Making Growth Work for the Poor: A Poverty Assessment for the Philippines
q The Congressional Policy and Budget Research Department (CPBRD) held a knowledge sharing forum on the results of the World Bank study entitled, “Making Growth Work for the Poor: A Poverty Assessment for the Philippines” at the House of Representatives on 17 October 2018. The event was jointly organized by the CPBRD and the World Bank under the Knowledge for Development Community partnership as part of celebrations for the House of Representative month. The main purpose of the forum was to elucidate on: (1) the characteristics of the Filipino poor – who they are, and what their income sources are, as well as the drivers and impediments to poverty alleviation, and (2) the measures that need to be strengthened and which need to be altered to put the country on a faster track to reducing poverty. Moreover, the Forum provided a venue to discuss the Human Capital Project, an initiative of the World Bank Group to understand the link between investing in people and economic growth, and to accelerate financing for human capital investments.
q Dr. Romulo Emmanuel Miral, Jr. of CPBRD, in his opening remarks, pointed out that the country does not lack in policies as evidenced by the medium-term development plan of every administration and the national budget reforms both aim to be more responsive to poverty and providing for a more inclusive growth. He added that it is important to assess whether these policies and programs actually contribute to poverty reduction and whether these are properly implemented. Dr. Miral concluded by saying that he hopes the presentation and the discussion would help the attendees in assisting the legislators based on real evidence.
q Dr. Xubei Luo, Senior Economist of the World Bank presented the findings of the main study. She identified the three key messages of the study: (1) the Philippines can overcome poverty; (2) the Philippines needs to do more to overcome poverty; and (3) it needs concrete actions by all concerned to do it. Poverty has declined by 5 percentage points from 26.6% in 2006 to 21.6% in 2015. The factors that contributed to this decline include the increase in wage income and movement of employment out of agriculture. The other drivers of poverty reduction were government transfers and domestic and foreign remittances.
q Luo noted that in spite these developments, the Philippines continue to lag behind its peers in terms of poverty reduction due to several factors: (1) the limited growth in agricultural productivity in the past decade: (2) the limited manufacturing base which can absorb low skilled workers from agriculture, most of whom end up in low-end service jobs; (3) high inequality in the country with only 1% owns half of the nation’s wealth; and (4) natural disasters and conflict with more than a million people pushed into poverty each year.
q The report identified six concrete actions to end poverty in the Philippines. (1) Create more and better jobs, focusing on quality by improving the business environment. (2) Improve productivity in all sectors, especially in agriculture. (3) Equip Filipinos with the skills needed for the 21st century economy through improved education. (4) Invest in health and nutrition to improve health care quality and equity, reduce child stunting and fully implement the Responsible Parenthood and Reproductive Health Law. (5) Focus poverty reduction efforts on Mindanao by increasing public investment and resolving conflict and promoting peace in Mindanao. (6) Manage risks and protect the vulnerable to support the poor and protect the vulnerable.
q Dr. Gabriel Demombynes, World Bank Program Leader for Human Development, presented on the Human Capital Project. He explained that the Project has three elements: The Human Capital Index; initiatives on measurement of human capital; and country engagements to boost investments in human capital. The Philippines has signed up to be an early adopter of the Human Capital Project. The presentation focused on the Human Capital Index or HCI, which is a measure that highlights the importance that investments have on human development for economic growth. The index emphasizes that investments on human capital also pays off in terms of economic outcomes and measures the impact of today’s investment on human capital to the country’s future productivity.
q The components of the HCI include: (1) the measure of child survival or the fraction of children who survive to age five; (2) schooling which means to capture not only how much schooling people get but also the quality of education. The project came up with a quality-adjusted year of education which incorporates the expected number of years of schooling the child will complete and quality based on international test scores; (3) health, indicated by not stunted prevalence and general measure of adult health which is the fraction of 15-year olds who survived to age 60. These three components results to an index which measures the productivity of a future worker relative to maximum potential.
q Survival rate in the Philippines is quite high at 97% and has been increasing although it is in the lower end compared to its peers in the region which have high survival rates. Expected years of education in the country is quite high at 12.8% due in large part to the creation of K12 and senior high education. It is above the average in Asia Pacific and above the middle-income group. In terms of harmonized test scores, the country’s score of 409 indicates that the Philippines has to improve its quality of schooling and improve its human capital outcome. In terms of nutrition, 67% of Filipino children are not stunted but the country is way below its other peers in the region and has not substantially improved on this measure over time. The Philippines is also a poor performer in terms of survival of 15-year old to age 60 relative to its regional peers. This is a measure of overall health conditions and the low levels show that the country is not where it should be in terms of this.
