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The Philippines: New Directions in Domestic Policy and Foreign Relations

David G. Timberman (ed.)

Asia Society

1998

The War Against Poverty: A Status Report
by Solita Collas-Monsod

 

Introduction

 

The ultimate objective of any nation is to improve the well-being of its people. This may be articulated as poverty alleviation, or satisfying minimum basic needs, or human development, or simply development. But whatever it is called, the central preoccupation is the same: to lift people up from poverty and deprivation in its many dimensions, expand their choices, and increase the opportunities available to them as well as their capabilities to respond. In short, to empower, or in a much broader sense to liberate, the people.

Fittingly, the restoration of democracy in the Philippines following the 1986 “people power” revolution brought with it greater and more focused efforts on the part of the Aquino government to promote people-centered development. Prior to 1986, development plans addressed the needs of so-called low-income groups and the need for a higher standard of living, but the Marcos government made no official attempt to measure poverty. Independent researchers had estimated poverty lines for the Philippines since 1971, but it was only during the administration of President Aquino sixteen years later that official estimates of poverty were first made based on an official poverty line.

Certain factors are responsible for the lapse in record keeping during the Marcos administration. One was the widely held assumption that economic growth and human development are directly related--the so-called trickle-down effect. It is now generally accepted that while economic growth is a necessary condition for development, it is not sufficient. An illustration from Philippine experience: between 1965 and 1971, real per capita GDP grew by 2 percent a year, but poverty indices showed, if anything, an increase rather than a decrease in poverty incidence. 1

Another now debunked theory that enjoyed great currency was that income inequality, or relative poverty, was a sine qua non for economic growth, because investment was the engine of growth, and only the rich could save and invest. Today the opposite view holds sway: not only is there no contradiction between growth and equity, but growth may not be sustainable without it.

A third possible reason for not keeping official poverty estimates was of a less intellectual and more political nature. The Marcos dictatorship probably operated on the principle that what the people didn’t know wouldn’t hurt the government.

With discarded theories and a discarded dictatorship and people power fresh in everyone’s mind, the Medium-Term Philippine Development Plan (MTPDP) for 1987–92 attempted to correct the situation. For the first time in Philippine planning history, income-based poverty reduction was included as a specific plan target, together with other equity indicators. Its successor, the 1993–98 plan, also gives pride of place to human resource development, devoting the first chapter to a discussion of the challenges faced in that area. The first target listed in this plan is the reduction of poverty incidence to 30 percent of Filipino families by 1998, from the official 1991 estimate of 40 percent.

The Ramos administration’s increased focus on poverty reduction, equity, and human development is reflected in many ways. A major issue of Fidel Ramos’s campaign platform was people empowerment. It is a theme that he has adverted to throughout his presidency: “We in the public sector and the basic sectors — declare our common commitment that our people should be at the center of development and that the real measure of growth must be the well-being of ordinary Filipinos.” His administration has been marked by multisectoral consultations called summits aimed at galvanizing the different sectors of society toward what he fondly calls Philippines 2000, a mission to improve the quality of life of the ordinary Filipino by fully industrializing the country. Aside from an Economic Summit in 1993, there was a Social Reform Summit in 1994, a Housing Summit in early 1995, an Employment Summit in late 1995, a National Anti-Poverty Summit in early 1996 (also a Peace and Order Summit in-between), and in mid-1997, a National Development Summit. President Ramos has also created a Social Reform Council, a Presidential Council on Countryside Development, and a Presidential Commission to Fight Poverty. At the same time, his administration has wholeheartedly endorsed the platform for action adopted by the UN Social Summit in Copenhagen. Whether the finely articulated human development goals set out at the beginning of President Ramos’s term have been met and can be sustained are questions that are addressed in this chapter.

 

A Profile of Philippine Poverty

Poverty Incidence

As of 1994 4.5 million families or 27.3 million Filipinos, comprising 35.5 percent of total families and 40.6 percent of total population, were officially considered poor. That is, their annual per capita incomes fell below the poverty threshold or poverty line, the critical amount of income necessary to satisfy nutritional requirements (2,000 calories) and other basic needs. That poverty line was placed at P8,885 per person per year, equivalent at the prevailing exchange rates to about $340 per person per year, or less than a dollar per person per day.

These aggregate figures for the country conceal a great deal of spatial and sectoral disparities. As Table 3.1 shows, the 1994 poverty incidence of families among regions ranged from a low of 8 percent in the National Capital Region (Metro Manila) to a high of 60 percent in the Autonomous Region of Muslim Mindanao (ARMM). The variations among the provinces are even larger: 11.6 percent (in Cavite) to 79.5 percent (in Romblon). Among the geographic sectors, rural poverty incidence at 47 percent was almost twice the urban rate (24 percent), although again there were tremendous disparities among specific locales.

 

Table 3.1: Poverty Profile Among Regions, 1994

Pop. (%) Contribution to
Poverty Incidence (%)		 Contribution to
National Poverty (%)		 Poverty Threshold (annual per capita income in pesos)
Families Pop. Families Pop.
Philippines 100 35.5 40.6 100 100 8885
NCR Metro Manila 13.8 8 10.5 3.1 3.6 11230
I. Ilocos 5.5 47.9 53.6 7.5 7.3 10022
II. Cagayan Valley 3.9 35.5 42.1 4.1 4 8316
III. Central Luzon 10.4 25.2 29.2 7.1 7.5 9757
IV. Southern Tagalog 13 29.7 34.9 11.3 11.2 9537
V. Bicol 7 55.1 60.8 10.7 10.5 8319
VI. Western Visayas 9 43 49.9 10.8 11 8197
VII. Central Visayas 7.2 32.7 37.5 6.9 6.6 6425
VIII. Eastern Visayas 5.2 37.9 44.8 5.8 5.7 6444
IX. Western Mindanao 4 44.7 50.6 5 5 7074
X. Northern Mindanao 5.9 49.2 54.1 8 7.8 7938
XI. Southern Mindanao 7.2 40.3 45.6 7.9 8.1 8201
XII. Central Mindanao 3.2 54.7 58.7 4.8 4.7 8971
CAR 1.9 51 56.4 2.7 2.7 10853
ARMM 2.7 60 65.3 4.4 4.3 8889

Source: National Statistics Office, Family Income and Expenditures Survey (Manila, 1994).

