training for SMEs: Prospects for Regional
Cooperation and Collaboration,The Asian Manager Magazine, June 1989
Scope: Proposes increased regional cooperative focusing on management development and training
through exchange of experiences, training materials, training methodologies and training perspective
and prospective collaboration in SME research
3. Victor S. Limlingan, Legal Structures to Liberalize Markets: The Philippine Experience,The Asian
Manager Magazine, 1990
Scope: Liberalizing local markets; elimination/Streamlining the bureaucracy through RA 6810
Kalakalan 20
REFERENCES AND TOOLS 7
138
4. Tarrin Nimmanahae Minah, Organizing for Entrepreneurship, The Asian Manager
Magazine, March 1990
Scope: Organizational aspects that encourage entrepreneurship in/on large companies
5. Quintin Tan, Growing Pains of SMEs in the Philippines,The Asian Manager Magazine, September
1997
Scope: Discussed the contribution of informal sectors, CBBs, cottages industries to the economy as
well as SME needs and problems; government assistance and programs for SMEs and the problems
of implementation and resulting policy changes; identifies the learnings gained in policy making and
implementation.
6. Brua Koppel, APO-IEDP Seminar on Structural Adjustment and Policy Reform: Impacts on Small
and Medium Enterprises in Asian Economics, APO-IEDP, 1990
Scope: Resource Papers on: Structural Adjustment Policy Reform and Impact on SMEs in Asian
Economic Experience; Issues and Lessons on SMEs in Asian Economics; Developing Government/Private
Sector Coordination for SME Promotion in Periods of Economic Adjustment. Discussion of issues on:
Relationship between Policy Reform and SMEs; Relationship between Macroeconomic Policy Reform
and Sector Policies; Macro-micro Private Sector Dialogues, Policy Reform and SMEs
Bureau of Rural Workers (BRW), SEA Consultants, Inc.
1. BRW, Promotion of Rural Employment thru Self-Employment and Entrepreneurship Development
(PRESEED) Program, BRW, 1997
Scope: Ways on how to help the rural workers through the initial provision of technical and financial
assistance/resources to enable them to generate and operate self-sustaining enterprises in the
countryside
139
Department of the Interior and Local Government (DILG)
1. Local Government Development Foundation and Federation of Canadian Municipalities,
Dissemination of Best practices in Local Governance, LOGODEF, 2001
Scope: Presents research findings of best practices study; profiles 36 agencies and institutions
included in the study; includes case studies of local governance dissemination programs
Department of Labor and Employment (DOLE)
1. Mario Lamberte, Impact of Special Credit and Guarantee Programs for SMEs on Employment and
Productivity, DOLE
Scope: Exhibit of SMEs access to bank credit; SME lending and guarantee programs and its impact
on employment and productivity
Department of Trade and Industry (DTI)
1. Small Business Handbook, BSMBD, 1996
Scope: Shaping the climate for SMEs; Situationer: SMEs in the Philippines; growing Philippine SMEs;
features; facing the future
2. Programs and Services for Cottage, Small and Medium Enterprises, BSMBD, October
1993 (updated)
Scope: A compilation of the different agencies involved in assisting the small business sector in the
following areas: Technology/Production; Marketing; Training; Regulatory/Incentives; Institutional
Development
140
3. Priority Industry of the following sectors:
a. Electronics
b. Metals
c. Leathergoods
d. Carrageenan and seaweeds
e. Garments and Textiles
f. Processed Food
g. Furniture
h. Marine Products
i. Holiday Dcor
j. Decorative Ceramics
k. Footwear
l. Basketware
m. Jewelry
n. Information Technology Service
o. Construction Service
p. Professional Consultancy Service
DTI-BETP Philtins, 1997 (updated)
Scope: Industry profile; export performance; top industry exporter; industry association
activities/projects for industry promotion
Development Academy of the Philippines (DAP)
1. Salem Sethuraman, Technology and Small Enterprise Development
Scope: Technological change in SE; factors constraining technological change at the enterprise
level; policies to promote research and development in SE
141
2. John Petrof, Small Enterprises and Economic Development
Scope: Development-related problems and small business; imports and small enterprises; small
enterprises and the government
3. S. Theocharides and A. Tolentino, Integrated Strategies for Small Enterprise Development: A Policy
Paper, ILO
Scope: Enabling policy environment; economic and business potentialities; strengthening existing small
enterprises
4. Measuring Good Governance in the Philippines, ed. by Magdalena L. Mendoza
Development Bank of the Philippines (DBP)
1. RH & H Consult, Ramboll Hanneman and Hojlun,
Sectoral Studies on:
a. Canned Preserved Fish
b. Spinning & Weaving
c. Canned/Preserved Fruits and Vegetables
d. Cocoa, Chocolate and Sugar Confectionery
e. Electrical Appliances and Housewares
f. Veneer and Plywood
g. Plastic Products
h. Fabricated Metals
142
Cross Subsectoral Issues and Concerns, DBP, 1994
Scope: Framework of the subsector; industrial and market structure; supply and end structure;
environmental issues; training-related issues; macroeconomic setting; SWOT analysis; product/market
strategies; recommendations and action; plans; summaries of analysis of the 8s sectors; external
conditions; strategy for breaking the deadlock; cross subsectoral and relationship linkages;
product/market strategies of the 8 subsectors
Local Government Academy (LGA)
1. Kaban Galing: Striving for Local Governance, No. 1, 2001 Edition
Scope: Presents cases focused mainly on the internal systems, processes, and procedures that
underpin an LGUs day-to-day operations and its delivery of basic services.
