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Managing Urbanization Under a Decentralized

Governance Framework

Volume 2

Eduardo T. Gonzalez Charmaine G. Ramos

Gemma Esther B. Estrada Leslie V. Advincula-Lopez

Gregorio Luis A. lgaya

DRDF Incorporated

Demographic Research and Development Foundation, Inc.

Philippine Institute for Development Studies

Copyright 2001 by Demographic Research and Development Foundation (DRDF), Inc. c/o Population Institute, University of the Phi I i ppi nes 2/F Pal rna Hall, Di I i man, Quezon City 11 01 Philippines

and

Philippine Institute for Development Studies 4/F NEDA sa Makati Building 1 06 Amorsolo St., Legaspi Village 1 2 2 9 Makati City Philippines

P r i n ted i n the Ph il i p pi n e s . A II rig h t s res e rv e d .

The findings, interpretations and conclusions in this volume are those of the authors and do not necessarily reflect those of DRDF and P/05.

Please address all inquiries to:

PHILIPPINE INSTITUTE FOR DEVELOPMENT STUDIES NEDA sa Makati Building 106 Amorsolo St., Legaspi Village 1 2 2 9 Makati City Phi I i ppi nes Telephone: (63-2) 8924059, 8935705 Fax: ( 6 3-2) 8 9 3 9 58 9, 81 61 0 91 E-mai I : pu bl ications@pids net. pids .gov. ph Website: http: I /www. pi d s. g ov. ph

ISBN 971-564-037-0 RP 09-01-500

ontents

Preface . . . . . . . . . . . . . . . . . . . . . . � . . . . . . . . . . . . . . . . . . . . . . . . . . . . . •

XI

Acknowledgement ........................................ . •

XI V

Summary ................................................. . XV

Urban Deconcentration and Dispersal . . . . . . . . . . . . . . . . . . . . . XV Output and Employment Decentralization .... . . .. . . . . .. . . . •

XVI Global Influences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . .. . . . .

•

X VI Urban Infrastructure ... . ....... . . ..... . . . . . ........... . .. xvii Human Development and Shelter ........... . ............ . xvii Decentralizing Through Growth Corridors .... . ... .. .... .. . xviii Endogenous Responses from Local Governments . . . . . . . . . . xix Crucial Policy Points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxi

Chapter 1 Human Settlement Patterns and Trends in Urban Decentralization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Urban Decentralization and Dispersal . . . . . . . . . . . . . . . . . . . . . 2

Deconcentration of Manila . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Internal Migration and Urbanization. . . . . . . . . . . . . . . . . . . . . . 11

Reclassification and Net Natural Increase: Engines of Urban Growth and Decentralization . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Fertility Decline and Urbanization . . . . . . . . . . . . . . . . . . . . . . . . . 21

Chapter 2 Links Between Economic Growth and Urban Decentralization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

High Urbanization Levels , Stagnant Industrial Output . . . . . . 25

The Urbanization-Services Sector Connection . . . . . . . . . . . . . . 29

Does Urbanization Expand Job Opportunities? . . . . . . . . . . . . . 32

Industrial Diffusion or Primacy Revival . . . . . . . . . . . . . . . . . . . . 33

Income Levels and Wages as Determinants of Urban Decentralization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Chapter 3 Global Influences in Urban Decentralization . . . 39

Foreign Direct Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 The Question of OCW Remittances . . . . . . . . . . . . . . . . . . . . . . . . 46

v

Chapter 4 Linking Urbanization with Infrastructure and Human Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Infrastructure-Urbanization Links . . . . . . . . . . . . . . . . . . . . . . . . 52

Human Development and Shelter Services . . . . . . . . . . . . . . . . . 58

Chapter 5 Impact of Growth Corridors on Urban Decentralization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Conceptual Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Growth Corridors : Origins and Features . . . . . . . . . . . . . . . . . . . 67

Spatial Development Under a Liberalizing Regime . . . . . . . . . . 74

Some Baseline Indicators of the Chosen Growth Corridors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Chapter 6 Local Government and Decentralized Urban Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

Subsidiarity and Allocational Efficiency of Local Choice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

Backdrop for Asymmetric Decentralization of Urban Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

Providing Public Goods of a Localized Nature . . . . . . . . . . . . . . 106

Financing Urban Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . 114

Central-Local Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

Chapter 7 Conclusions and Policy Recommendations . . . . . 121

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

Policy Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143

About the Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

•

VI

Figure 1 Figure 2 Figure 3 Figure 4

Figure 5 Figure 6 Figure 7 Figure 8

Figure 9 Figure 10 Figure 11

Figure 1 2 Figure 13 Figure 14 Figure 15 Figure 16

Figure 17

ist o

Urban Growth in the Philippines . . . . . . . . . . . . . . . . . . . The ASEAN Picture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Primary Reversal or Resurgence . . . . . ... . . . . . . . . .. . Population Density in Relation to Concentration

