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Spending Our Way
Out of Crisis:
Philippine Responses in
Social Protection
Cielito F. Habito
Ateneo Center for Economic Research & Development
Ateneo de Manila University
Philippines
Overview
 The Backdrop
Persistent Philippine challenges
 Impacts of Financial Crisis (1997-98 &
Now)
Human costs of crisis
 Government Responses
Fiscal Stimulus Package
Social Protection Measures
 Looking Ahead: Imperatives
Meeting the MDGs and Beyond
Persistent Challenges
Non-inclusive Growth
 Narrow: Growth propelled primarily
by a few leading sectors and
geographic areas
 Shallow: Weak linkages to rest of
economy – e.g., low domestic valueadded exports
 Hollow: Jobless growth; povertyincreasing growth
Top-Heavy Growth,
Bottom-Heavy Needs
 Poverty incidence rose from 30% in 2003 to
33% in 2006
 Real per capita income fell 10% nationally,
and fell in 50 provinces between 2003 and
2006 (PHDR 2008/2009)
 Basic education enrollment rates dropped
in 75% of provinces between 2002 & 2004
 Wide disparities in life expectancy across
provinces: from low of 53.4 (Tawi-tawi) to
high of 74.6 (La Union)
Asian Financial Crisis, 1997-98
Human Costs
Increased poverty
 Higher unemployment
 Increased school drop-outs
 Increased hunger, malnutrition and sickness
Reduced social investment
 Budget cuts on social services
 Public investments in HD
 Higher cost/reduced private provision of
social services
Asian Financial Crisis, 1997-98
Human Costs
Damaged social capital
• Rise in




