Philippines - A strategy to fight poverty

Report No. 14933-PH Philippines A Strategy to Fight Poverty November 13,1995 Country Operations Division Country Department I East Asia and Pacific Region Dota.eaFW~h. W.AO.wJV -_.~ .9 . . .- * -. ,.. rw ;'' '' ' ' '" "  CURRENCY EOUIVALENT Currency Unit - Peso (P) US$ = P 25.9 as of October 1995 ABBREVIATIONS AND ACRONYMS ARC - Agrarian Reform Communities ARMM - Autonomous Region of Muslim Mindanao ASEAN - Association of Southeast Asian Nations CAR - Cordilleras Autonomous Region CARP - Comprehensive Agrarian Reform Program CMP - Community Mortgage Program DA - Department of Agriculture DAR - Department of Agrarian Reform DECS - Department of Education, Culture and Sports DENR - Department of Environment and Natural Resources DILG Department of Interior and Local Government DOH - Department of Health DPWH - Department of Public Works and Highways DSWD - Department of Social Welfare and Development FIES Family Income and Expenditure Survey FFW - Food for Work GATSPE - Government Assistance to Students and Teachers in Private Education GATT - General Agreement on Trade and Tariffs GBRP - Grameen Bank Replication Program HUDCC - Housing and Urban Development Coordinating Council IAD - Integrated Area Development IRRI - Intemational Rice Research Institute LBP Land Bank of the Philippines LGU - Local Government Unit MEIP - Metropolitan Environmental Improvement Program MWSS - Metropolitan Waterworks and Sewerage System NCR - National Capital Region NEDA - National Economic and Development Authority NFA - National Food Authority NGO - Non Governmental Organization NNC - National Nutrition Council NSCB - National Statistical Coordination Board OECD - Organization for Economic Cooperation Development SRA - Social Reform Agenda FISCAL YEAR January 1 - December 31  PH ILIPPIN,S ECONOMIC REPORT A STRATEGY TO FIGHT POVERTY Table of Contents Page INTRODUCTION ................................................................i 1. WHY IS POVERTY SUCH A PERSISTENT PROBLEM IN THE PHHLIPPiES ..1 2. SHARING PROGRESS WITH THE RURAL POPULATION .13 3. RAISING LIVING STANDARDS OF THE URBAN POOR .30 4. INVESTING IN THE NEXT GENERATION OF FILIPINOS .45 S. A SAFETY NET FOR THE POOREST .60 6. A STRATEGY FOR POVERTY REDUCTION OVER THE LONG RUN .69 BIBLIOGRAPHY .80 MAP LIST OF TABLES, FIGURES AND BOXES Tables 1.1 Poverty Incidence, Philippines, 1961-1991 .3 1.2 Changes in Poverty Incidence for Selected Countries. 3 1.3 Employment by Sector, Philippines, 1960-1990. 4 1.4 Incidence of Poverty Using Different Measures, Philippines, 1991. 8 1.5 Incidence, Depth and Severity of Poverty, by Region and Sector, Philippines, 1991 .11 2.1 Implementation of the Comprehensive Agrarian Reform Program, Philippines, 1987-94 . 18 2.2 Indicators of Agricultural Lending, Philippines, 1983 and 1993 .22 3.1 Factors Affecting Supply and Demand for Land in Urban Areas .36 3.2 Costs of Land Conversion, Permit Delay and Land Development, Various East Asian Cities .37 3.3 Urban Access to Water, Sanitary Facilities, and Solid Waste Disposal, Philippines, 1992 .41 4.1 Human Development Indicators for Selected Asian Countries .46 4.2 School Performance in the Eastern Visayas and the National Capital Region, Philippines, 1991 .48 4.3 Cost Sharing in Public Education, Philippines, 1986-1994 .50 4.4 Total Health Expenditures and Public Health Expenditure, East Asian Countries . 51 4.5 Demographic Indicators for Selected Asian Countries .55 6.1 Targeting of Provinces: Coverage by Different Poverty Measures, Philippines .75 6.2 Guidelines for Spending on a Poverty Strategy .76  Fi!ures 1.1 Real Income Growth, Philippines, 1961-1994 .............................................................. 4 1.2 Trends in Numbers of Poor and Poverty Gap, Philippines, 1961-1991 ....................................7 2.1 Concentration of Agricultural Land Ownership, Philippines, 1988 .......................................... 14 4.1 Poverty and Primary School Completion by Province, Philippines, 1991 ................................. 47 4.2 Allocation of National Budget to Education, Philippines, 1960-1993 ...................................... 49 4.3 Distribution of Education by Income Decile, Philippines ................................... ..................... 50 4.4 Prevalence of Selected Diseases in Agricultural Workers Compared to Office Workers, Philippines, 1987 .............................................................. 52 4.5 Utilization of Health Facilities by Income, Philippines, 1992 .................................................. -el 3 4.6 Infant Mortality and Primary School Completion by Province, Philippines, 1990 ................... 57 6.1 Revenue Sharing with Local Govemrnents and Poverty Incidence, By Province, 1993 ............ 73 Boxes 1.1 Philippine Labor Market Performance: Translating Growth into Jobs ............... .....................6 1.2 How Many Poor Are There? It Depends How You Count Them ..................... .......................9 1.3 Bunching of the Population Near the Poverty Line .............................................................. 10 1.4 A Portrait of Average Poor Households in Rural and Urban Areas in the Philippines ........ ...... 