1

4

4

Per Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Deconcentration in Luzon . . . . . . . . . . . . . . . . . . . . . . . . . Regional Population Shares in the Philippines . . . . . . . Urban Population Shares of Philippine Regions . . . . . Speed of Urbanization of Selected Cities . . . . . . . . . . . . Directions of Net Migration and Urbanization . . . . . . . Migration to Metro Manila, 197 5- 1980 and 1985- 1990 . . . Comparison of Inflows to Provinces vis -a -vis Urbanization Levels .......... . .. . ... . ....... . . ... . Migration and Urbanization, by Sex . ..... . ..... . . . . The Top Catchment Provinces in 1990- 199 5 . . . . . . . . . . Direction of Migration, 1990- 199 5 . . . . . . . . . . . . . . . . . . Urban Growth After the Reclassification . . . . . . . . . . . . Effect of Reclassification and Net Natural Increase on Urban Decentralization .... . . . ... . . ......... . .. . Fertility Rates in Relation to Urban Growths

7

8

9

10

12

12

15

16

18

19

19

21

of Regions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Figure 18 Relationship Between Urbanization Levels and Economic Growth . I • • • • • • • • • • • • I • • • • • • • • • • • • • 26

Figure 19 Urbanization in Relation to Industrialization .. . . I • I • 26

Figure 20 Decline in Manufacturing Output Shares in Most Regions . . . . . . . . . . . . . I • I I • • • • • • • • • • • • • • • • • 2 8

Figure 21 Trends in Manufacturing Employment Shares Across Regions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Figure 22 Regional Services Output Shares . . . . . . . . . . . . . . . . . . 30

Figure 23 Shares of Services Employment Across Regions . . . . . 31

Figure 24 Link Between Urbanization Levels and Employment Rates in Personal, Community and Social Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Figt1re 25 Link Between Private Services Output and Urbanization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2

Figure 26 Urban Growth and Job Opportunities : Different Outcomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

• •

VII

Figure 27 R ise in Metro Manila's Industrial Primacy After the Economic Boom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Figure 28 Manufacturing Shares as a Percent age of Tot al Output . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Figure 29 Metro Manila's Performance in Services Production. . . 35

Figure 30 Effects of Per Capita Income on Urbanization. . . . . . . 36

Figure 31 Trends in Real Wages Across Regions . . . . . . . . . . . . . . . 38

Figure 32 Distribution of FDis Across Regions. . . . . . . . . . . . . . . . . 42

Figure 33 Regional Shares on FDis for Manufacturing. . . . . . . . . 43

Figure 34 Regional Shares on FDis for Nonmanufacturing Sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Figure 35 Export Share by Region. . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Figure 36 Correlat ion Between the Regions' Manufacturing Exports and Urbanization . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Figure 37 Correlation Between the Regions' Nonmanufacturing Exports and Urbanization . . . . . . . 47

Figure 38 Remittances vis-a -vis Private Services Output Per Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Figure 39 Regional Contributions to Total Remittances . . . . . . . . . 48

Figure 40 Link Between OCW Remittances and Employment in Non tradeable Sector. . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Figure 41 Link Betwee n Urbanizat ion and Nontrade able Sector. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Figure 42 Gr owth of Infrastructure vis-a-vis Urbanization. . . . . . 52

Figure 43 Share of Infr astruct ure Se r vice t o Reg ional Economies 5 3 . . . . . . . . . . . . . . . . . . . . . . . . " . . . . . . . . . . . . . .

Figure 44 Gr owth of Infrastructure in Regions . . . . . . . . . . . . . . . . 54

Figure 45 Effect of Urban Growth on Per Capita Availability of Major Infrastructure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Figure 46 Connect ion Between Urbanizat ion and Human Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Figure 47 Link Between Gender Development and Urban Gr owth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Figure 48 Gr owth of Housing Stock in Highly Urbanized Areas. . . 60

F' igure 49 Housing Pr oduction vis-a-vis Demand . . . . . . . . . . . . . . 61

Figure 5 0 Ho·using Stlpply and Demand in Regions. . . . . . . . . . . . 62

Figure 51 Hotlseholds in Makeshift Dwellings . . . . . . . . . . . . . . . . . 64

Figure 52 Shift Analysis : Patterns of Regional Growth. . . . . . . . . 85

Figure 5 3 Gains of Growt h Corr idor Cit ie s from Ur ban Decentralization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