Crime incidence
Domestic violence
Child abuse
Street children
• Breakdown in community cohesion
International Response to the
Current Global Crisis
• Liquidity & budget support (for
banks)
• Support for social safety nets
• Monetary easing
• Fiscal stimulus (vs. 1997 prescription!)
• Asia: “Growth rebalancing”
Current Crisis Challenge:
• Economic slowdown increased
unemployment, worsened job quality
• Poverty incidence worsened further;
raises MDG financing gap
• Measures for short-run stabilization
could take a toll on human welfare
and long-run sustainability (financial
stability vs. sustainable human
development: tradeoff or win-win?)
How Have Filipino Households
Coped? (CBMS Survey 2009)
• Financial: Borrowed money; saved
money; used savings; pawned/sold
assets; defaulted on loans
• Education: Transferred child from private
to public school; withdrew child from
school; used 2nd hand books, uniforms
• Health: Shift to alternative medicine;
stop buying/reduce intake of medicine;
shift to govt health centers/ hospitals; self
medication
Philippine Economy: Dramatic Slowdown,
But Spared from Recession
9.0
8.0
7.0
6.0
5.0
4.0
3.0
GDP Growth Rate,
Q1-04 to Q4-09 (%)
2.0
1.0
0.0
Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q404 04 04 04 05 05 05 05 06 06 06 06 07 07 07 07 08 08 08 08 09 09 09 09
Where Are the New Jobs ?
New Jobs by Sector
(Thousands)
Agriculture
Agri, Hunting & For
Fishery
Industry
Manufacturing
Mining
Utilities
Construction
Services
Jan
2009
61
38
23
-122
-122
2
2
-39
626
April
2009
408
385
28
86
-16
7
6
80
964
July
2009
-177
-214
38
136
-28
39
4
120
921
Oct
2009
-196
-271
75
68
44
5
39
15
1,142
Ave
2009
24
-16
41
42
-30
13
13
44
913
Total New Jobs
565
1,457
880
1,014
979
Where Are The New Services
Sector Jobs?
Services Sector Jobs
626
964
921
1,142
913
W&R Trade
Priv HH Emp
Real Est&Bus Act
Public Admin
Hotels & Rest
Other Services
Transp-Stor-Comm
Health & SW
Education
Finance
Intl Orgs
312
29
118
27
16
14
10
41
87
-28
0
346
139
76
108
41
71
42
51
45
16
0
104
263
132
46
97
57
173
46
99
10
0
356
189
98
82
96
57
142
11
66
10
0
279
155
106
66
63
50
92
37
74
2
0
Domestic Economy (GDP):
Government spends its way out
of recession
•Government consumption & construction up 8.5% & 15.7% respectively
•Consumption growth moderates as
consumers pull back
but…
•Total investment spending dropped 10%
even with brisk government construction
•Exports fell dramatically (-15%)
Govt Spending Dominates Growth
Amid Declining Investment
2008
Q4
FY
Q1
Personal Consn Exp
5.0
4.5
Govt Consumption
2.6
4.3
Capital Formation
Of which:
Construction
Public
Private
Durable Eqpt
Br Stck & Orch Dev
-13.1
4.2
8.2
3.2
17.8
-7.9
1.2
6.3
-0.7
11.4
1.7
-1.6
6.7
8.9
11.5 27.7
4.3
-10.1
-18.5 -19.7
1.0
-5.6
Exports
Imports
-11.5
5.0
0.0
-1.1
-14.7 -18.1 -13.6 -13.0 -10.0 -14.2
-20.6 -2.2
0.2
0.1
-2.5 -5.8
Indicator
Q2
2009
Q3
Q3
Q4
FY
1.3
5.4
4.0
3.2
5.1
3.8
4.5
9.7
7.9
8.1
12.1
8.5
-15.1 -10.3 -11.3 -12.1 -0.8
-9.9
1.7
22.2
-9.7
-5.7
1.4
1.7
21.8
-9.4
-4.2
1.5
-2.9
-7.2
-0.1
-0.1
-2.0
5.8
15.7
-4.2
-11.4
-1.4
Digression: The Multiplier Process
1
2
3
4
5
6
7
etc
1,000,000
800,000
640,000
512,000
409,600
327,680
262,144
Savings
Incomes
(20%)
1,000,000
200,000
800,000
160,000
640,000
128,000=
Multiplier
512,000
102,400
1/saving
rate
409,600
81,920
=5
327,680= 1/.2
65,536
262,144
52,429
TOTAL
5,000,000
5,000,000 1,000,000
Round
Spending
The Multiplier Effect is stronger
when:
 Marginal saving rate is lower
 Import content of the
stimulated economic activities
is lower (= domestic content
higher)
Social Sector Spending:
The Best Stimulus
• Labor intensive
 generates more jobs (broader benefits)
 money circulates more among lowerincome, lower-saving individuals
• Lower import content than most other
government projects
 money stays in domestic economy
 generates more tax revenues
• Uplifts people’s lives
Habito 2009 (ADBI Study)*:
• For every one percent of GDP spent on
education and health, poverty elasticity of
growth improves by 0.2 percent
• RP social expenditures (as % of GDP) in 20002007 less than Malaysia, Singapore, Thailand, Sri
Lanka & Nepal; higher than Bangladesh,
Cambodia & Indonesia
• Philippines had perverse experience of rising
poverty (30%  33% from 2003-2006) at a time
GDP reportedly grew the fastest in decades.
“Patterns of Inclusive Growth in Developing Asia: Insights from an
Enhanced Growth-Poverty Elasticity Analysis,” ADBI Working Paper.
Philippine Balancing Act:
• Fiscal stimulus subject to fiscal
sustainability (2009 saw record fiscal
deficit of PhP300bn; return of ‘debt
penalty’?)
• Need for emphasis on social &
environmental expenditures,
