Project No. 01.2467.7-001.00 Small and Medium Enterprise Development for Sustainable Employment Program (SMEDSEP)

COOPERATION Republic of the Philippines

Federal Republic of Germany

Philippine Cities Competitiveness Ranking Project 2003: Survey and Validation of Selected Indicators November 2004 Prepared/ Written by: Prof. Alvin Diaz, AIM Policy Center Consultant [email protected]

Published by: The Small and Medium Enterprise Development for Sustainable Employment Program (SMEDSEP) A DTI-TESDA-GTZ Program 10th Floor, German Development Center, PDCP Bank Centre Building, V.A. Rufino cor. L.P. Leviste Streets, Salcedo Village, Makati City www.smedsep.ph | [email protected] Ms. Martina Vahlhaus, Program Manager

Printed on: February 2005 - Makati City, Philippines Philippine Cities Competitiveness Ranking Project 2003: Survey and Validation of Selected Indicators November 2004 FOREWORD

The Small and Medium Enterprise Development for Sustainable Employment Program (SMEDSEP) a joint undertaking of the German Government thru the German Technical Cooperation (GTZ) and the Philippine Government thru the Department of Trade and Industry (DTI) and the Technical Education and Skills Development Authority (TESDA) supported the Cities Competitiveness Ranking Project in 2003. Conducted by the Asian Institute of Management (AIM), the PCCRP aims to eventually help Philippine urban centers cultivate competitive industries, promote healthy communities, and maximize the competitiveness potential of Philippine cities. Because it is at the level of local government units (LGUs) where the most basic business environment and regulatory framework is shaped, the SMEDSEP and the AIM jointly conducted a series of Focus Group Discussion (FGD) among eight cities in the program’s pilot provinces in the Visayas focusing on two main drivers of city competitiveness: Cost of Doing Business and Responsiveness of LGUs. The FGD was aimed to validate the results of the 2003 PCCRP among the owners and managers of business establishments of the eight cities, identify the key issues and concerns that affect the growth and dynamism of business in their respective localities, recommend solutions and present the outputs to the mayors for appropriate action.

This paper is a compilation of main points which emerged during the FGD in each city located in SMEDSEP’s pilot provinces in the Visayas. The cities covered in this paper are: Bacolod, Cadiz and San Carlos in Negros Occidental, Cebu, Mandaue and Lapu- Lapu in Cebu, and Ormoc and Tacloban in Leyte.

It is hoped that this paper will serve as a guide for local executives, the members of the local council, and the private sector to determine which are the concerns that affect businesses in their respective localities the most, and what can be done – from the point of view of the business entrepreneurs - to address such in order to enhance the attractiveness of their cities to spur investments and economic growth.

True enough, we are quite happy to report that there have been responsive mayors who readily responded to the concerns and issues brought forth by members of their business community right after the FGDs we conducted between August to November 2004.

We, therefore, encourage the local executives of these eight (8) cities to continue working towards more economically progressive LGUs.

SMEDSEP & AIM TABLE OF CONTENTS

Foreword

I. Introduction

II. Objectives

III. Framework and Methodology

Summary of Recommendation and LGU Response

FGD Discussion in 8 Visayan Cities Bacolod Cadiz Cebu Lapu-Lapu San Carlos Mandaue Tacloban Ormoc

I. INTRODUCTION (See Annex 1: PCCRP Presentation):

The Small and Medium Enterprise Development for Sustainable Employment Program (SMEDSEP) is a joint program of the German Technical Cooperation or the Deutsche Gesellschaft fuer Technische Zusammenarbeit (GTZ), the Philippine Department of Trade and Industry (DTI) and the Technical Education and skills Development Authority (TESD). The program’s goal is to establish favourable business conditions in the Philippines (particularly in the Visayas), thereby harnessing entrepreneurial potential and encouraging competition of SMEs. The program will be measured by the following indicators: • Improved competitiveness of selected cities • increase in SME financing, use of commercial Business Development Services (BDS) as well as trained workforce, • services of associations improved, • regional and local authorities have improved their functions as facilitators.

In order to address the above indicators, SMEDSEP’s measures are grouped in four components, namely, 1) Enabling Business Environment/SME Policies and Regulations, 2) Business Development Services, 3) Financial Services, and 4) Demand-Driven Training.

This study is in line with the objective of Component 1: Enabling Business Environment which reads “to develop and implement policy proposals for the improvement of the business climate at national, regional and local level (in the Visayas) in cooperation with the private sector”. The achievement of this goal is to be measured by the following indicators: • regular and effective integration of SMEs into decision-making processes by relevant promotion institutions • shorter, simpler and better published approval and licensing procedures for SMEs • better framework conditions from the SME point of view

Taking-off from an existing survey instrument to measure the competitiveness of selected cities in the Philippines, the program – in cooperation with the Asian Institute of Management (AIM) - embarked on a series of Focus Group Discussion with entrepreneurs or private sector representatives in eight (8) cities in the Visayas.

The Philippine Cities Competitiveness Ranking Project is a “pioneering effort of the City Competitiveness Program of the AIM Policy Center”. Together with other partner institutions, the project aims to “study the capacity and capability of Philippine cities in effective governance, human development and business growth” through scientific methodologies requiring quantitative data from national and local government agencies and qualitative data from survey respondents coming from Small and Medium Enterprises (SMEs). It also analyzes the good practices of other cities in the overall economic management of LGUs.

The policy objective of the PCCRP is to encourage local government leaders to understand that their roles must shift from being mere providers of public goods and services to becoming economic and development managers.

The study hopes to encourage local government executives, businessmen and other stakeholders to consider the PCCRP results in their policy-making, capacity-building and urban development planning.

The 2003 PCCRP study covered 50 cities nationwide which included 23 cities in Luzon, 11 cities in the Visayas and 16 cities in Mindanao. The cities were categorized into metro, mid-sized and small cities.

II. OBJECTIVES

The AIM Policy Center-GTZ project endeavors to foster competitiveness through the establishment of priority action agenda for the LGU’s consideration and implementation. The set of recommendations aims to improve the business environment for SMEs in the eight (8) pilot cities of GTZ (Region VI: Bacolod, Cadiz, San Carlos; Region VII: Cebu, Lapu-Lapu, Mandaue; Region VIII: Tacloban and Ormoc)

III. FRAMEWORK and METHODOLOGY (See Annex 2: SMEDSEP Presentation):

The objectives of the AIM Policy Center-GTZ project would be achieved through further validation of the selected drivers. Validation would be done through: ƒ Development of a tool guide with guide questions revolving around the selected drivers and indicators. (See Annex 3: Tool Guide). ƒ Focus Group Discussion (FGD) divided into two parts: in-depth (Responsiveness of LGU, dynamism of local economy, and cost of doing business) and information gathering (Linkages and accessibility, human resources and training) – all within the competitiveness and SMEDSEP framework. ƒ Meeting with the LGU representatives ƒ Visit to City Hall to gather other pertinent documents e.g., Application for Business Permit and license

The FGD would have three main components, namely:

1. Discussion of selected indicators from the 2003 PCCRP with SMEs 2. Prioritization of recommendations to improve business environment 3. Presentation/discussion of recommendations with the LGU.

The criteria for the prioritization of recommended actions include:

1. Overall impact and benefit – this would cover outreach, resource savings, better participation, among others. 2. Feasibility/Doability – this would include cost, time, commitment, clear responsibility, etc).

After the presentation and discussion of measures with LGU, the LGU may give its reactions/replies.

SUMMARY OF RECOMMENDATION AND LGU RESPONSE

CITY PROPOSED ACTION IMPACT RESPONSE OF LGU BACOLOD CITY Establishment of Bacolod City Sustainable Employment Program, Would need resources to set up the Development and Investment and revenue generation for SMEs Center. Local Investment Board to Promotion Center with focus on and LGU, streamlined bureaucratic partner with the Provincial tourism sector process. government re tourism. Enforcement of existing ordinances Improved quality of life for the Need to do baseline study re: ideal such as clearing of sidewalks, residents, orderly conduct of length of time for an investor to set management of traffic, provision of business, increased attractiveness of up business in the city (best practice avenues for livelihood for vendors (e.g. local business environment, or standards). night markets) and implementation of increased local taxes. LGU to conduct IT training for its solid waste management. staff to increase productivity. Continued private sector participation Strengthened partnership and LGU exploring landfill site. in the development planning process ownership among various including representation in special stakeholders and better image due to LGU bodies (e.g. increased increased transparency participation of private sector in PBAC, co-chairmanship of private sector in the LIB, and increased membership of private sector in LIB -- more than 50 percent of membership). Focus resources on tourism Maximized limited resources to LGU to explore with DOT re DOT establish niche and further strengthen office in Bacolod and with the tourism sector; backward and Provincial government re: additional forward linkages; job creation; and resources increased LGU revenue CITY PROPOSED ACTION IMPACT RESPONSE OF LGU Information dissemination of LGU Informed and support from LGU to tap media for information Plans e.g., development plans constituents dissemination. LGU plans to connect all barangays via IT for efficient and faster communication of policies and programs and feed mechanism.

CADIZ CITY One-Stop Shop for renewal of business ƒ Streamlined issuance of business ƒ City government to implement permits in January permits, which would attract more One-stop shop starting January businesses and investments thereby 2005 for business permits and generating more employment and renewals. However, this would taxes for government. require more resources ƒ LGU noted that a number of SMEs do not finish the processing of their permits thus causing delays. ƒ Will adopt the Bacolod one-stop shop model ƒ In Sept 2004, processing of business permits will be done in the public market ƒ Cadiz IPU conducts promotional activities only and not a full one- stop shop body. ƒ City Administrator signs the business permit. ƒ Local Investment Board in place with tax incentives. CITY PROPOSED ACTION IMPACT RESPONSE OF LGU Independent private body which monitors ƒ More transparent project approval ƒ Per DILG Directive, LGUs to and evaluates projects monitoring and evaluation resulting reactivate monitoring body. to more trust in and integrity of LGU.

ƒ More support from the various stakeholders such as the business sector.

Projects for public bidding should be ƒ LGU to publish pre and post published bidding

Conduct regular quality ƒ LGU conduct public information consultations/public hearings on new campaign on its policies and policies programs but noted that private sector send reps who are not knowledgeable of the issues and concerns. Establish commercial and fish port with ƒ Creation of sustainable employment ƒ LGU to push through with the port. multi purpose processing facilities program However, new bidding took place for a new port. LGU wants DOTC ƒ Increase in private and LGU to transfer ownership of the revenues unfinished port to city government. DOTC not amendable. CEBU CITY Organizational review of LGU • Streamlined and efficient • SMEs to be part of the solution: bureaucracy resulting to growth in LGU challenged the Chamber to the LGU and attracting more absorb the ones to be laid-off if and investments when LGU streamlines its bureaucracy. • Shared responsibility of LGU and private sector CITY PROPOSED ACTION IMPACT RESPONSE OF LGU Benchmark practices with best practices of • More efficient business transactions • Welcomed the benchmarking. Marikina and other model Cities with the LGU that would redound to Approach. LGU reportedly invited (concerned business permit/ licences more businesses to LGUs already Mayor of Marikina to offices) present before Cebu City. Will explore areas of cooperation.

Streamlined LGU and Training for LGU • Cost reduction for LGUs and • LGU invited the Chamber to personnel customer satisfaction (increase explore possibilities of retraining revenue for LGU and SMEs) and/or hiring LGU staff • LGU faced with more pressing issues: increasing informal settlers along the coast of Cebu city adversely affecting quality of life and unemployment rate. Regular Sectoral dialogues • More participation from the business • Vice Mayor to all for a meeting sector resulting to more support for with the Counselors to discuss the LGU policies and projects. appropriate action on the proposals.

LAPU – LAPU CITY Provision of Business Requirements’ Efficient delivery of service e.g. LGU to update its flowchart and Checklist and Schedule of Fees prompt issuance of business permits include a checklist of requisites and renewals, more business including SSS and BIR Updating of One-Stop-Shop Flow establishments, employment requirements Chart generation, and lesser penalties, and more LGU revenues

CITY PROPOSED ACTION IMPACT RESPONSE OF LGU Accreditation of PEZA Fire Clearance Lesser Costs of Doing Business LGU to waive fire inspection fee and Garbage Collection Fees by LGU Convenience and accept MEPZ fire and safety Cleaner Environment and Better clearance. Waste Management Efficient Garbage Collection Rationalized Fees LGU reported that LGU to conduct Boost Tourism seminars on waste management and will purchase 3 garbage compactors. LGU has a 10-year solid waste management plan. More businesses and increased LGU LGU to take the initiative to hold Organize regular business forums to revenue regular forums with the business disseminate information on the city’s Better partnership between private sector. Business sector can also master development plan, policies and sector and LGU approach the City Administrator’s programs and to get feedback from Employment generation office for any concern. business sector

Provision of Business Requirements’ Efficient delivery of service e.g. LGU to update its flowchart and Checklist and Schedule of Fees prompt issuance of business permits include a checklist of requisites and renewals, more business including SSS and BIR Updating of One-Stop-Shop Flow establishments, employment requirements Chart generation, and lesser penalties, and more LGU revenues

Accreditation of PEZA Fire Clearance Lesser Costs of Doing Business LGU to waive fire inspection fee and Garbage Collection Fees by LGU Convenience and accept MEPZ fire and safety Cleaner Environment and Better clearance. Waste Management Efficient Garbage Collection Rationalized Fees LGU reported that LGU to conduct Boost Tourism seminars on waste management and will purchase 3 garbage compactors.

LGU has a 10-year solid waste management plan. CITY PROPOSED ACTION IMPACT RESPONSE OF LGU More businesses and increased LGU LGU to take the initiative to hold Organize regular business forums to revenue regular forums with the business disseminate information on the city’s Better partnership between private sector. Business sector can also master development plan, policies and sector and LGU approach the City Administrator’s programs and to get feedback from Employment generation office for any concern. business sector

SAN CARLOS CITY Facilitate establishment of a Chamber of ƒ One strong voice to lobby concerns ƒ Mayor open to help to jump start Commerce (Role of Private Sector) e.g. electricity the formation of San Carlos ƒ Maximize limited resources Chamber of Commerce. Suggest to LGU to focus efforts in ƒ On power issue, Transco will lobbying with NGAs, Congress and other proceed with interconnection relevant organizations outside the city on project. Its doubled capacity will priority concerns (e.g. inefficient and high address power fluctuation. cost of electricity) Identify and request NGAS (e.g. DTI, ƒ Efficient and cost effective licensing ƒ Private sector to submit list of HLURB) to conduct renewal and in both SMEs and NGAs NGAs to the Office of the Mayor to registration of permits in the city and study be invited to a synchronized which can be requested to delegate their registration/processing of permits roles to LGU ƒ Other NGAs such as HLURB and DTI have devolved their issuance of permits and registration functions, respectively to LGUs. City government ready to accept responsibility. CITY PROPOSED ACTION IMPACT RESPONSE OF LGU Regular consultations with the business ƒ More transparent LGU ƒ Regular consultation with the City sector Development Council. ƒ Vice mayor to meet with real estate Accessibility of public records developers to explore transfer of other HLURB functions to LGU. ƒ An Executive Order has been issued lifting the ban on access to public documents.

