Joint Foreign Chambers ARANGKADA PHILIPPINES 2010: A BUSINESS PERSPECTIVE

Advocacy Paper

Social Services: Poverty

climate. Education determines the quality of tomorrows workforce. PERSPECTIVE fitness of ARANGKADA PHILIPPINES 2010: A BUSINESS Health determines workers. Population determines the numbers of the workforce. The quality of each is extremely ________________________________________________________________________ important. Well-educated citizens are better qualified for jobs in a modern economy emphasizing Social Services knowledge-based services. Good health, aside from being a basic human right, supports increased labor productivity, which in turn supports higher wages. Population policy supports the freedom of parents to choose family size. Before discussing each of these policy areas, a look at the statistics of poverty in the country is in order. The latest official survey data is for 2006 (the updated data for 2009 will not be available until 2011). Figure 231 shows the trend over two decades in both the number of poor and poor citizens as a percent of total population. The number of poor declines from 1985 to 1997 from 22.2 million to 18.2 million and then increases to 23.6 in 2006, an increase of 1.4 million over the 1985 level. As a percent of the population, however, there has been progress in a decrease from 41% in 1985 to 28% in 2006.

DRAFT September 13, 2010 This section will discuss three important policy areas that affect the business and PAPER Not for Distribution JOINT FOREIGN CHAMBERS ADVOCACY investment

Figure 231: Poverty trend, official estimates, Philippines, 1985-2006 Figure 231: Poverty trend, official estimates, Philippines, 1985-2006
30 25 20 15 10 5 0 1985 1988 1991 1994 1997 2000 2003 2006

No. of poor, million, lhs Poor, as % of total population, rhs

22.2

19.2

21.7

21.6

18.2

21.5

20.6

23.6

50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

Source: FIES, various years

Figure 232: Poverty incidence, <US$ 1.25-a-day, incidence of poverty (defined as Among the ASEAN-6 the Philippines has the most persistent ASEAN 6, 1990-2007 living on less than US$1.25 a day). The other five ASEAN countries have shown steady progress in 70% Indonesia reducing poverty at this level, but the Philippines, since 1998, has not. By extrapolating the trend Philippines 60% direction, the Philippines now has a higher poverty incidence than Vietnam and possibly Indonesia Vietnam 50% Malaysia 40% (see Figure 232). Thailand
30% 20% 10% 0%

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1990-1995

1996-2000

2001-2003

2004-2007

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Sources: PovcalNet (World Bank); Balisacan, Arsenio "Pathways out of Poverty." 2008; UNICEF for the urban-rural population distribution in Indonesia; Note: Indonesia's national poverty estimates are derived using the country's rural and urban poverty estimates of the World Bank.

25 20 15 10 5 0

Poor, as % of total population, rhs

22.2

19.2

21.7

21.6

18.2

21.5

20.6

23.6

Joint Foreign Chambers

1985 ARANGKADA PHILIPPINES 1988 1991 1994

2010: A BUSINESS PERSPECTIVE 1997 2000 2003 2006

45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

Advocacy Paper

Source: FIES, various years

Figure 232: Poverty incidence, <US$ 1.25-a-day, ASEAN 6, 1990-2007 Figure 232: Poverty incidence, <US$ 1.25-a-day, ASEAN 6, 1990-2007
70% 60% 50%

40%
30% 20% 10% 0% 1990-1995 1996-2000 2001-2003

Indonesia Philippines Vietnam Malaysia Thailand

2004-2007

Sources: PovcalNet (World Bank); Balisacan, Arsenio "Pathways out of Poverty." 2008; UNICEF for the urban-rural population distribution in Indonesia; Note: Indonesia's national poverty estimates are derived using the country's rural and urban poverty estimates of the World Bank.

A profile of theTable 83: Profile to all Filipinos is the Philippines, 2006 are mostly rural, poor in comparison of the poor in in Table 83. Poor Filipinos have less access to electricity and water, are mostly farmers, less educated, and have larger families.
Live in rural areas 51 71 Table 83: Profile of the poor in the Philippines, 2006 Do not have access to electricity 18 40 Do not have their own water source 52 78 As % of Filipinos As % of poor Filipinos90 Belong to male-headed households 85 Live to families with 51 52 71 Belong in rural areas more than 5 members 71 Do not families whose electricity 18 35 40 1.6% Belong to have access to head works in agriculture 59 Do not families whose household heads are informal sector workers 52 44 78 Belong to have their own water source 55 1.4% Belong to male-headed households 85 90 Belong to families with unemployed household heads 15 8 Belong to families with more than 5 members 52 71 1.2% Belong to families whose household heads agriculture did not attend school 3 6 Belong to families whose head works in 35 59 Belong to families whose heads did not heads highinformal sector workers 66 1.0% Belong to families whose household reach are school 44 44 55 Source: "Philippines: Fostering unemployed Growth." World Bank, Aug 2010. More Belong to families with 0.8% Inclusive household heads 15 8 Belong to families whose household heads did not attend school 3 6 _____________________________________________________________________370 0.6% Belong to families whose heads did not reach high school 44 66
Source: Philippines: Fostering NOVEMBER 20100.4% More Inclusive Growth. World Bank, Aug 2010.
0.2%