Although the Southern Tagalog region contributes the most to Philippine poverty (with 515,000 of the country’s 4.5 million poor families), at 29.7 percent it has the third-lowest poverty incidence among the regions, with only Metro Manila and Central Luzon having a lower poverty incidence. On the other hand, ARMM, with the highest poverty incidence among the regions in the country, is the fourth-smallest contributor to poverty, following the Cordillera Autonomous Region, Metro Manila, and Cagayan Valley.

The same observation applies to provinces. Of the twenty provinces with the highest poverty incidence, only four (Masbate, Zamboanga del Norte, Bukidnon, and Cotabato) are among the twenty provinces contributing the most to total poverty (see Tables 3.2a and 3.2b). The distinction between contribution to poverty and poverty incidence becomes relevant in any poverty-targeting exercise. Given scarce resources, the regions or provinces targeted will be different depending on whether the government gives priority to areas with the highest percentage of poor families or areas with the highest number of poor families.

Poverty incidence is highest in families whose head is engaged in agriculture, followed by mining and construction. The incidence of poverty among manufacturing workers is only about one-third of that in agriculture. Workers in the financial sector have the lowest poverty incidence. Poverty incidence is highest among families with a self-employed household head and lowest among families headed by wage and salaried workers. Within the latter category, government workers enjoy the lowest poverty incidence.

 

table 3.2a: Twenty Poorest Provinces by Poverty Incidence and Contribution to Total Poverty, 1994*

Poverty Incidence Contribution to Total Poverty (percent)
1. Romblon 79.5 0.76
2. MASBATE 77.7 2.49
3. Ifugao 72.1 0.42
4. Abra 71 0.58
5. Kalinga Apagao 70.3 0.71
6. Agusan del Sur 67.6 1.01
7. Mt. Province 67.1 0.35
8. ZAMBOANGA del NORTE 62.3 1.92
9. Davao Oriental 62.1 1.12
10. Sulu 60.1 1.06
11. Capiz 59.8 1.57
12. Camiguin 59.5 0.15
13. Quirino 59.4 0.33
14. Bukidnon 58.8 2.04
15. Tawi-Tawi 57.5 0.59
16. Surigao del Norte 56.4 1.16
17. Sultan Kudarat 54.9 1
18. Palawan 54.5 1.25
19. COTABATO 54.5 1.77
20. Sorsogon 54.4 1.48
Contribution of 20 Poorest to Total Poverty 21.76

* preliminary estimates
Source: National Statistical Coordination Board (Manila).

 

Table 3.2b: Twenty Poorest Provinces by Contribution to Total Poverty and Poverty Incidence, 1994

Contribution to Total Poverty (percent) Poverty Incident
1. Negros Occidental 4.58 44.9
2. Pangasinan 4.06 51.3
3. Cebu 3.67 32.9
4. Iloilo 3.37 46.5
5. Quezon 3.08 48.3
6. Camarines Sur 2.88 50.5
7. Leyte 2.83 42
8. MASBATE 2.49 77.7
9. Zamboanga del Sur 2.49 38.5
10. Batangas 2.25 36.5
11. Davao del Sur 2.15 32.7
12. Nueva Ecija 2.07 35.6
13. Bukidnon 2.04 58.8
14. Albay 1.96 47.1
15. ZAMBOANGA del NORTE 1.92 62.3
16. Misamis Oriental 1.88 45.3
17. Negros Oriental 1.81 40.6
18. COTABATO 1.77 54.5
19. Isabela 1.75 35
20. Davao 2.83 42
Contribution of 20 Poorest to Total Poverty 51.88  

Source: National Statistical Coordination Board (Manila).

The Face of Poverty

A composite picture of a typical poor Filipino household shows a family with the following characteristics:

Three things stand out from these points, which may run counter to popular perceptions. The first is that the poor are neither lazy nor shiftless nor jobless. Many of the poor are employed simultaneously in different occupations. They cannot afford to be unemployed. So the problem of poverty is not so much the lack of jobs as the lack of jobs that provide sufficient wages or income.

The second is that people in the agricultural sector bear the heaviest share of the poverty burden--poverty in the Philippines is largely an agricultural phenomenon (see Table 3.3). This fact is not limited to rural areas: the biggest contribution to poverty in urban areas is the same as that in rural areas: dependence on subsistence-level agriculture. Basically, this is a matter of definition. Areas become classified as urban when population density achieves a certain level, even if activities in the area remain largely agricultural in nature. The most recent empirical investigation into the determinants of agricultural poverty shows that low levels of human capital, inaccessibility of land, lack of infrastructure, and unfavorable policy environments are the main correlates of rural poverty. 2

 

Table 3.3: Poverty by Economic Sector, 1985 and 1994 (percent)

Sector Percent of Sector Impoverished Contribution to National Poverty
1985 1994 1985 1994
Agriculture 50.3 38.7 75.8 77.7
Mining 29 22.2 0.6 0.5
Manufacturing 23 10 5.5 3.3
Utilities 8.5 4.3 0.1 0.1
Construction 27.7 21.3 4.7 6.5
Trade 17.8 10.5 4.6 3.9
Transport 16.8 12.2 3.3 4
Finance 5.3 3 0.3 0.2
Service 13.1 6.8 5.1 3.8

agriculture = agriculture, fishery, and forestry
mining = mining and quarrying
utility = electricity, gas, and water
trade = wholesale and retail trade
transport = transportation, storage, and communication
finance = finance, insurance, real estate, and business
services = community, social, and personal services

Source: A.M. Balisacan, "Poverty and Economic Inequity in the Philippines" (Paper prepared for Asian Development Bank, Manila, 1997).

