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©2003 Philippine Urban Forum

Home > Ang Bahanggunihanan > State of the Philippine Urban System

State of the Philippine Urban System

Demographic and Socio-Economic Trends and Issues

Population growth and urbanization

The Philippines has one of the highest population growth rates in the world at an average of 2.36% observed in the last eight years. Of the total population of 76 million, 40 million (52%) live in urban areas (52%).1,2 By 2010, urban population is projected to increase to 56 million (60%).

Makeshift houses along the riverbanks

Rural population continues to migrate to urban areas, primarily to search for better economic opportunities. Together with a rapidly burgeoning population are growing urbanization, increasing urban poverty and worsening economic inequity. The unabated growth in urban population can exert environmental, economic, and political pressures on urban systems, and the institutions that are responsible for them. Social services and air and water quality in most urban areas are already below the desired levels. Provision of education, health, livelihood, housing, transportation, and other social and economic infrastructure requirements of the 56 million people forecast to live in urban areas by 2010 will become difficult.

Urban poverty

After a decade of declining poverty rates, the Philippines saw portion of households living below the poverty line rise again as an offshoot of the 1997 Asian economic crisis. The urban poverty rate fell from 24.0% to 17.9% between 1994 and 1997, then, rose again slightly to 20.4% in 2000.3

The geographical distribution of urban poverty reflects stark inequities in spatial and economic development. In 2000 9.7% of families in Metro Manila lived in poverty as compared with 39.5% and 63.9% of urban populations in Central Mindanao and Autonomous Region of Muslim Mindanao, respectively (NSO). In Metro Manila, more than 50% of its 11 million population live in slums or depressed areas.4

Poverty in the Philippine urban areas is evolving into a problem as the unabated growth in population and the influx of rural dwellers to urban areas put pressure on the ability of cities to accommodate their social and economic needs.

Inequity in social and economic development

The dominance of Metro Manila and the underdevelopment of cities in the regions create several economic inefficiencies and social inequities as manifested in unequal access to economic opportunities, global markets and market information, disparities in the provision of infrastructure and inequalities in income.

While many government programs and incentives have been put in placed to encourage the growth and development of regional cities, the desired distributive objectives have not been realized. Thus, there is a need to closely examine the impact of government institutions, policies and resource allocations on the locational choices of business and population.

Temporary shelters commonly built in many vacant lots and spaces in city streets

Housing and Human Settlements

The National Shelter Program estimates the backlog of housing need in urban areas at 2.5 million in 2004, of which 44% of the need will be in the NCR.5 Other data that include slum housing in the backlog, estimates the need at 4.5 million.

The problem of housing is more a problem of supply than affordability.6 More than one-third of the urban population lives in slum areas and half of the 1.4 million urban poor households reside in Metro Manila.7 Quite often, access to services in these settlements is inadequate.

Between 1990 and 1995, resettlement programs became widespread. While the magnitude of resettlement programs rose dramatically from 1,972 in 1990 to 12,369 in 1995,8 the number of slum upgrading, sites and services, and housing construction programs by the National Housing Authority (NHA) fell precipitously in the same period. Recently, shelter program targets are aimed at increasing both public and private sector production of low and middle-income housing.9

Across the NCR, Bicol, Visayas and Mindanao regions, POs and LGUs commonly raised the following concerns and recommendations:

  1. Need for an enabling environment with clear and supportive regulatory frameworks and equitable legal systems for security of tenure
    • While CMP proved to be a successful low-cost housing program of the government in terms of its high repayment turnout, the taxes being imposed on the group of borrowers is a hindrance to the program. Thus, a city ordinance that will exempt CMP borrowers from paying transfer tax can be an incentive among POs to organize into self-help organizations and avail of the program.
    • Land conversion takes time and costs a lot of money; the government can exempt socialized housing beneficiaries from paying the conversion fee
    • Passage of a regulatory ordinance is needed to prevent landowners from selling beyond the approved zonal valuation
    • Many LGUs do not have an approved Comprehensive Land Use Plans thus, resulting in the absence of areas identified for socialized housing
    • Lack of understanding among socialized housing beneficiaries, NGO originators and government officials of the social development goals and procedures mandated by the 1992 Urban Development and Housing Act (UDHA)

  2. Need for functional and efficient systems and structures

    Express lane processing for CMP documentary requirements

    The guidelines for processing should be clear and the government should make it easier for the POs to process documents. This serves as an incentive for POs to organize since they get discouraged to proceed with their applications when processing takes long.

    While CMP appears to be the most affordable option for the poor sector, the centralized processing of documents (e.g. Purchase Commitment Line and Letter of Guarantee) limited funding, complicated procedures, lack of appreciation among government regulatory agencies and petty corruption at different levels of the bureaucracy restrain the program in achieving a wider impact.