2. Kaban Galing: Managing the Environment, No.2, 2001 Edition
Scope: Presents cases of how LGUs have managed different ecosystems of air, water, land and built
environment.
3. Kaban Galing: Transforming the Local Economy, No. 3, 2001 Edition
Scope: Presents cases on how local governments can finance economic transformation; solve debt
problems and produce a surplus; transform local economies through infrastructure development;
develop indigenous industries; and use sustainable integrated area development.
143
4. Kaban Galing: Promoting Excellence in Urban Governance, No.5, 2001 Edition
Scope: Presents internally focused studies that look within the LGU itself, its processes and procedures.
Initiatives on actual programs implemented by the LGUs are showcased.
National Economic and Development Authority (NEDA)
1. Center for Advanced Philippine Studies, Impact Assessment of National Livelihood Program: Main
Report (Vol. I), NEDA, May 1993
Scope: Overview of livelihood program; survey of both beneficiaries and providers of livelihood
programs; impact of livelihood programs
Philippine Chamber of Commerce & Industry (PCCI)
1. Juanita C. Viray and Gilbert M. Llanto, Development and Growth of SMEs, Confederation of
Asia-Pacific Chambers of Commerce and Industry, 1993.
Scope: Recommendations for SME development including: human resource development;
technological capability development; infrastructural and advisory services; financial assistance;
marketing and market development; fiscal assistance; administrative simplification; and rationalization
of macro policies.
2. Macro Policies and Interventions for Small Enterprise in the Philippines, Appropriate Technology
International and International Development Research Center, .1991
Scope: Structure of SE and the impact of the macro-policy environment; recommendations on:
trade & industrial policy; monetary and credit policy; fiscal policy; labor policy; and regulatory policy.
144
3. Gwendolyn R. Tecson, The Effects of Trade and Industrialization Policy on SE: Analysis and
Proposals for Legislative Action
Scope: Situation of SE; Philippine trade and industrial policy environment and Micro, Cottage, Small
and Medium Enterprise (MCSME) growth; impact of specific macroeconomic policies on SMEs; and
policy suggestions for legislative action.
4. Mario B. Lamberto, Small Enterprise Promotion Policy and Legislative Agency: Focus on Monetary
Policy, Finance and Credit Program
Scope: Assessment of current monetary and credit policies; assessment of bills pending in Congress;
policy recommendations and legislative agenda
5. Milwida M. Guevarra, Fiscal Policy on the Development of Small Enterprises An Assessment and
Proposals for Policy Directions
Scope: Problem and its setting; taxation and SE; expenditure policies to promote the growth of SEs
6. Dante B. Canlas, Labor Policies and their Impacts on Cottage, Small and Medium-Scale Enterprises
Scope: Distribution of firms by size; employment generation by class size; labor costs; minimum
wage legislation; human resource development programs
7. Direct Regulatory Control Policies and Their Role in Small Enterprise Development in the
Philippines: Analysis and Recommendations
Scope: Overall assessment of direct regulatory controls; recommendations; review of existing laws
& regulations; decentralization and deregulation; simplification of procedures
145
Philippine Institute for Development Studies (PIDS)
1. Ma. Lucila Lapos, Growth & Dynamics of Small and Microenterprises: Does Finance Matter?
(Working Paper), PIDS, August 1991
Scope: Definition of microenterprise; Phil. Experience in microenterprise development; government
policies and programs; financial and technical assistance
2. Richard L. Meyer, Supporting Rural Non-Farm Enterprises: What can be Learned from Donor
Programs?, PIDS, 1992
Scope: Donor experiences; sustainability of donor programs; role of small-scale enterprises
3. Cesar G. Saldana, Denise B. Pineda, Gilbert M. Llanto, and F. C. Gunaru, Liberalization in Directed
Credit Programs for SMEs.
