MEETING OF THE UCLG COMMITTEE ON LOCAL FINANCE AND DEVELOPMENT (CLFD) June 11 -12, 2007, Barcelona, Spain

"Challenges in Financing Local Infrastructure in Makati City, Philippines"

Violeta Somera Seva Senior Advisor, Office of the Mayor

MAKATI CITY PROFILE

    2000 Census:

471,379

Growth Rate:

0.4%

2007 projected population: Daytime Population:

533,715 3.7 Million

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LAND AREA

: 27.36 sq km (2,736 has)

(4.3% of Metro Manila’s land area)

Metro Manila MAKATI AIRPORT

• Metropolitan Manila: 17 cities and municipalities • Makati is one of the component cities

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Metro Manila

• Governed by a policy making body called the Metro Manila Council: • 17 Metro Manila Mayors, • President of the Vice Mayors League , • President of the Metro Manila Councilors League • Secretaries of the national line departments with non voting powers 4

Services requiring local infrastructure and financing

LOCAL GOVERNMENT CODE OF THE PHILIPPINES:

Devolved certain functions and responsibilities of the national government to LGUs • Solid waste management • Health services • Social services • Transportation and traffic management • Water and waste water management 5

But in Metro Manila…

• • • • •

DPWH (Dept. of Public Works and Highways)

– roads and bridges – Major flood control projects

DOTC (Dept. of Transportation and Communication)

– rail based transport facilities

MMDA (Metro Manila Development Authority)

– solid waste disposal facilities

DepEd (Department of Education)

– School buildings – (LGUs) Makati City build schools to augment the lack of educational facilities

Metro Manila Water and Sewerage Administration

– Water and Wastewater – privatized in favor of two concessionaires Manila Water and Maynilad. 6

Makati’s Infrastructure Requirements

• Local road construction and maintenance • Drainage • Street lighting • School buildings • Health centers • Hospitals • Barangay halls/ community centers • Public housing 7

Makati 21- City Development Agenda

• Identified public infrastructure requirements of the City for the

next 5 years

• A set of

strategic directions

were formulated through a series of consultation meetings with key stakeholders: – Business retention, promotion expansion, privatization and redevelopment of potential satellite business districts/ communities – Human Resource Development and Enhancement – Expansion of Financial resources and its Revenue Base 8

Priority programs and projects requiring financing beyond the internal capacity of the city:

• Makati Urban Transportation Integration Program • Housing Development Program • Development of Satellite Business Districts • Development of Community Commercial Zones in the barangays • Urban Strip Development • Makati Heritage Zone Project $ 240 M = (P 11.3 Billion ) short and medium term 9

Project Feasibility Studies

• These projects would initially require studies: – market, technical, physical, environmental, organizational, economic, and financial feasibility. • Counterpart funding from donor agencies to secure foreign and local experts to compose the study team.

• The best alternative financing schemes shall be explored: – direct financing from the city budget, – joint financing with national government agencies and government owned or controlled corporations, – BOT, – joint ventures with local and foreign partners, – bond offerings, – long term loans from local and foreign sources and – community corporate ownerships. • The studies shall also explore cost recovery and income generating possibilities .

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Bankability : Makati City

• a first class, highly urbanized city • City assets: US$ 420 M (P20 Billion) • Ranked third in terms of income amongst Philippines Cities

Sources of Revenue (2006) US$ M Percent

Tax on Business Real Property Tax 72.1 74.7

42% 43%

Misc. Fees & Charges Economic Enterprises 12.6 3.4

7% 2% Sources of Revenue YR 2006 Real Property Tax;

$74.7M ; 42%

Misc. Fees & Charges

; $12.6M ; 7%

Challenges Faced in pursuit of Makati’s Livability

• inadequacy of open spaces • supply of housing facilities • improve air quality • discharge of waste water • garbage in waterways • severe traffic congestion • existence of informal settlers 12

Issues and Challenges Faced in Financing Urban Infrastructure 1. Inadequate local government capacity.

– lack of sufficient number of technically able staff – Heavy reliance on consultants

2. Credit environment is not LGU friendly.

– pass on rate to LGs is high and expensive. – Direct lending to LGs from international funding institutions is not allowed or is constrained by national laws and regulations.

3. Home grown hedging by LGs not allowed

– stifling the potential of entrepreneurial LGs to exercise proprietary functions.

4. Bureaucratic red tape

in availing foreign loans by multifarious national agency and bank requirements – causing delay in project approval and implementation

5. Coordination issues

on projects pursued by national agencies, private sector and the LGs itself. – Plans and projects have to be synchronized to avoid overlaps and duplication to save on valuable resources .

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Recommendations and Conclusion

• Adopt innovative revenue generation and resource mobilization schemes – improve revenue collection, – maximize utilization of the city’s financial resources – tap other potential sources of funds. • Institutional, legal and administrative issues have to be addressed • LGU friendly financial regime or environment 14

Recommendations and Conclusion

1. Enhance capability of staff through capacity programs

– seminars, workshops, trainings, technical staff exchanges, city to city cooperation, exchange of information and knowledge 2. Lobby for

review and repeal or amendment of laws or regulations

that inhibit the local governments from engaging in entrepreneurial projects. 3. Lobby for

direct access of local authorities to facilities of international funding institutions

4. Establish

clear agreements to cut on bureaucratic red tape

– not only in the country but with International banking institutions and other organizations dealing with local finance.

5. Strengthen coordination mechanisms

to improve the planning and implementation of infrastructure projects to avoid wastage of valuable resources.

UCLG Local Finance and Development efforts: a Welcome Development

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Thank you and Mabuhay!!!

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