By JESUS F. LLANTO
abs-cbnNews.com/Newsbreak

Cities that have experienced significant
cuts in their revenue shares starting this year due to the creation of
new cities are likely to lose their competitiveness and, as a
consequence, miss opportunities to attract investments.

This was the opinion expressed by local
governance experts and local officials at the recent launch of the 2007
Philippine Cities Competitiveness Report (PCCR) of the Asian Institute
of Management (AIM) in Makati City.

Done every other year, it was the fifth
time that the AIM measured the business-friendliness of select cities
in terms of infrastructure, cost of doing business, dynamism of the
local economy, human resources and training, responsiveness of the LGUs
to business needs, and quality of life.

The study classified this year 90 cities
into three categories: Metro cities, or those comprising metropolitan
areas in Manila, Davao, and Cebu; mid-sized cities, or non-Metro cities
with population more than 200,000 residents; and small-sized cities, or
those with less than 200,000 residents.

Wholesale conversion

Experts and local officials said the
almost wholesale conversion of municipalities into cities in the past
two years has reduced the old cities’ share in national taxes or the
Internal Revenue Allotment (IRA), which is used by LGUs to finance
their operation and deliver basic services.

The direct effects of less IRA on
infrastructure development, and consequently on the cities’ general
competitiveness, may show in the next round of surveys to be conducted
by the AIM Policy Center.

Under the Arroyo administration, an
average of three cities are being created every year, the most compared
to past governments. The biggest batch of new cities—18—was approved in
2007, thus canceling hundreds of millions of pesos from the expected
IRA increases of existing cities.

The League of Cities of the Philippines
(LCP) has a pending petition before the Supreme Court to nullify the
conversion of 16 of these 18 new cities due to their failure to meet
the requirements for conversion under the law.

Drivers of growth

Federico Macaranas, executive director
of the AIM Policy Center, told abs-cbnNews/Newsbreak the cuts on the
IRA share diminished the funding for infrastructure, which is an
indicator of a city’s competitiveness.

Mandaluyong City Mayor Benhur Abalos,
who is also LCP president, said that the reduction in the cities’ IRA
share did not only diminish their funds but also affected their
sustainable development and the delivery of basic services, like
education and health.

“The cities are the economic drivers and
they have to maintain their sustainability,” Abalos told
abs-cbnNews.com/Newsbreak. He said that urban areas and cities
contribute around 80 percent of the country’s gross domestic product.

The IRA has been the lifeblood and main
source of financing of most LGUs, with some of them having an 80- to
90-percent IRA dependency. Some cities, particularly in Mindanao, that
have experienced IRA cuts are forced to cut down spending on basic
services by as much as 40 percent and to lay off workers to cope with
the IRA cuts.

The LCP argues that the new cities have
eaten up the IRA share of old cities. For instance, Puerto Princesa is
receiving an IRA increase of only P1.7 million this year instead of the
expected P146.1 million before the creation of new cities.

Davao City will be getting an IRA
increase of only P69 million instead of the originally expected P263.5
million. Zamboanga City’s expected IRA increase of P150.84 million has
been slashed to P35.87 million.

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Not an excuse

Nathaniel von Einsiedel, former regional
coordinator for Asia Pacific of the United Nations Urban Management
Programme, said that the scenario occurred because the IRA pie to the
cities did not increase proportionate to the number of cities added.
“The number of cities increased but the pie did not.”

Marikina City Mayor Ma. Lourdes Fernando, however, said that a small fund should not deter a city to be competitive.

“Initially, it will have an effect but
it’s not always the case,” Fernando told abs-cbnNews.com/Newsbreak,
adding that there are some small cities that have little fund but are
still competitive. “In the end, governance is still important.”

Small is manageable

The study also showed that smaller
cities are more competitive—the “mid-sized cities did better than metro
cities on the average.”  

Metro cities got an average
competitiveness score of 6.21 points out of a perfect score of 10.
Mid-sized and small cities got 6.47 and 6.42 points, respectively.

“If there is no urban classification,
small cities occupy the top spots when all the drivers are taken into
consideration,” the study read. “However, the cities have obvious
differences that justify their classification.”

Macaranas said that this might be
attributed to the fact that metro cities are more difficult to manage
because they have bigger population and more needs.