Announcing the good news: 2nd Quarter GDP at 7.5%

It's in every major daily's (Aug. 31st) frontpage. Philippine Daily Inquirer: "Surprise! 7.5% growth". Manila Bulletin: "GDP grows 7.5% in 2nd quarter, highest in 20 years". Business Mirror: "GDP surges to 7.5% in 2nd qtr". Business World has a more modest yet prospective headline: "RP on track to meeting growth goal".

The National Statistical Coordination Board (NSCB) attributed the unprecedented growth to "continued favorable economic conditions such as stable interest rates and strong peso, resilient agriculture sector, vibrant industry and services sectors, plus election-related spending and intensified infrastructure investments". The just-released figure is a full 2% over the 2006 2nd quarter GDP (5.5%).

What the skeptics say. Private think tank IBON Foundation particularly singled out the "sustainable election-related expenses by both candidates and the government as the major contributor to the surge of the 2nd quarter GDP. IBON estimates that some P30 B to P50 B were spent by candidates during the May elections while P 51.4 B was spent by the government during the first semester allegedly in support of administration candidates.

I agree with IBON that the P30 B-P50 B the candidates spent during the election period have contributed to the increase in GDP, but the sweeping generalization that the P51.4 B first semester government spending was election-related to favor administration-backed candidates is not at all true.

For one, the government was operating on a 2005 re-enacted budget for the whole year of 2006. While spending for the 1st quarter of 2007 was based on the same re-enacted budget, this was augmented by the P46.9 B supplemented budget (RA 9358), which was mostly unloaded during the said quarter. The 2007 GAA took effect April 2007 and fund releases were correspondingly adjusted during the second quarter based on the new expenditure program, hence a higher government spending.

13 municipalities set to join ranks of cities.

Official information from the National Statistical Cooordination Board (NSCB) revealed that 13 of the more than 20 municipalities which have applied for cityhood and approved by the 13th Congress have completed the ratification process in a plebiscite as of June 30, 2007.

The ascension of these 13 municipalities to cityhood will increase the number of cities to 131 from 118, and consequently, bring down the number of municipalities from 1,510 to 1,497. The 13 new cities include: two (2) from NCR - San Juan and Navotas; NCR; two (2) from Northern Luzon - Tabuk, Kalinga and Batac, Ilocos Norte; four (4) from the Visayas - Bogo, Cebu; Baybay, Leyte; Catbalogan, Western Samar; and Borongan, Eastern Samar; and five (5) from Mindanao - El Salvador, Misamis Oriental; Mati, Davao Oriental; Lamitan Basilan; Bayugan, Agusan del Sur; Tandag, Surigao del Sur.

The old cities have reason to be wary and apprehensive about the addition of the lucky 13 to their ranks as the latter will partake of the 23% IRA alloted to cities pursuant to Section 284 of the 1991 Local Government Code - making their projected IRA adjustment smaller. On the other hand, the remaining 1,497 municipalities stand to benefit from this conversion in terms of increased IRA share since the newly converted cities will leave behind their respective IRA shares to the ranks of the municipailties.

On the macro perspective, conversion of municipalities to cities can be viewed as mechanism of redistributing or reallocating and democratizing government resources so that more funds are chanelled for service delivery and infrastructure facilities to the countrysides. On the average, the IRA shares of these new cities comes fiscal year 2008, would amount to more than a hundred million pesos each.

LGUs can't auction government properties to collect tax delinquency.

Here's a recent landmark decision by the Supreme Court affecting local government units' power of taxation.

Facts of the case. The Iloilo City government through the City Treasurer, attempted to sell at public auction the properties of the Iloilo Fishing Port Complex (IFPC) in order to collect the latter's unpaid real property tax amounting to Php 5.07 million. The Philippine Fisheries Development Authority (PFDA) under which the IFPC belongs, questioned the move and filed a case before the lower court - until it finally reached the Supreme Court.

The ruling. The Supreme Court ruled in favor of the PFDA stating that "the Authority should be classified as an instrumentality of the National Government which is liable to pay taxes only with respect to the portions of the property, the beneficial use of which were vested in private entities". In other words, the high court affirmed that subject property is taxable and the IFPC is liable to pay the tax. BUT . . . "Notwithstanding said tax delinquency on the leased portions of the IFPC, the latter or any part thereof, being a property of public domain cannot be sold at public auction". This means that the city government has to resort to other means to collect the tax obligation other than the sale at public auction.

Population Census important in allocation of govenment resources.

On August 1st, the National Statistics Office (NSO) commenced the Census of Population.

About 37,000 trained census-takers are being employed to conduct the house-to-house survey nationwide to make a complete count of the population. This will last for about 25 days and will cover 41,944 barangays thorughout the country.

The nationwide survey is the 12th to be undertaken since 1903, and will cover will cover all people living in the Philippines, including overseas Filipino workers and foreigners who intend to stay within one year.

Among the important uses of such census for the government is the accurate and timely formulation of policies, preparation of plans and programs concerning population such as the number of schools to be built, the number of teachers, number of policemen to be deployed, and number of public health workers needed in a province, city or municipality and even barangay.

For LGUs, the outcome of the census is vital as this will be the basis for (a) the allocation of the Internal Revenue Allotment (IRA) for fiscal year 2008; (b) creation of new LGUs; and (c) conversion of some LGUs to a higher level (i.e. from municicpality to city) - pursuant to the 1991 Local Government Code.

So we advise all LGUs to assist the NSO census takers in this undertaking.