Local economic enterprises special report


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Local economic enterprises special report

  2. 2. <ul><li>PUBLIC ECONOMIC ENTERPRISES - a business like entity, wholly or partially owned by local government that sells a product or service to meet a perceived specific public demand </li></ul><ul><li>Common PEEs in the Philippines are: public markets, slaughterhouses, bus terminals, waterworks and cemeteries </li></ul>
  3. 3. <ul><li>PURPOSEFUL PEE – is the one that contributes to the sustainable development and quality service delivery goals of the local government unit (LGU) and the nation </li></ul><ul><li>Characteristics of a Purposeful PEEs: </li></ul><ul><li>1. with clear vision, mission, goals and objectives </li></ul><ul><li>2. has a form that supports the long term LGU </li></ul><ul><li>sustainable development plans </li></ul><ul><li>3. supported by national and local policy </li></ul><ul><li>4. managed according to well researched business plan </li></ul><ul><li>5. managed using a performance based approach </li></ul><ul><li>6. demonstrates innovation </li></ul>
  4. 4. <ul><li>How do Purposeful PEEs contribute to poverty reduction? </li></ul><ul><li>1. Require less subsidy from government and generate </li></ul><ul><li>profit </li></ul><ul><li>2. Equitable delivery of products and services will </li></ul><ul><li>increase the access of marginalized groups to local </li></ul><ul><li>services </li></ul><ul><li>3. Quality services such as utilities, markets and </li></ul><ul><li>transportation will attract potential investors to the </li></ul><ul><li>LGUs </li></ul>
  5. 5. <ul><li>PEEs contribution to Local Economic Development </li></ul><ul><li>and promotion of Local Small and Medium Enterprises </li></ul><ul><li>1. Attract potential investor </li></ul><ul><li>2. Contributes to investor confidence in LGU </li></ul><ul><li>management </li></ul><ul><li>3. Create an agreement that involves an SME in </li></ul><ul><li>ownership, management or operation of the PEE may </li></ul><ul><li>contribute to SME development </li></ul>
  6. 6. <ul><li>PEEs contribution to LGU Revenue Generation and </li></ul><ul><li>Resource Mobilization </li></ul><ul><li>1. Require less subsidy from LG and generate a profit </li></ul><ul><li>for the LGU </li></ul><ul><li>2. Have efficient financial planning and management </li></ul><ul><li>system that allow for careful control and tracking of </li></ul><ul><li>PEE revenues and expenditure </li></ul><ul><li>3. Good business plans are key to success negotiation </li></ul><ul><li>of credit financing for capital investment in PEE </li></ul>
  7. 7. <ul><li>PEEs contribution to Good Governance </li></ul><ul><li>1. Ensure that products and services meet </li></ul><ul><li>stakeholders needs </li></ul><ul><li>2. Publish annual financial performance reports that </li></ul><ul><li>provide transparency and accountability </li></ul><ul><li>3. Opportunities for citizen involvement </li></ul>
  8. 8. <ul><li>Republic Act 7160, otherwise known as the Local Government Code under Section 17 provides…. </li></ul><ul><li>(a) Local government unit shall endeavor to be self reliant and shall continue exercising the powers and discharging the duties and functions currently vested upon them. They shall also discharge the functions and responsibilities of national agencies and offices devolved to them pursuant to this Code. Local government units shall likewise exercise such other powers and discharge such other functions and responsibilities as are </li></ul>
  9. 9. <ul><li>… appropriate or incidental to efficient and effective provision of the basic services and facilities enumerated. </li></ul><ul><li>(IX) public markets, slaughterhouses and other </li></ul><ul><li>municipal enterprises; </li></ul><ul><li>(X) public cemetery </li></ul><ul><li>Under section 17, the phrase “ and others” is added, which connotes that any other utilities or services can be considered as economic enterprises, provided they generate income or revenues. </li></ul>
  10. 10. <ul><li>LPEs include : </li></ul><ul><li>a. public market </li></ul><ul><li>b. transport terminals (bus, jeepney, parking, piers), </li></ul><ul><li>c. slaughterhouses, livestock trading and cattle fattening, </li></ul><ul><li>d. fish landing and cold storage facilities, </li></ul><ul><li>e. post harvest facilities (grain storage, drying, milling) </li></ul><ul><li>f. water supply </li></ul><ul><li>g. sanitation (local drainage, sewerage, solid waste collection and disposal) </li></ul><ul><li>h. public parks, sports and recreational facilities </li></ul><ul><li>i. public cemeteries </li></ul>
  11. 11. <ul><li>The main objective of RA 7160 or LGC of 1991 is local autonomy and self reliance in all aspects of local governance and administration. The Code mandates the devolution and decentralization of LGUs certain functions and responsibilities undertaken by National Government </li></ul><ul><li>After 15 years of implementation of the LGC, it shows that there are many issues that have to be addressed regarding the LPEs. Two issues : (1) with respect to local autonomy and (2) fiscal administration. </li></ul>
  12. 12. <ul><li>First- LPEs have been traditionally considered political obligations and administrative functions of LGU rather than investments for economic growth and development </li></ul><ul><li>Second-LPEs are part of the mainstream bureaucracy and operate subject to government regulations and procedures. These situations limit the capability and potential of the LPEs to be autonomous and self-reliant </li></ul>