ƒ Anybody could approach any department and request for public documents. MANDAUE CITY ƒ Implementation of one stop shop ƒ Better processing, reduced red tape ƒ LGU to implement one-stop- (business permits) and increased efficiency and shop in January 2005 transparency ƒ Increased revenue for local gov’t unit

ƒ Intensify information dissemination ƒ Better results of programs/ projects ƒ LGU has enhanced its website. campaign of LGU on its policies ƒ Good partnership between gov’t and ƒ LGU has established linkage private sector with industry groups and non- ƒ Better image of the local governmental organizations government unit ƒ Guides Mandaue where it wants to be ƒ Generate more support and cooperation among citizens of Mandaue ƒ Regular consultation of LGU with the ƒ Better cooperation between the LGU ƒ LGU to hold regular fora with local chamber of commerce & the business sector stakeholders of the city ƒ Increased investments for the businesses ƒ Increased revenues for the LGUs ƒ Increased employment opportunities ƒ Derive effective policies CITY PROPOSED ACTION IMPACT RESPONSE OF LGU TACLOBAN CITY ƒ Streamlining of business licensing ƒ Increased attractiveness of the local ƒ LGU to revive the one-stop- processes business environment, increased shop in 2005. The process involves LGU revenue, job creation, better three major steps: assessment, image of the City, better public payment, and issuance of permits. services

ƒ Provision of tax holidays ƒ Increased investments & LGU ƒ A proposed study was revenue, job creation submitted to the Sanggunian Panglusngsod in 2000 that would provide tax incentives to businesses with Market Capitalization of 10 million ƒ LGU to look into the development of this initiative ƒ Intensify information dissemination ƒ Well-informed business sector, ƒ LGU has a mechanism called campaign on LGU policies, regulation better LGU-business sector “barangayan.” and requirements partnership, increased attractiveness of the local business environment

ƒ Improve transparency at the LGU- ƒ Better image of the City, reduction ƒ LGU acknowledged that this is level in the cost of LGU operations, better an area for improvement. LGU-business sector partnership, increased revenue, level playing field (healthy competition) for the business sector which in turn makes the city more attractive ORMOC CITY ƒ Implementation of an all year round ƒ Increased investments, more ƒ LGU to conduct study on the one-stop shop for renewal and new revenues for the LGU, employment possibility of implementing an all applications depending on the LGU creation, and saves time on the part year round one-stop-shop. budget. of businessmen CITY PROPOSED ACTION IMPACT RESPONSE OF LGU ƒ Full implementation of the Tax ƒ Increased LGU revenues ƒ The CPDO is working on the Mapping Mechanism; and actual ƒ tax mapping of Ormoc’s survey of the informal sector establishments.

ƒ Base taxes on the net income of ƒ Increased investments, increased ƒ LGU to conduct study to establishments instead of gross sales revenues for the LGU, employment validate this issue. creation, more cooperation between LGU and businessmen

ƒ Efficient information dissemination of ƒ Increased business and product ƒ Committed to hold regular local policies, regulations and development, encourage more forums and activate councils that requirements through print media and participatory approach in local would address concerns of the website governance community.

ƒ Hold regular LGU-business sector for ƒ Better partnership between the LGU a and the business sector ƒ Review traffic plans ƒ Increased convenience for motorists ƒ LGU has implemented loading and pedestrians and lesser accidents and unloading scheme and is yet to implement ordinances that would ƒ Expand business areas outside the cover multi-cabs and tricycles. city proper

ƒ Provision of accountable forms in the ƒ Increased transparency at the LGU ƒ LGU to further investigate the public markets, ambulant vendors, and level, better image of the city, issues and committed to come up public terminals; increased in investments, and with the best measure to address the increased LGU revenues concern. CITY PROPOSED ACTION IMPACT RESPONSE OF LGU ƒ Request LGU’s support to lobby a ƒ Lower cost of doing business, ƒ LGU plans to set-up an IPP in decrease on the power rates in Ormoc increased investors, increased LGU Ormoc to address the concern on City revenues, employment creation power rates. This project is perceived to depress power rates in the city.

FOCUS GROUP DISCUSSION IN EIGHT VISAYAN CITIES

I. BACOLOD CITY

Bacolod City at a Glance:

Location Global location: 10 degrees, 40 minutes 40 seconds – north and 122 degrees 54 minutes 25 seconds - east with Bacolod Public Plaza as the benchmark. Situated on the NW of the island of Negros, bounded by the Guimaras Strait on the west, the municipality of Talisay on the north, the municipality of Murcia on the east, and Bago City on the South. Area 16,145 hectares or 156.1 kilometers including straits and bodies of water and the 124 hectare reclamation area. Terrain Located on a level area, slightly sloping as it extends toward the sea with average slopes of 0.9 percent for the city proper and between 3 to 5 for the suburbs. The altitude is 32.8 feet or 10.0 meters above sea level. The benchmark is the Bacolod Public Plaza. Income Class First Class Population 429,076 (2000) Employment Rate 88.7% (Apr 2003) No. of Educational /training Secondary: Public : 20 (SY 2002-2003), Private: 24 (SY 2002-2003), higher ed: 13 (2000-01) institutions No. of Health Facilities 31 (2002) Ports 1 airport, 3 seaports Land Use 5.0% of the City’s total land area is commercial; 30.0 % is residential; 7.4 % is institutional, 2.2 % is industrial and 51.4% is agricultural. 4.0% - Roads, rivers and bodies of water Primary crops Rice, sugarcane, coconut and vegetables. Areas adjacent to the shoreline are suited for aqua/marine culture. Total financial resources (2003) P 817.76 (in million) Total expenditures (2003) P 647.0 (in million) Internal Revenue Allotment (2002) P366.76 (in million) IRA-dependency ratio (IRA/total 44.85% financial resources) # of business permits issued or # of 11,582 (permits) business establishment in 2002

How to get there The City is accessible by sea through the ports of Banago; the BREDCO Port in the Reclamation Area, and the port of Pulupandan. By air, it is accessible through the Bacolod Airport, which is approximately three (3) kilometers away from the center of the city.

A. BACKGROUND

Bacolod was proclaimed as a Chartered City in June 18, 1938 by virtue of Commonwealth Act No. 404. Bacolod was derived from the Ilonggo word "bakolod" meaning "stonehill" since the settlement was founded in 1770 on a stonehill area, now the district of Granada and the former site of the Bacolod Murcia Milling Company. Due to the Muslim raids in 1787, Bacolod was transferred towards the shoreline. In 1894, by order of the Governor General, Bacolod became the capital of the Province of Negros. On March 1899, the American forces occupied Bacolod. Then, the Japanese imperial army defeated the Americans and occupied the city in May 1942. In May 1945, three years after, the American forces regained Bacolod. The city was proclaimed by the Department of Interior and Local Government as one of the Outstanding Cities and a Hall of Fame recipient as the Cleanest and Greenest City in the country.

B. ECONOMIC PROFILE

Bacolod City, a major seaport in Western Visayas, has a total land area of 16,145 hectares, 51.40% of which is agricultural. Most of this is planted with sugarcane. Bacolod’s economy depends primarily on commerce, transportation, communication and services. Trading accounts for half of gross sales for 2000 and more than a third of business permits issued, capital invested, and manpower employed in 2001. Due to price fluctuation of sugar in the global market, a number of industries have risen, most of which were export-oriented businesses like food processing, garment making, furniture, souvenir items, ceramics, and fashion jewelries and accessories, among others. Data from 2001 to May 2003 show that the non-traditional product sales like aqua/marine were the leading products totaling to P20,989,006.67 or about 68.95% while raw sugar also consistently led in the traditional export product amounting to P72,633,767.35 or 78.45% of the total export sales.

As of date, there are thirty-three privately operated financing companies and lending institutions, and fifty-four banks and other financial institutions. The City Government offers financial assistance to qualified beneficiaries under its Livelihood and Cooperative Development Program.

C. HIGHLIGHTS OF THE CITY’S RANK IN THE 2003 PCCRP (See Annex 4)

Bacolod City ranked first under the mid-sized cities category. Based on the executive survey in the 2003 PCCRP, Bacolod City got above average competitiveness in all seven drivers with score of 6.62, ranking highest in the quality of life (7.04) and human resources and training drivers (7.36). This meant further enhancement in these drivers to be highly competitive.

Bacolod city got above average competitiveness in most of the selected indicators scoring highest in the appropriateness of the city’s master development plan and reasonable business taxes (6.52); followed by a friendly regulatory environment (6.36) simple

business permit application process (6.24); flexible land use regulations (6.18); and regular forums with stakeholders (6.15). Though above average, the city still needed to enhance its standing to attract more businesses. On the other hand, the city has average competitiveness in terms of an honest government (5.89).

In terms of linkages and accessibility, the city has above average competitiveness in the availability of support services (6.40) including financial services (6.70) while the level of services of national government agencies was just average, hence needed a lot of improvements to address the concerns of the SMEs. With regard to IT training and availability of skilled labor, the city has above average competitiveness scores which meant there were still room for enhancement.

D. FGD ON SELECTED DRIVERS AND ITS INDICATORS (See Annex 5)

Issues raised in the Focus Group Discussion ranged from the issuance of business permits, government procurement, and absence of a PEZA to lack of regular forums with the business sector, limited presence of national government agencies and lack of relevant IT skills and quality manpower. The discussion with the representatives of the business sector focused mainly on policies and regulations under the responsiveness of the LGU and dynamism of local economy.

1. In general, the city’s regulatory environment (such as licensing procedures and fees, taxes and other regulatory requirements is conducive to business) (6.36) and Securing a business permit is simple and efficient (6.24) (See Annex 6: Bacolod City Business Permit Form): Though the licensing procedures was a one page back-to-back application form entitled “Application for Permit to Engage in Business, Trade or Occupation under Chapter IV, Art. 1, Sec. 47 of the Revenue Code of the Bacolod City of 1993, issuance of business permits comprised of six major steps, nine certifications, and about eighteen regulatory fees and service charges. It was reported that the LGU charged some fees that were not part of its services like fees on generator sets operated by an enterprise. There were also overlapping assessments being charged like fees on the use of airconditioners and mechanical fees.

The participants intimated that the LGU has a “one-stop shop” for renewal of business permits every January of each year. It was noted that it took one week to be issued a permit that may be attributed to the nine (9) signatories. Though the different desks are located in one room, it was believed that the number of signatories could still be lessened. They also cited the duplication of inspections and clearances e.g., Fire Department and the City Engineer inspections and proposed to streamline said fees and clearances.

2. Business taxes imposed by the city are reasonable ( 6.52).

The participants cited the Local Investment Code as the bible of the city government in terms of tax incentives. However, they requested for an amnesty and lowering of zonal valuation (by BIR). On the other hand, the implementation of non-fiscal incentives such as better infrastructure was considered a stronger motivation for SMEs.

3. Policies and regulations in the city are reflective of business needs(6.14): Enforcement of laws was one area that needed improvement. It was noted that not all the city’s policies and ordinances were being implemented by the LGU. The new ordinance on tourism requiring clearances to go through the city‘s Tourism Board was raised. It was mentioned that said ordinance did not go through consultations with the tourism sector particularly the hotel and restaurant association. Concern on the composition of the Tourism Board was aired while the new membership of the investment promotion board seemed acceptable but still required amendment on the composition of membership to better represent the private sector.

4. The city’s master development plan is appropriate to business sectors’ needs (6.52): A number of the participants were not aware of the City’s development plan. This may be due to lack of information dissemination by the LGU. It was reported though that the City’s development plan has been updated. The City has a comprehensive land use plan and highlighted the dispersal of industries. However, it was noted that it was only as good as the Mayor’s commitment to implement said plan.

5. The city government is honest and transparent in its dealings (5.89) and Informal fees (bribes) in the city are non-existent (6.15)

The main concern in this indicator was the procurement process of the LGU, especially on big-ticket projects. The credibility of the Board responsible for the bidding process was raised. The participants called for the strengthening of the evaluation and monitoring system of LGU projects by a private body.

E. RECOMMENDATIONS AND PRIORITIZED ACTION AGENDA (See Annex 7: Recommendation and Prioritized Action Agenda)

Among the recommendations that were forwarded, five were considered priority action agenda to maintain its level of competitiveness.

1. Establishment of a comprehensive one-stop-shop. Considered a priority agenda, the participants recommended for its LGU to implement its approved city ordinance “Establishing the Bacolod City Development and Investment Promotion Center with focus on tourism sector, considered a major strength of the city. The improvement of infrastructure, particularly the provision of access and linkage roads between cities or among various points e.g., translink highway was deemed to boost tourism, particularly, mountain resorts. They believed that said establishment and focus on tourism would facilitate and streamline bureaucratic process resulting in sustainable employment program, revenue generation for SMEs and LGU.

2. Enforcement of existing ordinances such as clearing of sidewalks, management of traffic, provision of avenues for livelihood for vendors (e.g. night markets) and implementation of solid waste management. This was considered their second priority

action agenda as this would result to improved quality of life for the residents, orderly conduct of business, increased attractiveness of local business environment, and increased local taxes.

3. Continued private sector participation in the development planning process including representation in special LGU bodies (e.g. increased participation of private sector in PBAC, co-chairmanship of private sector in the LIB, and increased membership of private sector in LIB -- more than 50 percent of membership). It was believed that a strong partnership would encourage wide support from the various stakeholders of the city’s policies and plan resulting in the city’s better image due to increased transparency.

4. Focus resources on tourism. It was felt that focusing efforts on a sector considered the city’s strength (in this case the tourism sector) would maximize limited resources to establish niche and further strengthen said sector. This would result to backward and forward linkages; job creation; and increased LGU revenue.

5. Information dissemination of LGU Plans e.g., city development plan. Effective public information campaign on all policies, plans and rules and regulations of the city would make the LGU more transparent and make the various publics well-informed of the city’s vision, mission, programs and projects. Hence, wide support could be generated from the constituents.

F. DISCUSSION ON OTHER SELECTED INDICATORS (Annex 8)

In terms of level of support services provided by both private and government agencies, the participants believed that the Department of Tourism should set up its office in the city. As of the present, the Tourism representative is based in Iloilo city. Being positioned as a tourism hub in Western Visayas, a Tourism office in the city was believed to boost its tourism promotion campaign. Financing packages are available but not accessible due to higher interest rates and stiff and different requirements.

