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Tugs of War: Local Governments, National Government

This paper traces the origins of the recurrent functional conflicts among local governments and the financial conflicts between local governments and the national government under decentralization to the formulation and implementation of the Local Government Code of 1991. Though these tugs of war are inherent in a decentralized setup, they are avoidable. They persist, however, because decentralization was pushed too far, leading to fragmentation in service delivery, each piece inefficiently assigned to a different local government. Furthermore, the distribution of the devolved functions was not directly tied to the allocation of the additional fiscal revenue shares to local governments, which did not wean the latter from their financial dependence on the national government. Addressing these issues requires more than simply revising the Code, since increasing urbanization, ICT developments, and climate change over the last 25 years also underscore the need to restructure the local government system and political institutions. The main lesson is to implement the reforms correctly the first time, since rectifying the errors later could prove to be costly, if not impossible.


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