12 2.1 Rehabilitation of Coconut Smallholdings: Higher Yields Improve Farm Incomes and Export Earnings .26 2.2 The Central Visayas Regional Project (CVRP): Community Management for Sustainable Use of Resources ....................................................... 28 3.1 A Community Study of the Urban Poor: Commonwealth Barangay, Manila ...................... ... 32 3.2 The Community Mortgage Program (CMP): Pooling Community Resources .......................... 35 3.3 The Metropolitan Environmental Improvement Program (MEIP): Creating Jobs Out of Urban Waste. .................................................... 43 4.1 LAKASS - A Community Based Nutrition Action Program .................................................... 56 4.2 Reducing Household Costs of Education .................................................... 58 5.1 Overseas Workers: Overseas Employment Brings Large Benefits Home ..................... .......... 62 5.2 Food Coupons for Better Nutrition in Honduras ..................... ............................... 63 6.1 Chile and Colombia: Complementing Decentralization with Social Investment Funds ..................................................... 78 6.2 Indonesia's Use of an Improved Household Survey for Poverty Targeting ............................... 79 This report is based on a mission to the Philippines in March-April 1995 led by Erika Jorgensen (Task Manager) and including Anil Deolalikar (consultant, poverty profile), David Greene (consultant, rural poverty), Alastaii Blunt (consultant, urban poverty), and Egbe Osifo (EAlCO, social sectors). A number of additional technical working papers served as background, authored by Arsenio Balisacan (consultant, rural land reform), Ramon Clarete (consultant, rural infrastructure), Louis Enoff (consultant, social security), Susan Horton (consultant, labor markets), Shamima Khan (EAlCO) and Richard Bird (consultant) (decentralization), Caroline Moser (TWURD, urban poverty), Edgard Rodriguez (consultant, overseas workers, decentralization), Joanna Ledgerwood (consultant, credit); and Michael Goldberg and Maniza Naqvi (ASTHR, credit). Special thanks go to Charlene Hsu (ENVLW) for the maps and analysis provided by the Geographical Information System, Nam Pham (EAlCO) for statistical support, and Hedwig Abbey (EAlCO) for editing and formatting.  INTRODUCTION 1. The Philippines is entering a new and promising phase in the struggle to lift its people out of poverty. The decade-long effort at macroeconomic stabilization and structural reform is bearing fruit, and the prospects for the higher, sustainable economic growth required to reduce poverty appear good. The Government has taken the bold step of devolving responsibility for key functions to local governments. Although transitional problems are inevitable, this step holds promise of making government more responsive to the needs and desires of the populace. Finally, the Government is launching a new, better-integrated Social Reform Agenda with the objective of mobilizing and coordinating the efforts of the central government, nongovernmental organizations, private enterprise, and communities in the poverty-alleviation effort. 2. This report is an attempt to crystallize key, as yet unresolved, issues in the hope of stimulating an informed dialogue within the Government and within key groups (including NGOs and local government officials). The report is not meant to be a final blueprint for government action. Rather, it is intended to provide substance for an ongoing discussion and debate of the issues related to poverty alleviation in the Philippines. The Bank plans to take this report to the public and discuss it widely with the Philippine Government, with local governments, with beneficiaries, with NGOs, and with the press so that a widely understood and supported strategy can be forged. The Bank will transmit the outcome of these discussions and the various points of view to all participants and work to identify the next phase of our partnership with the Philippines on poverty alleviation. 3. Chapter 1 reviews past progress toward poverty alleviation and the current extent and severity of the problem. It finds that, although the Philippines' social indicators are reasonably good, progress towards poverty alleviation has been slow, and the country has been losing ground relative to its East Asian neighbors and competitors. More than one third of Philippine households still have income below the poverty line. Slow progress primarily reflects inadequate and unsteady overall economic growth, the inheritance of an historic policy bias in favor of capital-intensive, inward-oriented development, continued uneven distribution of income and assets, insufficient investment in human capital development, and limited success of 'afety net" programs. 