q The country’s overall HCI value is at 5.5 which means that the future productivity of Filipino workers is only 0.55 of what it could be if the country has maximum achievement on education and health.
q Demombynes also noted that in absolute value, there have been increases in investments however the Philippines is still fairly low compared to other countries in terms of the amount of money it spends on human capital investments. The Philippine Development Plan (PDP) includes key policy milestones on education, health and social protection to improve human capital and mot human capital strategies are already embedded in the PDP, including improving nutrition and health, ensuring lifelong learning opportunities, and increasing income earning abilities. If the Philippines achieve its goals under the PDP by 2022, it would lead to a significant improvement in the HCI from .55 to .75 and 25% increase in future productivity.
q In the open forum, questions were raised on the use of perception to measure poverty, channeling funds from social protection to improve agriculture and to institutionalize 4Ps to cover 60% of the extremely poor people, and the lack of data on the impact of social protection programs on the poor. Dr. Luo said that the report used objective measures of poverty using local poverty line developed by the government and international poverty line at $1.99 per day, Purchasing Power Parity to $3.20 international poverty line. She added that using the different measures of poverty depends on who should be targeted in relation to the poverty line. Demombynes added that the strong point of the 4Ps is its targeting system, Listahanan which uses an objective targeting measure and they promote it as a good model for targeting. Initial assessments of the 4Ps program also revealed that it had positive impact on school enrollment, maternal and child health. There is however a need to improve administrative data systems to allow a more in-depth study of the issues.
q On rural poverty, Luo said it is very important to develop the agriculture sector by putting in more investments because, 60% of the poor work in agriculture. It is also important to develop agribusiness to give more room for upgrading the value chain. Also, as the country moves up, agribusiness will give more value-added to worker’s productivity. It is also important to improve the business environment to increase investments in both urban and rural areas which is important to increase productivity.
q On the poor performance of Philippine students compared to their East Asian peers in terms of test scores, countries in the region are usually strong performers and it is not bad to perform lower than these states but the country may use them as models. The increases in enrollment may be directly linked with the investments made in the past decade although the quality is harder to measure because of lack of data. Participation in international assessments are important as they allow a country to understand its challenges and know how to address them as well as how its systems perform vis-à-vis other countries. Investments in the last few years focused on expanding the school system in terms of number of children going to school.
q On the effect of housing security to poverty, Luo said it is also important especially for the informal sector which lacks access to basic services. On the question on the extent of the role of domestic remittances, Luo explained that foreign and domestic remittances are important sources of income in the country. The share of poor households that receive domestic remittances is higher than that of households that receive foreign remittances, which gives a stronger role for domestic remittances in helping the poor. Spatial inequality in the Philippines is very high, from 5% poverty in NCR to 40 to 50% in Visayas and Mindanao. There is also a strong overlap between being poor and living in poor regions. To tackle this issue is beyond the remittance issue, instead a solution is to match the development policies in a region to its economic endowment.
q On the experience of other countries on poverty reduction compared to the Philippines, the difference in the performance in poverty reduction of countries like China is when people in these countries moved out of agriculture, they went to the manufacturing sector which provided decent paying labor-intensive jobs for semi and low skilled workers. While the Philippines also has structural transformation, the labor gains are lower compared to other countries. The Philippines has good GDP growth rates, but the high population growth rate slows down per capita GDP growth rate. Inequality is also very high as measured by GINI. The challenge in the country is how to distribute the benefits of growth so it will work for the poor.
q Demombynes said that the plan is to release HCI every three years since annual data will not show much change. However, the World Bank cannot make participation to the program mandatory. Compared to other ASEAN countries, the Philippines is in the middle of the group above Laos and Cambodia. HCI is also very compatible to HDI but the difference is that the HCI has a conceptual basis linked to productivity. Investments in human capital can have impacts on future productivity.
|1:00 PM - 1:30 PM||Registration|
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- National Anthem
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ROMULO EMMANUEL M. MIRAL, JR., Ph.d.
House of Representatives
|2:00 PM - 2:10 PM||Audio-Visual Presentation|
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Making Growth Work for the Poor: A poverty Assessment for the Philippines
XUBEI LUO, Ph. D.
Senior Economist, World Bank's Poverty & Equity Global Practice
The Human Capital Project
GABRIEL DEMOBYNES, Ph. D.
Pogram Leader for HUman Development, World Bank
|3:00 PM - 3:55 PM||OPEN FORUM / CLOSING|
Congressional Policy and Budget Research Department