especially in light of “past sins”
Govt Responses for Social
Protection: Components
• Fiscal Stimulus: Economic Resiliency Plan
(ERP)
• Conditional Cash Transfers: Pantawid
Pamilyang Pilipino Program (CCT/4Ps)
• Comprehensive Livelihood and Emergency
Employment Program (CLEEP)
• PhilHealth Indigent Program
• DOH Hospital Assistance Program
• Self-Employment Assistance-Kaunlaran
• National Household Targeting System for
Poverty Reduction (NHTS-PR)
RP Fiscal Stimulus Package
Economic Resiliency Plan (PhP330B)
• P160B for hiring more teachers, policemen, soldiers & doctors; repair/ rehab
govt buildings; supplies and equipment
e.g. patrol cars, ambulances; agriculture
support
• P100B for investments by SSS, GSIS in PPP
infra projects
• P30B in additional SSS, GSIS & PH benefits
• P40B in income tax cuts
CCT/4Ps
Benefits & Budgetary Cost
• Beneficiary household receives
PhP500(USD11)/mo. for health & nutrition +
PhP300(USD6.50)/mo. for education expenses
for a maximum of 3 children
• Eligible household with 3 children receives up to
PhP1400(USD30)/mo. or PhP15,000(USD326)/year
• Allotted PhP5 B(USD109M) in 2008 (321,000
beneficiaries); PhP10 B (USD218M) in 2009
(targeted beneficiaries >doubled to 700,000)
CCT/4Ps
Grant Conditions
• Pregnant women must get pre/post-natal care;
must be attended by professional at childbirth
• Parents/guardians attend parenting classes
• Children 0-5 yrs must receive regular preventive
health checkups & vaccinations
• Children 3-5 yrs must attend preschool at least
85% of the time
• Children 6 -14 yrs must enroll in elementary/HS and
attend at least 85% of the time
• Children 6 -14 must avail of deworming pills every
5 months
• Compliance monitored by the DSWD
CLEEP
Features
• Provides emergency employment, training &
funding/supervising livelihood projects for the
poor, returning expatriates, export industry
workers, & out-of-school youth
• Allotted PhP13.7 B(USD298M) in 2009
• Administered by National Anti-Poverty
Commission (NAPC)
• Participating Agencies: DA, DepEd, DENR, DFA,
DOH
CLEEP
Contributed Programs
• DA: Gulayan ng Masa, ISLA for Fisherfolks
• DepEd: 1,500 OSYs as school utility workers;
12,300 OSYs trained for livelihood; Negosyong
Pang-Eskuwela (school co-op enterprises)
• DENR: 111,536 “green collar” workers for Upland
Devt Pgm, Bantay Gubat; Jatropha planting,
tricycle LPG retrofitting, etc.
• DFA: FAME (Financial Assistance & Microfinance
for Expatriates) – for laid-off OFWs
• DOH: Botika ng Bayan, Nurses Assigned in Rural
Service (NARS)
Health Assistance
PhilHealth Indigent Program
• Goal: Universal PhilHealth coverage
• To cover 4.7 million indigent families
• Government shoulders monthly
contribution of qualified family
beneficiaries
• Budgetary cost: PhP1 billion
DOH Hospital Assistance Program
• PhP1.97B to upgrade manpower &
facilities in government hospitals
National Household Targeting
System (NHTS-PR)
Features
• Identify beneficiaries for social protection pgms;
avoid past record of 62% leakage and 80%
undercoverage of these programs
• Nationwide targeting system costs PhP1.7B
(PhP1B from DBM, PhP0.7B from PSF)
• Implemented by DSWD, NSO, NSCB, and NEDA
• Uses proxy-based measures to estimate
household income and classify them as nonpoor, poor, & food poor
Fiscal Implications
• Total cost of package = PhP351.7B (USD7.64B),
or about 23% of PhP1.5T 2009 budget (Note: Only
PhP181.7B(USD3.95B) from national budget)
• But only PhP38.4B (2.6%) for Social Protection
• Social Services share of Total Expenditures up
from 28% in 2008 to 30.6% in 2009, 31.1% in 2010
• Budget allocation for “Social Security, Welfare,
and Employment” reportedly rose from 4.5
percent in 2007, to 5.7 percent in 2008, and
further to 6.1 percent in 2009
MDG Resource Gaps (Manasan 2007)
Impact of Slowdown
• 2007-2010





Educ
Health
WatSan
Poverty Red
TOTAL
• 2010-2015





Educ
Health
WatSan
Poverty Redn
TOTAL
Orig Scenario
Low Growth
- PhP166B
- PhP33.9B
- PhP1.35B
- PhP208.5B
- PhP409.5B





PhP190B
PhP36.4B
PhP1.5B
PhP220B
– PhP349B
– PhP83.6B
- PhP1.92B
- PhP343.6
- PhP778B





PhP506.3
PhP94.8B
PhP2.7B
PhP417.8BB
PhP447.8B
PhP1.02T
What Needs To Be Done?

Boost levels of social sector spending
― Improve tax administration
― Negotiated debt relief
― Encourage private sector funding: Tax credits
for poverty-reducing CSR?

Raise quality of social sector spending
― Do proper targeting (Apply NHTS-PR)
― Invest in Communication & Behavior Change
― Participatory budget allocation: e.g., widen
membership in Local School Boards
― Complement CCT on supply side
― Limit NG to “steering”, let LGUs “row”
Maraming Salamat Po
Thank You
[email protected]