As % of Filipinos

As % of poor Filipinos

The Human Development Index prepared by the United Nations Development Program (UNDP) 0.0% measures on the scale of 0.0 to 1.0 (a) life expectancy, (b) education, and (c) per-capita income. While all the countries in Figure 233 below showed improvement, the Philippines was the slowest, ranked with IndonesiaSource: ADB and Vietnam in 2007 and lower than the other three ASEAN-6 economies.
Figure 233: Human Development Index, ASEAN-6, 1980-2010
0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 1980 1985 1990 1995 2000 2005 2010 Source: UNDP HDR 2010; Note: As a result of periodical revisions to data by international agencies, statistics presented in different editions of the Report are not comparable. This time series uses the latest HDI methodology and the most up-to-date trend data for each component of the index (UNDP website). Components include life expectancy, education and income.

Singapore Malaysia Thailand Philippines Indonesia Vietnam

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3.5% 3.0% 2.5%

Thailand Vietnam

ARANGKADA PHILIPPINES 2010: A BUSINESS PERSPECTIVE ________________________________________________________________________ Figure 233: Human Development Index, ASEAN-6, 1980-2007
Joint Foreign

JOINT FOREIGN CHAMBERS ADVOCACY PAPER ARANGKADA PHILIPPINES 2010: A BUSINESS PERSPECTIVE ________________________________________________________________________ Figure 233: Human Development Index, ASEAN-6, 1980-2007

The poor are hungry. Their diet is inadequate. Their children are malnourished (see Part 4 Health and Population). SWS measures self-rated moderate and severe hunger by asking respondents if they have had nothing to eat. The September 2010 poll counted 16% of households equivalent to some three million families claiming to have had nothing to eat at least once in the past three months, down from 21% in the previous survey June 2010 (see Figure 234).

1.0 0.9 Chambers 0.8 ARANGKADA PHILIPPINES 2010: A BUSINESS PERSPECTIVE 0.7 0.6 0.5 0.4 Singapore Malaysia 0.3 Thailand Philippines 0.2 0.1 Indonesia Viet Nam 1.0 0.0 0.9 1980 1985 1990 1995 2000 2005 2006 2007 0.8 0.7 Source: UNDP; Note: No data for Vietnam in 1980; No data for Singapore in 2000 and 2005 and the 1995 0.6 index was used as the country's HDI in those years. The HDI measures the average progress of a country in 0.5 human development. Components include life expectancy, education and GDP. 0.4 Singapore Malaysia 0.3 Thailand Philippines 0.2 0.1 Indonesia Viet Nam 0.0 25% Total 1980 1985 1990 1995 2000 2005 2006 2007

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Figure 234: Degree of hunger in households, 1998-2010 Figure 234: Degree of hunger in households, 1998-2010

Moderate 20% Severe Source: UNDP; Note: No data for Vietnam in 1980; No data for Singapore in 2000 and 2005 and the 1995 index was used as the country's HDI in those years. The HDI measures the average progress of a country in 15% human development. Components include life expectancy, education and GDP.
10% 5% 25% 0% 20%

Figure 234: Degree of hunger in households, 1998-2010

Total Moderate Severe
2000

1998

1999

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

15% Source: SWS; Annual averages

The Philippines has the highest percentage of slum population as a percent of its urban 5% Philippines Vietnam population 70% among six Asian countries. However, most poor Filipinos live in rural areas and migrate India China 60% 0% Indonesia Thailand to urban slums, where they have better income opportunities than in the countryside (see Figure 50% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 235).
40% Source: SWS; Annual averages 30%

Figure 235: Slum population as percent of urban population, 1990-2005 10%

Figure 235: Slum population as percent of urban population, 1990-2005 Figure 235: Slum population as percent of urban population, 1990-2005 20%
10% 70% 0% 60% 50% 40% 30% 20% 40 35 30 25 20 15 10% 0% 1990 2001

Philippines India Indonesia

2005

Vietnam China Thailand

Source: UN Stats Div

Figure 236: GSIS and SSS coverage, 1990-2008

GSIS members, mil, lhs SSS members, mil, lhs Total GSIS & SSS members, % of labor force, rhs
1990 2001 2005 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 100% 0% 90%