    Creation of Local Housing Board (LHB)

    At present, the Urban Poor Affairs Office caters to the needs of the POs but they have many other concerns apart from housing. The creation of a Local Housing Board will help the POs process their documents.

    Streamlined Zoning Requirements

    Additional requirements from the zoning board should be kept at a minimum because many urban poor groups have difficulty completing the processing of their documents. Any additional requirements must always be assessed vis-à-vis their applicability and practicality.

  3. Need to generate adequate resources in implementing Secure Tenure programs
  4. Proper Resource Allocation and Complementation

    Resources are always considered to be limited and thus, identifying the potential universe and magnitude of resources that can be tapped from the national government, local governments, private sector and donor community for urban development needs should be seriously looked into. The national budget has been criticized for its lack of urban development considerations in determining its priorities and distribution of funds. Hence, synchronizing and complementing resource infusions to urban development concerns should be done. Interim financing for CMP projects

    It is a reality that the processing of CMP applications usually takes time and hence, landowners hesitate to go on with the negotiation and instead sell their property to other buyers. In this case, the LGUs can help in setting up a revolving fund that will allow POs to immediately close the sale of an available property.

    The foreclosed properties of government banks can also be awarded to housing associations without the necessity of a bidding process.

  5. Need to develop capacities of NGAs, LGUs, NGOs, and POs for effective delivery of housing services
    • Provision of land development and basic services in CMP communities.
    • In view of the low capacity of housing associations to follow up or process their documents, there is a need for a technical support from housing and related agencies
    • The low financial capacity of NGOs, who are usually the originators in CMP, limits their ability to serve the POs. CMP processing can be made to adjust to such concerns.
    • Lack of technical assistance and capability among the POs in tackling the issues on settlements.

    While there has been a considerable improvement in socialized housing starting in year 2000, still much has to be desired in terms of increasing the volume of new housing constructions as well as in making amortization rates affordable (PHILSSA, 2000).

"Urbanization and globalization are dominant trends that are changing the parameters of sustainable development. As three-fifths of the world's population is soon to live in urban areas, there is a fundamental need to change the ways cities functioned, made decisions, allocated resources and established institutions. That is why UN Habitat continues to focus on “Sustainable Urbanization” as a key to realizing Sustainable Development."

Executive Director
UN Habitat

Urban Governance

The country has over 1,608 towns and cities. In the last few years, there have been a significant number of conversions of municipalities into cities.10 In 2000 alone, 16 new cities were created. During the first half of 2001, 15 municipalities more were converted, bringing the total number of Philippine cities to 115 as of April 2001.11 The population threshold to become a city is 150,000. However, if an urban area is defined as localities having populations exceeding 50,000, there will be more than 200 urban areas in the Philippines. Recent studies estimate that there may be as many as 600 urban areas by 2020.12

One critical factor to minimize the costs of urbanization is good urban governance. It is therefore important to look into the current issues concerning the state of urban governance in the country in light of these trends and projections:

  1. Need to improve capacities to manage urban development and reduce poverty

    Good urban governance can help alleviate poverty by improving access to services and increasing economic opportunities. Managing urban development and reducing poverty require improving the capacities of government both at the national and local level. National government must devolve more functions to local governments and improve its capacity to provide consistent and relevant policies.

    Local governments, on the other hand, need to improve their institutional capacities in the planning and management of the following areas: land use, urban infrastructure, urban economy, housing and community development, social services, development finance, management of the other sectors and participatory governance.

  2. Need to strengthen participation in urban governance

    Institutionalization and strengthening of mechanisms for people's participation in governance in both national and local levels is an important element of good urban governance. The PUF as a forum for discussion, debate, consensus and sharing among government, business and civil society regarding urban issues is a critical step towards a stronger participatory governance.

    At the local level, people's organizations should develop their capacities to meaningfully contribute to various local development processes. On the other hand, local governments must strengthen their respective avenues for participation such as the various local special bodies.

  3. Need to increase budget for development projects

    Budgetary constraints at the national and local levels greatly affect expenditure for development programs or projects. A large chunk of LGU expenditures goes to financing operational and overhead expenses, leaving quite limited funding for development projects that could have improved the quality of life of their constituents.

    Although some city governments have been successful in investment planning, financial management and revenue generation, most LGUs need to improve their performance in these areas.

  4. Need to forge stronger partnership between government and non-government institutions

    The devolution process has demonstrated the strength and the strategic advantage of partnership between LGU and civil society in addressing concerns on public safety, food security, housing, education and job creation, as seen in the experience of cities that became recipient of the Galing Pook Award for best practices in local governance.