It was also felt that the city lacked IT skills and skilled labor needed by its industries and service sector. In this regard, a proposal was put forward to abolish the Regional Development Council and instead strengthen the local government’s capability to focus on quality education and continuing education and training specific to industry needs.

In food processing sector, the participants complained that there were no testing laboratories in the city. Hence, test results of food products were not promptly released adversely affecting the small entrepreneurs.

G. RESPONSE OF THE LOCAL GOVERNMENT OF BACOLOD CITY (See Annex 7)

Bacolod City’s local government headed by Mayor Evelio Leonardia together with his Vice Mayor, Council members, City Administrator and relevant department heads attended the presentation of the results of the FGD.

In terms of boosting tourism, the LGU of Bacolod reported that their Local Investment Board would be planning to work with the Provincial Government of Negros Occidental. They believed that this strategic partnership would maximize potential to be a tourism hub amidst dwindling resources. The city government was also planning to connect all their barangays electronically in order to boost their market reach and be able to disseminate information efficiently. They believed that active tourism and IT sectors would result to more employment and livelihood opportunities not only in the city but also in the whole of Negros Occidental.

II. CADIZ CITY

Cadiz City at a Glance

Location 65 kms from Bacolod City at the northern part of Negros Occidental. Bounded by the Visayan Sea in the north, by Silay and Victorias Cities in the south, Sagay City in the east, and by Manapla Municipality in the west. Area 69,000 has or 516.50 sq. km. Terrain Rolling clay loam terrain suitable for agriculture. 3-5 kms of plain from the shoreline. Zero to 3% sloping coastal barangays Income Class First Class Population (2000 census) 141,954 No. of Educational / Training Institutions 69 (public and private) No. of Health Facilities 1 public hospital, 22 Barangay Health Centers, 1 main health center, emergency clinic No. of financial institutions 5 banks, 12 lending institutions Port 1 government wharf, 10 private fishing wharves Land Use Urban: 277.14 has. Rural: 51,372.86 has. Primary crops Sugar, corn, rice, coconut, vegetables, fruits and rootcrops Total financial resources (2003) P286.94 (in million) Total expenditures (2003) P311.05 (in million) Internal Revenue Allotment (2003) P281.85 in million) IRA-dependency ratio (IRA/Total revenue 98.23% for 2003) # of business permits issued or # of business 4468 establishments in 2002 How to get there Just 65 kilometers northeast of Bacolod City, the major point of entry in Negros Occidental. At least one airline services the Manila–Bacolod City route with at least one flight daily. Bacolod City is also accessible by ship from Manila. Buses regularly ply the Bacolod–Cadiz 1.5 hours route.

A. BACKGROUND

A coastal city in northern Negros Occidental, Cadiz City started as a trading settlement in Cadiz Viejo near the bank of the Hitalon River. It became a chartered city on July 4, 1967 through Republic Act 4894. It has twenty-two barangays comprising mainly of agricultural land. Population density is placed at 312 persons/sq. km. with an annual growth rate of 2.4%. It has a literacy rate of 93.68% of which about 58.8% are in the labor force.

B. ECONOMIC PROFILE

Cadiz is dominantly an agricultural city using about 50% of its land for this sector. Fish production is also a major contributor to the city’s economy. Being positioned as the Fishing Center of Northern Negros Occidental, the Department of Agriculture recorded about 27,000,000 metric tons of fish caught in 2001, registering an increase of about 30% from the previous year. Its marine resources include grouper, tuna, sea bass, mackerel, shrimps, crabs, among others. The city also boasts of crabs, bangus and prawn ponds.

As of 2002, business establishments increased by about 18% from 3778 in 2001 to 4468 in 2002. .

C. HIGHLIGHTS OF THE CITY’S RANK IN THE 2003 PCCRP (See Annex 9)

The City of Cadiz ranked 21st under the small cities category in the 2003 PCCRP. It placed 6th among the small Visayan cities. Among the competitiveness drivers, Cadiz has above average competitiveness (6.15) in the cost of doing business and average competitiveness (5.00 to 5.99) in the responsiveness of LGUs, infrastructure and human resources. However, the city needs to improve its linkages and accessibility and quality of life in order to attract more businesses.

In terms of the specific indicators relevant to the GTZET project, Cadiz City scored 6.00 and above in most of the selected indicators under the responsiveness of the LGU. It has above average competitiveness in the following: friendly regulatory environment, simple and efficient business permit process, reflective business policies and regulations, and reasonable business taxes. Under the linkages and accessibility, the city lacks access to support services such as product, marketing and business strategy development. In terms of human resources, Cadiz has above average competitiveness (6.12) in the availability of skilled labor while it has average competitiveness in the availability of IT training programs.

D. FGD ON SELECTED DRIVERS AND ITS INDICATORS (See Annex 10)

A number of concerns were raised during the discussion on the selected indicators. Discussions focused more on how to make the business environment become more conducive to small enterprises and how to achieve greater transparency in the city’s policies, plans and programs. Particular emphasis was made on the streamlining of the whole process of securing a business permit and licenses and rationalizing the city’s fees and clearances.

1. In general, the city’s regulatory environment (such as licensing procedures and fees, taxes and other regulatory requirements) is conducive to business (6.34) and securing a business permit is simple and efficient (6.41) (See Annex 11: Flowchart and Annex 11A: Cadiz City Business Permit Procedure)

Though records showed that the requirements and steps in applying for a business permit were printed and posted for the public’s information in the City Hall of Cadiz, the FGD participants felt that the fourteen (14) signatories, fifteen (15) major steps, the absence of other national government agencies in the city such as the SSS and the dispersed offices of the relevant LGU departments made the application process more difficult. The location of SSS office in Sagay City was not just costly but also time consuming. Getting a barangay clearance from the relevant barangays required resources such as time and personnel. These basically added to the delay of the processing of business licenses, at least two weeks of processing time. Another factor that caused delays in the renewal of business permits is the requirement of paying real property taxes. Most of the participants stated that due to liquidity problems especially during the first quarter of the year, their payment of their real property taxes are delayed, hence they cannot renew their license on time.

In terms of business fees, the participants felt that the fees on equipment, lights, electric outlets, refs, aircon, and other electrical appliances were assessed by the City Engineer’s office and paid for separately from business registration fee which they believed could be rationalized.

It was also reported that Cadiz City has an Investment Processing Unit, a one-stop shop lead agency tasked in promoting Cadiz City as investment destination. However, it was not fully functional. Its activities were limited to promotional endeavors only.

2. Business taxes imposed by the city are reasonable (6.79) Cadiz City Hall imposed eight (8) types of fees on tax clearance and compliance, e.g., Zoning, Health, Fire inspection. Its business tax was based on 2% of assessed value: 1% basic and 1% Special Education Fund (SEF). The participants also noted that the city’s real property taxes were relatively higher than other neighboring cities like Bacolod City.

3. Local policies and regulations in the city are reflective of business needs (6.14) Unlike the printed/published business permit process, there seemed to be limited awareness of private sector on the LGU’s policies affecting the business sector. There

were no information collaterals available. They mainly attributed the lack of information to the absence of regular consultations with relevant stakeholders, relevant ordinances and transparency of the city government.

4. The city’s master development plan is appropriate to business sectors’ needs (6.17) Due to the lack of information and consultation, most of the participants were not aware of city’s master development plan. A few knew about the plan due to their personal LGU contacts. It seemed that the city development plan did not reflect views of other sectors like the business sector. If ever they were involved in the process, the participants proposed to include the completion of the unfinished port.

5. The city government is honest and transparent in its dealings. (5.93) and Informal fees (bribes) in the city are non-existent (6.11) The participants consistently stressed the need for transparency on the city’s plans, projects and policies. They were not informed about the changes in approved projects (e.g., commercial port in Banquerohan; LGU signed contract without assurance of budget availability). In this regard, services were compromised due to politics. It was acknowledged that there was a private sector representative in the PBAC and bidding was published. However, the public was not aware of said bidding, approval of project, winning bidder, project and timeframe. This may be due to the absence of an independent monitoring body and publication of project details in a local daily.

E. RECOMMENDATIONS AND PRIORITIZED ACTION AGENDA (See Annex 12)

The recommendations of the participants could be summarized under three main proposals which were considered under the purview of the local government of Cadiz.

1. Establishment of a One-Stop Shop for renewal of business permits in January of every year. This may include SSS and Barangay representatives to be housed under one roof. It was proposed to accept proof of SSS contribution from the bank, in lieu of clearance from SSS in Sagay City. The One-Stop Shop would also include the rationalization of business fees (which could be based on size of business) and simplification of assessments e.g., real property and business income taxes.

A streamlined issuance of business permits would attract more businesses and investments thereby generating more employment and taxes for government.

2. Creation of an independent private body which would monitor and evaluate government projects. Projects for public bidding should be published and regular quality consultations/public hearings on new policies with relevant stakeholders should be conducted. More participation of private sector in the PBAC and monitoring body (There were only 2 NGOs appointed to represent private sector). In this regard, it was forwarded that various private sector groups should appoint common representatives to the body to have a more united voice.

An independent monitoring body was believed to contribute to a more transparent project approval monitoring and evaluation process resulting to more trust in and integrity of LGU. Hence, this would result to more support from the various stakeholders such as the business sector.

3. Completion of the commercial and fish port with multi purpose processing facilities. It was strongly felt that a commercial fishing port would help attain the vision of Cadiz of becoming the agro-industrial center of Northern Negros Occidental. The completion of the unfinished port would lead to the creation of a sustainable employment program and increase in private and LGU revenues.

F. DISCUSSION OF OTHER INDICATORS (See Annex 13)

Basically, financial services were provided by five banks while TESDA provided relevant hands-on training programs through its accredited institutions. However, it was observed that the presence of other national government agencies (NGAs) in the city such as BFAD, BFAR are limited to offer services to major industry such as fishery and food processing. It was noted, though that these NGAs scheduled their visits to the city either on a regular basis or upon invitation by the LGU. Hence, the quality and timeliness of services are compromised.

In terms of availability of financial services, accessibility was a key issue. Most were small traders without collateral. Government-assisted financing were not present in the city, except for Land Bank which has 2 branches. The LGU of Cadiz has a credit window but is perceived to be practicing patronage financing.

Skilled manpower was considered more than demand. Hence, unemployment rate is high. Laborers are exploited (in terms of wages at e.g. P1,000/month; and employed by LGU as casuals). Banks, the sector requiring IT skills, sourced their manpower from the local tertiary and technical institutions. On the other hand, there were no fisheries colleges in the area but TESDA offered the training needs of this sector.

G. RESPONSE OF THE CITY GOVERNMENT OF CADIZ (See Annex 12)

The City government of Cadiz represented by its City Planning Officer and City Treasurer responded constructively to the proposed action agenda presented by the representative of the FGD group.

The proposals solicited the following reactions from the LGU of Cadiz:

1. One-Stop Shop. The City of Cadiz would be implementing a One-Stop Shop starting in January 2005 which would include business permits and renewal of licenses. They would use the Bacolod City One-Stop Shop as its model. The representatives of Cadiz

LGU also reported the business permit only needs the signature of the City Administrator. It was also highlighted that Cadiz has a Local Investment Board whose first project involved the Cadiz Hotel.

2. Monitoring Team. Per DILG memorandum, all LGUs had been directed to reactivate its monitoring team. They also agreed to publish pre- and post bidding status of all LGU projects in local dailies for the public’s information. They were also open to the idea of conducting genuine regular forums with the business sector in order to inform them and solicit their views on relevant policies, plans and projects.

3. Multipurpose commercial fish port. The proposed port was rebidded in September and four (4) contractors qualified. However, they noted that they would be putting up a new port. The Cadiz government would like the DOTC-managed port which was already half way done be transferred under the LGU ownership and management but DOTC was not amenable to the proposed arrangement. Hence, a new port in another site under the LGU of Cadiz was proposed.

III. CEBU CITY

Cebu City at a Glance

Location Located on the central eastern part of Cebu Province, an island at the center of the Visayas in Southern Philippines; it is 10 degrees 17 minutes North Latitude and 123 degrees, 54 minutes East Longitude. It is bound by Mandaue City in the North and the City of Talisay in the South. On the East is Mactan Channel and on the West are the Municipality of Balamban and the City of Toledo Area 29,124.78 has Terrain Rugged and mountainous with elevation reaching up to 900m above the mean sea level. Flat lands are found along only the shorelines occupies about 23 sq. km (8% of its total land area) Income Class First class highly urbanized Population 1.5 million (2000) Employment Rate (1999) 86% No. of Educational/Traininng Institutions 38 No. of Banks (2001) 58 Land Use 28% of Cebu City are within 18% slope or less; 64% of the city's land classified as alienable and disposable the rest are classified as forest and timberland; 76.3% of its land covered under NIPAS; 23% of the 80 barangays are totally or partially located in the watershed areas Total financial resources (2003) P3,385.68 (in million) Total expenditures (2003) P2,909.16 (in million) Internal Revenue Allotment (2003) P608.12 (in million) IRA-dependency ratio (IRA/Total financial resources) 17.96% Number of business permits issued in 2002 or # of business establishments 21,125 (permits) How to get there Regular direct flights from Tokyo, Hong Kong, Kuala Lumpur, and Singapore, Mindanao to Mactan Inetrnational Airport. Superferry sails frequently between Manila and Cebu.

A. BACKGROUND

Cebu, the “Queen City of the South” is the oldest city in the Philippines. AsiaWeek has consistently ranked it among the best Asian cities. In 1996, it placed 8th in the magazine’s selection of 40 major Asian cities – even ahead of Manila. It is historically known to be an enterprising fishing village way back in the early days of the Chou-Ju- Kua, long before the Spanish expedition of Magellan came to the Philippines in 1521. Sugbu, as the village was intimately called established trade relations with foreign merchants of Europe, Asia and even old Cathay. On October 20, 1934, Commonwealth Act. No. 58 creating the City of Cebu was approved. Authored by the late Senator Vicente Rama (who also served as Cebu's second City Mayor), Commonwealth Act No. 58 provided for the granting of the Charter of the City of Cebu.

