FINANCING
SOCIAL PROGRAMS
PUBLIC POLICY AND BUDGET
IN THE PHILIPPINES: RESTRUCTURING
FINANCING
SOCIAL PROGRAMS
PUBLIC POLICY AND BUDGET
Rosario
IN THE PHILIPPINES: RESTRUCTURING
G. Manasan
Gilberto
M. Llanto
Wilfredo
G. Nuqui
Copyright Philippine
_ 1996 by the Institute %r Development
Studies
(PIDS)
Printed in the Philippines. All rights reseiwed. The findings, interpretations and. conclusions in this book are those of the authors and not necessarily those of" PIDS.
Please
address
all inquiries
to:
PHILIPPINEINSTITUTE FOR DEVELOPMENT 4th Floor, NEDA sa Makati Bui.ld{ng 106 Amorsolo Streett, Legaspi Village 1229 Makati City, Philippines Fax Nos. {632) 893-9589 and 816-1091 Tel. Nos. (632) 893-5705 and 892-4059
ISBN 971-564-025-7 RP- 11-96-500 iv
STUDIES
TABLE OF CONTENTS
1
Background
...................
_ ..........
Introduction
....................................
,...
5 14,
......................................
16
User Charges ................................ Privatization .................................
23 26
Official Development Assistance. : ................... Global, Context ............................... Donor Policies ................................
27 27 32
Trends in Official Flows to Philippines Specific Findings and Recommendations
33 42
Summary 2
1 l
Macroeconomic Situation .......................... Government Revenues ............................ Taxes
....
............. ...........
......................................
Inter-Sectoral
Budget
49
Restructuring
................
Distribution of Government Expenditures Debt Service ................................. Domestic External General
Debt
53
Across
Sectors
............................
65
Debt .............................
Public
Administration
55 55 68
...................
75
Social Service Sectors .......................... Economic Sectors .............................
76 82
National
83
Defense
and
Distribution of Government Across Economic Categories Interest Personal Subsidies
Peace
Order .............
Expenditures .......................
Expense
....................
Service
Expenditures
to Government
and
......
.............
Corporations
Maintenance and Other Operating Capital Outlays .............................. Summary
..................................
V
84 . ........ ............
Expense
.........
84 84 89 90 95 l,00
3
Performance, in the Health Situation
Public Expenditures and Nutrition Sector
Analysis
Mortality Morbidity Nutritional Factors Health
and Challenges ................
103
..............................
103
.................................. ........... i ....................... Status ........ : ..................
Affecting
Health
Expenditures
By Economic By Function By Program
Status
.......
1.03 105 106
.................
109
......................
Categories
110
.......................
11.2
.................... ....... _ ........................
.............
113 116
Issues and Challenges ........................... Underinvestment in Health• Relative to Other Sectors ...................... Overallocation
on Curative
Overallocation
on Administrative
Underfundirtg
of Maintenance
123 123
Care .................
123
Services
.........
126
and Operating Expenditures ................... Use of Less Cost-Effective Interventions ...........
128 128
Poor Logistics
129
Management
System
. . ...
.........
Cost Recovery in DOH Hospitals.. ............... Devolution of Health Services ................... Summary 4
1,30 131
.....................................
135
Performance, Public Expenditures and Challenges in the Education Sector ......................... Situation Analysis ................... Gross Enrolment . :.. .........
.... . ......... . .I. _ ..........
Participation Rates ............................. Cohort Survival Rate .... ............. Completion
Rate
Tertiary
Education....
Public Expenditures and the Distribution
....
"........
•
...............
in Education' of Personnel vi
and Facilities
139 139 142 143
. ........
144
.......... .
.
. . .......
...................
Drop-out Rate . . . ..... .' . Graduation Rate
139
.
144 144
.........
147
.......
151
Distribution Public
of Facilities
Expenditure
and
Personnel
on Education
Proposed
Education Solutions
Quality Access
5
. .....
and
State
Efficiency
Interventions
of Schools
...........
167
: ............ Rationalization
169 171 173
...................
174
.....................................
Performance, in the Water Situation
176
Public Expenditures and Challenges and Sanitation Sector ................
Analysis
..............................
2 & 3 Water
MWSS
Summary 6 Political Budget
Water
Issues
and
183 184
.......................
186
.........................
LWUA and General
Services
i ..........
Districts
.....................
Recommendations
Process
of Budget
...............
191 194
Allocation
.............
197
.................................
Key Players and Dynamics of Government Resources
197
in the Allocation .............
....
.......
National Level .............................. Exectztive Branch ........................... Legislative
Branch
Branch....
Legislative
Branch..
......... ...............
..................... ......................
Nongovernment Organizations Assessment ................................... vii
199 199 199
...............
N째ng째vernment Organizations Local Level .................................. Executive
187 188
..................................... Economy
179 180
Institutional Arrangements ..................... National Policies ............................. Levels
160 160 165
Education ......................... of Education .......................
Internal Summary
158
..........
...........................
of Education ............ to Basic Education and
of Higher Relevance
151
................
Issues and Challenges and Problems Basic Education .............................. Tertiary
...........
. . .. ...........
211 213 214 214 215 215 216
7 Summary,
Conclusions
•and Recom_aendations
Sources of Incremental Increased Revenues
Financing . ........
Intersectoral
Reallocations...
Intrasectorai
Reailocations
Matching
Resources
Bibliography
........
219 222
: .................
223
.....................
224
......
...............
List of Boxes,
219
.... ............... : .................
with Needs...i ...
.......
Tables,
i ..........
225
. ............
231
and Figures
_ox 1
The Proposed
20:20
2
User
in Government
3
Cost Recovery
4
Debt
5 6
National Food Authority .............. Board of Investment Incentives...
7
National
8
Local Government
Charges
Compact
Hospitals
in LGU Public
Restructuring
on Human
Development...
6
.............
Enterprises
24
............
28
.............................
Government
Budget Budget
71 .......... : ..........
Process
Process
93 96
......
..............
200
................
204
BOX, TABLE 2, 1
Region 3, Cost Recovery Levels: 1987-1989 ...................................
3, 1
Profitability
Comparison
Government-Operated Private
Sector-Run
Income
Public
Expenditures, 25
Between
Facilities:
and
City
Enterprises 1988
and
Comparable
(In P thousand)
4, 1
Debt Reduction,
4, 2 5, 1
Profile of Foreign Debt (In US $ million) ............. NFA Losses, 1986-1991 (In P billion) ...............
5, 2
Cost of Delivering
NFA Subsidy,
6, 1
Revenue
by Type of Incentives
Foregone
1986-November'1991
viii
1991
(In P million)
(In P billion)
....
27
....
71 73 93
.....
(In P billion)
94 . . . 97
TABLE 1.1
Macroeconomic
1.2
Consolidated
1.3
(In P billion) .................................. Ratio to GNP of National Government
1.4 1.5
Expenditures and Deficit: 1975-1993 (In percent) ...... National Government Revenues, 1975-1992 .......... Tax and Revenue Effort in Selected Asian Countries (In percent
1.6 1.7
Bouyancy Potential
Indicators Sector
Deficit,
of GNP)
Potential and
1.9
Revenue
11 Revenue 15 17 19 1975-1991..
..........................
20 20
from VAT
ODA from Major
Donors
of Donor
.....................
22
to All Recipients
GNP) (In US $ million} .............
ODA from Selected and
1986-1992
............................
the Level of Tax Evasion
(Percent 1.10
Philippines,
8
Coefficient of Major Tax Groups, Revenue from Individual Tax and
the Level of Tax Evasion 1.8
........................
Major
the Philippines:
Donors
to the Rest of the World ......
34
1.11
Summary
35
1.12
by Source, 1988-1992 (In US $ million) ............ Aid Social Allocation Ratio (Ratio of Social Expenditures to Total
1.13
Selected
31
of External
External
Ratios,
Assistance
Assistance)
1988-1991
to the Philippines
to the Philippines
by Major Source, 1.989-1991 ..................... External Assistance Disbursement by Sector and
Subsector,
1987-1992 and Technical
36
...................... Assistance,
37
1.14
ODA Grants
(By sector, in US $ million) ....................... Summary of External Assistance Disbursement
38
1.15
43
1.16
by Type, 1988-1992 Cumulative Official
44
1.17
by Funding Source (As of December 1992} ........... Sectoral Profile of Selected Foreign-Loan Funded Projects Percent
45
2. l
(In US $ million) Loans to Selected
1978-1989
............... Projects
(As of December 1992} ................... Distribution of National Government
Expenditures
by Sectoral
Classification,
ix
1975-1993
....