Third, while the headcount poverty data using national poverty lines seem to indicate that poverty is much greater in the Philippines than in the other countries of the Association of Southeast Asian Nations (ASEAN), that would be an unfair conclusion because the standards are not the same. The Philippines’ income poverty lines seem to be based on higher food and caloric standards than some of its neighbors’ poverty lines. Using the World Bank’s $1 a day benchmark based on purchasing power parity (a method of comparing production and income levels of different nations by looking at what it actually costs to buy similar goods in various countries to determine the real purchasing power of local currencies), the difference in poverty per capita narrows, and Philippine poverty incidence is closer to countries like Indonesia and China.

Other Indicators of Deprivation

Income-based measures of poverty assume a person’s or family’s deprivation stems mainly from an inability to earn or obtain sufficient private income. There is undoubtedly a connection: the poorest 30 percent of Filipino families (in income) also show a very low educational achievement, and only one-fifth of them are high school graduates, compared to a national average that is double that. But the connection between deprivation and earning ability is certainly not on a one-to-one basis, nor is it always in the same direction. And this is amply illustrated in the Human Development Index (HDI) and the Minimum Basic Needs (MBN) Index, which are more comprehensive socioeconomic measures.

The HDI is a composite of three basic indicators of deprivation and development: health, proxied by life expectancy; knowledge, represented by functional literacy; and standard of living, measured by real per capita income. The closer the HDI is to 0, the greater the level of human deprivation; the closer it is to 1, the higher the level of human development. Cavite had the highest HDI (0.840), closely followed by Rizal, Batanes, Laguna, and Bulacan. The provinces with the lowest HDI were Sulu (0.372), Tawi-Tawi (0.384), Ifugao (0.409), Basilan (0.427), and Lanao Sur (0.445).

The absence of a one-to-one correspondence between incomes and quality of life highlights the need to include the other dimensions of poverty to income measures. For example, Zamboanga del Sur and Tawi-Tawi have practically the same per capita income, but their HDIs differ markedly, with the former having a much higher HDI (0.543) than the latter (0.384). Ilocos Sur’s real per capita income is higher than that of La Union by more than P1,300, but their human development levels are very similar (0.657 vs. 0.650). And finally, Romblon, which has the lowest real per capita income and the highest poverty incidence among the provinces (with 79.5 percent of its families below the poverty line), has an HDI higher than that of twelve other provinces, six of which are not even among the poorest twenty provinces (in terms of poverty incidence).

The life expectancy and functional literacy data, which are essentially health and education indicators, help to clarify the situation. Average life expectancy in the Philippines is estimated (in 1994) to be 66.9 years, but again this hides large variations among the provinces. Cebu has the highest average life expectancy at 71.8 years, whereas life expectancy in Tawi-Tawi is only 52.8 years. The disparities in functional literacy are even larger: with a national average of 83.8 percent, the provincial rates ranged between 92.8 percent (in Cavite) and 52.7 percent (in Tawi-Tawi).

The Minimum Basic Needs Index uses the same methodology as the HDI, but whereas the HDI has three components, the MBN Index has eight: number of families below the official poverty line; incidence of official poverty in the province; infant mortality rates; malnutrition rates; cohort survival rates; adult illiteracy rates; proportion of households without access to safe water; and proportion of households without access to sanitary toilets. The 1997 United Nations Development Programme’s Human Development Report, which introduces a multidimensional Human Poverty Index similar to the MBN Index, indicates that the Philippines is in fact better off than Indonesia under this measurement of poverty and about on par with China.

Philippine averages for the MBN indicators hide large variations among the provinces. Infant mortality, for example, ranges from a high of 126 per 100,000 live births in Sulu and Tawi-Tawi to a low of 31 in Zambales. Five percent of children in Batanes are malnourished, compared to 31 percent in Camarines Sur. Ninety percent of households in Sulu have no sanitary toilets, whereas in Batanes all households have access to sanitary toilets. In the education sector, cohort survival rates are high at 96 percent in Antique, whereas only a little over a third of those entering elementary school in Sulu and Maguindanao finish the fourth grade.

As with the HDI, the MBN Index does not correspond on a one-to-one basis with income poverty. Provinces such as Sorsogon, Camiguin, Antique, Quirino, Bohol, Oriental Mindoro, and Marinduque, which in 1991 were among the twenty poorest provinces by way of poverty incidence, were all in the top half of the provinces ranked according to fulfillment of minimum basic needs.

Income Distribution: Relative Poverty

So far, the discussion has centered on absolute poverty, in its many dimensions. Before proceeding to the next section, a look at income distribution in the Philippines is in order. The Gini coefficient, which measures the inequality of income distribution, was 0.4507 in 1994 (a Gini of zero shows perfectly equal income distribution and of one shows perfect inequality) for the Philippines. The 1994 data show that the bottom 40 percent of families in the country accounted for only 13.7 percent of total family income, and the top 10 percent of families accounted for 35.5 percent (see Table 3.7). The income of the highest decile was almost nineteen times the income of the families in the lowest decile. Income in the Philippines is more equally distributed than in Thailand and Malaysia, and less equally distributed than in Singapore and Indonesia.

