Celia M. Reyes
Senior Research Fellow
Philippine Institute for Development Studies
Regional Forum: Journey to and From the Middle Income Status- The
Challenges for Public Sector Managers
April 22-25, 2015, Shanghai, PRC
Challenges for middle
income countries
 Avoiding middle income trap
 Achieving inclusive growth – all benefit from and
participate in the growth process
Track record of the Philippines
 Relatively higher economic growth in recent years
 Slow reduction in poverty
 Lower inequality in urban areas but small increase in
inequality in the rural areas
 “Jobless” growth
Recent economic growth has been
remarkable
Gross Domestic Product, Growth Rates, 1990-2013
(at constant 2000 prices)
8.0
7.6
6.7
5.2
4.4
In Percent
6.6
5.8
6.0
4.0
6.8
3.0
5.0
4.4
4.7
5.2
4.8
4.2
3.6
3.1
3.6
2.9
2.1
2.0
0.0
1.1
0.3
-0.6
-2.0
Source of basic data: NIA, NSCB
-0.6
7.2
Yet slow progress in poverty reduction
40
Poverty incidence among population (%), 1991-2012
35
30
34.4
25
26.6
26.3
25.2
2006
2009
2012
20
15
10
5
0
1991
Source: NSCB
GINI Coefficient, Philippines, by Areas,
1985-2009
0.55
0.5183
0.53
0.5045
0.51
0.49 0.4803
0.47
0.45
0.4871
0.4735
0.4850
0.4736
0.43
0.39
0.4190
0.3941
0.3942
1991
1994
0.4743
0.4782
0.4602
0.41
0.4837
0.4255
0.4513
0.4496
0.4462
0.4288
0.4296
0.4278
2006
2009
0.37
0.35
1997
All Areas
2000
Urban
2003
Rural
Source: Celia M. Reyes, Aubrey D. Tabuga, Ronina D. Asis and Maria Blesila G. Datu, 2012, Poverty and Agriculture in the
Philippines: Trends in Income Poverty and Distribution (PIDS DP 2012-09)
Unemployment Rate, 2005-2012
9
8
7
6
5
4
3
2
1
0
7.8
2005
8.0
2006
7.3
7.4
7.5
7.4
2007
2008
2009
2010
7.0
7.0
2011
2012
Note: Data refers to average of January, April, July and October rates except for 2005 which is the average of April, July and
October rates.
Source: Yearbook of Labor and Statistics: http://www.bles.dole.gov.ph/ (downloaded 13June2013)
Underemployment rate, 2005-2012
25.0
21.0
22.6
20.0
20.1
19.3
19.1
18.8
19.3
19.3
2007
2008
2009
2010
2011
2012
15.0
10.0
5.0
0.0
2005
2006
Note: Data refers to average of January, April, July and October rates except for 2005 which is the average of April, July and
October rates.
Source: Yearbook of Labor and Statistics: http://www.bles.dole.gov.ph/ (downloaded 13June2013)
Constraints to inclusive
growth include
 Weak investment
 Inadequate infrastructure
 Governance issues
 Human capital
Investment to GDP Ratio ( in percent)
30.0
25.0
20.0
15.0
10.0
Source of basic data: National Income Accounts, NSCB
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
0.0
1990
5.0
Infrastructure Ranking of Selected
Countries (out of 144), 2012-2013
Philippines
Indonesia
Malaysia
Thailand
Viet Nam
Overall
98
92
29
49
119
Road
87
90
27
39
120
Source: World Competitiveness Report 2012-2013.
Railway
94
51
17
65
68
Port
120
104
21
56
113
Air
112
89
24
33
94
Electricity Rates for General and Business
Use in Selected ASEAN Cities (2012)
City
Manila
Cebu
Singapore
Phnom Penh
Yangon
Bangkok
Kuala Lumpur
Danang
Ho Chi Minh
Hanoi
Jakarta
Vientiane
Batam
Country
Philippines
Philippines
Singapore
Cambodia
Myanmar
Thailand
Malaysia
Vietnam
Vietnam
Vietnam
Indonesia
Lao PDR
Indonesia
Electricity Rate for
General Use
(US$/kWh) *
0.25
0.24
0.23
0.16
0.12
0.11
0.11
0.08
0.08
0.08
0.08
0.07
0.06
Average Electricity Rate
for Business Use
(US$/kWh) **
0.15
0.23
0.2176
0.216
0.12
0.14
0.09
0.085
0.085
0.085
0.08
0.0685
0.11
Table taken from: Navarro, A. (2013) Finding solutions to the problem of high electricity rates in the Philippines.