Scope: Alternative development financing; policies for SMEs; features of directed SME Credit Programs;
capacity of PFI to Finance SME Growth
Small Enterprise Research and Development Foundation (SERDEF)/ University of the
Philippines - Institute for Small Scale Industries (UPISSI)
1. UPISSI, A Study on Financial Intermediation for Small and Medium Enterprises in 7 Regions of
the Philippines, 1992
Scope: Survey of financial institutions lending policies and schemes; financial management; practices
of SMEs
146
2. UPISSI, Impact Study for the Project Development of Entrepreneurs for Cottage, Small and
Medium Industries, 1990
Scope: Specific target groups were identified in developing the section growth of the CSMI sector
3. UPISSI, A Study on Capital/Labor Ratios and Financial Ratios of Small and Medium Industries, 1982
Scope: Data on capital/labor ratios and financial ratios of SMEs for IGLF survey results showing
financial ratios by area, by asset size and by industry groups
University of Asia & the Pacific (UA&P)
1. R. Quesada and Joseph Sy-changco, Sources of Credit for Small Business and the Informal
Sector, UA & P
Scope: Government guarantee programs; the role of NGOs and PVOs
2. Cottage, Small and Medium-Scale Business Lingering Issues and Prospects Under the New
Government.
Scope: Growth and equity; financial sourcing; subcontracting; sourcing of raw materials; institutional
exports
3. Eight Major Issues Facing Small Business in the Philippines, UA&P
Scope: Removal of sales tax exemptions; alleged anomalies in government purchases from
cottage producers; difficulties in securing financial assistance; limits to tax exemptions on
raw materials imported by registered cottage producers; lack of common service facilities; problems
of technology transfer; confusion about what is "small" business; government intervention in
marketing
147
4. R. Quesada, The State of Small and Medium-Scale Business in the Philippines, UA&P
Scope: 5 options for large Firms and SMEs; influx of SMEs
5. R. Quesada and Enrico Basilio, Opportunities in APEC for Philippine SMEs, UA&P
Scope: Impact of APEC on SMEs; APEC SME Action
6. R. Quesada and Francis Xavier Vicente, Kalakalan 20: Is it Worth the Debate?,
UA&P
Scope: The components; the Italian Model
7. R. Quesada, E. Basilio et al, Evaluation of the Impact of the Small and Medium Enterprise Credit
(SMEC) Projects on its SME Beneficiaries in the Countryside, PBSP, 1004
Scope: Effectivity of the financing project to SME development
8. E. L. Basilio and J. M. Chua, Telecommunications SMEs and Regional Development (Parts I & II),
Economic Policy Papers, UA&P, 1997
Scope: SMEs and regional development; barriers to SME growth; economic impact of
telecommunication on SME & regional development; slow roll out of landlines; interconnection
issue; pricing; servicing of unprofitable areas; cloning; adapting to technological development;
remembering the regions
REFERENCES
148
9. Enrico L. Basilio, Can Our SMEs be Globally Competitive? (A Look at the Proposed Bills on SMEs),
UA&P, 1995
Scope: Review of the following Philippine Bills: SB 1283 Amendment to RA 6977; HB 2737
Reorganizing GFSME; HB 4805 SMEX Bill; HB 1217, 2472 & 2566; Reestablishment of Kalakalan 20
UP School of Economics
1. G. Tecson, L. Valconel and C. Nunez, The Role of Small and Medium Scale Industries in the
Industrial Development of the Philippines,The Role of Small and Medium Scale Manufacturing
Industries in Industrial Development Experience of Selected Asian Countries, Economic and
Development Resource Center/ Asian Development Bank, 1990, pp. 313-423.