But in the same way that absolute poverty varies among regions, relative poverty also does. The regions with the lowest Gini coefficients (and therefore the more equal income distributions) were the ARMM (0.3125), followed by Central Luzon, the Ilocos Region, Western Mindanao, and Metro Manila. The region with the highest Gini concentration ratio was the Central Visayas, followed by Central Mindanao and Eastern Visayas (see Table 3.4).

 

Table 3.4: Gini Concentration Ratios by Region, 1994

Philippines 0.4507
NCR Metro Manila 0.3967
I. Ilocos 0.3814
II. Cagayan Valley 0.4056
III. Central Luzon 0.3630
IV. Southern Tagalog 0.4016
V. Bicol 0.4116
VI. Western Visayas 0.4063
VII. Central Visayas 0.4417
VIII. Eastern Visayas 0.4198
IX. Western Mindanao 0.3861
X. Northern Mindanao 0.4157
XI. Souther Mindanao 0.4114
XII. Central Mindanao 0.4280
CAR 0.4100
ARMM 0.3125

Source: National Statistics Office, Family Income and Expenditure Survey (Manila, 1994).

Income distribution by main source of income is also relatively unequal. Families whose main income comes from wages and salaries comprise 45.4 percent of total families yet account for 50.4 percent of total income. But within the wage and salary category, agricultural families, comprising 8.4 percent of total families, account for only 4.3 percent of total income, whereas wage and salary earners in nonagricultural activities comprise 37.1 percent of the families but account for 46.1 percent of the income. Furthermore, those engaged in “entrepreneurial activities” (self-employed) comprise 36.7 percent of total families but earn only 29.5 percent of total income. Here again, activities of an agricultural nature--crop farming, livestock, and poultry raising--did not earn their proportional income share, although livestock and raising poultry were less disadvantageous.

If the distribution of income in the Philippines is highly unequal, the distribution of assets, or wealth, is even more so. The Gini coefficient for landholdings as a whole is 0.57, with Cagayan Valley showing the least unequal distribution (0.49) and Western Visayas showing the most unequal (0.64). Landholding inequality by crops produced also tells an interesting tale: the Gini coefficient for sugar land is 0.81, and is almost as high for coconut, coffee, pineapple, banana, and other fruit crops. For rice and corn, as well as vegetable farms, landholding inequality is closer to 0.35, having decreased substantially since 1971, no doubt because of the various land reform programs.

 

Recent Trends in the War Against Poverty

Poverty Incidence

Whether one is measuring the incidence or the depth or the severity of poverty; whether one chooses income or consumption as the indicator of the level of living; whether one uses the official poverty line or other estimates, the results are similar: the incidence of poverty in the Philippines decreased between 1985 and 1994.

The Philippine government concluded that 40.2 percent of Filipinos were poor in 1994. However, a recent analysis of poverty incidence which used the same basket of goods across all regions to fulfill the minimum food requirements (the Fixed Level of Living or FLOL approach) showed instead a 23.4 percent poverty incidence for 1994 (see Table 3.5). 3 The FLOL estimate is broadly comparable to that for other countries at similar levels of economic development, like Indonesia and China.

 

Table 3.5: Poverty Estimates, 1985-94 (percent)

Official Poverty Lines/Income Measure Head Count
1985 49.2
1988 45.3
1991 45.2
1994 40.2
 
FLOL Poverty Lines/Expenditure Measure Head Count
1985 32.7
1988 26.9
1991 26.6
1994 23.4

Source: A.M. Balisacan, "Poverty and Economic Inequity in the Philippines" (Paper prepared for Asian Development Bank, Manila, 1997).

In addition to showing declining poverty, both approaches also show that the downward trend was not smooth, with the poverty head count declining between 1985 and 1988, stagnating (declining or increasing very slightly depending on whether one uses incidence or depth and severity) between 1988 and 1991, and then declining again between 1991 and 1994. The FLOL approach shows that greater poverty reduction took place between 1985 and 1988 than between 1991 and 1994, but the government’s approach shows the opposite results. Other data for the two periods tend to support the FLOL estimates. For example, the employment data show that more jobs were created in the 1985–88 period than in the 1991–94 period (3 million versus 2.2 million); at least equally important, the jobs were also of better quality (if one considers that wage and salaried jobs are generally better than unpaid family worker jobs and being self-employed), with 69 percent of the increased employment being in wage and salaried jobs in the earlier period, versus only 47 percent in the later period. Additionally, the average inflation rate in the earlier period (4.4 percent) was less than that in the later period (8.5 percent). And finally, the average growth rate of GNP in the earlier period at 5.5 percent was higher than that in the later period (2.7 percent).

Again, the Philippine aggregates mask large spatial disparities. Official estimates show that Ilocos Region and Central Mindanao experienced increases in poverty incidence between 1985 and 1994; the Cordillera Autonomous Region and the Autonomous Region of Muslim Mindanao, both created after 1985, also exhibited increases in poverty incidence. On the other hand, Metro Manila, Southern Tagalog, and the three Visayas regions demonstrated a continuously decreasing poverty head count. For these five regions, the number of families living in poverty also decreased.

Provincial poverty data, available only since 1991, indicate that poverty incidence increased in twenty-one provinces, representing a little over a quarter of the total, with the greatest deterioration in Tawi-Tawi, La Union, Davao Sur, Northern Samar, and Benguet. The greatest improvements (decreases in poverty incidence) were recorded in Cavite, Rizal, Catanduanes, Occidental Mindoro, Siquijor, and Nueva Vizcaya.