Philippine Institute for Development Studies Discussion Paper (forthcoming)
Proportion of children attending school, by
income quintile and by age group, 2011
100
90
85.1
98.8
97.7
97.1
94.9
90.5
92.6
96.1
99.2
98.7
85.9
80
67.3
70
60
50
6 to 11
55.3
12 to 15
47.9
16 to 18
42.6
40
30
20
10
0
Poorest
2
Basic source of data: APIS 2011, NSO.
3
4
Richest
In Percent
Percentage distribution of workers by highest
educational attainment and by income quintile, 2009
50
45
40
35
30
25
20
15
10
5
0
Poorest
Second
Third
Fourth
Richest
No formal schooling
Some elementary graduate
Elementary graduate
Some high school
High school graduate
Some College
At least college graduate
Basic source of data: Family Income and Expenditure Survey 2009, NSO.
Distribution of workers who have elementary
education by sector of employment, 2011
Public
Education Health & Other community,
social & personal
administration &
0.1%
social
service activities
defense
work
1.7%
1.7%
Real estate, renting 0.1%
& business activities
Financial 0.5%
intermediation
0.0%
Transport, storage
& communications
5.5%
Hotels &
restaurants
1.1%
Agriculture, hunting
& forestry
50.5%
Wholesale & retail
trade
13.5%
Construction
5.9%
Electricity, gas &
water supply
0.1%
Manufacturing
5.7%
Mining & quarrying
0.8%
Private household
activities
5.5%
Fishing
7.3%
Source of basic data: LFS (July 2011), NSO
Average daily wage of wage/salary
workers by educational attainment, 2011
Php 1200
1,137
1000
800
598
600
400
200
335
141
169
186
202
246
0
No grade
Elementary Elementary High school High school
College
completed undergraduate graduate undergraduate graduate undergraduate
College
graduate
Postgraduate
Source: Celia Reyes, Aubrey Tabuga, Christian Mina and Ronina Asis, 2013. Regional Integration, Inclusive Growth and
Poverty: Enhancing Employment Opportunities for the Poor (PIDS DP 2013-10)
What can be done to
promote inclusive growth?
 Poor to Benefit from growth
 Redistributive policies and programs
 Poor to Participate in the growth process
 Social Protection programs such as Conditional cash
transfer program or the Pantawid Pamilya Pilipino
Program (4Ps)
Features of the 4Ps
 Objectives:
 Social Assistance – provide cash assistance to alleviate
immediate needs (short-term poverty alleviation)
 Social Development – to break the intergenerational
cycle of poverty through investments in human
capital
Features of the 4Ps
 Target families: Extremely poor families with
children aged 0 to 14
 Components: Health and Education
 Health: P6,000 annually (P500 per month)/family
 Education: P3,000/child/school year
(P300/child/month for 10 months); up to a max. of 3
children in each family
Features of the 4Ps
 Conditionalities:
o Pregnant women must avail of pre- and post-natal care and
be attended during childbirth by a trained health
professional
o Parents must attend family development sessions
o 0-5 year old children must receive regular preventive
health check-ups and vaccines
o 3-5 year old children must attend day care or preschool
classes at least 85% of the time
o 6-14 year old children must enrol in elementary or high
school and must attend at least 85% of the time
o 6-14 years old children must receive de-worming pills twice
a year
Features of the 4Ps: Targeting
Scheme
 Criteria for selection of beneficiaries:
 Residents of poorest municipalities;
 Households whose economic condition is equal to or
below the provincial poverty threshold;
 Households that have children 0-14 years old and/or
have a pregnant woman at the time of assessment; and
 Households that agree to meet conditions specified in
the program.
Features of the 4Ps: Targeting
Scheme
 The DSWD selects the beneficiaries through the National
Household Targeting System for Poverty Reduction (NHTS-PR).
 The benificiaries are selected from the poorest municipalities
based on the 2003 Small Area Estimates of poverty incidence
generated by the NSCB.
 Municipalities with poverty incidence higher than or equal to 50%
are saturated – all families are interviewed and assessed for
eligibility.
 In municipalities where the poverty incidence is less that 50%,
“pockets of poverty” are identifies by the municipal social welfare
and development officer and then families in these pockets are
interviewed and assessed for eligibility. Families residing outside
these pockets of poverty are excluded in the assessment. This leads
to significant exclusion.
 The poorest households in the selected municipalities are
identified through a Proxy-Means Test.
4Ps has been scaled up too rapidly
6.000
5.2
5.000
3.8
4.000
3.1
3.000
2.3
2.000
1.000
0.000
0.006
2007
0.34
2008
Source of basic data: Reyes, et al (2013)
0.63
2009
1.0
2010
2011
2012
2013
2014
4Ps Targeting: Leakage
 Based on the APIS 2011, 4Ps beneficiaries comprise 6.4%
of the total number of families. Over 82% of all 4Ps
beneficiaries are rural families.
 Only 70.81% of the 4Ps beneficiaries in 2011 are income
poor (after taking out the cash grant).