    However, development efforts are still generally fragmented. Hence, a stronger partnership between government and the civil society towards achieving development targets must be forged.

  5. Gaps in urban-local governance13

    Based on a review of the first Local Governance Congress and the submitted city action plans, the following common issues were raised by local government units:

    • Need for a common consensus on issues pertaining to devolution
    • Need to harmonize LGC with other laws (e.g. AFMA, IPRA, UDHA, NIPAS etc.)
    • Improve the current IRA system in accordance with the recommendations articulated in the numerous LGC review and consultations
    • Need to develop local perspectives on good governance with poverty reduction bias
    • Need to institutionalize urban management through capability building programs
    • Need to establish alternative and creative ways of financing poverty reduction programs at the local government levels
    • Need to strengthen existing participatory structures and processes

    In general, the cities need a lot of improvement in the area of development planning. Most cities did not have policies and guidelines in planning and they lack a reliable databank system. In this case, cities lack a rational basis in formulating development strategies and programs. Such inadequacy thus, mirrors the need to enhance the planning skills of local staff.14

    Cities face a myriad of problems such as environmental degradation, declining literacy rates, rising unemployment rates, lack of low cost housing units and other social services like protective services, access to potable water and electricity. These impel city governments and their civil society partners to rethink their development strategies in dealing with urban problems; these include the need to prioritize the allocation of limited resources, innovate ways to mobilize resources, reengineer local bureaucracies and install the necessary infrastructure. In addressing these urban concerns, operationalizing the framework of good urban governance and strengthening collaboration with other stakeholders is truly a challenge among cities.

HUDCC Chairperson Mike Defensor at a site inspection activity in Metro Manila

Vision for the Philippine Urban System

The vision for the Philippine urban system, as outlined in the National Urban Development and Housing Framework, is to develop an urban structure that facilitates economic production, develops and strengthens local comparative advantages and provides all urban residents with an improving quality of life.15

To this end, this national action agenda attempts to provide a comprehensive agenda of action that is geared towards instituting legal, institutional and financial reforms as well as capacity building measures for both government and non-government sectors in order to pave the way for sustainable human settlements. As a response to the increasingly urbanizing Philippine cities, it highlights strategic interventions that are multi-level, multi-sectoral and grounded at the local level.

Envisioned housing projects in the coming years to provide secure tenure for the poor


1. Source: ADB (April 1999), p. 1; and The World Bank, Urban Sector Country Assistance Strategy (CAS), Manila: World Bank, 2001a (Final Draft), p.1.
2. Overseas Philippines workers, numbering at least 3 million are dominantly urban in origin and current place of work, indicating an even higher real rate of urbanization in Philippines society. Most overseas workers are from the Manila EUR (the NCR plus Regions III and IV), contributing 4.925 billion US dollars to the economy, mainly to the Manila EUR, in 1998.
3. Data on size of overseas population from: Mallari, R., "What a Performance," Asian Business, August 2001, p.50.
4. Based on Philippine official data, as cited in NSCB's Philippine Poverty Statistics, 2000a, p.2; and in World Bank's Urban Sector CAS, 2001, p.2. According to the World Bank's Philippines Poverty Assessment, which uses a lower poverty line, the 1997 urban poverty incidence was only 11.9%. See: The World Bank, Philippines Poverty Assessment, Vol. I: Main Report, The World Bank, 2001b, p. 2. Manila Standard, Section B, p16, Oct. 15, 2002.
5. ADB (April 1999), Appendix E, Table 4, p. A-20.
6. NLUC (2000), p. 57.
7. World Bank (2001a), p. 3.
8. NSO (2001), Table 14.18, p. 625.
9. ADB (April 1999), Appendix E, Table 5, p. A-21.
10. National Land Use Committee (NLUC), National Framework for Physical Planning: 2001-2030, Manila: NEDA, October 2000, p. 36.
11. To become a city, a municipality must have a population of at least 150,000 and an annual income of PhP 20 million for two consecutive years. To qualify as a highly urbanized city, annual income must be PhP 50 million for two successive years. Source of data on Philippine cities: NSO (2001), p. 183.
12. The World Bank, 2001a, p. 1.
13. These identified gaps in Philippine urban-local governance were further substantiated by the results of the Good Urban Governance National Framework Localization Workshop and these results were then used as guides for developing a model city action plan for poverty eradication. Moreover, the results of the State of Cities Report otherwise known as the Local Productivity and Performance Measurement System undertaken by the Department of the Interior and Local Government and the National College of Public Administration and Governance showed similar results.
14. BLGS-DILG and UP-NCPAG, (2002), A report on the state of cities based on the local productivity and performance measurement system, p94.
15. National Urban Development and Housing Framework, 1999-2004, HUDCC, p7.