B. ECONOMIC PROFILE

Cebu City is a regional center and continues to radiate its influence to the rest of the Visayas and Mindanao regions. It must be noted that for the last four decades after World War II, the City of Cebu has metamorphosed as the center of education and culture; the hub of sea and air transport; and the center of trade and commerce. The city boasts of a 300 hectare prime property development project on reclaimed land located ten minutes away from the coast of Cebu’s central business district called the “South Road Properties or SRP”. It is registered with PEZA as a special economic zone. The SRP was designed to accommodate manufacturing, commercial, tourism, IT and other service enterprises. The Cebu Investment Promotion Center (CIPC) helped a lot in fast-tracking investor inquiries and services. Foreign tourists started to come by the thousands, as new luxury hotels spruced up the landscape. And to cater to the growing affluence in the city, big malls opened in the area. In recognition of Cebu’s export strength, American giant Federal Express made the city its third gateway in the country.

C. HIGHLIGHTS OF THE CITY’S RANK IN THE 2003 PCCRP (See Annex 14)

Cebu City ranked 5th in the over-all competitiveness under the metropolitan category and 1st among the Visayan Metro Cities. Among the seven drivers, Cebu City has above average competitiveness in quality of human resources (7.19), dynamism in local

economy (6.99), then linkages and accessibility (6.31). However, in order to stay competitive, these drivers needed to be enhanced through better policies and programs.

On the other hand, the city has average competitiveness in the cost of doing business (5.18), responsiveness of LGU (5.55), quality of life (5.75), and infrastructure (5.77). These areas required lots of improvement in order to have a friendlier and more attractive business environment.

Among the selected indicators under the responsiveness of LGU, dynamism of local economy and cost of doing business, Cebu has above average competitiveness in terms of a business-friendly regulatory environment (6.21) and policies and regulations reflective of business needs (6.04). The city needed to improvement in making the city more transparent (4.94) and raising the standards of its work-ethics (4.43). It got an average mark in the following indicators: efficient and simple business permit application process, appropriate master development plan including flexible land use plan, reasonable business taxes, and regular business forums.

In terms of linkages and accessibility, Cebu City has above average competitiveness in terms of availability of support services (6.05) like financing packages (7.02). However, in terms of level of services provided by national government agencies, the city has average competitiveness (5.74).

D. FGD ON SELECTED DRIVERS AND ITS INDICATORS (See Annex 15)

Overall, the participants attributed the city’s success in attracting investments to aggressive promotion campaign as an investment haven in the Philippines. It’s adequate supply of educated manpower, being an education center of Central Visayas as well as an active local government figured in laying down the necessary (hard) infrastructure such as roads and telecommunication facilities. However, they recognized the need to improve its soft infrastructure e.g., streamlining of the local government bureaucracy and processing of business permits and licenses in order to make the city more attractive to trade and investments. The need to improve the productivity of the City Hall personnel and its frontline services and its organization system were also stressed.

1. In general, the city's regulatory environment (such as licensing procedures and fees, taxes, and other regulatory requirements) is conducive to business. (6.21), and securing a

business permit is simple and efficient. (5.66) (See Annex 16: Application for Business Permit)

Cebu City’s business permit services included online retrieval of relevant requirements, clearances and forms to register a business e.g., application for business permit form, community tax form, and certificate of zoning compliance. It was reported that there were ten (10) major steps involved in the processing of business permits with about nine (9) basic permits and clearances to be issued by either the LGU or NGA, e.g., sanitary permit, SSS clearances, Phil Health, and Fire Safety Inspection Certificate. In addition, there were other requisites to be complied with depending on the type of business e.g., business name registration with DTI, BFAD and NFA license, and SEC certificate of registration. Experience showed that it took ten (10) signatories and about 3 weeks to a month to be issued a business permit.

A number of participants viewed that it was time for the city government to attune its policies vis-à-vis new and emerging sectors e.g., SPA industry. It was felt that the City Hall was not prepared to classify SPA industry separate from the massage parlors. It was argued that the requirements for SPA were too stringent and impractical e.g., four (4) restrooms for every 50 sq. m. room and issuance of health cards every six months.

Other causes of delay in the issuance of business permits that were identified included the requirement of manager’s check as form of payment (added cost to small entrepreneurs), no regularity in the inspection schedules e.g., health, sanitary and fire departments. They usually came at their own time causing more delay in the processing of the business permits.

2. Business taxes imposed by the city are reasonable. (5.58)

It was reported that there were ten (10) types of taxes levied by the local government including real property and sales tax. There were clamors to audit the entire system of tax collection of the city government. Rationalization of the real property tax was called for especially amidst high zonal valuation. The city’s sales tax of 3%-4% was 250% higher than Mandaue City.

3. Local policies and regulation in the city are reflective of business needs. (6.04)

A number of the participants especially those with new businesses declared that they were not aware of the LGU’s policies and regulations vis-à-vis applying for a business permit and its requirements. They considered the procedure not user friendly while they noted the LGU personnel’s lack of basic IT knowledge. They also said that the LGU did not hold regular forums nor consider views of the business sector in their policy-making.

4. The city's master development plan is appropriate to business sectors' needs. (5.96) It was reported that there was a draft master development plan for the city of Cebu. However, due to politics and the absence of consultation and regular dialogues between the LGU and business sector, there seemed to be a lack of awareness of the city’s master development plan. If they were consulted on the plan, they would have suggested the inclusion of the establishment of a modern market.

5. The city government is honest and transparent in its dealings. (4.94) and Informal fees (bribes) in the city are non-existent. (4.43) Some participants shared that they experienced giving money and/or gifts to LGU personnel especially during Christmas season to facilitate their business transactions. On the other hand, a number stated that they did not believe in giving “favors” just to facilitate processing of their papers.

E. RECOMMENDATIONS AND PRIORITIZED ACTION AGENDA (See Annex 17)

Amidst the pressing issues and concerns raised by the participants, a number of ideas were brought to fore for the city government’s consideration and action. The proposals ranged from auditing the entire system (system check) of the local government of Cebu including setting standards and streamlining of procedures, computerization of processes, using the online forms, retraining of LGU personnel and rationalizing of fees to benchmarking with the best practices of other LGUs like Marikina. Wit regard to real property taxes, there was a suggestion to adopt the market valuation instead of zonal valuation. Among the ideas presented, the following were considered priorities:

1. Organizational review of LGU. It was regarded that the streamlining of the local government bureaucracy and business process including auditing of the taxation system would lead to efficient bureaucracy resulting in growth in the LGU, attracting more investments and increasing revenues.

2. Benchmark practices with best practices of Marikina and other model cities (concerned with business permits / licenses offices). It was felt that comparing Cebu’s practices with other model cities could mean more efficient business transactions with the LGU rebounding to more businesses to LGUs. This could save resources for the city of Cebu e.g., time and money.

3. Streamlined LGU and training for LGU personnel. A lean, effective and efficient LGU backed by relevant retraining programs e.g., customer relations and people skills, IT for the LGU staff would not only raise productivity but also reduce cost for LGUs while meeting customers’ (stakeholders) satisfaction.

4. Regular Sectoral dialogues. More participation from the business sector would result in more support for LGU policies and projects.

F. DISCUSSION OF OTHER SELECTED INDICATORS (Annex 18)

In order to level the playing field and increase competitiveness of the SMEs in Cebu City, the participants recognized the importance of accessibility to financing and more relevant IT training programs geared towards specific industries.

G. RESPONSE OF THE CITY GOVERNMENT OF CEBU (See Annex 17)

The local government of Cebu represented by its Vice Mayor Michael Rama and his staff promised to convene a Councilors’ meeting to consider the proposals presented by the representative of the FGD. The Vice Mayor emphasized that the LGU could only move forward if and when the SMEs become partners in implementing the proposed solutions. He pointed out that though the LGU was decided to streamline the bureaucracy, he challenged the private sector, particularly the Cebu Chamber of Commerce to help explore the possibilities of absorbing or retraining the LGU staff to be laid off. He also spotlighted the need to urgently address the increasing problem of informal settlers along Cebu’s coastline. He invited the private sector to be actively involved in looking for solutions and share in the responsibility of improving the quality of life in the city.

IV. LAPU-LAPU CITY

Lapu-Lapu City at a Glance

Location Located in Mactan Island, about 13 kilometers away from the Port of Cebu, bounded on the north and west by Mactan Channel, on the east by Bohol Strait, and on the south by the Municipality of Cordova and Bohol Strait. Area 59.23 sq. km Terrain Generally flat. Its soil type is Faraon clay, Bolinao clay, Hydrosol and Beach sand. Its climate is that of a typical south sea island climate. Number of Barangays 30 Income Class First Class Population 224,059 (2000) Employment Rate (2000) 83.3% No. of Health Centers 2 public hospitals Port 1 airport (Mactan International Airport), and 1 seaport (Osmena Wharf) Primary crops coconut products, marine products such as seaweeds and seashells and fish Total financial resources (2003) P534.65 million Total expenditures (2003) P453.13 million Internal Revenue Allotment (2003) P214.18 million IRA-dependency ratio (IRA/Total financial 40.06% resources) Number of business permits issued in 2002 or # of 3,863 business establishments How to get there It is only 3-4 hours away plane ride from major cities in the Asia Pacific. Linked to mainland Cebu Province by two modern bridges.

A. BACKGROUND

Lapu-lapu was formerly known as the town of Opon founded by Spanish friars in 1730. It was later renamed after the famous native chieftain who killed the Portuguese circumnavigator Ferdinand Magellan, in the 1521 battle of Mactan. A chartered city of the central Philippines, sLapu-lapu lies on the western coast of Mactan Island, about 5 km across Cebu Harbor from the city of Cebu. On June 17, 1961, Lapu-lapu became a chartered city.

B. ECONOMIC PROFILE Lapu-Lapu is an industrial center noted for its thermal installations, which burn petroleum for energy; corn and flour milling; fishing; and handmade guitars. The Mactan International Airport, the country’s second major international gateway, and the Mactan Export Processing Zone (MEPZ), an industrial tax-free zone that opened in 1979, are located in Lapu-Lapu city. From six (6) firms in 1986, there are now over 100 firms located at MEPZ, employing close to 40,000 workers and generating export sales of $1.5 Billion in 1999. Japanese firms such as Asahi Pentax, Taiyo, and NEC are locators of MEPZ. Other well-known locators are Fairchild Semiconductors, TMX, and United Technologies. Tourism is also an important sector in Lapu-Lapu’s revenue and employment generation.

C. HIGHLIGHTS OF THE CITY’S RANK IN THE 2003 PCCRP (See Annex 19)

The city of Lapu-lapu ranked 12th in the overall competitiveness under the Metro cities category and 3rd among the Visayan Metro cities. It has above average competitiveness in infrastructure (7.08), dynamism of local economy (6.87), and quality of human resources (6.94). These drivers needed further enhancement in order to be more competitive. On the other hand, the city has below average competitiveness in cost of doing business (4.91) and responsiveness of LGU (4.79), hence, required a lot of improvements in these areas.

Under the specific indicators under the responsiveness of LGU, the city has above average competitiveness in terms of conduciveness of its regulatory environment (6.06), and reasonable business taxes (6.01). Under other indicators, Lapu-lapu got average

competitiveness marks in the following: transparency in government transaction (5.19), existence of informal bribes (5.28), conduct of regular forums (5.42), and reasonable land-use regulations (5.44).

Under the linkages and accessibility driver, the city has above average competitiveness in the availability of support services (6.20) and availability of financing (6.10). The city needed to enhance the support services for SMEs if it is to attract more trade and investments. The level of services provided by national government agencies like BFAR and BFAD should be improved and be market-driven in order to better serve the needs of the SMEs.

Regarding human resources and training, Lapu-lapu city has above average competitiveness in terms of availability of skilled labor (7.30) and IT training programs (6.23). A a key ingredient in the competitiveness of Lapu-lapu, these areas needed enhancement in order to compete in the global market for trade and investments.

D. FGD ON SELECTED DRIVERS AND ITS INDICATORS (See Annex 20)

Though Lapu-lapu has the Mactan Export Processing Zone (MEPZ) as one of its key selling points, the participants expressed that there were still a lot of room for improvement in the city’s regulatory environment from participatory governance to effective information dissemination campaign and rationalizing of clearances and fees by both local government and NGAs. It was also noted that the absence of an organized SMEs (Chamber) contributed to the lack of a united voice of this sector.

1. In general, the city's regulatory environment (such as licensing procedures and fees, taxes, and other regulatory requirements) is conducive to business. (6.06), securing a business permit is simple and efficient. (5.57) (See Annex 21: Application for a Business Permit and Annex 21A: One-Stop Shop Application [for MEPZ locators]) Lapu-lapu has a one-stop shop for business permits involving eleven (11) steps, seven (7) inspections, about seven (7) local (business) taxes and nine (9) regulatory fees. It took at least two (2) days to one (1) week for the issuance of the business permit. However, this was subject to passing the inspection which took about two-three months to be conducted. They attributed the delay in inspection to the lack of resources e.g., transportation for inspectors to do their jobs without delay. It was also noted that fire inspection was done by both the city government and MEPZ resulting in two separate

payments of fire and safety fees to the fire departments of Lapu-lapu and MEPZ. Garbage collection fees (cost dependent on type of business) were also charged by both MEPZ and City Hall. In addition, both MEPZ and local government were not collecting the wastes promptly and efficiently resulting in sub-contracting the wastes of the industries and firms with private garbage collectors. These fees and inefficient garbage collection increased the cost of doing business in the city.

It was also felt that the lack of consultation and ineffective information campaign on the policies, rules, regulations and fees in doing business imposed by the city government and NGAs like the BIR and PEZA, resulted in unclear ordinances e.g., tax mapping, lack of awareness of BIR requirements, and similar fees paid to City Hall and MEPZ and penalties in the renewal of permits. These and other factors like the absence of an updated flowchart and requirements per step, SSS requirement for proof of employment and Environmental Clearance Certificate, basically delayed the issuance of business permits.

2. Business taxes imposed by the city are reasonable. (6.01). In terms of local taxes and other assessments, it was stressed that Lapu-lapu has higher business taxes (about 4%) as compared to Cebu and Mandaue. In addition, the participants thought that there were unnecessary fees that could be done away with or rationalized e.g., SME assets should be depreciated in the assessment method.

3. Local policies and regulation in the city are reflective of business needs. (5.43). The participants were unclear about certain city government’s rules, regulations and ordinances e.g., tax mapping, requirements per step in the issuance of business permits and licenses, cut-off dates, among others. This may be due to the absence of a regular forum between the business sector and LGU. On the other hand, the MEPZ locators apprised the body that their association of locators had a regular forum with the LGU of Lapu-lapu through MEPZ.

The representative of the Chinese Chamber of Commerce pointed out that there should be ordinances on easing traffic congestion and cleanliness, especially in the market and ought to be strictly implemented.

4. The city's master development plan is appropriate to business sectors' needs. (5.75) The participants were not aware of the city’s master development plan. This may be due to the lack of information available to the public and lack of consultation.