  13. 13. <ul><li>IMPLICATIONS OF THE ISSUES TO THE COUNTRY </li></ul><ul><li>Efficient and effective delivery of LPEs will redound to the greater benefits of the country. The efficiency and effectiveness of LGUs public service at the local level have a great impact to human development outcomes and national economic growth. </li></ul><ul><li>LPEs are authorized to collect fees and charges to cover costs of administration and operations. Unfortunately, almost all of them operate at a loss except for few that is properly managed. </li></ul>
  14. 14. <ul><li>LPEs are always part of the regular budget rather than a multi-year economic and financial investments. Historical records show that 70%-80% of LGUs annual appropriations go to administrative and recurrent expenditures. </li></ul><ul><li>Almost all of the existing economic enterprises are subsidized by local budget which are always unlimited. The LPEs are unsanitary, congested, fire hazards, poorly maintained-conditions that fall short of the required standards of public health and safety. These are evident in the 4 th and lower class LGUs. </li></ul>
  15. 15. <ul><li>The IRA formula is inequitable and biased toward big and densely populated LGUs. Consequently, the delivery of public services suffer the most meantime economic development is stunted. </li></ul>
  16. 16. <ul><li>Various Problems of PEEs </li></ul><ul><li>1. Most operate at a loss and require heavy subsidies </li></ul><ul><li>from LGUs </li></ul><ul><li> 2. Most are operated according to traditional practices </li></ul><ul><li>without regard for new technologies, local </li></ul><ul><li>development priorities and changing consumer </li></ul><ul><li>demand </li></ul><ul><li>3. Many are inefficiently managed, wasting previous </li></ul><ul><li>resources </li></ul>
  17. 17. <ul><li>4. Many offer substandard and poor quality products </li></ul><ul><li>and services </li></ul><ul><li>5. Some provide products and services below market </li></ul><ul><li>rates in unfair competition with the private sector </li></ul><ul><li>6. Some are established opportunistically without </li></ul><ul><li>regard for their financial feasibility and their impact </li></ul><ul><li>on the local ecological, economic and social </li></ul><ul><li>environment </li></ul><ul><li>Various policy options are available to LGUs and NG to effectively address the issues. </li></ul>
  18. 18. <ul><li>PRIMARY POLICY OPTIONS </li></ul><ul><li>Option No. 1 – The need to exercise the authority and power of LGU as a corporation under sections 15 and 22 of the Local Government Code to achieve the goal. </li></ul><ul><li>Option No. 2- Privatization as authorized in sections 3, 17 and 18 of LGC. </li></ul><ul><li>Option No. 3- The inter local government cooperation and resources sharing authorized in the LGC have been inoperative and remain untapped. </li></ul>
  19. 19. <ul><li>B. INSTITUTIONAL OPTIONS </li></ul><ul><li>1. Detach the LPEs from the mainstream bureaucracy, </li></ul><ul><li>separate units with own accounting, auditing and </li></ul><ul><li>administrative system. </li></ul><ul><li>2. The potential of LGUs have not been fully tapped. </li></ul><ul><li>3. Operating system shift-delivery of basic services by </li></ul><ul><li>district rather than by political jurisdiction </li></ul>
  20. 20. <ul><li>C. LOCAL OPTIONS </li></ul><ul><li> 1. Deregulate fees and user charges </li></ul><ul><li>2. The present set-up and practices on public utilities, </li></ul><ul><li>and economic enterprises need to be restructured. </li></ul><ul><li> 3. Shift from the supply-driven to demand driven </li></ul><ul><li>delivery of services where and when needed. </li></ul>
  21. 21. <ul><li>The primary principle of devolution and decentralization is very clear- to unburden the national government of responsibilities of attending to the basic needs of the people by shifting the responsibilities down to the LGUs where such needs can be best carried out. </li></ul><ul><li>On the part of the LGUs, if the issues above have not been adequately addressed, the problems they are encountering regarding the delivery of the LPEs will not only continue to occur but will grow into unmanageable proportion </li></ul>
  22. 22. <ul><li>It goes without saying then that consequently the whole country will be affected worse, the LGC will prove to be a dismal failure. </li></ul><ul><li>The policy mandates regarding the provision of public utilities and services under the LGC are clear and complete. The LGUs have adequate authority and power under the same legal framework to execute these policies. The problems appear to be in the interpretation and application of the pertinent provisions of the LGC. </li></ul>
  23. 23. <ul><li>The policy issues on the local public enterprise cannot be ignored. Their negative implications and adverse impacts to the country, in general and the LGUs on particular, are too close for comfort. </li></ul><ul><li>Unless these issues are addresses soon these negative impacts will grow into unmanageable magnitude that may be too difficult to resolve, if ever prohibited at cost. </li></ul><ul><li>The LGUs would of course be victims and will be hit hard by these negative impacts. While the poor LGUs may suffer the most, becoming poorer especially because of the rural push. </li></ul>
  24. 24. <ul><li>In the final analysis the magnitude and severity of socio-economic problems and administrative shortcomings will be much greater in cities and urban LGUs, particularly the urban push. </li></ul><ul><li>The policy issues are not difficult to confront. This is because the policy options are available easy to adopt and transform into actions. In fact a number of them are immediately doable since there are existing legal instruments and authoritative mandates, available to LGUs, particularly, the LGC, MBN/SRA, and the Constitutional mandate and empowerment of LGU. </li></ul>