Source: UN Stats Div

Most Filipinos needing financial assistance approach better-off relatives, who offer better 10 GSIS members, mil, health insurance is not widespread. However, government terms 5than banks. Private life and lhs 40 SSS members, mil, lhs 0 Total GSIS & SSS members, % of labor expanded 35 insurance coverage in the Philippines has gradually force, rhs to include higher percentages of the 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 80% 30 total population, as shown in Figures 236. The GSIS and SSS provide retirement payments and 70% 25Sources: SSS, GSIS and NSCB loans to public and private sector employees and together cover 80% of the workforce in 60% terms of 20 50% enrollment. However, the figures for SSS are deceptive. A very large number of persons working in 40% 15 _____________________________________________________________________371 10 the informal sector (e.g. tricycle drivers) have been enrolled by local politicians in order 30% them for 20% 5 NOVEMBER 2010 10% to receive funeral benefits. However, since they do not have regular deductions remitted from their 0% 0 income, they are not entitled to retirement benefits.
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Figure 236: GSIS and SSS coverage, 1990-2008

Sources: SSS, GSIS and NSCB

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60% 50% 40% 30%

India Indonesia

China Thailand

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10% 0%

20%

Advocacy Paper ARANGKADA PHILIPPINES 2010: A BUSINESS PERSPECTIVE

1990 2001 2005

Source: UN Stats Div

Figure 236: GSIS and SSS coverage, 1990-2008 Figure 236: GSIS and SSS coverage, 1990-2008
40 35 30 25 20 15 10 5 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

GSIS members, mil, lhs SSS members, mil, lhs Total GSIS & SSS members, % of labor force, rhs

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Sources: SSS, GSIS and NSCB

The Philippine Health Insurance Corporation Of course, the ideal public policy is to _____________________________________________________________________371 (PhilHealth) membership has grown steadily since provide universal basic health care, when NOVEMBER 2010 1997, reaching 50% of the labor force in 2008 after citizens get medical attention based on a decade of operation (see Figure 237). Expansion needs rather than on their income or political color. of membership continues under the National Household Targeting System, which is currently Benjamin E. Diokno, Will CCT help or hurt the issuing PhilHealth cards to 800,000 families. DRAFTpoor?, Business World, October 12, 2010
September 13, 2010

JOINT FOREIGN CHAMBERS are very modest by developed country standards.PAPER ADVOCACY However, Benefits from these three programs Not for Distribution ARANGKADA PHILIPPINES remain the population PERSPECTIVE the poor, who dominate the informal economy, 2010: A BUSINESS cohort still largely excluded ________________________________________________________________________ from coverage.
Figure 237: PhilHealth membership, 1997-2010 Figure 237: PhilHealthmembership, 1997-2010
25 20 15 10 5 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Principal members, in mil, lhs Members as % of labor force, rhs

60% 50% 40% 30% 20% 10% 0%

Source: PhilHealth Insurance Coporation's annual reports and "Stats and Charts" reports

Conditional cash transfers (CCTs) are aEducation instrument in the Philippines intended to new policy improve the lives of the poor, especially children in poor families. They have been used successfully in over 30 countries, beginning in Brazil and Mexico a decade ago. The World Bank in 2009 loaned US$ 2.9 billion for CCT programs in 13 countries, including the Philippines. CCTs are a social safety net used to incentivize poor families with cash payments for meeting certain requirements that improve the education and health of their children. The intended results

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Joint Foreign Chambers ARANGKADA PHILIPPINES 2010: A BUSINESS PERSPECTIVE

Advocacy Paper

are for their children to go to school for a minimum number of days, eat better at school feeding programs, and be healthier. Visits to health center for immunizations and pre- and post-natal care, including counseling for family planning and breastfeeding, are also required. Achieving MDG goals for improved maternal health and reduced infant mortality are supported by CCT programs. CCTs will not work if the intended government programs are not available to beneficiary parents. Classrooms with teachers and health clinics with health workers must be in place. The program, which began in 2008 under former president Macapagal-Arroyo, will be expanded by President Aquino to eventually add 4.6 million families (an estimated 23 million persons) by the end of his term in 2016. His first budget included a PhP 21 billion allocation to assist 2.3 million families (an estimated 11.5 million people or one-third of the countrys poor population). An advantage of the CCT is that the money will reach poor families directly and more efficiently than many past programs that had large leakages, such as benefits going to non-target beneficiaries among political supporters of politicians and the pockets of bureaucrats. Beneficiaries will be carefully selected and their names will be posted on the website of the Department of Social Welfare and Development (DSWD), the implementing agency. If CCTs are effective in the Philippines, they will reduce school dropout rates (see Part 4 Education) and improve the health of mothers, babies, and children and also will reduce the poverty of the poorest of the poor. In Brazil, along with strong economic growth, CCTs have helped reduce the poverty rate to 15.3% in 2009 from 33.8% 15 years before. Recommendations: (4) A. Steadily reduce number of poor and poor as percentage of population. (Medium-term action DSWD, DILG, DTI, DepEd, DOH, DOLE, NEDA, and Congress) B. Reduce the incidence of hunger. (Medium-term action DSWD, NEDA) C. Expand insurance coverage to include more poor. (Medium-term action SSS, PhilHealth) D. Successfully implement the expanded CCT program to include all 6.9 million poor Filipino families. (Long-term action DSWD, DBM)

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