5. The city government is honest and transparent in its dealings. (5.19) and Informal fees (bribes) in the city are non-existent. (5.28) There was a general agreement that there was a need for clear cut processes, rules and regulations (Primers, published, posted, and on-line information) for transparent and good governance. One experience revealed that one has to know “someone in the City Hall” in order to be properly attended. At the same time, there were no programs that encouraged a bribe-free city government.

E. RECOMMENDATIONS AND PRIORITIZED ACTION AGENDA (See Annex 22)

In order to address the issues and concerns that were raised during the FGD, the participants proposed the following recommendations for the consideration of the local government of Lapu-lapu:

1. Provision of business requirements’ checklist and schedule of fees and updating of the One-Stop-Shop flow chart. This could be done through various ways e.g., posters, website, flyers, etc. It was believed that transparent process and an updated list of requirements per step including cut-off dates for payment of taxes and fees would result in efficient delivery of LGU services e.g. prompt issuance of business permits and renewals, lesser penalties and increased LGU revenues. This would also mean more business establishments being registered leading to more employment generation.

2. Accreditation of PEZA Fire Clearance and Garbage Collection fees by LGU and efficient garbage collection. It was suggested that there should be only one garbage fee to be collected. The MEPZ could hold a forum with the LGU of Lapu-lapu to explore this possibility. A single garbage fee would mean lesser costs of doing business, convenience for the SMEs locators in the MEPZ. In addition, regular garbage collection would result in cleaner environment and better waste management improving the image of the city, thereby boosting local tourism.

3. Organization of regular business forums to disseminate information on the city’s master development plan, policies and programs and to get feedback from business sector. The participation of the various stakeholders in the policy-making and planning process would result in more support thereby attracting more businesses, generating more

employment and increasing LGU revenue. It would lead to better partnership between private sector and the LGU.

F. DISCUSSION ON OTHER SELECTED INDICATORS (See Annex 23)

In relation to the other indicators, the participants reported that financial services were not available in the city. It was intimated that Mandaue City provided financial packages to SMES in Lapu-lapu city. The absence of other NGAs in the city e.g., BIR was also an issue. MEPZ locators needed to go to Mandaue BIR to transact business.

On terms of skilled labor and IT training programs, the furniture industry faced with the lack of skilled furniture makers while the IT sector lacked specific IT training programs like Linux.

G. RESPONSE OF THE CITY GOVERNMENT OF LAPU-LAPU (See Annex 22)

The representatives of the Lapu-lapu city government welcomed the proposals and replied positively. The following were their reactions:

1. Updating of flowchart. They agreed to update the flowchart for the issuance of the business permit and include a checklist of requirements including SSS and BIR requisites.

2. Rationalizing of fees/clearances. LGU of Lapu-lapu would consider waving their fire clearance and accept the clearance from MEPZ.

3. Efficient waste management. This issue was recognized by the LGU as urgent. In this regard, the city government of Lapu-lapu conveyed that a ten-year solid waste management plan was in place. In addition, the city would be purchasing three (3) garbage compactors and would be conducting seminars on solid waste management.

4. Conduct of regular forum. The city government acknowledged the need to conduct regular dialogues with the business sector. It was also stressed that the private sector could approach the City Administrator’s Office for any queries or information.

They welcomed the forum as an avenue for informing the public about its policies and plans and for soliciting the views of its stakeholders.

V. SAN CARLOS CITY

San Carlos City at a Glance

Location Located at the Northeast part of Negros Island, 123° 23’65” longitude and 10°25’15” latitude, bounded on the North by the Municipality of Calatrava, on the West by the Municipality of Don Salvador Benedicto and the City of Bago, on the South by Municipality of Vallehermoso (Negros Oriental) and the City of Canla-on, and the East by Tañon Strait. Area 45,150 has. Terrain Has sloping to rolling lands ranging from 0-18% comprising about 18.77% of the total land area (8,473.9300 has). The northern part of the City is dominantly moderate to rolling slopes ranging from 18-30% and comprising about 27.85% or 12,575.0000 has of land. There are also steep areas with slope distribution from 30-50%, which constitutes 20.82% or 9,400.0000 has. The remaining 32.56% are slopes with distribution above 50%. Income Class First Class Component City Population 115,259 (2000) No. of Educational Institutions 9 (secondary), 3 (higher) No. of Health Facilities 3 No. of Financial Institutions 8 (banks) Port 1 port under PPA Land Use Non-agricultural area: 11.96% Agricultural area: 69.07% Protected land area: 19.87% Primary crops Agricultural Products: Sugar (Raw & Refined), Molasses, Black Pepper, Cabbage, Beans, Corn, Rice, Livestock, Mango, Bananas, Nuts, Coffee, Marine Products (Cultured & Non-Cultured), Coconut Total financial resources (2003) P 462.68 (in million) Total expenditures (2003) P 209.73 (in million) Internal Revenue Allotment (2003) P 251.75 (in million) IRA-dependency ratio (IRA/Total 54.41% financial resources) Number of business permits issued or # of business establishments in 2002 1,066 (Permits) How to get there It is an hour by jet from Manila, two to Hong Kong and Taiwan, and four to Singapore, Korea and Japan. 2 hour drive from Bacolod City via the Translink highway

A. BACKGROUND

San Carlos City was formerly known as Nabingkalan, an arrabal of Hilub-ang (Calatrava) in the island of Buglas (Negros). Nabingkalan derived its name from Nabingka, an ebon beauty of a princess, who ruled the barrio during the early part of the 17th century. In October 1898, a parish priest of Calatrava, then the township under the jurisdiction of Nabingkalan, visited the place and found it more prosperous than the town proper. After meeting the cabesas de barangay, he decided to name the new town San Carlos, in honor of the Patron Saint of the barrio, Saint Carlos Borromeo. By virtue of RA No. 2648, the Municipality of San Carlos was converted into the City of San Carlos on July 1, 1960.

B. ECONOMIC PROFILE

San Carlos City has total land area of 45,150 hectares, 15,898 hectares or 32% of which constituted the agricultural production zone, and 2,535 as strategic agriculture and fisheries zone. The city has a 405- hectare PEZA-approved San Carlos Economic Zone comprising an industrial estate, residential and commercial complex, and an eco-tourism estate. The city, a major sugar producer, exports raw and refined sugar and cross-stitch products. San Carlos City has been elevated to the Hall of Fame of the Galing Pook Awards, for its innovative, sustainable and replicable programs, namely: the Buluangan Fishport, the Homelot Program for Squatters, “Daan sa Kaunlaran” project, Cemetery/Memorial Tree Park program, and Agricultural Productivity Training Center project.

Nature has also endowed San Carlos City with a deep natural harbor that can take in large shipping vessels and protected from inclement weather of Sipaway Island. Due to these special attributes, the Philippine Ports Authority has chosen the San Carlos City port for its expansion program in 1998 which include the reclamation of four hectares of sea to accommodate various port buildings, facilities and container vans, an extension on the eastside for two Ro-Ro vessels and the extension of the length of the port to 242.5 meters. The national highway system has linked the city with Bacolod and Dumaguete. Enhanced by the new Negros Trans-link Highway, road distance to Bacolod has been cut into half, or by 80 kilometers. A new central business district has been set in place in the 100-hectare master-planned San Carlos City Center ready for occupancy for business locators, residential subdivision, commercial center, and a cultural and sports complex.

C. HIGHLIGHTS OF THE CITY’S RANK IN THE 2003 PCCRP (See Annex 24)

San Carlos City ranked 10th among the twenty five (25) small cities. Among the competitiveness drivers, San Carlos City had high rating in quality of life, while it got a low mark in Cost of Doing Business.

Under the responsiveness of LGU driver, the city has above average competitiveness in all indicators (6.05-7.64). These were mainly attributed to the city’s tax incentives, agricultural and infrastructure support, multi-sectoral participation on the city’s master development plan and existence of the San Carlos Economic Zone and Business Park. However, the city could still enhance their standing in order to attract more trade and investments.

San Carlos has average competitiveness in availability of support services both by private and government agencies. However, the city has above average competitiveness in terms of availability of financing (6.46).

In terms of human resources and training, the city has above average competitiveness in terms of availability of skilled labor (7.02). The city got an average competitiveness in relevant IT training programs (5.03) which may be due to lack of relevant colleges and universities in the city. Students had to go to Cebu, Dumaguete and Bacolod for their education.

D. FGD ON SELECTED DRIVERS AND ITS INDICATORS (See Annex 25)

Overall, the participants had a good working relationship with the city government of San Carlos. However, the main problem that the city faced was the high cost and inefficient electricity. They had power failures at least three times a week and electricity cost per kilowatt hour was P1.00 which is higher than Cebu, adversely affecting the bottom lines of the SMEs. The need to form a San Carlos local electric cooperative was stressed. However, this would engage the National Electrification Agency (NEA) and/or Congress. It was also reported that a windmill farm project has been planned to be set up in San Carlos City to help meet the increasing medium-to-long term power needs of the city.

It was believed that the power issue and other concerns may be addressed through the formation of a San Carlos Chamber of Commerce. The Filipino Chinese Chamber of Commerce, a member of the San Carlos investment Board, could be part of the planned Chamber in order to have a stronger voice in the city, congress and other avenues. This body could help lobby for common concerns e.g., franchise for an electric cooperative.

1. In general, the city's regulatory environment (such as licensing procedures and fees, taxes, and other regulatory requirements) is conducive to business. (6.55) and Securing a business permit is simple and efficient. (7.64). (See Annex 26: Application for Business License and Permit)

In general, the participants agreed that the LGU of San Carlos was responsive to the business sector’s needs. However, they noted that licensing procedures involving national government agencies such as DTI were more tedious since not all government agencies had offices in the city. The DTI representative reported that DTI has an online registration to address this concern. It was proposed to have harmonized licensing procedures with the NGAs.

Business permits and licenses took only two (2) days to process. In general, business license involved a one-page application form and eight (8) requirements/signatures plus article of incorporation for SEC registered firms. The participants mainly attributed this efficiency to the One-Stop Shop held every January of each year for business permits and renewal of licenses.

2. Local policies and regulation in the city are reflective of business needs. (7.05). Its high score could be attributed to the city’s local investment code aimed at facilitating trade and investments. There was a general sentiment that the LGU conducted consultations with the relevant sectors. They acknowledged the openness of City Hall to the views and comments of the business sector.

3. The city's master development plan is appropriate to business sectors' needs. (7.28). The city’s twenty-year (4-volume) master development plan was done through a participatory approach involving the different stakeholders. The participants particularly the real estate sector, together with foreign consultants, participated in the development of the city plan, especially the Housing and land use plan. They reported that the consultation was based on a bottom-up approach.

4. Business taxes imposed by the city are reasonable. (6.90). The participants said that there has been no increase in the city’s local taxes, e.g., real estate taxes. Hence, they were pleased with their relatively low taxes. However, they opined that it was time to update the city’s local taxes.

5. The city government is honest and transparent in its dealings. (6.39).

The only issue under this indicator was the access to public documents. The question “how accessible are public documents?” was raised. It was perceived that it was difficult to request for public documents.

6. Informal fees (bribes) in the city are non-existent. (6.29).

Unethical practices both in public and private entities were considered almost non-existent in the city.

E. RECOMMENDATIONS AND PRIORITIZED ACTION AGENDA (See Annex 27)

A number of recommendations were put forward for the consideration of the local government of San Carlos, namely:

1. Facilitation of the establishment of a Chamber of Commerce. The participants believed that a well-organized Chamber of Commeerce of San Carlos would result to a strong voice to lobby concerns e.g. electricity. They requested the Mayor to be a catalytic agent in jump-starting the formation of the San Carlos Chamber of Commerce e.g., by endorsing or welcoming said chamber.

2. Focusing of efforts in lobbying with NGAs, Congress and other relevant organizations outside the city on priority concerns (e.g. inefficient and high cost of electricity). In so doing, the city government would be able to orient its limited resources to more pressing issues.

3. Identification of and request for NGAs (e.g. DTI, HLURB) to conduct renewal and registration of permits in the city and study which can be requested to delegate their roles to LGU. In addition to harmonizing the licensing procedures and on-line registration by the NGAs, it was believed that delegation of functions by NGAs would result in efficient and cost effective licensing in both SMEs and NGAs. However, they cautioned that there was a need for capability-building before on-line registration or delegation of functions could be put in effect.

4. Regular quarterly consultations with the business sector and accessibility of public records. This would mean greater transparency in local governance. Hence, various stakeholders would be able to make a well-informed decision and extend support to LGU policies and projects.

F. DISCUSSION OF OTHER SELECTED INDICATORS (See Annex 28)

The participants highlighted the need to have national government agencies offices in the city proper. The reported they had to either go to other cities or invite representatives to conduct registration on a particular time. In addition, other support services like consultancy on product development and marketing were not readily available in the city. As for financial services, the local government has a P5 million loan portfolio for micro-to-small enterprises while rural banks charged 12% interest rate. The outstanding issue remained to be collateral.

In terms of availability of skilled labor, the city has three (3) colleges, four (4) secondary and one (1) technical school. They stated that their city provided 300 IT people to Innodata. As regards their training needs, some schools entered into partnership with other organizations like the Rotary Club to conduct custom-made IT training programs. However, they emphasized the need to have training programs for plumbers, electricians and air-condition technicians. The participants also said that they were also interested in providing training programs for caregivers.

G. RESPONSE OF THE CITY GOVERNMENT OF SAN CARLOS (See Annex 27)

The Honorable Mayor Lacson and his team from the local government of San Carlos graced the presentation of the results of the FGD. He had the following response:

1. Power. The Mayor recognized the problem of high cost of and inefficient power in the city. He said that the city was under VRESCO jurisdiction. He mentioned that he had already made representation with the appropriate bodies and informed that Transco would proceed with the interconnection project with San Carlos. This would double the city’s capacity and would help address power fluctuation.

2. Delegation of function by NGAs. Mayor Lacson reported that some agencies had already delegated the issuance of their licensing authorities to LGUs. He cited that Housing and Land Use Regulatory Board (HLURB) had already devolved it’s the issuance of preliminary and development permit to the city government while the city was already ready to accept registration functions from DTI . Also along this line, the Mayor requested the private sector to submit to his office a list of NGAs and the proposed schedule of their visits so that his letter of request would be guided accordingly.

3. Regular consultation. It was reported that there were avenues for regular consultations such as the City Development Council. The Myor also suggested that his Vice Mayor could also meet with the Real Estate sector to explore the possibility of absorbing other functions of HLURB.

4. Accessibility to public documents. It was reported that an Executive Order was already signed lifting the ban on access to public documents. A citizen could just go to the relevant department to request the pertinent documents.