On a sectoral level, while poverty incidence declined for all classes of workers, the largest relative decreases were recorded among workers with pay in family businesses, workers in private firms, and the self-employed. The decline in poverty was also felt across all occupations, although the largest relative decreases occurred in manufacturing, utilities, and services, and the smallest relative decreases were recorded in agriculture and mining.

Trends in Other Poverty Indicators

The record is also mixed with respect to the behavior of nutrition, health, and education indicators over the last ten years (see Table 3.6). In nutrition, improvements have been made in all areas, except for the prevalence of iodine deficiency. But despite these improvements, the Philippines still has one of the lowest daily per capita protein and calorie supplies in ASEAN. In health, access to safe water has improved, but access to sanitation has improved only a little. The country’s access to sanitation remains less than that of its neighbors, except for Indonesia. Persons per physician and persons per hospital bed have increased.

 

Table 3.6: Other Human Development Indicators

Period Earlier Year Latest Year
Education      
Adult Literacy Rate (%) 1985-95 84 95.8
Functional Literacy Rate (%) 1989-95 75.6 83.9
Participation Rate (%)      
Elementary 1987/92-95 91.4 91.1
Secondary 1987/92-95 54.8 61.2
Achievement Levels (%)      
Elementary 1987/92-95 55.2 45.6
Secondary N.D.   40.9
Cohort Survival Rate (%)      
Elementary 1987/92-95 67.9 67.5
Secondary 1987/92-95 76 75.9
 
Nutrition      
Per Capita Energy Intake (calories) 1987-93 1753 1872
Prevaleance of Anemia (%) 1987-93 70.4 67.3
Vitamin A Deficiency (%) 1987-93 0.2 0.11
Prevalence of Iodine Deficiency (%) 1987-93 3.5 6.3
Child Malnutrition Rate (%) 1985-95 33 30
 
Other Health Indicators      
Pop. w/access to Safe Water (%) 1985/87-90/95 52 85
Pop. w/access to Sanitation (%) 1985/87-90/95 87 69
Pop. w/access to Health Services (%) 1990/1995   76
Persons per Physician 1985-95 6413 9689
Persons per Hospital Bed 1985-95 645 935

Sources: UNDP Human Development Reports (1990, 1996); Asian Development Bank, Key Indicators of Developing Asian and Pacific Countries (Hong Kong: Oxford Univ. Press, 1993, 1996); National Economic and Development Authority, Mid-Term Assessment of the 1993-98 MTPDP (1996).

In education, basic and functional literacy rates show large improvements, as do participation rates at the high school level. As a result, the Philippines can more than hold its own vis-à-vis its ASEAN neighbors with respect to such indicators as adult literacy rates and mean years of schooling. But participation rates at the elementary level have remained stagnant or even declined, as have cohort survival rates at both the elementary and secondary levels. The Philippines’ primary school completion rate is much lower than those of its ASEAN neighbors--30 percent of children who start elementary school do not finish. They are then condemned to low-paying jobs, which makes it more difficult for them to send their children to school, which makes these children unable to command higher incomes, and so on in perpetuity.

Most disturbing have been trends in the quality of education, as indicated by low achievement levels in elementary education--partly due to the fact that the pupil-teacher ratio, which is an indicator of the quality of education, is much higher in the Philippines than in the other ASEAN countries, both at the primary and the secondary levels. The achievement levels in secondary education are even lower than the elementary, although there are no data for previous years with which to determine progress, if any. The results of the recently completed International Mathematics and Science Study show that the Philippines would have placed third from the bottom in math and second from the bottom in science had it been included.

Provincial HDI data only allow for comparisons between 1990 and 1994. Among the seventy-three provinces for which data is available, the HDI improved for all but ten. Of the ten provinces that showed a decline in their HDI, only three also had a deteriorating poverty situation. To put it another way, while twenty-one provinces exhibited an exacerbation of poverty, only three of those suffered degeneration in their HDI at the same time. This reinforces the important point that a decrease in income (an increase in poverty) is not necessarily accompanied by a decrease in human development, and vice versa. Low private incomes do not necessarily mean low outcomes, which in turn highlights the significant role of government or community provision of basic health and education services.

Income Distribution

Income distribution deteriorated between 1988 and 1991 (see Table 3.7). The slight improvement registered between 1991 and 1994 could not counteract this enough to achieve or better what prevailed in 1985. In 1985 the family incomes in the top decile were 18 times that of the income in the bottom decile. This did not change in 1988. Then in 1991, inequality worsened, with the tenth decile incomes almost twenty-one times larger than first decile incomes. The situation improved in 1994 (nearly 19 times), but not by enough to represent an improvement over the original 1985 distribution.

 

Table 3.7: Family Income Distribution by Decile

1985 1988 1991 1994
Decile Group % of Total Income Average Income (P000)* % of Total Income Average Income (P000)* % of Total Income Average Income (P000)* % of Total Income Average Income (P000)
First 2 6.3 2 8.2 1.8 11.9 1.9 15.6
Second 3.2 10 3.2 12.9 2.9 19.2 3 25.3
Third 4.1 12.7 4.1 164 3.8 24.7 3.9 32.7
Fourth 5 15.5 5 20.2 4.7 30.4 4.9 40.6
Fifth 6 167 6 24.3 5.7 37.2 6 49.8
Sixth 7.3 22.6 7.3 29.5 7 45.8 7.4 61.2
Seventh 8.9 27.8 9 36.5 8.8 57.1 9.1 75.3
Eighth 11.4 35.3 11.6 46.8 11.4 74.2 11.8 98.2
Ninth 15.7 48.6 16 64.6 16.1 104.9 16.4 136.7
Tenth 36.4 113.2 35.8 144.8 37.8 246.4 35.5 295.5

Source: National Statistics Office, Family Income and Expenditure Survey (Manila, 1994).
* thousands of pesos

Can the country’s performance in its war against poverty in all its dimensions be considered satisfactory? To help answer this question, this section compares the country’s performance with predetermined targets, especially those set out in the 1993–98 Medium-Term Philippine Development Plan.