56
2.2
2.3 2.4 2.5
National
Government
2.7
by Sectoral
Classification, Obligation Basis: 1975-1993 (Percent of GNP) ........... ............. . ...... Real Per Capita National Government Expenditures: 1975-1993 ................................... National Governement Debt Service 1976-1991 ................................... Public
Debt
Instability 2.6
Expenditures
and Bridget
Exchange
Public
Expenditure,
Human
63
Source
of Economic
2.8
Selected
2.9
Government
Country
66
Liabilities
(In US $ Million) .........
Social Allocation,
Development
RatiOs,
Expenditure
Expenditure
Social
Shares,
on Health
.........
1988 .......... and
National
2.11
Classification, Obligation BasiS, 1975-1993 .......... Percentage Distribution of National Government
2.12
Obligation 1975-1993
Number
2.14
Agency
of Developed
2.15
Administrative
Budgets
(In P thousand) Agencies Government in Selected
3.1
infant per
3.3
1992 1992
Causes
1989
..............
................................ Devolved
92 92
deaths
..........................
104
in Selected Asian Countries, i....... .... ........
105
of Deaths:
(Rate per
90 91
of Selected
........................
Rate (Infant
1,000 live births)
Leading
86
Expenditure on Personal Services Countries, 1.986 ......................
Mortality
85
87
Personnel,
Budgets
81
Government,
Devolution,
Service
Infant Mortality Rates 1970-1990 ............... and
3.4
Basis, by Economic .........................
(In P thousand)
2.16
3.2
and
79
by Economic
Interest Payments of the National 1990-1.991 ...................................
2.13
78
Education
2.10
Expenditures, Classification,
Expenditures
69
Priority,
1981-1993
Compared to GDP and Total P_b!ic Expenditures on Selected Asian Countries ...................... Government
61
Expenditure,
....................................
Foreign and
Deficit:
58
1968,
100,000
1978,
population)
Leading Causes of Deaths: 1981-1985, 1987, 1988 and 1989 .......................... X
1988 ...........
106
1986, 107
3.5
Ten Leading
3.6
and 1989 (Rate per 100,000 population) ............ Undernutrition Among Children: •1•978, 1982, 1987
3.7
1989-1990 (Percent of children in age group) Basic Nutrition Indicators for Selected Asian
3.8
(1978) ........................... Micronutrient Deficiencies (Percent
Causes
of Morbidity:
of population
1983-1.987,
1988
........ Countries
_ .... by Type of Nutrient,
group)
108 and
..... 1987
110
.....................
3.9
Fertility Declines in Thailand, Indonesia and the Philippines .......................
3.10
Patterns
3.11
The Department
109
111 ....
112
of Public •Health Expenditures
in Selected in 1985
Asian
Prices
Countries
(Average
of Health (In P million)
3.12
Use of DOH Expenditure
3.13
DOH Programs
1980-1989)
.....................
in 1985
114 ............
by Office and
Service
1993 Appropriations of Resource
113
Prices
(in P million) ..................... of Funds,
.....
Expenditures
(In pesos) 1993
...........
117
3.14
Estimate
.....
125
3.15 3.16
Spending for and Cost of Various Health Services ..... Percent of Households Which Have Used Government
127
Hospitals National
Gap,
115
and Source
(In P thousand)
During the Past Year, Health Survey, 1987 .................... Health
3.17
Per Capita
3.18
Income (PCY) by Region, Population to Government
1988-1991 ........... .... 132 Facility Ratio, 1989/1991 . . 133
4.1
Gross
by •Level of Education
School
Expenditure
131
Enrolment
and by Type of School
(PCHE) and
(In thousand) Elementary
............... School
140
4.2
Participation
4.3
by Region ............ ........................ 142 Survival Rates at the Elementary and Secondary Levels of Education SY 1981-1982 to SY 1993-1994 .......... 143
4.4
Rate of Public
Per Capita
Pupils
Completion Rate in Public Elementary and Secondary Schools, SY 1.981-1982 to SY 1991-1992 ........ . . .
4.5
Dropout Rate in Public Elementary and Secondary SY 1981-1982 toSY 1991-1992 ..................
4.6
Graduation
Rates
of Elementary
xi
and
Secondary
145
Schools 146 Levels.
146
4.7
Number
of Government
by Tertiary 4.8 4.9 4.10 4.11 4.12 4.13
4.15
4.16 4.17
PriVate
Schools
to SY 1.992-1993
Tertiary Enrolment and Graduation SY 1990-1991 . ..............................
by Level, 150 150
....
152 154
.........................
155
Pupil-Teacher Ration in the Elementary and Secondary Level of Education, SY 1981-19g2toSY1991-1992 . . .
156
Budget of Department of Education, Culture as a Percentage of the National Government 1963-1.993 ..................................
159
Percentage of Examinees Who Passed SY 1981-1982 to Sy 1991-1992
4.19
Selected Years (In percent) ...................... Cost Implication of Additional Teachers
of Unemployed
by Highest
Total Enrolment in State Universities by Level of Education ..........................
160
Grade
and
in Water Sector
5.3
Rate and
5.4
1980-1,989 (Rate per 100,000 population) Rate and Number of Morbidity and Other
Number
Sanitation-Related per 10'0,000
Coverage, i
of Diarrhoeal
population)
Colleges 1980-1990
. . 180
(In P million)
. . . 181
Morbidity
Diseases,
for All Ages, .......... water-
182
1980- i989 ...................
183
Metropolitan Water and Sewerage System (MWSS) and Local Water Utilities Admirfistration (LWUA): Selected Financial Ratios, 1985i1992 ............... i
xii
168 . . 170
Schools
172
Water
198!-1989
Completed,
and
Trend
(Rate
Sanitation
IV 161
5.2
and
and
Grades
5.1
Investments
and Sports Budget,
the NCEE
Comparison of Mean Percentage Scores, and VI by Subject Areas ........................ Proportion
5.5
by Level of ..........
Schools ............ SY 1981-1982
4.18
4.20
in Licensure
Number of Government and Private Schools Education, SY i965-1966 to SY 1992-i993 Elementary to Schools,
148 149
Percentage Passing of Tertiary Graduates Examinations, 1985-1989 ......................
Barangays Without Ratio of Enrolment
....
by Field of Study,
Survival Rates in Tertiary Education 1980-1989 ..................................
to SY 1991-1992 4.14
and
Level, SY 1965-1966
'
"
189
6.1
Prioritization
Criteria
of 1993 Budget 6.2
Variance and
Between
General
7.1
Potential
7.2
Programs Additional
1 2
in the Preparation
President's
Appropriation's
Sources
208 Proposed
Budget
Act, 1993-1994
of Additional
Financing
........
1994-1995
(in P billion)
212
for Social
on a Yearly Basis ................ Resources Needed Per Year to Attain
MDG Goa!s, ANNEX
Used
...............................
...............
Sector
......
220 226
TABLE
Items
Included
in Computing
Human
Priority
Expenditures
..........................
Human
Development
Priority
(In P thousand)
Development 228
Expenditures
......................
.........
229
FIGURE
2.1
National Government Expenditures of GNP: 1975-1993 .............................
as a Percentage 54
2.2
Per Capita National Government Expenditures in Real Terms, 1975-1993 . . . ....................
6.1
NationS1
Government
Budgetary
Xlll
Process
...........
60 198
FOREWORD
The study Fund
was
commissioned
by the United
(UNICEF} as part of its advocacy
to promote
sive and cost-effective policy and financing and human development. It identifies issues the realignment
of social
to the Philippines basic services immunization.
and to the
More recently, proposal during
the
concept
in local
mum
basic
the Social larly
to
World League
Reform children
budget such
has
Summit
on Social
decisions,
Agenda. and
and and
The provision
and resource
20:20
would
and the need
at all administrative
levels
with the concept the com-
to implement
the pursuit
of the
the mini-
in the context
of MBN services, require
both
of
particubudget
mobilization.
for continuing and
reform
in the management
interest and of poverty in
in public
Ponciano S. Intal, Jr. President, PIDS
1996
XV
finance
of official
to the country.