VI. MANDAUE CITY

Mandaue City at a Glance:

I. Location Mandaue City is located on the coastal plains of the Province of Cebu, approximately at 10 9” 40.34” latitude and 123 5’ 28.16” longitude with an average elevation of 55 feet (16.8 meters) above sea level. The city is bounded on the north by the municipality of Consolacion, on the east by the Mactan Channel, on the southwest by Banilad (Cebu City), on the northwest by Talamban (Cebu City) and on the south by the Cebu City North Reclamation.

Formed like a heart, the city is located at the heart of the province of Cebu. It is strategically located as it straddles through two major transport links, the 1st (old) Mandaue-Mactan Bridge and the 2nd (Marcelo Fernan) Mandaue- Mactan Bridge, and the Cebu International Port. Area The city has a total land area of 3,487 hectares or 34.87 square kilometers. Every square kilometer is inhabited by more or less 8,112 people. Terrain Mandaue City is a low-lying area whose land elevation is below 100 meters. It is one of the two (the other one being the municipality of Consolacion) local government units located within the mainland Metro Cebu where the elevation of land is less than 100 meters. Many of the areas of the city are extremely flat. About 77.37% is within the 0-8% slope category and Tabok.

The greater portion of the city, comprising about 70%, is dominated by the Mandaue Clay Loam soil series. This is found in the 0-2% and 2-5% slope ranges. Faraon clay loam characterizes the rest of the land with slope range from 5- 8% and up to 25-40%.rest of the land with25-40%. Income Class First Class Population 259,728 (2000 census) Employment Rate 88.3% (January 2003) No. of Educational /training institutions Primary and Secondary: 42; Higher Education: 6 No. of Health Facilities 35 (2003) Land Use 6.94% of the city’s total land area is commercial, 25 % is residential, 48.61% is industrial, 8.12% is agricultural, and 1.72% is institutional. Roads comprise 3.44% of the city’s total land area while parks and open spaces account to 0.69%.

Primary Crops Buri ,Fiber, Limestone, Bamboo, Coco Sheels Total financial resources (2003) 515.78 (in million) Total expenditures (2003) 427.6 (in million) Internal Revenue Allotment (2002) 232.31 (in million) IRA-dependency ratio (IRA/total financial resources) 45.04% # of business permits issued or # 6,573 (permits) of business establishment in 2002 How to get there The City is three kilometers away (or about 10 minutes) from the Mactan Cebu International Airport serviced by the country’s major local airlines. The airport also services international flights to and from Hong Kong and Taiwan.

A. BACKGROUND

Ferdinand Magellan founded the City of Mandaue on April 7, 1521 during one of his Spanish expeditions. The discovery of “Mandawe”, which means the “Cove of Cebu”, marked the origins of industrialization in the country as it paved way to the promotion and sustainability of the Acapulco Trade, which took place during that period. The “Cove of Cebu” was officially constituted into a “pueblo” from 1580 to 1700 and was officially known as the town of Mandaue in the year 1899. From that “Cove of Cebu” emerged the now industrial city of Mandaue, which became a chartered city on June 21, 1969 through Republic Act 5519. It was then considered a highly urbanized city in the year 1991.

B. ECONOMIC PROFILE

Mandaue City’s moniker for being the “Cove of Cebu” speaks a lot of how its economy runs. Its coastal location has been significant to the city’s economical development because its major sources of income come from exports, general merchandising, manufacturing/imports and services. Furthermore, as of 2001, the city has 381 export and import private manufacturing firms. It also has more than 8,000 major business establishments engaged in local and domestic trade, wholesale and retail merchandising, and services.

The City of Mandaue is considered to be the industrial hub of the whole province of Cebu and Region VI. A total of 9,000 commercial and industrial institutions have been established in 2002 which generated gross sales totaling to P50,540,275,281.30 and business tax collection amounting to P89,615,062.01. Consequently, 872 new businesses were set up in the same year. From the total number of establishments set up in the city, 2,509 came from the General Merchandising sector, importers and exporters were recorded to be at 128 and 171 respectively, 272 were into the manufacturing business, 461 are into the real estate business, 52 in the banking sector, 235 in food/restaurant, and 983 are into the service sector.

C. HIGHLIGHTS OF THE CITY’S RANK IN THE 2003 PCCRP (See Annex 29 )

While Mandaue city ranked 10th in the 2003 round of the Philippine Cities Competitiveness Ranking Project with an average score of 5.71, it ranked second in the Visayas region closely following Cebu City. Among the drivers of competitiveness, Mandaue got an above average score in the human resources and training (6.00) and linkages and accessibility (6.10) while it showed average performance in its cost of doing business, responsiveness of the LGU, dynamism of the local economy, infrastructure and quality of life. These scores meant that Mandaue had to enhance these competitiveness factors to be at par with the other metro cities.

Mandaue City scored below average to above average in the selected indicators of the GTZET. In terms of the responsiveness of the local government unit, the city scored highest with regard to the reasonableness of local taxes (5.90) followed by the appropriateness of its master development plan (5.63) and the presence of a conducive regulatory environment (5.63). On the other hand, identified areas for improvement included: the transparency of the local government in its dealings, existence of informal fees in the city, and presence of regular public-private sector fora to address the concerns of the community.

In terms of linkages and accessibility, the city got an above average competitiveness in financial services (6.35) while it exhibited average performance in the availability of support services for small and medium enterprises. In addition, the city got a below average score in the level of services provided by national government agencies. Due to its low rating on this indicator, government agencies in Mandaue need to enhance the delivery and quality of their services. With respect to human resources and training, Mandaue has above average competitiveness in the availability of IT training programs (7.59) and presence of competent and skilled labor (7.30). Though above average, the city still needed improvement in its human capital endowment to further attract IT-related businesses.

D. FGD ON SELECTED DRIVERS AND ITS INDICATORS (See Annex 30 )

Discussions delved more on how to make the business environment more conducive to small enterprises and how to provide greater transparency in the city’s policies plans and programs especially in the city’s waste management program.

1. In general, the city’s regulatory environment (such as licensing procedures and fees, taxes and other regulatory requirements is conducive to business) (5.63) and the process of securing a business permit is simple and efficient (5.03) (See Annex 31: Mandaue Business Permit Form):

It was reported that Mandaue City was currently implementing a streamlining process that would make business permit processing efficient for all its applicants. The regulatory process was projected to reduce processing time of securing permits to forty minutes. Though this project seemed promising, the local businessmen validated that the current system has eight major steps with a maximum processing time of two weeks. The process entailed paying fees namely: garbage, fire, zoning, business plates, sanitary, and barangay clearance.

The participants intimated that the delays in securing business permits may also be attributed to the processing of SSS, Fire Department, and DTI clearances, and lack of compliance on the part of the applicants to provide the necessary requirements. Thus, the LGU’s “one-stop shop” was viewed to be a solution to the bottlenecks of the business and licensing process.

2. Business taxes imposed by the city are reasonable (5.90) The participants perceived that business taxes in the city are generally reasonable. However, it was noted that they are not getting the value of their garbage fees since collection are not done regularly. It was cited that the local entrepreneurs have to pay additional fees to waste management personnel just to ensure that industrial waste be collected on a regular basis. The participants noted that this is an area that should be looked into by the local government unit.

3. Policies and regulations in the city are reflective of business needs (5.36) Lack of information dissemination campaign and multi-sectoral consultation on the part of the LGU were the major concerns of the participants. It was cited that while the city hall has implemented its policies and regulations, it has also failed to inform its constituents on its various initiative and policies. The LGU also failed to come up with policies that would address the needs of businessmen and residents alike because it neglected to elicit the opinion of stakeholders.

4. The city’s master development plan is appropriate to business sectors’ needs (5.63) Due to the non-existence of an efficient information dissemination scheme by the LGU, it was evident that most of the participants were not aware of the City’s roadmap or master development plan. It was again noted that the LGU has to improve on this area in order to attract more investments especially small and medium enterprises.

5. The city government is honest (4.76) and transparent in its dealings and Informal fees in the city are non-existent (4.71) The participants agreed that while the scores of Mandaue City showed below average competitiveness, they perceived that the city government was generally transparent in its dealings. It was also agreed that informal fees in the processing of business permits were almost non-existent. However, local businesses had to pay additional fees to garbage collectors to ensure regular disposal of their waste. This situation incurred additional costs to business and it added burden to small and medium-sized players.

E. RECOMMENDATIONS AND PRIORITIZED ACTION AGENDA (See Annex 32)

The recommendations of the participants were summarized under three main proposals which were considered under the mandate of the local government of Mandaue.

1. Implementation of Mandaue’s One-Stop Shop for securing business permits. It was proposed that city government’s one-stop-shop project be implemented in 2005. There were clamors for the city government to implement different set of requirements for business permit renewals vis-à-vis new business applications with lesser number of procedures/ steps on the former. It was also recognized that this proposed one-stop-shop had to operate on Saturdays to accommodate more clients. Bringing the one-stop-shops to the barangays on specified dates so as to lessen the red tape in the city hall was another recommendation.

To complement the streamlining initiatives, the establishment of a new city hall or an investment center where the one-stop-shop will be located, was proposed. It was believed that a new location for the one-stop-shop would expedite processes and increase the effectiveness of the licensing. Moreover, values re-orientation of LGU personnel with emphasis on customer-oriented public service should also be undertaken.

A business-friendly environment was perceived to attract more businesses thereby resulting to increased LGU revenues and job creation.

2. Intensify the LGU’s information dissemination campaign on its policies. Policies, ordinances, and the city’s master development plan had to be disseminated to the private sector. It was recommended that primers and flyers on the city government’s policies and incentives schemes be circulated to the public. In addition, it was also proposed that the City’s master development plan be made available on Mandaue’s website for the information of the public and thereby attracting more locators.

Such initiatives were viewed to generate more support and cooperation among the citizens of Mandaue, strengthen the LGU-business sector partnership, and to improve the image of the local government unit.

3. Hold regular LGU-led consultation with the local chambers of commerce. It has been noted that for policies to be relevant, the business sector, through the city’s chambers of commerce, had to be in close coordination with the local government unit. Multi-sectoral consultation was viewed as an effective and efficient tool to address issues on local governance. Hence, the participants recommended that the local government should hold regular forums with the private sector.

The perceived benefits of this initiative included better coordination between the public and private sectors, effective formulation of policies, and more business-friendly environment, which is believed to attract more investments and generate employment for the local economy.

F. DISCUSSION ON OTHER SELECTED INDICATORS (See Annex 33)

In terms of the level of support services provided by both private and government agencies, the participants believed that the Department of Trade and Industry provided a number of training programs for small and medium enterprises. Similarly, it was affirmed that the local government also sponsored training programs to the furniture sector since this is among the primary industries of the city. However, small and medium enterprises contended that national government agencies had to establish satellite offices in the city (since offices are located in Cebu City) to further improve its services to local establishments.

It was also a consensus among the participants that while Mandaue had an adequate supply of skilled manpower, academic institutions could still enhance their curricula to meet the current needs of companies. Likewise, the participants believed that land-use regulations of Mandaue are relatively flexible and financing packages for private businesses are readily available.

G. RESPONSE OF THE CITY GOVERNMENT OF MANDAUE (See Annex 32)

The City government of Mandaue represented by its City Planning Officer and a City Councilor acknowledged the proposed action agenda and openly responded to each item accordingly.

The proposals solicited the following reactions from the LGU of Mandaue:

1. Implementation of Mandaue’s One-Stop Shop for securing business permits The City of Mandaue would be implementing a virtual One-Stop Shop that would cover business permits applications and renewals of licenses. With the new system, securing business permits would be a three-step process (Assessment – Payment of Fees – Issuance of Permits). Online retrieval system was said to be a key feature of the project that would expedite the process. The city administrator informed the body that system would be set in place on January 2005.

2. Intensify the LGU’s information dissemination campaign on its policies The LGU had recognized the need to disseminate relevant information to the stakeholders of the city. The LGU had been enhancing its website to include data and relevant documents about Mandaue City. They had also created the Mandaue Non-Governmental Organizations to strengthen the network of NGO’s in the region. In addition, the city government had also intensified its linkages with industry groups such as the Mandaue Chamber of Commerce and Industry, Mandaue Chinese Chamber of Commerce and Industry, and the Mandaue Business Club. They were optimistic that with the present coordination of theses sectors, policies would be more reflective of the locals. These initiatives are perceived to intensify the information dissemination of the city’s policies and strategic thrusts.

3. Hold regular LGU-led consultations with the local chambers of commerce The Mandaue City government acknowledged the importance of regular consultations not only with industry organizations but also with other sectors of the locality. They promised that regular forums would be conducted with the stakeholders to elicit views and opinions on pressing issues on local governance. The city officials commended the results of the FGD and welcomed more reforms and recommendations that would enhance the competitiveness of Mandaue City.

VII. TACLOBAN CITY

Tacloban City at a Glance:

II. Location Tacloabn City is located in the northeastern part of the province of Leyte. Leyte is one of the islands of the Eastern Visayas Region. Tacloban lies at 110 14'36" north latitude and about 125-east longitude and is situated about 360 miles southwest of Manila. It is surrounded by San Pedro Bay where many species of marine products are found in abundance. Area The original land area of Tacloban was 10,297.29 hectares as taken from the then Bureau of Lands. A survey in 1977 by the Bureau of Lands disclosed that certain portions of the Municipalities of Babatngon and San Miguel were actually part of Tacloban. Hence, Barangay Sta. Elena of Tacloban, which is adjacent to these two towns, increased its area by 556 hectares, hence, increasing the total land area to 10,853.29 hectares. Terrain The elevation of Tacloban City is 3.05 meters above sea level. The rolling terrains at the western vicinity of the city are evenly distributed throughout the northwestern potion of its territory.

On the southwestern part lies the Naga-nage mountain, which has a height of 1,300 feet. This range serves as the Tacloban-Palo and Tacloban-Alang-alang boundary. Likewise, on the northeastern portion of the city proper is the Kanhuraw Hill overlooking the Cancabato Bay which presently serves as the City Government Center.

Income Class First Class Population 178, 639 (2000 census) No. of Educational /training Higher Educational Institutions: 12; Vocational Institutions: 3 institutions Primary Crops Rice, sugar, copra and corn Total financial resources (2003) 376.39 (million) Total expenditures (2003) 359.34 (million) Internal Revenue Allotment 235.09 (million) (2002) IRA-dependency ratio (IRA/total 62.46% financial resources) # of business permits issued or # 7,889 (permits) of business establishment in 2002 How to get there Three airlines operate regularly from Manila to Tacloban City. Buses ply the Manila-Maharlika-Highway route passing Eastern Visayas. Fast ferries and ships facilitate inter-island travel from Cebu, Manila, and other ports of call. The types of available land transportation are cars, vans, jeepneys, tricycles, and buses.