How has the country fared vis-à-vis the government’s targets? Table 3.8 tells the story. As mentioned at the beginning of this chapter, the first target set out in the MTPDP is the reduction of income poverty incidence from 40 percent in 1991 to 30 percent of Filipino families by 1998. Although there are no intermediate targets, the actual 1994 family poverty incidence of 35.5 percent indicates that the country is on track, if not slightly ahead.

 

Table 3.8: Selected Human Development Indicators, 1995

MTPDP Target Actual
Education (%)    
Literacy Rate 94.3 95.8
Functional literacy rate 79.6 83.9
Participation rate    
Elementary 91.7 91.1
Secondary 61.2 61.2
Cohort survival rate    
Elementary 76.5 67.5
Secondary 79.5 75.9
Postsecondary enrollment 585,498 499,040
Persons to be given tech./vocational training 150,000 184,823
Achievement level    
Elementary 66.9 45.6
Secondary   40.9
 
Land Distribution (cumulative 1988-96)    
DAR (million hectares) 3.4 2.4
DENR (million hectares) 2.6 1.7
 
Employment (1996)    
Jobs to be created (million) 1.1 1.7
Unemployment rate (%) 8.4  
Employment share    
Agrictulture 43 41.7
Industry 16.9 16.6
Services 40.1 41.6

Source: National Economic and Development Authority (Manila) and Department of Agrarian Reform (Manila).

Education and Health

In the education sector, some targets have been achieved or even bettered: Literacy rates and functional literacy rates were both overshot; elementary school participation rates reached just slightly below target and secondary school participation rates hit above the mark; and the number of persons to receive technical or vocational training was overshot. However, some very important education targets were not met: 1995 elementary school cohort survival rates--the percentage of children starting first grade who completed an elementary education--were not only much lower than targeted (68 percent versus 74 percent) but were also lower than what they were in 1993. The same is true for the secondary level cohort survival rate.

Worse, even as cohort survival rates failed to increase, government-administered achievement tests at the elementary and secondary levels showed disappointing levels of academic performance, particularly in science and math--a national achievement level of 45.6 percent in the elementary and 40.0 percent in the secondary, versus targets of 75 percent for both.

Unfortunately, whether targets for health and nutrition have been met cannot be determined, as there seems to be either no provision or no capability for monitoring movements in the large number of indicators specifically targeted in the MTPDP.

Access to Employment

As Table 3.8 shows, the job creation target for 1996 of 1.1 million was exceeded by 600,000. This is the highest increase in absolute levels of employment that the country has experienced since 1983 (the year the Philippine economy went into debt crisis), when employment expanded by 1.8 million, and it beats the previous post–people power record of 1.6 million jobs created in 1987. It is also the first time since 1993 that the targets were even met. In 1994 and 1995, job creation fell short by 208,000 and 328,000, respectively.

The Philippines’ recent employment performance is heartening: of the 1.7 million new jobs, 1.4 million or 79 percent were wage and salaried of which, 559,000 or 32 percent were in industry. Thus, their respective shares in total employment increased. The gloomy side of the picture, however, is that the targeted industry share in total employment was unmet, the shortfall comprising 55,000 to 70,000 jobs.

But inadequate employment opportunities, in terms of number of jobs, have been only part of the problem where poverty alleviation is concerned. The problem for the poor seems to be not so much the lack of employment as the lack of remunerative employment--the phenomenon of the employed poor. In 1996 more than four-fifths (83.3 percent) of the employed were in agriculture and services, where productivity is low and at best stagnant. Industry’s share in total employment was 16.6 percent. The share of agriculture to total employment decreased by 7.9 percentage points between 1985 and 1996, and the service sector (e.g., wholesale and retail trade, finance, government, community, and personal) took up most of the slack, increasing its employment share by 5.1 percentage points, with industry’s share going up by only 2.8 percentage points (see Table 3.9).

 

Table 3.9: Employment Share by Major Industry Group

1985 1988 1991 1994 1995 1996
Total Employment            
(thousands) 20,327 21,497 22,979 25,166 25,698 27,442
Share of Employment (%)            
Agriculture 49.6 46.1 45.3 44.7 44.1 41.7
Industry 13.8 15.6 16 15.8 15.6 16.6
Manufacturing 9.5 10.4 10.4 10.3 10 10
Construction 3.3 4 4.6 4.7 4.8 5.7
Services 36.5 38.3 38.7 39.5 40.8 41.6
Trade 13 13.8 13.8 14.2 14.6 15.8
Community/Personal 17.3 17.8 17.9 17.8 17.7 18.3

Source: National Statistics Office, Labor Force Surveys, various years.

The relationship between poverty and quality of employment in the Philippines is brought into sharper focus in Table 3.10. In the case of the agricultural sector, which has the highest incidence of poverty and also the largest number of poor people, unpaid and own-account (i.e., self-employed) workers comprise 79.1 percent of the employed, with wage and salaried workers accounting for the other 20.9 percent. Compared with the national average across sectors for 1996 of 52.3 percent and 47.7 percent respectively, it is clear why agriculture bears the brunt of Philippine poverty. Or to look at it in another way: 55.9 percent of own-account workers and 81.4 percent of unpaid workers, categories having the highest poverty incidence and which together contribute the largest number of poor, are employed in agriculture.