December
and
financing
Development, Cities
most
relevance
It is hoped that this study will further generate inquiry into the subject considering the high incidence the Philippines
of the
education
to fight poverty
mothers,
respon-
(ODA} of donors
in support
further
the
of Provinces
(MBN) strategy
the most
as primary
gained
Children's
options toward social and opportunities for
assistance
to adopt
budgetary
needs
restructuring
national
Philippines
1995
of the
the
the study
of the
mitment
development,
population
Nations
flows
ACKNOWLEDGEMENT The authors sions
with
have.greatly
numerous
benefited
individuals.
from meetings Especially
and
discus-
helpful
was
the
seminar-workshop on "RestructUring the Budget for the Social Sector" held on April 18,1994 in Makati which was attended by a large number of scholars, officials in related areas. page 237. The
authors
experts, practitioners and government The names of participants are listed on
acknowledge
support of the United made this undertaking
Nations possible
with
deep.
gratitude
Children's Fund and the valuable
the
(UNICEF) comments
Keshab B. Mathema, former UNICEF Area Representative Philippines, Papua New Guinea and the Pacific. Needless to say, all errors bility of the authors.
and omissions
xvii
financial which of Mr. for the
are the sole responsi-
1 Background
INTRODUCTION
AFTER
posting
during
the
nomic
crisis
a creditable
1975-1982
economic
period,
in 1984-1985
the
growth
Philippines
when
Gross
rate
of 5.6 percent
faced
Dgmestic
its worst Product
eco(GDP)
shrunk by 7.3 percent yearly. Since and bursts. There was a turnaround GDP grew
at an estimable
then, growth has come in fits in the economy in 1986 when i of 5.7 percent yearly from 1986 to
rate
1989. However, the economy had not been s_ccessful in preserving this growth momentum. The economy started to weaken in 1990 ! and
once
had been
again
GDP growing to the
political
As a result, most
a mild contraction i
countries
implementation instability per capita
of structural
income
reforms,
and ! I
1990,
Recovery
in 1992, and
in 1993. The problem I
uP to 1989
in the region.
in 1991.
in a virtualIstandstfll
by a low 1.7 percent
halting
burden, shocks.
GDP suffered
slow with the economy
was traced heavy and
debt
external
was only $805 in 1992, lower than I worrisome, the incidence !
Even more
of
poverty had it deteriorated
not significantly declined in tl_e last 20 years. In fact, / slightly from 45.5 percent in 1988 to 44.5 percent in I 1991. At the same time, unemployment and underemployment rates
remained high at 11.3 and 22.2 percent, resPectively , in 1993. Also, the Philippines had not performed ! well in terms of most human
development
indicators.
While
significant
!
improvements
2-
Financing
were registered since then.
in the
1960s
Social Programs
and
1970s,
in the Philippines
they were slow to come by
Improvement in the population's overall health status decelerated- in the period between the mid-1970s and the mid-1980s as indicated by thestagnation in the infant mortality rate (59 per 1,000 live births in 1980 to 57 in 1990). And yet, the leading causes of death amongchildren diseases, diarrhea
are highly preventable, and measles. In turn, the
namely: respiratory prevalence of these
diseases may be traced to the slow decline _of the fertility rate, environmental sanitation, and infant and child malnutrition. Philippines'
population
growth
and is still one of the highest of the population access
had access
to sanitary
toilets.
children
were underweight,
stunted
and the health
is fairly
in the region, to safe water
of 9 percent
reported
a 93.5
percent
children
aged
in 1990, only 80 percent only 70 percent
growth
had
of preschool
of 11,6 percent
were
werewasted.
a quarter of the population as of 1989 although the
literacy
years
at 2.4 percent
14 percent
the physical
more than illiterates
stable
while
In i989-1990,
Meanwhile, to be functional
7-12
rate
poor The
rate.
Although
are enrolled,
there
some
were found 1990 census 85 percent
is a high dropout
of rate
in the primary grades (30 percent in 1991). Thus, Some 1.5 million children are out of school. About one-fourth of all barangays in the country schools
do not have elementary schools have incomplete facilities.
In response
to these
problems,
while many
the government
of those
existing
committed
itself
to attain as priority the social and human development goals in the Medium-Term Philippine Development Plan, 1993-1998. Moreover, mid-decade goals also established. Inhealth,
(MDGs)
the goals
째 eradication * elimination
for Filipino
least
80
pregnant
mothers
were
of measles
tetanus; cases
by 90
death by 95 percent; 째 achievement and maintenance immunization
and
are:
of polio; of neonatal
째 reduction
children
Coverage
percent, women;
of at
of one-year
tetanus
percent least
and 90
old children
immunization
measles percent and
coverage
at of
Background.
-a
• virtual
elimination
• universal
of vitamin
iodization
• -certification • achievement and
A deficiency;
of salt;
of all hospital s .as baby-friendly; of 80 percent_ use 0f oi_a1rehydration "
• adequate infections
therapy;
managemen{ Of pi_eumonia and respiratory among children under five years 01d in at least
50 percent
of all government
In the field of education,i
facilities;
the mid-decade
• increase
elementary
percent; • increase
elementa_ry
percent i and • increase literacy
health
scl_0ol sch0ol
goals
are:
participation cohort
rate
survival
to 92
rate
to 76.5
rate to 96.5.percent.
In water and sanitation, the goals are: • increase access to safe water from 73 to 84 percent households;
• increase access of all households. With thepolitical
of all
and tosanitary
toilets
commitmentgiven
from
68 to 81 percent
by the President,
the most
important constraint to the achievement of these goals is financing. Alano et al. (1993) estimated that the •total cost of the mid-decade goals for the health and-nutrition 1995 is P4.0 billion. In 1993, between
the funding
sector alone the resource
requirement
for the years 1993 to gap, the difference
and .the available
resources
from
both government the total resource
and donors, was P798 million or 65.4 percent of need. For that year, the share of donor agencies
to t0tal resources
available
•at 54.3 major
percent. shifts
assistance mobilize
This highlights
in donor
policies
than
that of the government
the vulnerability and
allocation
The years sector
goals from domestic 1991 and limits
1992
the options
sources,
showed
that
of the programs
of official
(ODA). In turn, this points to the more resources for the mid-decade
development public
was larger
both
increased and other public
the fiscal
to
development
and private.
position
open to the government
need to human of the
in support
4
Financing
of economic The stringent
Social Programs
recovery, sustainable monetary and fiscal
growth ceilings
in the Philippines
and poverty alleviation. under the International
Monetary Fund (IMF) stabilization program restricted the government's ability to pump-prime the economy and stimulate economic revival. sary
Also, they prevented
infrastructure
same
time,
the poor state
government safety nets that that
the government
projects
needed
from financing
for long-term
of the country's
neces-
growth.
fiscal
position
At the
made
the
unable to expand social services and provide adequate to protect the most vulnerable groups from the burden
comes from stabilization and structural adjustment have to take place if growth is to be sustained. Keeping
the fiscal
be a pressing
problem
deficit
at manageable
levels
in the near/medium
term
processes
will continue
to
and this will tend
to keep the overall level of government expenditures revenue effort of the government will, of course,
low. Raising the have a positive
impact on government expenditure. Like infrastructure, which has been deprived of adequate funding during most of the 1980s, the social sectors have to compete with other sectors for the use of available resources. The primary, increasing sector, trol,
objective
financial
in general, mother
education, tional
mentation, particular.
resources
and
child
earlychildhood
child
priority
health,
concerns
basic
and
practices,
Wh_le the principal
for
training,
care,
and
family
focus is on budget
voca-
supply
micronutrient
con-
primary
education
water
for
of the social
(e.g., disease
secondary
technologies
education feeding
the potential
curative
development,
low-cost
hygiene
is to assess
to meet the requirements
and human
training,
sanitation,
of this study
and
supple-
planning),
restructuring
in , the
study will also explore changes i-n nonbudgetary public policies (e.g., cost saving, cost shifting and quality enhancement measures) which will ensure
that
as possible operations.
in terms of beneficiary coverage Specifically, it will (a) examine
nontax
resources
existing
resources
for the social
are Ibeing
sectors;
.and
used and how suggest
as productively cost efficiency of to raise tax and public
policies
that will encourage the private sector (including households) to fund social sector concerns; (b) assess the Sectoral distribution of national government expenditures with a view toward intersectoral and
intrasectoral
(in the case of the social
sectors)
budget
restruc-
Background turing;
5
(c) document
the
decisionmaking
process
and
the
policy,
organizational and management framework and issues which ern budget allocation at the national and subnational levels;
govand
(d) analyze external assistance as a source of increased social sector expenditures. The study will cover the period 1980-1992. The rest of this chapter consists of three sections. The first section
presents
Its purpose constraints
an overview
of the
macroeconomic
is to indicate in broad terms to increasing financial resources
environment.
the opportunities and for the social sectors.