Scope: Contribution of SMIs to output growth and employment generation; external constraint to SMI
development; the functioning of SMIs; evaluation of SMI; Performance: success and failure; existing
SMI-promotion policies; policy recommendations
University of the Philippines Library System
1. Perla E. Legaspi, The Changing Role of the Local Governments Under a Decentralized State: Some
Cases in Philippine Local Governance, 2001
Scope: Enabling role of local governments; the local government code; selected local government
experiences
2. Perla E. Legaspi, The Role of LGUs in the Management of Fisheries/Aquatic Resources: Some Policy
Issues and Proposals, Local Government in the Philippines, A Book of Readings, Vol. II, ed. by
Proserpina Domingo Tapales, Jocelyn C. Curesma, Wilhelmina L. Labo
149
Scope: Codal provisions pertinent to the management of fisheries/aquatic resources; managing
fisheries/aquatic resources at the local level, problems encountered in codal implementation
3. Perla E. Legaspi et al, Local economic promotion in the Philippines, Local Government Center and
German International Foundation for International Development, 1996
Scope: Overview of local government in the Philippines; local government and economic promotion;
local experiences in economic promotion
4. United Nations Center for Regional Development, Local Governance and Local Economic
Development: Capability-Building, ed. by Josefina S. Edralin, 1996
Scope: Findings of a research project on Local Government and the new Community Governance; case
studies on intermediate-sized or secondary cities in Asia (found in countries of China, Indonesia,
Malaysia, Philippines, Sri Lanka) and Latin America (Argentina and Brazil)
5. Local Governments in the Philippines: Four Best practices in Service delivery, Ateneo Center for
Social Policy and Public Affairs, 1998
Scope: Case studies of LGU experiences in service delivery
6. Rolando M. Acosta et al, Local Government Capacity Building Handbook, Local Government
Development Foundation and Bureau of Local Government Supervision, DILG, 1991
Scope: Decentralization and local government capability building; designing/packaging/negotiating
local government capability project; project implementation; developing local government capability
indicators
REFERENCES
150
7. Fernando C. Fajardo, Population and Development Integration in Local Planning, Integrated
Population and Development Planning Project, NEDA, 1994
8. Cesar B. Umali Jr., Pathways to Decentralization: A Decade of LRM Project Innovations in People-
Centered Development, NEDA, 1991
9. Decentralization: Examining and Maximizing Decentralization Efforts of the Philippine Government,
NEDA, 1990
10. Gilberto M. Llanto, Making Rural Credit Work: Lessons from the Local Resource Management
Project, NEDA
11. Industrial Metabolism: Restructuring for Sustainable Development, ed. by Robert U. Ayres and
Udo E. Simonis, United Nations Press, 1994
World Bank
1. LED: A Primer
2. Pamphlet on Strategic Planning Process
3. The Role of Local Economic Development Agencies
4. Guidelines in Drawing up a Terms of Reference for Information Collection for a LED Strategy
5. Doing a Competitive Assessment: The Approach of the Club du Sahel and the Municipal
Development Program
ENDNOTES
1
http://www.parul-led.or.id/e_overview.htm
2
Takes off from the discussion in http://www.worldbank.org/urban/led/implementing.html
3
Economic Focus: Finding your niche: The discovery of poor countries' industrial strengths is a
matter of trial and error," in The Economist, March 1-7, 2003, p.70
4
Takes off from the discussion in http://www.worldbank.org/urban/led/planning.html
5
Local Economic Transformation Program and Local Solid Waste Management Program. Bureau
of Local Government Development - Department of the Interior and Local Government 2002.
p.40.
6
Takes off from the discussion in http://www.worldbank.org/urban/led/promoting.html
7
Takes off from the discussion in http://www.worldbank.org/html/fpd/urban/led/glossary.html
8
Takes off from the discussion in http://www.worldbank.org/urban/led/local_business.html
9
Takes off from the discussion in http://www.worldbank.org/urban/led/new_enterprises.html
10
Takes off from the discussion in http://www.worldbank.org/urban/led/cluster.html
11
Takes off from the discussion in http://www.worldbank.org/urban/led/area_targeting.html
152
12
Takes off from the discussion in http://www.worldbank.org/urban/led/disadvantaged.html
13
Marcia Feria Miranda. "LGU, Inc. Developing Local Economies by Sustaining Local Enterprises."
Punla sa Tao Foundation. Paper presented at the Roundtable Discussion on "Enhancing the Role
of Local Government Units (LGUs) in Local Economic Development (LED)," Astoria Hotel, Pasig
City, 28-29 May 2002.

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