 

Table 3.10: Employed Persons by Class of Worker and Major Industry Group, October 1996

Total Employed Class of Workers
Industry Group (thousand) Percent wage & salaried % own account % unpaid %
Philippines 27,442 100 13,096 100 10,297 99.9 4,049 100.1
% 100   47.7   37.5   14.8  
Agriculture, Forestry, Fishery 11,451 41.7 2,394 18.3 5,761 55.9 3,296 81.4
% 100   20.9   50.3   28.8  
Industry 4,567 16.6 3,648 27.9 763 7.3 158 3.9
% 100   79.9   16.7   3.4  
Services 11,419 41.6 7,048 53.8 3,774 36.7 595 14.8
% 100   61.7   33.1   5.2  

Source: National Statistics Office (Manila).

Access to Land and Other Resources

The Comprehensive Agrarian Reform Program (CARP) of 1987 is the major government program aimed at giving priority to 3.9 million farmers in the delivery of land, other assets, inputs and services. Although the 1993–98 MTPDP calls for the “vigorous implementation” of the CARP, the targets of the CARP are not explicitly included in the plan, probably because the schedule of implementation is included in Republic Act (RA) 6657, the law for implementing CARP.

RA 6657 calls for the disposition of ten million hectares, including seven million of public agricultural lands. Using the ten million hectares as a target, the cumulative accomplishments claimed by the government agencies involved as of the end of 1996 are dismal--1.7 million hectares by the Department of Environment and Natural Resources and 2.4 million hectares by the Department of Agrarian Reform (DAR), for a combined accomplishment rate of 40 percent after eight years of implementation, with two years before the program is scheduled to be completed.

While the MTPDP calls for the vigorous implementation of the CARP, very powerful lobby groups in and out of the legislature have persistently tried to reverse it. The successful implementation of the CARP has been obstructed by limited funds and the bureaucratic red tape involved in the land transfer process. It also has been limited by some major loopholes: commercial farm ownership transfers were deferred for ten years, and widespread conversion of lands from agricultural to nonagricultural use and leaseback agreements have been allowed.

 

The Social Reform Agenda

The efforts of the Ramos government toward achieving its human development targets are embodied in the so-called Social Reform Agenda (SRA), launched by President Ramos in mid-1994 during a People-Empowerment Caucus. The SRA has the following goals: the eradication of absolute poverty, defined as incomes below the food threshold level; the reduction of relative poverty; and the fast-tracking of the growth and development of twenty of the “poorest” provinces (which reportedly were personally chosen by the president). In Ramos’s words, “Because the poor cannot wait — we have intervened to put poverty alleviation at the center of government’s concerns. We reject the trickle-down approach.”

The SRA is described as a package of government interventions, organized around nine flagship programs, each under a lead government agency designated as a flagship champion, and each intended to focus on the critical needs of a specific basic sector--farmers, fisherfolk, indigenous people, urban poor, and so forth. The SRA employs the Minimum Basic Needs approach, which uses 33 indicators, reportedly agreed on after nationwide consultations to measure whether the basic needs of survival and security, and “enabling” needs of the individual, family, or community are being attended to.

In theory, this is an excellent strategy because it allows for maximum community participation (in prioritizing their basic needs) and for objective and transparent bases for evaluating the performance of local government executives. Unfortunately there have been problems in policy implementation--a potentially deadly combination of not enough focus and insufficient funds.

The lack of focus is reflected partly by the fact that the Club 20--the provinces specially targeted as the poorest under the SRA, were chosen based on criteria other than poverty incidence, contribution to total poverty, or shortfalls in minimum basic needs or human development. This list includes only six out of the twenty provinces with the highest poverty incidence, only one out of the twenty provinces with the largest number of poor, and only nine out of the twenty provinces with the lowest HDI. In fact, at least six of the Club 20 belong to the “richer” half of provinces--those with the lower poverty incidence. The SRA has since been expanded to cover all provinces, but priority is still given to Club 20 provinces. The concern has been raised that these twenty, being atypical, will not serve well as pilot areas. 4

The lack of funds is not immediately obvious, because on the face of it, the government budget for the SRA increased to P78 billion in 1996--a 270 percent increase from P20 billion the previous year. A closer examination of the components of the 1996 SRA budget submitted by the executive, however, shows that the actual increase was only around P4.5 billion, representing a 6.5 percent addition. Given that the 1996 inflation rate was almost 9 percent, this means that the 1996 SRA budget was smaller in real terms than that of the previous year.

Where did the rest of the supposed P53.5 billion increase come from? That additional amount seems to have been the result of a simple relabeling exercise. Items already existing in the 1995 total government budget but not part of the SRA budget that year were merely placed under SRA in the 1996 accounts. Some of the more glaring examples of this unfortunate relabeling: an P11 billion increase for farmers turns out to be largely (P7.8 billion) a reclassification of the GATT-related budget of the Department of Agriculture under the SRA; another P12.6 billion increase in the SRA budget on second glance turns out to be a large chunk (82 percent) of the budget of the Philippine National Police, now listed under the SRA. It seems entire agency budgets were included, even agencies whose mandates are only remotely related to the SRA.

An even more disturbing aspect about SRA funding, however, is that between 1995 and 1996 budgets corresponding to national support for targeted assistance in food, nutrition, health, water, income security, and preschool all decreased, and that real per capita spending on formal elementary education increased by only 1 percent, compared to the increase in real per capita spending on secondary and higher education by 10 percent. The SRA budget has not done very well by the core poor in this regard.

Indeed, while the government has committed (at the Social Summit in Copenhagen) to 20 percent of its expenditures going to human priority expenditures, it has actually spent less than 16 percent on these basic concerns. Moreover, the national government is spending only 1.6 percent of GNP on human priority needs (the so-called human expenditure ratio). This is only one-third the international norm of 5 percent.