The second explores the possibilities of mobilizing ernment revenues from both tax and nontax sources examines
the
funding
social
Chapter
trends
and
service
expenditure.
patterns
2 reassesses
the
in ODA and
overall
trend
additional govwhile the third its potential
and
for
composition
government expenditure in the last decade. It aims to identify where reallocations can be made in favor of the social sectors current
level of resources
chapter,
the trend
compared
On the pattern
other
sectors,
hand, the
allocation
in order
and
government
Chapter 7 summarizes mendations.
Chapter
resources
the findings
measured
in terms
growth, the economic 1960s and the 1970s
of either
the and
where
(Box
spending sanitation
savings
can be
of lower-cost alternaof services and where 6 documents
the political to the
economy social
of this study
MACROECONOMIC When
areas
application targeting
discusses
Report
5 review water
will be
Development
Development
and
to identify
In this
expenditures Nations
3, 4 and
education
are needed.
process
greater
Human
Chapters
through policy shifts, the cost recovery and better
additionalresources secure
in government
1991
health,
respectively,
to the government.
set by the United
(UNDP) in the
within
is available
pattern
with the targets
Programme 1).
made tives,
and
that
of areas given
the budget of trying
sectors.
to
Finally,
and makes
recom-
or per capita
income
SITUATION
GDP growth
performance of the Philippines compares favorably with that
during of other
the less
Background developed
7 countries.
panded
by an
percent
average
From
annual
1965
average
to 1980,
the country's
of 5.9 percent
for middle-income
GDP ex-
as against
less developed
the
countries
6.2
(LDCs).
Also, per capita income grew by a yearly averag e of 2.7 percent during the period, slightly higher than the 2.5 percent average growth
rate of per capita
•However, that
even during
the pace
deficit 1979.
income the
of.growth
swelled from The inflation
in middle-income
1970s,
there
LDCs.
were already
was not sustainable.
indications
The current
account
1.2 percent of GNP in 1974 to 5.4 percent in rate was in the vicinity of 17 percent from
1979-1980. Real GDP growth
started
an average
annual
it declined
to 3.4 percent
percent
growth
to decelerate
in the early
rate well above inl 1981,
in -1983. The economy
5 percent
3.6 percent
percent
in 1985. Unemployment
percent
in 1984 and 7. I percent
From
in 1975-1980,
in 1982,
then took a precarious
growth contracted by 7.3 percent 1984 and i985. Inflation surged
1980s.
turn
and
1.4
and GDP
yearly for two consecutive years, to 50.3 percent in 1984 and 23.1 rose to unprecedented in 1985. The current
levels account
of 7.3 deficit
ballooned to $3.2 billion in 1982 before declining to $2,75 billion in 1983 and $1.12 billion in 1984 after the institution of foreign exchange Thus,
controls
i. 1).
in _1984, the Philippines
in its post-war developments weather the situation
(Table history.
This
was
faced
at home and abroad. two oil price shocks and
in the
1970s
the worst
brought
about
economic
crisis
by unfavorable
The Philippines was able to the worsening terms of trade
via a c ountercyciiCal
exPansionary
expendi-
{ure .program that was supported• by external financing. This approach proved to be unsustainable in the early 1980s for a number of reasons. First, the world economic recession lasted longer than
expected.
•Second,
the period (compared have the •wherewithal political
difficulties
foreign
capital
was not as accessible
to the 1970s) so that the government to finance the external imbalance. in the
domestic
front
in 1983
during did not Third,
led to massive
capital flight that exacerbated the situation. Fourth, the government delayed the conduct of structural reform measures that would have improved the overall economic to the massive investments
efficiency and implied greater returns that were put in place. While some
TABLE1.I MACROECONOMIC INDICATORS Years
1975
1976
1977
1978
1979
1980
1981
1982
1983
RealGNPGrowthRate(%) RealGDPGrowthRate.(%) REALGNPPERCAPITA
4,87 5,56 10722
8.16 8,81 11290
5,79 5.60 11628
5.47 5.17 11940
6.39 5,64 12368
4.62 5.15 12596
3.24 3.42 12684
2.84 3r62 12724
1.51 1.87 12601
Inflation Rate(CP_) Jnflation Rate(GNP) Inflation Rate(GDP) T-BillRate(91days) CurrentAccountBalance(US$ billion) CurrentAccountBalancelGNP in (%) Na_on a[G0_em mentDefidt/GNP in (%)
6.76 9.34 9,32 10.34 -0.89 -5.99 1.30
9.23 8.32 8.30 10.19 _1,05 -6.19 1.86
9.92 8.26 8,27 10,9 -0.75 -3.84 1,97
7.42 9,33 9,33 10.89 -1,1 -4.87 1,30
16,5 14.84 14.84 12.25 -1.5 -5,44 0.17
17,61" 14.24 14.25 12.14 -1.9 -5,87 1.39
12,37 11,70 11,70 12.61 2.06 5.80 4,33
10,2 8.68 8.70 13.81 -3.2 -8.72 4,59
10,18 14,13 1422 14.17 -2.75 -8.41 2.05
Consolidated PublicSectorDe_cit/GNP in(%) ExternalDebt(US$ billion) Exchange Rate. RealInvestments (sharetoGNPin%) Expods(US$million) Exports/GNP in(%) Imports(US$ million) Imports/GNP in (%) M3/GNP Unemployment Rate . •
4.94 6,77 .8.07 10.69 13.35 17.25 20.89 24.68 24,82 7.25 7.44 7.4 7.37 7,38 7.51 7.9 8.54 11,11 30.93 33.13 30.83 30.76 33,05 29,14 27.57 28.2 30.07 2294 2574 3151 3425 4601 5788 5722 5021 5005 15.45 15.18 16,14 1515 16.68 17.87 t6,11 13,68 t5.31 3459.2 3633.5 3914.8 4732.2 6141.7 7726_9 7945,7 7666.9 7486.6 23..29 21,43 20.05 ,20.94 22.27 23.86 22.37 20.88 22,90 0.27 0.28 0.30 0.31 0.28 0.28 0.29 0.30 0.31 4.2 5.2 4.5 4.1 4.2 5.0 5.3 6.0 4,4
_
o_ _ ;_
O_
TABLE1.1(continued) MACROECONOM]C INDICATORS Years RealGNPGrowthRate(%) RealGDPGrowthRate(%) REALGNPPERCAPITA InflationRate(CPI) Inflation Rate(GNP) Inflation Rate(GDP) T-BillRate(91days) CurTent AcceuntBalance(US$ billion) CurrentAccountBalancelGNPin (%) NationalGovernmentDeflcit]GNPin (%) ConsolidatedPublicSectorDeficit/GNPin (%) ExternalDebt (US$ billion) ExchangeRate RealInvestments(shareto GNPin %) Exports(US$ million) Experts/GNPin (%) Imports(US $ million) _mportsJGNP in (%) M3/GNP UnemploymentRate
1984
1985
1986
1987
1988
1989
1990
1991
1992
-8.82 -7.32 11211 50.34 53.52 53.34 30.53 -1.116 -3.67 1,98 25.42 16.7 22.48 5391 17.70 6069.6 19.93 0.24
-7.03 -7.31 10172 23.11 17.62 17.63 26.81 -0.103 -0.34 2.00 6.51 26.25 18.61 15.77 4629 15.49 5110.7 17.10 0.24
4.15 3.42 10341 0.75 2.96 2.95 14.43 0,996 3.41 5.24 4.98 28.26 20.38 16.34 4842 16.55 5044 17.24 0.24
4.61 4.31 10563 3,79 7,54 7,50 11,39 -0.444 -1,36 2.49 2.30 28.65 20.57 18.3 5720 17.54 6737 20.66 0.24
7.68 6.75 11110 8.76 9.61 9.65 14.67 -3.9 -10.39 2.93 3.75 27.92 21.1 18.55 7074 18.85 8159 21.74 0.25
5.88 6.21 11495 10.6 9.03 9.03 18.64 -1.456 -3.46 2.14 4.20 27.6 21.74 22.12 7821 18.60 10419 24.78 0.28
4.48 2.66 11740 12.65 12.9l 12.95 23.67 -2.695 -6.08 3.45 5.00 28.5 24.31 22.42 8186 18.45 12206 27.52 0.28
0.41 -0.50 11528 17.71 16.97 16.93 21.4 -1.033 -2.27 2.09 t.95 30.0 27.76 19.75 8839 19.43 12051 26.49 0.27
1.03 0.10 11395 8.93 7,78 7.81 16.02 -0.994 -1.92 1.16 1.93 31.9 25.51
7.3
7.1
6.7
9.1
8.3
8.4
8.13
1058
9824 18.19 14519 26.88 0.28 9.78
10
"
Financing
. measures
tending
to liberaiize
instituted
in 1981-1983,Panteand
Social Programs the trade
in the Philippines
and financial
Medalla.{1990)
sectors
pointed
were
out that
the. growth..0f dii_ect and indirect government interventions in. the -ec0_n0mY..dtirin.g the 1970s and t.he.eai"ly..1980 s grossly undermined the .market mechanism, and discouraged private sector :initiative. . The public
enterprise
sector
expanded
rapidly..