• • •

VIII

Figure 54 Natural Increase as a Major Factor in Corridor

Provinces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Figure 55 Per Capita Income of Growth Corridor Provinces. . . . 91

Figure 56 Rise in Urbanization with Employment Rate

in the Industry Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

Figure 5 7 Employment Rates in Services. . . . . . . . . . . . . . . . . . . . . 92

Figure 58 Real Wage Growth in Growth Corridor Areas. . . . . . . . 93

Figure 59 Growth in Real Wages vis-a-vis Inflation in Growth

Corridor Areas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

Figure 60 Impact of OCW Remittances on Growth Corridor

Provinces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

Figure 61 Roads Per Capita in Philippine Provinces . . . . . . . . . . . . 98

Figure 62 Power Availability in Urban Centers. . . . . . . . . . . . . . . . . 100

Figure 63 Ht1man Development Index of Philippine Provinces . . . 10 0

Figure 64 Inverse Relationship Between Urbanization Level and Growth Rate of Ft1nctional Literacy. . . . . . . . . . . . . 101

Figure 65 Access to Safe Water vs. Urbanization Level. . . . . . . . . 101

Figure 66 Apparent Housing Shortfalls in the Mindanao Corridor Provinces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

Figure 67 Decline in National Road Building Since 1993. . . . . . . . 10 7

Figure 68 Mixed Record for LGUs in Road Bt1ilding After Devolt1tion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Figure 69 Per Capita Mileage and Road Ot1ality Per Province. . . 108

Figure 7 0 Allocation of Commt1nity Mortgage Program. . . . . . . . 112

Figure 7 1 Coverage of the LGU Performance Program (LPP) in the Philippines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

Figure 7 2 Trends Between Urban Densities and Resot1rces

Per Person Per Province . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

Figures 7 3 Spending Patterns of Provinces vis-a-vis Social

Allocation Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

Figure 74 Relationship Between Urbanization Levels and Human Development Priority Ratio . . . . . . . . . . . . . 117

•

IX

-

ist o Table 1 The Urban-Rural Divide (1984-1995) ... . . ..... . ...... . Table 2 Urban Growth in Philippine Regions . . . . . . . . . . . . . . . . . Table 3 Decline of Metro Manila's Primacy . . . . . . . . . . . . . . . . . . . . Table 4 Slowdown in Growth of Secondary and Tertiary Cities . . . Table 5 Growth of Old Growth Centers and Rapidly

U b . .

c· t· r an1 z1ng 1 1 es . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table 6 Net Migration Flows Across Regions . . . . . . . . . . . . . . . . . Table 7 Contribution of Net Migration to Urban Growth . . . . . . . Table 8 Migration as a Percentage of Population Growth . . . . . . . Table 9 Effect of Rural-Urban Reclassification on Favored

2

3

5

10

11

14

14

16

Destination Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Table 10 Sectoral Disaggregation of FDis . . . . . . . . . . . . . . . . . . . . . . 41

Table 11 Comparison of Infrastructure Stocks and Services of Asian Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 7

Table 12 List of Regional Agri-Industrial Center (RAICs) . . . . . . . . 68

Table 13 Growth Corridors , Ranked in Order of Priority. . . . . . . . . 69

Table 14 Key Features of CALABARZON, CIC and CD Z Crescent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Table 15 Shares in New BOI-Approved Investments and in Employm ent Generated, 1997. . . . . . . . . . . . . . . . . . 76

Table 16 Industrial Location Quotients in Growt h Corridor Regions vs . NCR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

Table 17 Comparison of Changes in Effective Protection Rates ( EPR) with Industrial Location Quotients . . . . . . . . . . . . 82

Table 18 Results of Key Shift Analy sis . . . . . . . . . . . . . . . . . . . . . . . . . 84

Table 19 Positive Population Shifts in Growth Corridor Provinces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Table 20 Increase in Urbanization Levels in the Corridor Areas 90 • • •

Table 21 CALABARZON's Dominance over CIC and CDZ in Terms of FDis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 5

Table 22 Exports by Top 15 Provinces , 1995. . . . . . . . . . . . . . . . . . . . . 9 7

Table 23 Assignment of Major Urban Services to LGUs and Metropolitan Jurisdictions . . . . . . . . . . . . . . . . . . . . . . . 105

Appendix

Table 1 Urbanization Estimates Using Services Output/ Employment Share to the National Total . . . . . . . . . . . . . . 145

Table 2 Urbanization Estimates Using Services Output/ Employment Share to the Provincial Total . . . . . . . . . . . . 147

X