4. Poverty is overwhelmingly a rural problem. Over half the rural population is poor, accounting for nearly two thirds of the country's total. Chapter 2 examines the dimensions and causes of rural poverty and looks into possible solutions. The basic conclusion is that rural poverty cannot be solved in the agricultural sector alone nor in rural areas alone. Progress requires greater opportunities provided by higher overall economic growth, combined with increased emphasis on human capital development and provision of infrastructure in rural areas, increased research and extension, and improved access to land and modem inputs. The chapter urges a reexamination of land reform, which is entering a more complex and expensive phase. Clear choices need to be made on the future pace of the program and the trade-offs necessitated by budget constraints, while focusing on additional measures to help poor farmers. The report  -ii- downplays the importance of expanding rural credit and argues agaitst subsidiIzation of credit but recommends strengthening and expanding the role of cooperatives. 5. Chapter 3 finds that urban poverty is less extensive and severe -ihaik rural poverty and that the urban poor are more likely to benefit rapidly and directly from accelerated growth. In addition, access to health and educational services is better in urban areas. The key problems of the urban poor are inadequate housing and transport, unsafe and inadequate water supply, and inadequate disposal of human and solid waste. Many of these problems are linked to failure of the urban land market, which results in both poor and nonpoor families living in unsatisfactory conditions on land to which they do not have legal tenure. The report urges exploration of innovative approaches to 'urban land reform" and better provision of urban services related to environmental health. 6. Chapter 4 reviews the state of human capital of the poor anid government efforts to improve it. It finds that there are severe regional disparities in health and education indicators. The level of overall public expenditure on health and education is not as much of an issue Ps its regional distribution and equity and efficiency considerations. The major educational problem is the one third of children who do not complete the primary cycle. The major health problems are preventable diseases such as malaria and respiratory and water borne intestinal ailments. Unfortunately, the report finds the trends in expenditure favoring curative medicine and secondary and higher education. Instead, the chapter emphasizes the need for increased emphasis on improved access to and quality of primary education and preventive, community-based primary health care. 7. Chapter 5 examines the '%afety net" or the efforts of goveii-nenlt to improve the well being of the poor through food subsidies, employment-creating public works programs, 'livelihood development', and small scale credit programs. It finds that most of these prograns have not reached the very poor, have been expensive, and have not produced sustainable income increases. The report urges reexamination of these programs to highlight factors leading to successful outcomes and consolidation of the rapidly growing number and variety of programs. The report points to the dangers of expanding politically popular, but inefficient and ineffective, efforts at the expense of tried and true approaches such as primary education and health care and rural infrastructure. 8. Finally, Chapter 6 provides a summary of the strategy suggested above and outlines the role of the central and local governments in the new era of devolution, in conjunction with the continued strong presence of NGOs. A poverty alleviation strategy for the Philippines should include the following elements: * Continuing the strong focus on economic growth, driven bv opemness and competitiveness and accompanied by macroeconomic stability. * Improving access to the means of production by the rural pooiw t,y focusing rural land reform on the do-able, promoting tenancy reforms and market assisted land reform, and ensuring the essential investments in rural infrastructure and improvements of agricultural extension services necessary to raise productivity and, thus, incomes.  -iii- * Addressing the scarcity of affordable urban housing and threats to environmental health in urban areas by considering a program of urban land reform and extending water and sanitation services to poor urban areas, while slashing public spending on housing (which does not reach the truly poor). * Increasing investment in human capital by improving the quantity and the quality of primary education across the country, easing access to primary education in rural areas, and strengthening primary health services, especially immunization and prevention of water-borne and respiratory diseases. * Consolidating and targeting the social safety net by closing down publicly subsidized livelihood creation and credit to the poor programs and ceasing general food price subsidies in favor of targeted income subsidies or food stamps and supplementary feeding programs. 9. This report was based on a series of technical working papers, which are available upon request. They cover the topics of the poverty profile, rural land, urban poverty, the social sectors, the labor market, overseas workers, and credit.   1. WVHY IS POVERTY SUCH A PERSISTENT PROBLEM IN THE PHILIPPINES? "We regard poverty as another tyranny, oppressing halfof all our population of 66 million - a tyranny against which we must wage the moral equivalent of war. " President Fidel V. Ramos, Speech to the World Summit for Social Development, Copenhagen, March 12, 1995 ' Poverty Rate (%) ' ; Share of the Poor (%) ht a~E < 10 j i < 0.5 l l 1 | 2