Moreover,.icronyism
•gave monopoly powers to the leading p01itieal/economic groups with. inte#est-in.certain sectors, notably, sugar and coconut. Also, .the. biases
of the import
substitution
strategy
pursued
was, to .a large extent, maintained despite toward a more liberalized trade regime. Given this setting ,.th eAquino, to embark
on. a structurai.reform
in 1986_ The major • liberalization, " regulation,
elements
financial fiscal
market
the 1950s to move.
administration
had no choice
program,
it assumed
power
are privatization,
trade
when
of this program
policy reform
since
.some attempts ..
liberalization, and
•foreign •exchange
investment
but
de-
policy reform.
•The e donomy rebour/ded from the recession of 1984-•1985 with. a creditable GDP growth rateof 3.14 percent in 19•86. From 1987 to 1989, GDP'grew •recovery proved
by an &nnu-al-average to be unsustainabte.
of 5.5 percent. However, the Thusi the economy faltered •
.once.. again fin. !9.90:.as :the rate Of GDP gl:owth decelerated •to 2.4 .. percent2 GDP contracted by 0.5 percent in 1.991 but grew at an : almost imperceptible •Imports expanded 1990 with.detrimental a surplus account
of $996
rate in 1992 (Table1.1).. .: more.rapidly than exports between 1986 and effects on.the current account balance. From mitlion
posit!0 n quickly
%-.of:GNP) .in-1987, in •1.990. :: ' The fiscal
in
degenerated
bottoming
deficitlof
1986 out-at
(3.4 % of GNP), to-a deficit $2695 .:
the centralgovernment
the current
of $444 •million
million -was
(6.1%:of large
( i.. 4 GNP)
(5..2 % of
..GNP) in 1986 because • of huge _eiecti0n-related exisenditures , the transfer of the liabilities of the government financial institutions to the central gram, and
government as. part the expansionary
undertaken
to pump
subsequently government's ernment
deficit
prime
of the former's rehabilitation expenditure program that
the economy
(Table 1.2). The deficit
prowas was
trimmed down to 2.1 percent of GNP in 1989 as the tax effort ratio improved. However, the national govsurged
to 3.5 percent
of GNP in 1990
because
of an
•
TABLE1.2
t_
CONSOLIDATED PUBLICSECTORDEFICIT PHILIPPINES,1986- 1992 (In P billion)
TOTALCPSD (Percentof GNP) NationalGovernment MonitoredGOCCs OPSF Adjustments PSBR SSSIGStS CentralBank GFIs LocalGovernmentUnits Adjustments. PERCENTOF GNP NalJonalGovernment MonitoredGOCCs OPSF Adjustments PSBR SSS/GSIS CentratBank GFls LocalGovernmentUnits Adjustments
1986
1987
1988
1989
1990
t991
1992
-30.84 -5.t7 -31,25 -6.78 0.00 10.84 -27.17 5.55 -18.20 -12.40 1.30 20.30
-12.87 -1.90 -16.69 0.25 0.00 6.79 -9.66 5.06 -10.70 1.02 0.30 1,00
-29.71 -3.73 -23.21 2.94 0.00 -0.38 -20.64 4.54 -16.90 i .79 0.10 1.40
-38.43 -4.21 ' -19.57 -3.00 -8.10 5.45 -25.21 .4.00 -20.90 2.68 1.10 -0.10
-53.95 -5.01 -37.19 -19.14 -2.90 13,25 -45.98 10.41 -21.90 3.12 0.20 ,0.20
-24.66 -1.95 -26.35 -7.40 11.80 7.06 -14.88 8.10 -21.17 239 1.00 -&10
-26.60 -1.94 -15.97 -10.66 5.44 0.33 -20.86 8.19 -21.54 3.84 0.17 3.60
-5.24 -1.14 0.00 1.82 -4.56 0.93 -3.05 -2.08 0.22 3.40
-2.46 0.04 0.00 1.00 - 1.42 0.75 -1.58 0.15 0.04 0.15
-2.92 0.37 0.00 -0.05 -2.59 0.57 -2.12 0.22 0.01 0_18
-2.14 -0.33 -0.89 0.60 -2.76 0.44 -2.29 0.29 0.12 -0.01
-3,45 -1.78 -0.27 1,23 -4.27 0.97 -2.03 0.29 0.02 0.02
-2,09 -0.59 0.94 0.56 - 1.18 0.64 -1.68 0.19 0.08 -0.0t
-1.17 -0.78 0.40 0.02 -1,52 0.60 -157 0.28 0.01 0.26
_,
TABLE1.2(continued) GNP{NOMINAL)
596.28
678.13
795.66
913.84
1076.84
1261.65
1370.38
21.61 3.62 -1.55 8.97 1.50
36.91 5.44. 3.54 34,73 5,12
45.87 5.76 2.03 33,06 4.15
54.71 5.99 1.78 37.18 4.07
71.11 6.60 1.59 39.07 3.63
• 74.92 5.94 3.98 71.44 5.66
79.57 5.8l 3.87 74,.51.
NG InterestPayments As percentof GNP As percentof GNP Primary Sector Surplus excluding CB deficit As percent of GNP
Source: Fiscalpolicy and PlanningOffice, Departmentof Finance Notes: CPSD- ConsolidatedPublicSectorDeficit GOCCs- Government-Owned andControlledCorporations PSBR- PublicSectorBorrowingRequirements GFIs- GoveinmentFinancialInstitutions
7. c_ _
.C",
_. h_
Co
Background
13
unprecedented rise in interest payments and salary adjustments of government personnel.
increased
outlays
for
After declining from 5.2 percent of GNP in 1986 to 1.9 percent in 1987, the consolidated public sector deficit surged once again to 5.0 percent in 1990 because of huge Central Bank losses and large subsidies arising from the failure to adjust petroleum product prices to reflect financed percent
the higher prices through money in 1986
to 17.7 percent
The unsustainable confluence of external dictated anemic
during the Gulf war. The deficit was partly creation, and inflation zoomed from 0.8 in 1991.
growth in 1986-1989 may be explained and internal factors, some of which
by natural laws while growth in the developed
country's exports hit by a number overall output infrastructure.
by a were
others were man-made. First, the countries lowered demand for the
during the period. of calamities that
Second, •the country was badly had deleterious effects on the
growth and devastated huge amounts of government Third, incessant political instability led to a crisis in
investor
confidence.
duced.