 Among the 4Ps beneficiaries who are poor, only 7.2%
became non-poor when given cash transfers.
 NHTS-PR identified 5.2 million poor families, way above the
estimated 3.9 million poor families in 2009. Including all these
families will lead to even higher leakage rate.
Leakage rate
 Proportion of 4Ps beneficiaries who are nonpoor
Source
Leakage rates
APIS 2011(less cash grant)
29.2
4Ps Targeting: Exclusion Issue
 As of 2011, the 4Ps has reached 20.3% of the
country’s total poor families
 On-demand system (families who claim eligibility
but are not selected have to go through the ondemand system); they are entered into the database
of eligible beneficiaries in the NHTS-PR; there is a
lag before they can be accommodated into the 4Ps
database of beneficiaries
Administrative cost of the program is substantial
Share of Cash Transfer to Total Budget
Budget category
Total
Cash transfer/grant to beneficiaries
2011
2012
21,194
17,138
39,450
35,453
4,056
1,625
716
3,997
703
1,877
Bank service fee
171
346
Information, education and advocacy materials; printing of
manuals and booklets
Capital outlay
649
218
252
133
677
80.9%
686
89.9%
Implementation support*
Trainings
Salaries and allowances for 1,800 new personnel
Monitoring, evaluation and administration support
Share of cash transfer to total budget
Source: DSWD, available online http://pantawid.dswd.gov.ph/index.php/pantawid-pamilya-financials
Percent (%)
School Attendance falls below 90% after age 13
100
90
80
70
60
50
40
30
20
10
0
92.6
98.0
98.4
98.9
98.8
98.3
96.4
93.6
89.7
77.5
60.0
43.6
33.8
6
7
8
9
10
11
12
Age
Source of basic data: APIS 2011, NSO
13
14
15
16
17
18
Proportion of children attending school, by
income group and by age group, 2011
120.0
100.0
80.0
94.1
97.2
95.9
86.1
91.2
92.4
93.2
60.0
48.5
75.4
71.0
64.9
61.9
58.9
56.7
53.9
99.3
98.7
99.1
98.9
97.9
99.5
98.5
98.1
96.3
96.9
93.4
93.0
84.8
97.6
97.0
40.0
20.0
0.0
Poorest
2
3
4
6 to 11
Source of basic data: APIS 2011, NSO
5
12 to 14
6
7
15 to 18
8
9
Richest
%
100 92.1
90
80
70
60
50
40
30
20
10 0.00
0
6
96.9
96.5
95.7
94.4
92.6
88.7
84.8
75.2
63.1
48.4
46.10
38.29
26.15
33.6
14.88
0.00
0.00
0.00
0.10
0.54
0.91
2.52
5.39
7
8
9
10
11
12
13
14
15
16
Age
out-of-school, working
studying, not working
Source of basic data: Matched files of APIS 2011 and LFS July 2011, NSO
24.3
17
18
4Ps
Non-4Ps
Difference
Significance
(α=0.05)
Aged 6-14
96.3
92.8
3.5
significant
Aged 6-11
97.8
95.0
2.8
significant
Aged 12-14
93.1
89.0
4.1
significant
Aged 15-18
57.1
54.3
2.8
not significant
Age group
Note: Figures are estimates from the Nearest Neighbor (1), or One-to-one, matching with replacement.
Source of basic data: Matched files of APIS 2011 and LFS July 2011, NSO
Php 1,200
1,137
1,000
800
598
600
400
200
0
335
141
No grade
completed
169
186
202
Elementary
undergraduate
Elementary
graduate
High school
undergraduate
Source of basic data: LFS (July 2011), NSO
246
High school
graduate
College
undergraduate
College
graduate
Postgraduate
Recommendations of the
study
 To extend the 4Ps to cover high school education -
children up to 18 years
 Improve targeting scheme to reduce leakages and
exclusion
Government response:
 Extended it to high school and increased the budget
allocation for 4Ps
 Updating the targeting scheme
Revenue and Tax Effort
(GDP base year 2000)
20
18
16
14
12
10
8
6
4
2
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Q1-Q3
Revenue Effort
*Using the 2000 rebased/revised GDP by NSCB
Tax Effort
Distribution of total public expenditures,
by Sector, 2013
Economic Services
34%
General Public
Services
24%
Defense
5%
Other Social
Services
7%
Social Security,
Welfare and
Employment
9%
Health
3%
Source: Department of Budget and Management (DBM)
Education, Culture
and Manpower
Development
18%
Concluding remarks
 The Philippines is in a higher growth trajectory.
 However, inclusive growth still has to be achieved.
 To address constraints, investments in infrastructure
and human capital, among others, are necessary.
 Raising government revenues to finance these
investments are critical.
 “Sin” tax on alcohol and tobacco (2013) to finance
higher health care programs