 

Conclusion: Prospects for the Future

Can the gains that have been made in the war against poverty be sustained and the losses reversed? Will the human development targets set out for 1998 be achieved? Those are the gut questions addressed in this conclusion.

While growth is not a sufficient condition for human development, it is certainly necessary. The prospects for the country’s sustained growth are discussed at length in Emmanuel de Dios’s chapter, but briefly, the positive signs for a continuation of the country’s present growth path are given by the structural reforms begun during the Aquino administration that have finally begun to show results in both government and market operations (e.g., deregulation, demonopolization, devolution, privatization, tax reform); the country’s improved credit and financial status; and the smooth electoral transition in 1992. The causes for concern, on the other hand, have to do with policy-induced distortions (e.g., underpricing of capital, overpricing of labor, currency overvaluation in tandem with trade liberalization), as well as wasteful use of resources (e.g., the congressional and executive pork barrels) which could imperil not only the country’s growth but also its human development.

The importance of the “right,” or pro-poor kind of growth cannot be overemphasized. In 1995, for example, although the economy grew by 5 percent, not enough jobs were created to accommodate the increase in the labor force, and wage and salaried employment actually decreased. The rest of ASEAN seems to offer more employment opportunities, as reflected in their lower unemployment rates. The relative quality of this employment may be indicated by the share of manufacturing employment, and here again the Philippines falls short of the other ASEAN countries. (See Table 3.11.)

 

Table 3.11: Human Develoment Indicators, Philippines and Other ASEAN Countries

Indicators Year Philippines Indonesia Malaysia Singapore Thailand
Human Development Index 1993 0.665 0.641 0.826 0.881 0.832
Education            
Mean years of school 1992 7.6 4.1 5.6 4 3.9
Adult literacy rate (%) 1995 94.6 83.8 83.5 91.1 93.8
Primary school completion rate (%) 1993 70 77 96 100 87
Pupil-teacher ratio            
Primary 1992 34 23 20 26 17
Secondary 1992 33 14 19 22 18
Health            
Access to safe water (%) 1990-96 86 62 78 100 89
Access to sanitation (%) 1990-95 69 51 94 99 74
Number of persons per physician 1992 9689 7028 2302 722 4425
Daily per capita protein supply (grams) 1993 52 61 60 -- 54
Daily per capita calorie supply 1992 2257 2752 2888 2929 2432
Income and Employment            
Population in poverty (%) 1989-94 41 16 8 -- 13
Gini coefficient 1975-88 0.45 0.31 0.48 0.42 0.47
Gender empowerment measurement (rank)   39 61 46 44 53
Unemployment rate (%) 1986-90 8.1 2.8 6.9 3.2 2.6
Unemployment rate (%) 1991-94 8.7 2.4 3.5 1.9 1.9
Emplyment share (%) 1995          
Manufacturing   10 11 25 24 12
Agriculture   44 51 19 -- 57

Sources: Asian Development Bank, Key Indicators for Developing Member Countries (New York: Oxford Univ. Press, various years); United Nations Development Program, Human Development Report (New York: Oxford Univ. Press, various years).

The three general areas discussed above, in which government performance is measured against its own targets, are of basic importance in the war against poverty. The first--education and health--has to do with improving human capabilities, and the last two--access to jobs and land--deal with enlarging the opportunities to use these human capabilities. They are obviously mutually reinforcing. Without the capabilities, opportunities cannot be seized. Thus improved access of the poor to human capital development, increased access to land and credit facilities, and the expansion of remunerative employment opportunities represent the long-term solutions to poverty.

Unfortunately, the government’s record in these areas is spotty at best, with perhaps more failures than successes so far. The country clearly lags behind its Asian neighbors in some very important areas of human capital development. The achievement levels in elementary and secondary education are a particular cause for concern, as are the unmet targets (already quite low) on cohort survival rates. The inaccessibility of quality and quantity education to the poor has intergenerational effects, perpetuating poverty.

This is cause for concern, because investment in basic education and health is a common feature of the high-performing Asian economies, or Asian “tigers.” If the Philippines aspires to be one of the tigers of Asia, current and future governments will have to focus more attention and effort on improving the capabilities of the Filipino people and expanding the opportunities that are available for them to make use of those capabilities. Fortunately for the Philippines the country outranks the other ASEAN countries in the Gender Empowerment Measure (GEM), which measures the relative empowerment of women in political and economic spheres of activity. (In a universe of 100 countries, it ranks 39th, higher than Singapore, Malaysia, Thailand, and Indonesia.)

Studies indicate that human capital development and access to land are the most important factors in poverty alleviation in the Philippines. These are, of course, not the only weapons available in the war against poverty. Two other variables that can significantly influence poverty alleviation are infrastructure development (especially roads, irrigation, and electricity) and the policy environment (particularly the agricultural terms of trade). Clearly, unless the Ramos administration implements its Social Reform Agenda properly, continues its structural reforms, discards policies which induce distortions, and puts its money where its mouth is, the gains that have been made in human development cannot be continued, and the losses cannot be recovered.

Endnotes

Note 1: Balisacan, A.M. Poverty, Urbanization and Development Policy (Quezon City: University of the Philippines Press, 1994). Back.

Note 2: Balisacan, A. M. “Poverty and Economic Inequity in the Philippines.” Paper prepared for the Asian Development Bank, 1997. Back.

Note 3: Ibid. Back.

Note 4: World Bank, Philippines: A Strategy to Fight Poverty (Country Operations Division, Country Department I, East Asia and Pacific Region, November 1996). Back.