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Challenges in achieving inclusive growth: The Philippine Case

Challenges in achieving inclusive growth: The Philippine Case. 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.

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Challenges in achieving inclusive growth: The Philippine Case

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  1. Challenges in achieving inclusive growth: The Philippine Case 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

  2. Challenges for middle income countries Avoiding middle income trap Achieving inclusive growth – all benefit from and participate in the growth process

  3. 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

  4. Recent economic growth has been remarkable Source of basic data:NIA, NSCB

  5. Yet slow progress in poverty reduction Source: NSCB

  6. GINI Coefficient, Philippines, by Areas, 1985-2009 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)

  7. Unemployment Rate, 2005-2012 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)

  8. Underemployment rate, 2005-2012 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)

  9. Constraints to inclusive growth include Weak investment Inadequate infrastructure Governance issues Human capital

  10. Investment to GDP Ratio ( in percent) Source of basic data: National Income Accounts, NSCB

  11. Infrastructure Ranking of Selected Countries (out of 144), 2012-2013

  12. Electricity Rates for General and Business Use in Selected ASEAN Cities (2012) 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)

  13. Proportion of children attending school, by income quintile and by age group, 2011 Basic source of data: APIS 2011, NSO.

  14. Percentage distribution of workers by highest educational attainment and by income quintile, 2009 Basic source of data: Family Income and Expenditure Survey 2009, NSO.

  15. Distribution of workers who have elementary education by sector of employment, 2011 Source of basic data: LFS (July 2011), NSO

  16. Average daily wage of wage/salary workers by educational attainment, 2011 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)

  17. 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 PantawidPamilya Pilipino Program (4Ps)

  18. 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

  19. 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

  20. Features of the 4Ps • Conditionalities: • Pregnant women must avail of pre- and post-natal care and be attended during childbirth by a trained health professional • Parents must attend family development sessions • 0-5 year old children must receive regular preventive health check-ups and vaccines • 3-5 year old children must attend day care or preschool classes at least 85% of the time • 6-14 year old children must enrol in elementary or high school and must attend at least 85% of the time • 6-14 years old children must receive de-worming pills twice a year

  21. 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.

  22. 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.

  23. 4Ps has been scaled up too rapidly Number of 4Ps families (in millions), Philippines, 2007-2014 Source of basic data: Reyes, et al (2013)

  24. 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.

  25. Leakage rate Proportion of 4Ps beneficiaries who are nonpoor

  26. 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 on-demand 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

  27. Administrative cost of the program is substantial Share of Cash Transfer to Total Budget Source: DSWD, available online http://pantawid.dswd.gov.ph/index.php/pantawid-pamilya-financials

  28. IMPACTS of 4Ps on EducationBased on Reyes et al assessment of the 4Ps

  29. School Attendance falls below 90% after age 13 Proportion of children in 4Ps families who are attending school, by age Source of basic data: APIS 2011, NSO

  30. Proportion of children attending school, by income group and by age group, 2011 Source of basic data: APIS 2011, NSO

  31. Older children drop out of school to work to augment family income Proportion of children in matched 4Ps families who are attending school and/or working, by single year of age, 2011 Source of basic data: Matched files of APIS 2011 and LFS July 2011, NSO

  32. Comparison of school attendance rates of children in matched 4Ps and non-4Ps families, by age group, 2011 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

  33. Average daily wage of high school graduate is 40% higher than an elementary undergraduate Source of basic data: LFS (July 2011), NSO

  34. 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

  35. Revenue and Tax Effort(GDP base year 2000) *Using the 2000 rebased/revised GDP by NSCB

  36. Distribution of total public expenditures, by Sector, 2013 Source: Department of Budget and Management (DBM)

  37. 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

  38. Thank you

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