A. BACKGROUND

In the closing years of the 16th century, Tacloban, formerly named “Kankabatok”, comprised a part of Basey Parish in Samar, which was under the political administration of Palo, then a thriving settlement southwest of “Kankabatok”. In 1813, it took its official name of Tacloban, which was derived from the Leneyte-Samarnon word, "tarakloban", meaning a place where the natives catch fish using bamboo traps locally called "taklob". This linguistic origin indicated the importance of fishing as a major livelihood for Tacloban's early settlers.

On February 26, 1830, Tacloban was officially designated the capital of Leyte. There were two significant factors, which led the Spanish Administration to choose Tacloban as the capital of Leyte, and later on to proclaim it as an open port. First, the ideal location of the Tacloban port area on the Pacific Coast was open to ocean-going vessels, and second, it had an active local government. It was on June 12, 1952 when Tacloban was proclaimed one of the chartered cities in the Philippines. This was because of its growing political as well as economic importance in the province of Leyte. Lately, it became the regional center of Eastern Visayas.

B. ECONOMIC PROFILE

Economically, Tacloban is one of the fastest growing cities in the Philippines. It is the site of the region's biggest airport, and has a well-sheltered deep natural harbor. Its major export product is copra. The government has established an economic zone, the Eastern Visayas Regional Growth Center (EVRGC) to take advantage of its large pool of skilled and educated workers. Investors in the EVRGC are given a generous package of tax exemptions and incentives, as well as other privileges, by the national and local governments.

The city is an attractive investment location because it is powered primarily by the large geothermal power plant of Leyte (of which Tacloban is the capital). The Tongonan Geothermal Power Plant is one of the largest in the world, providing hundreds of megawatts of electricity, impervious to fluctuations in oil prices. Water resources are also abundant. Tacloban is also the gateway to the Leyte Industrial Development Estate in Isabel, home of the Philippine Phosphate Fertilizer Plant, the biggest fertilizer factory in Asia, and the Philippine Associated Smelter and Refining Company, the country's biggest copper processing plant.

C. HIGHLIGHTS OF THE CITY’S RANK IN THE 2003 PCCRP (See Annex 34)

Tacloban City ranked 7th overall under the small cities category and it ranked 1st among the Visayan small cities. The city had above average competitiveness in human resources and training (6.51), dynamism of the local economy (6.29), and linkages and accessibility (6.25). On the other hand, the city had average competitiveness in LGU responsiveness (5.75), cost of doing business (5.24), and quality of life (5.18) while it garnered a below average rating in infrastructure (4.85).

With regard to the selected indicators under the responsiveness of LGU, dynamism of local economy and cost of doing business, Tacloban had above average performance in terms of conduciveness of the city’s regulatory environment (6.48), appropriateness of the city’s policies and regulations to business needs (6.11), and the reasonableness of taxes in the city (6.06). In contrast, the city had an average mark on the following indicators: efficient and simple business permit application process, appropriate master development plan including flexible land use plan, transparency of the LGU in its operations, and non-existence of informal fees in the city.

In terms of linkages and accessibility, the city got an above average competitiveness in financial services (6.97) and the level of services provided by national government agencies (6.03) while it had an average score in the availability of support services provided to small and medium businesses. With respect to human resources and training, Tacloban had above average ratings on the availability of IT training programs that equips students with needed IT skills (6.99) and the presence of skilled labor in the locality.

D. FGD ON SELECTED DRIVERS AND ITS INDICATORS (See Annex 35)

Issues raised in the Focus Group Discussion ranged from the issuance of business permits, incentives for pioneer businesses, information dissemination of the city government’s policies to the transparency issues in the LGU’s procurement process. In general, the discussions put particular emphasis on areas for improvement and action agenda under the responsiveness of the local government to the business sector’s needs.

1. In general, the city’s regulatory environment (such as licensing procedures and fees, taxes and other regulatory requirements is conducive to business) (6.48) and the process of securing a business permit is simple and efficient (5.88) (See Annex 36: Tacloban Business Permit Form): The business permit application form of Tacloban City was a one-page document. The document consisted of eighteen national and local government signatories. However, the said requirements may vary according to the nature of business being applied for a permit. According to the business and licensing division of the city hall, establishments that underwent the entire process were usually engaged in the hotel and food businesses.

While the participants expressed that the LGU had implemented one-stop-shop on January and February every year, they cited that the current set-up and procedures in securing business permits were complex and inefficient. They cited that the procedures had irrelevant signatories such as the SSS and BIR Clearances. It was also reported that City Assessor’s Office had inappropriate tax declaration. The participants mentioned that the City Assessor would question their gross income and would require revaluation of their tax declaration. The participants also intimated that the current system of licensing procedures entailed tedious and consistent follow-ups. It was felt that processing could be expedited if the applicant knew somebody from the City Hall. Moreover, it was conveyed that there were no flow charts of procedures in the City Hall and it usually took forty-five days for permits to be issued.

2. Business taxes imposed by the city are reasonable (6.06)

The participants believed that business taxes in the city were generally reasonable. They commended the city government for its effort in rehabilitating the drainage system and for maintaining a peaceful environment. However, it was noted that they were not getting the value of their garbage collection fees. It was conveyed that garbage collection were intermittent hence it needed improvement. Provision of fiscal incentives or tax holidays to pioneer businesses (i.e. aquaculture industry) was also conveyed.

3. Policies and regulations in the city are reflective of business needs (6.11) Although Tacloban City showed above average performance in this indicator, the participants raised concerns on the inconsistency in the enforcement of business taxes (i.e. implementation of the tax policies approved by the Sangunian Panglungsod), inefficient information dissemination of local policies, and the absence of committee hearings before the enactment of local ordinances (i.e. control and regulation of Internet cafes). It was cited that the LGU should give the business sector opportunities to air their views on proposed policies to ensure that ordinances would be beneficial to all sectors.

4. The city’s master development plan is appropriate to business sectors’ needs (5.93) Due to the non-existence of an efficient information dissemination scheme, the participants were unfamiliar with Tacloban’s master development plan. The participants mentioned that they were aware of its existence, but they acknowledged the fact that they were not knowledgeable of its content and strategic thrusts. It was suggested that the LGU had to publish the development plan in its website and local dailies.

5. The city government is honest (5.51) and transparent in its dealings and Informal fees in the city are non-existent (5.05) The participants noted that the local government unit lacked due diligence in selecting winning bidders of projects (i.e. development of the Tacloban City Public Market). A case in point was the development of the public market where it was later found out that the contract was awarded to contractors who were not registered with the Securities and Exchange Commission. It was also mentioned that the procurement process did not take into account that one family owned some companies who bid for the LGU projects. Therefore, these players had monopoly power on the bidding process.

E. RECOMMENDATIONS AND PRIORITIZED ACTION AGENDA (See Annex 37)

The action agenda proposed by the FGD participants to the local government of Tacloban are as follow:

1. Streamlining of business licensing processes. One of the recommendations proposed was the streamlining of the procedures in securing business permits. They noted that the current system had many irrelevant signatories specifically with the national government agencies. They also proposed that the LGU should have visible flowcharts and customized procedures and requirements in accordance with the nature of the applicant’s business. They believed that with this system, processing time of permits would be shortened.

While the LGU had implemented a one-stop-shop action center at the beginning of the year, they also proposed that the LGU should explore the possibility of implementing this system all year round. The participants also noted that the LGU should standardize the processing time of permits and. In addition, they suggested that responsible personnel of the business and licensing division should be made accountable for all delays in the process.

Similarly, the businessmen felt that appropriate training and values re-orientation of government personnel should accompany the streamlining initiatives to ensure the quality of services provided to the public. These initiatives were seen to increase the attractiveness of the local business environment, generate more revenues for the LGU, provide impetus for job creation, and to enhance the overall image and competitiveness of Tacloban.

2. Provision of tax holidays. Aside from enabling the business environment of Tacloban, implementation of the city’s Investment Incentives Code was also the consensus of the body. They believed the Investment Incentives Code would stimulate and attract more locators and entrepreneurs. Moreover, they contended that pioneer businesses, such as aquaculture, needed support from the local government to guarantee its survival.

3. Intensify information dissemination mechanism of the city government. The participants recommended that the city government should improve its information dissemination campaign on LGU policies, regulations and requirements. They cited that the business sector and the residents were not properly informed on the initiatives of the city government. Among the measures suggested included: creating a website where relevant policies could be posted; publishing LGU initiatives in local newspapers and appointing an LGU information officer responsible for disseminating policies to the different sectors of the community.

The perceived benefits of this initiative include better LGU-business sector partnership and increased attractiveness of the local business environment.

4. Improve transparency of LGU procurement process. It was reported that there were unethical practices in the city government’s procurement and bidding process. The participants suggested that the LGU should actively advertise all projects and exercise due diligence in the bidding process to ensure the legitimacy of awarded contracts. Moreover, they suggested that the LGU should implement the e-procurement law and it should review its bidding policies specifically for the construction and I.T. industries.

F. DISCUSSION ON OTHER SELECTED INDICATORS (Annex 38)

The participants believed that the level of services provided by national government agencies was satisfactory. However, they intimated that the Department of Environment and Natural Resources had unclear steps in its processes (i.e. issuance of environmental clearance certificate). Likewise, they expressed that the Department of Agrarian Reform had been inconsistent in its implementation of the land reform program.

In terms of financial services provided for SMEs, the participants perceived that micro enterprises had limited access to financing due to high interest rates. This condition was seen as one of the vital factors that affected the proliferation of micro to medium enterprises in the city. Moreover, it was also mentioned that the city had unclear land-use regulations. They cited that the LGU should strictly enforce the comprehensive land-use plan of the city.

G. RESPONSE OF THE CITY GOVERNMENT OF TACLOBAN (See Annex 37)

The City Treasurer represented the City government of Tacloban and he acknowledged the proposed action agenda constructively. Below are reactions solicited from the local government representative:

1. Streamlining of business licensing processes. It was mentioned that the city government of Tacloban had a one-stop-shop policy in 1999. However, the process was eliminated when the city government implemented the “turn around policy”. The said policy paved the way for the current cumbersome set-up of securing business permit.

It was reported that the city government would revive its one-stop-shop in 2005. It was noted that in the proposed action center for business permit processing, three steps would be implemented namely: assessment, payment, and issuance of permits (APP). The local government was optimistic that the new system would be convenient to local entrepreneurs and it would entice new investments.

2. Provision of tax holidays. It was reported that in 2000, a proposed study was submitted to the Sanggunian Panglusod that would provide tax holidays to local businesses with market capitalization of Php 10,000,000. However, the study did not materialized. The City Treasurer assured the body that he will look into the development of this proposed tax incentives.

3. Intensify information dissemination mechanism of the city government. It was reported that the city government had an effective information dissemination mechanism called “barangayan.” The mechanism enabled LGU personnel to inform constituents with regard to the city government’s programs, projects, and policies.

4. Improve transparency of LGU procurement process. The representatives from the local government of Tacloban acknowledged the fact that indeed, this is an area that should be looked into by the city government.

VIII. ORMOC CITY

Ormoc City at a Glance:

Location Ormoc City is located in the western part of Leyte province. It is about 109 kilometers from Tacloban, Leyte’s provincial capital. The city is bounded on the north by the towns of Mag-ob and Merida, the northeast by Jaro, Pastrana and Danggami and on the east by Mt. Mindiwin. The southern border of the city is shared with the town of Albuera while Ormoc Bay lies to the west. Area The total land area of the city is 46, 430 hectares, which is comprised of 41 urban and 69 rural barangays.

Income Class First Class Population 154, 279 (2000 census) No. of Educational /training Higher Educational Institutions: 12; Vocational Institutions: 3 institutions Primary Crops Rice, sugarcane, coconut, legumes and corn

Total financial resources (2003) 407.94 (million) Total expenditures (2003) 392.64 (million) Internal Revenue Allotment 313.39 (million) (2002) IRA-dependency ratio (IRA/total 76.82% financial resources) # of business permits issued or # 2,738 (permits) of business establishment in 2002 How to get there Three airlines operate regularly from Manila to Tacloban City. Buses ply the Manila-Maharlika-Highway route passing Eastern Visayas. Fast ferries and ships facilitate inter-island travel from Cebu, Manila, and other ports of call.

A. BACKGROUND

The name Ormoc originated from “Ogmok,” and old Visayan term for lowland or depressed plain. The Malayan families were one of the early settlers in Romoc, trading with the Chinese, Javans, and Indonesioans, and developing into a Spanish settlement in the 1500’s.

Originally part of the town of Palompon, Ormoc was declared as a separate district municipality on February 26, 1834. Ormoc City was declared as the first Non-Provincial Capital City of the Philippines on September 4, 1947. The declaration was made by virtue of Republic Act. No 179. The City was then formally inaugurated as a chartered political subdivision on October 20, 1947.

B. ECONOMIC PROFILE

Ormoc City is essentially an agricultural city with a plantation system persisting among sugarcane lands and some rice farms. Recently, Ormoc has been chosen to host the Leyte Provincial Industrial Center (LPIC). The LPIC is envisioned to be the centerpiece of the growth concept for the province and to assist in the complementary development of agriculture and industry. The presence of abundant raw materials makes the city a strategic location for processing and industrial activity.

The city hosts a seaport that can accommodate passenger, light to medium ships and fast craft ferries. It also host one of the three secondary airports in the region. Water is abundant and power is sourced from the Philippine National Oil Company (PNOC) Tongonan Geothermal Field. Major telecommunication companies operate in the city and sixteen financial institutions provide financial and credit services to industrial and other types of business enterprises. Ormoc prides itself with its skilled and competent manpower that are trained in the province’s prestigious learning institutions.

C. HIGHLIGHTS OF THE CITY’S RANK IN THE 2003 PCCRP (See Annex 39)

Ormoc City was ranked 8th overall under the small cities category and it ranked 2nd among the Visayan small cities. The city has an average rating of 5.70 and it is particularly competitive in infrastructure (6.19), human resources and training (5.97), and linkages and accessibility (5.88). Conversely, the city needs to improve the dynamism of its local economy (5.16), cost of doing business (5.38), and the responsiveness of the local government unit (5.54).

Among the selected indicators, Ormoc had an average performance in terms of the conduciveness of the city’s regulatory environment (5.91), appropriateness of the city’s master development plan to business needs (5.90), and the reasonableness of taxes (5.81). On the other hand, the city needed improvement in the following indicators: LGU-led

forums with its constituents; transparency in the city government’s operations; and land- use regulations.