Implementation
Fourth,
part
of the deterioration
of policy
reform
was policy-in-
measures
was
delayed
so
that the structural weaknesses of the economy persisted through the late 1980s. Moreover, it is well documented that the stabilization program•
consisting
response
to an impending
of tight
monetary
and
fiscal
balance-of-payments
policy crisis
pursued
in
in 1990
was
very costly in terms of economic growth (Krugman et al. 1992). Government expenditures proved to be highly vulnerable to the fluctuations
in the
macroeconomic
environment.
The
central
gov-
ernment expenditure ratio (i.e., the ratio of central •government expenditure to GNP) exhibited a strong positive relationship with the growth rate of nominal GNP. Thus, during the economic crisis from
1983
dropped 1982.
to 1985,
the
to 14. I percent Following
ration
of GNP to government
from an average
the recovery
of the economy
expenditures
also expanded
the economy expenditures
took another downturn dropped to 18.8 percent
Moreover, the amount revenue
and peaked
the government of resources
effort)
and
the
ratio
in 1986,
at 20.2 percent in 1991-1992, of GNP in 1992.
expenditure
available
expenditure
of 17.0 percent
in 1981-
government in 1990. As government
ratio was also limited
(measured
of GNP to the
by the government's national
government
by
14
Financing
deficit.: as
1 Specifically,
(a) the
rate
improved,
and
the
Social
central
government
section
of nominal
QNP went
(c) fiscal
deficit-GNP
ratio
nues.
reviews
It also
government
however,
incremental
resources,
revenues
that the be
spend
on the
central
government
P0:16
on human
branch
the
P0.23
as a reaction
sector to the
by the marginal
uses
social
sectors. section
propensity performance,
Similarly,
expenditures
an
for the
additional
in this
service
sectors
from
it should emerging
allocation shortage
It should
Of the
on tl-ie social
budget
severe
additional
it generates.
suggested in
all
onpast
HOwever,
reve-
sources.
provided
Based
priority
it mobilizes.
in Chapter-6
infrastructure
revenues
•revenue
raising
Will be rival that
government's
development
revenue
there•
sectors.
spends
of additional
discussion
the
by service
in
non-tax
likely
effort
1.3). 2
of government
will be secured
of additional
social
peso
the
since
is not.
(b)-revenue
rose
3
ioptions and
ratio
(Table
_patterns
tax
that it
adjusted
every
of additional
both
will be generat_ed
estimates
should
and
various
from
up,
grew
REVENUES
trends
presents.the revenues
be emphasized,
Thus,
•the
in the Philippines
expenditure
of growth
GOVERNMENT
This
Programs
to the from
it spends every
peso
be noted
that
preference in
in basic
the
for
Executive
infrastructure
1. In principle, the level of government expenditure together with the level of government revenue determine the fiscal deficit. In practice, the fiscal deficit tin'get is first established within the context of the IMF stabilization progrmn mid then government expenditure is estimated as a residual after ascertaining the likely level of government revenues_ 2. The following relationship was obtained when the central government expenditure - ratio, CGER was regressed against nominal growth rate of GNP, the. revenue effort of tt_e central government, REVR and fiscal defiait-GNP ratio, DEFGNP: CGER = 0.0747 + •0.0016+ 1.4182 REVR + 1,3827 DEFGNP (0.108) (0.025 (0.000) (0:001) r 2 = 74.1 D.W. _ 1.112, where numbers in parenthesis refer to level of significance 3. This section draws heavily from Rosario G. Mmlasm_, '_Breaking Away From the Fiscal Bind: Reforming the Fiscal System," Philippine Institute for Development Studies, 1994.
Background
15 TABLE1.3
RATIOTO GNPOF NATIONALGOVERNMENTREVENUEEXPENDITURES, AND DEFICIT:1975-1993 (In percent) NominalGNP Year
Revenue
Expenditure
Deficit
GrowthRate
1975
15.65
16,96
1.30
14.66
1976
14.34
16.20
1.86
17.15
1977
13.81
15.79
1.97
14.53
1978
14.45
15.75
1.30
15.31
1979
14,48
14.65
0.17
22.18
1980
14.28
15.67
1.39
1952
1981
12.81
17.14
4.33
15.32
1982
12.19
16.78
4.59
11.76
1983
12.56
14.61
2.05
15.86
1984
11.18
13.16
198
39.98
1985
12.40
14.40
2.00
936
1986
13.29
18.53
5.24
7.23
1987
15.39
17.87
2.49
12.50
1988
14.25
17.18
2.93
18.04
1989
16.67
18.81
2.14
15.45
1990
16.77
20.22
3.45
17.97
1991
17.44
19.52
2.08
17.40
1992
17.54
18.70
1.15
9.28
1993
17.26
18.63
1.37
8.99
Sourceof basicdata:
NationalStatisticalCoordinationBoardand Bureauof Treasury, Departmentof Finance,
16
Financing
sufferred
in recent
propensity data
years. 4 Because
to spend
will tend
Social Programs
on the social
in the Philippines
of this, estimates
of the marginal
sectors
from
obtained
historical
to be on the high side.
Government revenues may come from tax and nontax sources. Taxes remain the principal source of income for the central government,
accounting
(or 15.2 consist
for 86 percent
% of GNP in 1992). of grants,
user
of national
In contrast,
charges;
government nontax
income
revenues
revenues
from public
which
sector
enter-
prises, and proceeds from the privatization contributed 14 percent of national government revenues (or 2.5 percent of GNP) in the same year(Table
1.4).
Taxes One of the nagging half
of the
However,
problems
1980s
was
the Tax Reform
tax measures as it resulted
the
the
economy
precipitate
Package
of 1986,
put in place in the ensuing in a significant improvement
total tax revenues m 1-975-1985
to GNP climbed
to 15.2 percent
had
decline
to face in the first in the
together
effort. 5
with the other
years, reversed that trend in tax effort. The ratio of
from an average
in 1992
tax
of 11.3 percent
(Table 1.3). This development
allowed the Philippines to partly catch up with the tax effort of other Asian countries. However, despite this improvement, the co.untry continued South
Korea
Hand ance
to lag behind
the
and Thailand
in hand
performance
(Table
Malaysia,
1.5).
with the improvement
of the tax system
of Indonesia, in overall
has been a notable
change
revenue
perform-
in the composition
of national government taxes in recent years. The marked rise in the share of direct taxes to total taxes is a. positive development, being 'indicative
of some
improvement
system.
The proportion
(which
comprise
expanded
close
dramatically
in the
contributed to 95 from
progressivity
by taxes
percent an average
of the
on income
of aggregate of 25.3
tax
and profits direct
percent
taxes)
in 1975-
1985 to 3316 percent in ].992 (Table 11.4). Conversely, excise taxes accounted for a declinit_g share of total taxes between 1987 and 4. Over-time,the Legislative b_'anch has been Consistent in its prelerelme for the infrastructure sector in .budget allocation. 5. Tax effort is defined as the ratio of tax rever_es to GNP.
b_
TABLE1.4 NATIONAL GOVERNMENT REVENUES, 1975-1992 % Distribution
C3
1975. 1982
19831985
19751985
19861992
1986
1987
1988
1989
1990
1991
1992
TAXREVENUES
86.60
88.20
87,30
83.04
82.64
83.25
80.06
80.35
83.86
82.56
85.99
1.Bureauoflnternal Revenue of which: a.Incomeandprofits b. Excisetax c. Salestaxandlicenses 2.BureauofCustoms ofwhich: a,rmportdutiesandtaxes 3,OtherOffices
52.51 " 55.40
53.78
55.42
59.06
56.78
56.46
53.80
57.48
52.66
55.!7
21.42 14.13 11,78 29.72
23.24 17.63 11,17 29,43
22.22 15.67 11,51 29,59
26,25 15,14 11.19 26.56
24.16 20.67 11.67 22.08
21.12 21.94 11.75 25.18
24.29 17.36 10,95 22,t6
24.66 16.31 10.29 25.18
27.42 15.96 11.51 25,40
27,65 11,51 10.96 29.16
28.89 11.38 11.45 30.02
28.17 4.37
27.68 3.38
27.95 3.93
26.50 1.06
21.27 1.50
25.17 1.29
22.16 1.43
25.18 1,37
25.40 0.98
29.16 0,74
30.02 0.80
13.40
1t,80
12.70
16,96
17.36
16,75
19.94
19.65
16.14
17.44
14.01
11,91 1_71
9.83 0.00
10,99 1.'01
7.19 4.78
9.34 2.41
8.00 1.88
7.79 1.56
6.60 0.69
8.36
10,39
2.43
NONTAX REVENUES of which: Usercharges Saleofassets TOTALREVENUE
100.00 100.00 I00.00
100.00 100,00 100.00 100,00 100.00 100.00 100.00 t00.00 I,,w.