In terms of linkages and accessibility and human resources and training, the city got an average rating in financial services (5.78); availability of support services for small and medium businesses; and the level of services provided by national government agencies (5.42). Ormoc showed above average competitiveness with regard to the availability of skilled labor (6.13) while it garnered an average rating in terms of the availability of I.T. training programs that equip students with needed skills.

D. FGD ON SELECTED DRIVERS AND ITS INDICATORS (See Annex 40)

Generally, the businessmen who participated in the focus group discussion were satisfied with the performance of Mayor Eric Codilla. They emphasized that the current administration is implementing measures to the proposed action agenda of the body. The discussion with the representatives of small and medium enterprises put particular emphasis on areas for improvement on the tax issues and information dissemination mechanism of the local government unit.

1. In general, the city’s regulatory environment (such as licensing procedures and fees, taxes and other regulatory requirements is conducive to business) (6.52) and the process of securing a business permit is simple and efficient (5.57) (See Annex 41: Ormoc Business Permit Form): Securing business permits in Ormoc City was comprised of five steps namely: application, securing clearances, assessment, payment of taxes and fees and issuance of permits. The system had nine signatories and had a maximum processing time of five working days. It was noted that the city government provided flow charts of procedures and checklist of requirements to business applicants and the LGU personnel were very customer-oriented.

While there were no major concerns in the licensing process, it was a general consensus of the body that there were overlapping functions between the LGUs Pollution Control Office and the Department of Environment and Natural Resources. The body suggested that functions had to be devolved to the local government.

2. Business taxes imposed by the city are reasonable (5.81) The participants viewed that business taxes in the city were reasonable. However, they cited that there were inconsistencies on the basis of taxes imposed by the BIR (based on net income) and the city government (based on gross income). It was noted that the city government also lacked an effective tax mapping mechanism and information dissemination campaign. They suggested that the LGU should promote for the Barangay Micro Business Enterprise Law (BMBE) and should inform the public regarding the benefits of BMBE.

3. Policies and regulations in the city are reflective of business needs (5.79)

While Ormoc City got an average rating in the appropriateness of its policies and regulation to business sector’s needs, the businessmen noted that the local government unit had no regular consultation with the various sectors of the society. The participants perceived that for policies to be effective, there is a need to elicit the views of the stakeholders. Hence, they believed that some policies were not reflective of business need. In addition, they also intimated that the city government had no efficient information dissemination mechanism on its policies and ordinances.

4. The city’s master development plan is appropriate to business sectors’ needs (5.90) Due to an inefficient information dissemination scheme by the LGU, the participants were unapprised with the content of Ormoc’s master development plan. They also affirmed that the drafting of the master development plan was not done in consultation with the various sectors of the city. Concern on the existing traffic congestion on the city’s major thoroughfares was also raised in the forum.

5. The city government is honest (5.16) and transparent in its dealings and Informal fees in the city are non-existent (5.76) It was reported that unethical practices in the city were usually encountered with national government agencies. Nevertheless, local entrepreneurs noted that there were instances where some LGU personnel were involved in debauched practices such as the duplication of public market receipts in 2003.

E. RECOMMENDATIONS AND PRIORITIZED ACTION AGENDA (See Annex 42)

To address the issues and concerns that were raised during the FGD, the participants summarized seven action agenda that were considered under the purview of the local government unit of Ormoc.

1. Implementation of an all year round one-stop-shop It was acknowledged that an all year round one-stop-shop for renewal and new applications of business permits would promote more investments and increase the revenue coffers of the local government. However, the participants recognized that this initiative had cost implications for the city government. Hence, they recommended that this proposal be carried out if the city government has enough financial resources to implement the project.

2. Full implementation of Tax Mapping Mechanism The participants saw the importance of an efficient tax mapping mechanism. They contend that by having a survey of taxpayers, the local government unit would have a large tax base.

3. Base taxes on the net income of the establishments While the Bureau of Internal Revenue uses net income as the basis for taxes imposed on business establishments, the local government utilizes gross income as the benchmark for taxes. The participants expressed that the system resulted to inconsistencies that were

burdensome to entrepreneurs. The body recommended that tax declaration should be based on net income.

4. Implementation of an efficient information dissemination mechanism Information dissemination campaign of the local government was perceived to be an area for improvement. The group suggested that the city government has to publish the master development plan in local dailies and to disseminate it to the business community during regular consultation.

5. Review traffic plans It was recommended that traffic plans be reviewed by the LGU with appropriate consultation with the various stakeholders of Ormoc. The perceived benefits for this initiative included increased convenience for motorists, lesser accidents, and possible expansion of business district outside the city proper.

6. Provision of standardized forms for ambulant vendors, public market and terminals With the occurrence of unethical practices in the public market in 2003 (i.e. duplication of receipts issued to vendors), the participants suggested that standardized receipts duly issued by the city hall would minimize, if not abolish, incentives for malpractices by LGU personnel.

7. Support from the LGU to lobby reduction of power rates in Ormoc While Ormoc has one of the country’s geothermal plants, it was reported that its power rates were higher compared to neighboring cities in the Visayas. The participants intimated that power consumption constituted a major chunk of their operations cost. They recommended that the LGU should lobby for a reduction of power rates in order for Ormoc to be a more attractive hub for investments.

F. DISCUSSION ON OTHER SELECTED INDICATORS (Annex 43) The participants felt that support services for micro, small, and medium enterprises were present in the city. However, representatives from the local meat vendors cited that they were never invited to undergo training programs provided by the local government. On the other hand, it was argued that the level of services provided by the national government agencies was satisfactory except for some agencies that have become sources of unethical practices in the city.

Financial services provided for SMEs were said to be adequate but with high interest rate of 2.5% per month. It was also discussed that in order to sustain a skilled manpower supply, initiatives of private sector to build an academic center was deemed necessary.

G. RESPONSE OF THE CITY GOVERNMENT OF ORMOC (See Annex 42)

Honorable Mayor Eric Codilla, together with other city government officials, attended the presentation of action agenda provided by the business sector. Mayor Codilla acknowledged the recommendations and provided his reactions on the issues at hand.

1. Implementation of an all year round one-stop-shop Mayor Codilla assured the body that the LGU would study the possibility of an all year round one-stop-shop and signified commitment that he would consult with the different sectors of the city before implementing the proposed one-stop-shop action center.

2. Full implementation of Tax Mapping Mechanism According to Mayor Codilla, the City Planning Department Office of the LGU had been working on the tax mapping project of Ormoc’s business establishments.

3. Base taxes on the net income of the establishments It was noted that the local government would look into this issue and would conduct a study to validate its feasibility.

4. Implementation of an efficient information dissemination mechanism Mayor Codilla emphasized that his administration would implement an effective information mechanism through regular consultation with stakeholders. He also informed the body that he would activate councils that would elicit and address the different concerns of the locality.

5. Review traffic plans Ormoc’s vehicular congestion problem had to be addressed with a “win-win solution.” It was reported that the LGU had already designated unloading and loading areas to lessen vehicular traffic. Along with this, the city government was said to implement traffic schemes that would cover multi-cabs and tricycles.

6. Provision of standardized forms for ambulant vendors, public market and terminals The local government of Ormoc informed the body that it would conduct further investigation on the issue to come up with the most appropriate measure that would prevent unethical practices at the local level.

8. Support from the LGU to lobby reduction of power rates in Ormoc The city government of Ormoc recognized the sentiments of the business community on this issue. Mayor Codilla informed the body that he envisioned to put an independent power contractor in Ormoc to address the growing concern on power rates. He was optimistic that he would get the support of the public on this issue.

Annex 1 Mr. Alvin L. Diaz Program Manager AIM Policy Center

OVERVIEW OF PCCRP

What is “PCCRP”?

ƒ The project assesses the capacity of cities to provide an environment that nurtures the dynamism of its local enterprises and industries;

ƒ It assesses the general ability of the city to attract investments, entrepreneurs, and uplift the living standards of its residents;

ƒ The project provides a benchmarking process that will aid individual cities in measuring competitiveness. Objectives of PCCRP:

ƒ Motivate local governments to change mentality from service provider to economic and development managers

ƒ Provide feedback mechanism for business community to local governments

ƒ Ranking process functions as tool to pinpoint and analyze good practices in economic management of local governments and build the capacity of all LGUs by applying competitiveness lessons from other LGUs

Based on World Competitiveness Yearbook by IMD

ƒ AIM Policy Center has been the Philippine partner of IMD since 1995

ƒ Annual competitiveness ranking of 60 countries

ƒ IMD Utilizes more than 300 indicators/ criteria from national statistics and executive surveys Drivers of City Competitiveness

DYNAMISM OF LOCAL COST COMPETITIVENESS ECONOMY

LINKAGES and HUMAN RESOURCES ACCESSIBILITY AND TRAINING

RESPONSIVENESS OF LOCAL INFRASTRUCTURE GOVERNMENT

QUALITY OF LIFE

PCCRP

1999 2001 2003 10 Pilot Cities 33 Cities 50 Cities Scale to Assess Urban Competitiveness

ƒ Scores for each indicator are converted into a ten-point scale based on national and global benchmarks

Score Qualitative Meaning 1-2 Very low competitiveness (improve) 3-4 Below average competitiveness(improve) 5 Average competitiveness 6-7 Above average competitiveness(enhance) 8-10 High competitiveness(sustain)

Overall Competitiveness

METRO CITIES

1. Marikina 6.58

2. Pasig 6.36

3. Davao 5.89 Overall Competitiveness

MID-SIZED CITIES

1. Bacolod 6.62

2. San Fernando, Pampanga 6.24

3. Cagayan de Oro 6.18

Overall Competitiveness

SMALL CITIES

1. Koronadal 6.17 2. San Fernando, La Union 6.09 3. Tagaytay 6.05

Annex 2 The Private Sector’s View of the Business Environment for SME in Lapu-Lapu

Focus Group Discussion September 29, 2004

Introducing…

GTZ – a German consultancy with profound knowledge in promoting SME

The Small and Medium Enterprise Development for Sustainable Employment Program (SMEDSEP) of DTI, TESDA and GTZ Deutsche Gesellschaft fuer technische Zusammenarbeit, GTZ

Î international cooperation enterprise for sustainable development Î operating on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) Î operations in more than 130 countries of Africa, Asia, Latin America and Europe

GTZ experience in SME promotion

Î 25 years of experience in project consultancy Î extensive network of national and international partners Î over 100 highly qualified field staff and 20 senior consultants in the “Economic Development and Employment Promotion” division at headquarters Providers of policies Enabling and regulations Environment e.g. DTI, TESDA, Component LGUs, etc. Financial Access to Service Finance Providers

Access to BDS BDS Providers SMEs

HRD Access to Service HRD

SMEDSEP Advisory Team Providers

Clients

SMEDSEP Framework

AIM FOCUS GROUP DISCUSSION Policy (in eight cities in the Visayas) Center Prioritization of Discussion of After the recommendations Presentation/ City selected eight FDG, to improve the Discussion of the Competitiveness indicators from business recommendations GTZ offers the PCCRP with Project (PCCRP) environment by with the LGU SME its service SME packages

Fostering Competitiveness by benchmarking, establishing priority action and implementing it Objective of today’s Focus Group Discussion:

To recommend action to improve the business environment for SME in Lapu-Lapu City

Outline of the discussion:

1. The business environment from the point of view of SME (strengths and weaknesses) 2. Identification of areas of improvement 3. Prioritization of recommendations

Î Presentation/Discussion of the recommendations with the LGU/Mayor Criteria for the prioritization of measures:

- Impact/Benefit (outreach, resource savings, better participation…)

- Feasibility (cost, time, commitment, clear responsibility)

Thank you for participating and sharing your views on how to improve the business environment for SME in Lapu-Lapu City ANNEX 3: TOOL GUIDE FOR THE FGD TABLE 1: IN-DEPTH DISCUSSION

SELECTED INDICATORS Specific Issues Responsible Proposed Agency Actions RESPONSIVENESS OF LGU/DYNAMISM OF LOCAL ECONOMY/COST OF DOING BUSINESS In general, the city's regulatory environment (such as licensing procedures and fees, taxes, and other regulatory requirements) is conducive to business. Securing a business permit is simple and efficient Are the requirements /steps published/posted in strategic locations? (Are the requirements per step identified?) How many steps are involved in securing licenses/permits? How many signatories are required for the issuance of licenses/permits? How long does it take (number of days from submitting application to issuance of license) to have your license /permits issued? Where are the bottlenecks in the licensing procedures? Are the required clearances practical and justifiable? Cite examples. Can you cite areas where the process could be streamlined? What other measures do you think should be implemented to make the regulatory environment more business-friendly? Business taxes imposed by the city are reasonable How many types of fees do you pay? Cite some examples. How much does City Hall charge in terms of business tax? Real property tax? Do you think you get the value for the local business taxes imposed on you? Give examples (in terms of services) Local policies and regulation in the city are reflective of business needs Are you aware of your city’s business policies and regulations? Are the city’s business policies published and/or posted for public’s information? What ordinances should be passed and implemented effectively to facilitate business in your city? Are there policies/ordinances that should be amended? Cite some examples. Does City Hall consider views of the business sector in its local policies? Do you have regular dialogues with the LGU? The city's master development plan is appropriate to business sectors' needs Are you aware of the city’s master development plan? How did you learn about the city’s development plan? Did the LGU consult the various sectors in coming up with its development plan? If yes, does the development plan reflect your views? If no, what does your sector want to include in the plan? The city government is honest and transparent in its dealings. Informal fees (bribes) in the city are non-existent Do you find yourself providing favors to local government employees in order to accomplish something? Do you need to “drop names” or know a person in authority in order to facilitate a service you need? Does the LGU have programs/projects and practices that improve its image of being a bribe- free/corrupt-free city government?

TABLE 2 PROPOSED ACTION IMPACT RESPONSE OF LGU

PROGRAM MANAGEMENT Martina Vahlhaus, Program Manager H 10th Floor, German Development Center, PDCP Bank Centre Building, V.A. Rufino corner L.P. Leviste Streets, Salcedo Village, Makati City ( +63 2 8123165 (local 46) * SMEDSEP c/o GTZ-Office Manila, P.O. Box 2218 MCPO Makati City, Philippines 8 [email protected]

Training Services Christian Widmann H 4th Floor, TESDA Central Office, East Service Road, Taguig, Metro Manila ( +63 2 8938297, 8405035, 8179095 (fax) 8 [email protected]

Business and Financial Services Markus Ehmann, Business Development Services Harald Neimeier, Financial Services H 38 Acacia Street, Lahug, Cebu City, 6000 ( +63 32 4122256, 2344494 (telefax) 8 [email protected]

Deutsche Gesellschaft für Technical Education and Department of Trade GFA Management Technische Zusammenarbeit Skills Development and Industry (GTZ) GmbH Authority