,,q
TABLE14 (continued) % to GNP
19751982
19831985
19751985
19861992
i986
1987
1988
1989
1990
1991
1992
TAX REVENUES
1.87
10.59
11,26
13,55
10.98
12.81
11.41
13,40
14.07
14,44
15,15
1, Bureauof InternalRevenue
7.20
6.65
6,94
9,04
7,85
8,74
8.05
8.97
9.64
9,21
9.72
of which: a. Incomeand profits b. Exciselax c, Salestax and licenses 2. Bureauof Customs of which:
2,93 1,94 1.61 4.07
2,79 2,12 1,34 3.53
2.87 2.02 1.48 3,82
4.28 2.47 1.83 4,33
3.21 2.75 1.55 2.93
3.25 3.38 1.81 3.87
3.46 2,47 1,56 3,16
4.11 2.72 1.72 4,20
4.60 2,68 1,93 4,26
4.84 2.01 1.92 5.10
5.09 2.01 2,02 5,29
_, !mpo_dutiesand taxes 3, OtherOffices
3.86 0,60
3.32 0.41
3.61 0.51
4.33 0,17
2.83 0,20
3,87 0,20
3.16 0.20
4,20 0,23
4.26 0.16
5,10 0,13
5.29 0,14
NONTAXREVENUES of which:
1.84
1,42
1.64
2.77
2.31
2,58
2.84
3.28
2.71
3,05
2.47
Usercharges Saleof assets
1.63 0.28
1.18 0,00
1.42 0,15
1.17 0.68
1.24 0.40
1.23 0.32
1.11 0:27
1.10 0.12
1.40
1.82
0.43
TOTALREVENUE
13.70
12.01
12,90
16,32
13,29
15.39
14,25
16.67
16,77
•
_o_ o r_ _ ha
3 _, ('b
ha
Source: Bureauof Treasury,Departmentof Finance. NationalStatisticalCoordinationBoard,
17.49
17,6t
-I =
Backgrou
nd
19 TABLE1.5
TAX ANDREVENUEEFFORTIN SELECTEDASIANCOUNTRIES (In percentof GNP) Country Indonesia(1990) •Malaysia(1989) Philippines(1992) Singapore(1989) Thailand(1990) SouthKorea(1990)
Tax Effort
RevenueEffort
19.81 17.45 15.15 13.79 19.00 16.54
20.93 26.45 17.72 23.18 20.28 18.27
Source: Manasan,RosarioG, 1994.
1992.
Meanwhile,
sales
taxes
and
licenses
and
import
duties
and
taxes maintained their share through the years. Despite the increasing share of direct taxes in 1986-1992, indirect taxes continued to account
for the bulk of national
Concomitant more responsive of the tax system
taxes. 6
the tax system
has also become
to the growth in economic activity. The buoyancy with respect to GNP rose from 0.88 in 1976-1985
to 1.34 in 1986-1.991 The
government
with this progress,
improvement
(Table in tax
1.6), 7 buoyancy
has
been
such
1986-1991 level has not only risen above the 1981-1985 but also surpassed the 1976-1980 level (1.09).
that
its
level (0.92)
6. In this regm-d, one notes that taxes on income mid profits rose by almost 2 percentage points in 1986-1992 after hovering in the 3 percent range in 1976-1985. Import duties and indirect internal revenue tL_xesalso recovered between 1986 mid 1991 the losses they suffered li'om 1981 to 1955. The resurgence of revenues from import duties was striking as it increased by 2 percentage points to reach 5.3% of GNPin 1992, even surpassing its peak of4.5%in 1983 (Table 1.3).Thus, one observes that increased dependence on direct taxes during the period 1986-1992 did not result from the replacement ofindirect taxes by direct taxes. Rather it was due to the marked rise in the overall direct tax effort without an accompanying reduction in the overall indirect tax effort. In other words, the yield of indirect taxes measured against GNP has not diminished while that of direct taxes has significantly increased. 7. Buoyancy is defined as the ratio of the percentage change in tax revenue to the percentage change in aggregate income or GNP, with the revenue chm_ge being inclusive of the increments in revenues brought about by discretionary tax measures. It measures responsiveness of tax yields to chmrges in economic activity.
20
Financing
Social Programs
in the Philippines
TABLE1.6 BUOYANCYCOEFFICIENT 'OFMAJORTAX GROUPS,1975-1991
1976-1985
1980-1985
1986-1991
0.92
1.34
1.12
1,62
IndividualIncomeTax
0.44
1.08
CorporateIncomeTax
1.18
1.20
Passive
5.05
3.20
0.69
1.26
0.83
1.49
All Taxes
0.88
Income/Profit
0.94
Sales/LicenseTax
'
0.95
SalesNAT+ OtherPercentageTax ExciseTax
1.02
1.38
0.58
OtherDomesticTax.
0.77
1.87
1.41
ImportDutiesand Taxes
0.76
0.49
1.66
Source: Manasan,RosarioG., 1994.
TABLE1.7 POTENTIALREVENUEFROMTHE INDIVIDUALTAX. AND THE LEVELOFTAX EVASION
Potential
Actual
Evasion
Collection
Revenue
Revenue
Difference
Rate
Rate
(PM)
(PM)
(PM)
(%)
(%)
1985 "
21,949.60
5,912.0
16,037.6
73.1
26,9
1986
1,5504.74
5,940.0
9,564.74
61.7
38.3
1988
27,887.30
,7947,0
19,940.3
71.5.
28,5
1990
46,20&30
16,206.0
29,994.3
64.9
35.1
1991
61,112.10
20,744.6
40,367.5
66.0
34.0
Year
Source: Manasan,RosarioG., 1994.
Background
21
At the same faster
pace
against
time,
than
in 1986-1992
national
18.2 percent).
in 1975-1985
tax revenues
government
expenditures
This contrasted
when
the
growth
markedly
rates
ture
requirement
control done
ability
to raise
than
as required
sufficient
its ability
grown
(19.1
at a
percent
with the situation
of tax revenues
ment expenditures were just about equal respectively. However, this development government's
have
and
govern-
at 16.1 and 15.9 percent, is less a reflection of the
revenue
to coverits
expendi-
to keep the fiscal deficit
by the government's
commitment
level under
to the IMF.
Moreover, while the preceding discussion indicates that changes in the last half of the 1980s in both the structure of the tax
system
and
its administration
nue
performance,
that
vast
the need
opportunities to raise
Table
exist
1.7 compares
albeit
somewhat
1985
to 34 percent
some
P40
revenues)
billion
in 1985 since years
from
individual improvement,
rate from 26.9 percent it also
government
tax
percent
hand,
tax/value to 27.8
shows
take
in
an immense
through
further
In particular, uncoltax alone amounted to
of national
government
tax
Table 1.8 shows
added percent
that the collection
tax (VAT) deteriorated in 1989.
The collection
rate from
from 31.7 rate
has
percent
recovered
1990 to reach 38.4 percent in 1992. Undeniably, the early of VAT implementation were problematic. However, some have been
enormous
improvements
achieved
gains
can
in the last three
still
in the administration
lar, the amount
of evasion
be
years.
expected
from
of the VAT system.
from the VAT is equal
Neverthe-
to P29.1
further In particubillion
13.9 % of national government tax revenues) in 1992 alone. Admittedly, tax evasion estimates are not precise. Because is being
in-
in 1991.
improvements less,
without new taxes.
some
However,
(or 22.2
revenues
revenue
in the collection machinery. from the individual income
On the other the sales
the
indicate
It suggests
in its collection
in 1991.
to increase
more
its reve-
years
taxes or to impose
potential
collection.
improved
in recent
for collecting
the
defective,
improvements lected revenue
remarkably
of tax evasion
the tax rate of existing
come tax with the actual
potential
have
estimates
measured
is something
measurement
errors
evasion
are at best approximate.
levels
cannot
hidden
be assumed
and not directly away. Thus, However,
(or
what
observable, the estimated
even if one allows
22
Financing
Socia_ Programs
in the Philippines
TABLE1.8 POTENTIALREVENUEFROM VATAND LEVELOFTAX EVASION
Potential
Potential
Actual
Evasion Collection
Revenue Revenue Revenue Difference
Rate
Rate
Year
(PM)
% of GDP
(PM)
(PM)
(%)
(%)
1985
9428.0
1.65
2996,0
6432,0
68.2
31,8
1989
36414,0
3,94
10134,5
26279.5
72,2
27.8
1990
39395,0
3.68
13079.3 '26315.7
66.8
33,2
1991
45443.0
3.65
15095,7
'30347.3
66,8
33.2
1992
47191.0
3.52
18112,9
,29078.1
61.6
38.4
Soume: Manasan,RosarioG., 1994.
for a margin of error as large as 50 percent , the estimated leakage in the tax system from evasion of the individual income tax and the VAT in 1991 alone be emphasized
potential revenues ble because tax best-designed In order
adds
that
up to P35,3
curbing
billion.
evasion
Furthermore,
is important
it should
not only in raising
but also in making the tax system evasion weakens the progressivity
more equitaof even the
tax systems. to address
the present
weaknesses
of the tax admini-
stration system, Manasan (1994} identified the need for the (a} decentralization of the tax collection agencies, (b) improvements in systems and procedures governing assessment and collection enforcement, (c) increased computerization, and (d) a restructuring the compensation scheme and the ru_es on hiring and firing personnel in the Bureau of Internal t_evenue ,and the Bureau Customs. Chapter Legislative
6 indicates branches
strong
support
of government
from both the Executive
for improvements
of of of and
in tax collec-
tion efficiency. However, it should bej emphasized that a major reform of the tax administration system cannot be instituted overnight, due
Thus, to evasion
it is more
likely
will be plugged
that
the leakage
from the tax
by the government I
phase
system
by phase
Background basis,
23
say 25 percent
of the tax evasion
in year
2, 75 percent
implies
that
through
some
year
3 and
P8.8 billion
concerted
in the second
in year
efforts
year,
in year 1, 50 percent
100 percent
in additional
to curb
P26.5
estimate
in year
resources
evasion
4. 8 This
can be raised
in first year,
P17.6
billion in third year and P35.3
billion
biUion every
thereafter.
User Charges User
charges
private Unlike least
refer
to fees
that
the
government
sector
beneficiaries
of publicly
taxes,
user
make
part
such,
many
while
they
economists raise
the
Moreover,
households
the
those
that
user
at the same
a fee for the
government
funding
enables
argue
revenues
By collecting service,
charges
of the cost of producing
use
the provision
and
from
the
or services.
firms
pay for at
services
they consume.
charges
increase
of a publicly their
of these
to avoid
goods
As
efficiency
time.
discourages
government
exacts
provided
produced
wasteful
goods through
the
deadweight
good
or
consumption. user losses
charges that
are
associated with tax financing. On the other hand, other analysts have argued that since user charges are levied by the government on a quid pro quo basis, to needed this
government
criticism
government Tertiary
services.
is misplaced. services
education
implementation such example. equity
that
point
and efficiency
subsidies
disproportionately
objectives
have
shown
'%he many benefit
that
subsidized
the better
of the Philippines,
installing to the
and at the same
by charging
in the Philippines.
all users
well-targeted
poor.
In the
this may take the form of selective The revenue potential of user
prior
off." to the
Thus,
revenues
15.3
in 1976
to 5.8 percent
cost-based
fees and
to deliver
of university
the contribution
government
time find some relief
programs
case
scholarships. charges has
total national percent
others out
of the poor
of the socialized pricing scheme now in place, is one It is, thus, argued that government can promote its
by simultaneously
ploited
limit the access
However,
They
at the University
from its fiscal constraints needed
they effectively
not
in 1992
been
of user
has continuously
the
education, fully
ex-
charges
to
declined
{Table
from
1.4). When
8. Note that the comprehensive computerization program of the BIR and the BOC is expected to be completed about four years from now.
26
Financing
measured the last result charges
relative
to GNP, revenue
17 years, of the
from user
from 2.2 percent
government's
to reflect
in the Philippines
charges
to 1 percent.
failure
changes
The Opportunities hospital services and are discussed
Social Programs
was halved
This was largely
to automatically
in the cost of producing
adjust
in the
user
goods/services.
and constraints to charging for government for services offered by local government units
in Box 2 and
Box 3, respectively.
Privatization
Capital receipts from the sales of government corporations the share of nontax revenues significantly in 1987-1992. that period, proceeds comprised 10.9 percent government ments
from the Asset Privatization Trust (APT) of total nontax revenues (or 1.8 % of total
revenues).
considerably
slowed
arising
However, down
from
raised During
the
the
since fact
1991
that
the
privatization because
program
has
of (a) legal impedi-
majority
of nonperforming
assets up for sale are not in physical form but in financial form and as Such are not conveyable; (b) government bidding procedures; (c) poor marketability of the assets because of their inferior physical and financial state; (d) disagreement within government about the privatization
of certain
and political
environment;
Act (RA) 7181
which
corporations;
(e} unfavorable
and (i) constraints
extended
macroeconomic
arising
from Republic
the life of the Committee
on Privati-
zation (COP) APT to December 31, 1993. 9 RA 7661 further the life of the COP and APT to June 30, 1995. Consistent avowed
support
for the privatization
program,
Congress
extended with its also intro-
duced amendments which are designed to hasten the privatization process and facilitate the sale of rer_aining nonperforming assets (NPAs) which is expected
are described to lead
as '_hard-tb-sell."
to an early
resolution
In particular, of judicial
RA 7661 proceedings
involvingAPT assets. On the other hand, the recent privatization of PETRON and the progress in the privatization of Manila Hotel indicate
that
the
resistance
of GOCC
managers/supervisors
to
i 9, RA 7181 provided that Philippine debt papers would no longer be eligible instruments to pay for APT assets. It "alsomandated that sales to former owners sYmuldnot be lower than the original transfer Iprice plus accrued interest thereon. The inclusion of a loss recovery provision for s_es of assets sold below market price compelled the APT to set a price greater than the fmr market value of the asset.
Background
27
privatization consistently economy
is not insurmountable from higher levels.
if political will is manifested Finally, the turnaround in the
in the first half of 1994 provides
for the program.
To further
sustain
a conducive
environment
the privatization
process,
the
following are recommended: (a) the centralization of the disposal function in the APT, (b) minimal involvement of GOCC managers in the disposition activities ential treatment of the Audit.
to avoid conflicts of interest and (c) differprivatization activity by Commission on
As of the end of 1993, aggregate transfer sold. Io Privatization of P26.4
billion
152 nonperforming
assets
(NPAs) with an
price of approximately P66 billion remain unof these NPAs is estimated to yield a net revenue
assuming
that
the net
recovery
rate
is 0.4.11 This
implies that the government could raise P5.3 billion yearly (or PI.8 billion in excess of the average amount generated from the sales of NPAs in 1991-1993) assuming that the privatization of these assets/GOCCS are evenly
spread
Strictly for the
is completed
in the next 5 years
and that the proceeds
over the period.
speaking,
proceeds
Comprehensive
Agrarian
from the sale of NPAs are earmarked Reform
Program.
However,
mizing these will minimize claims on government revenues could otherwise be a11ocated to priority social services.
OFFICIAL Global
DEVELOPMENT
(ODA) 12.
Context
In 1992, the Philippines percent
ASSISTANCE
maxiwhich
received
$1.738
of its GNP. The present
global
billion worth
of ODA or 3.7
environment
for accessing
10. Transfer price refers to the price at which the NPAs' assets were booked when they were transferred to the national government. 11. Net revenue refers to the settlement of selling price less operating and custodianship costs of APT.Net recovery,rate is the ratio ofnet revenue to tranfer price. The average net recovery rate in 1987-1993 is 0.41. 12. ODAexcludes nonconcessional officitflflows, i.e., those whose grant element is less than 25 percent. The term ODAis liberally applied in this paper. Organization of Economic Cooperation and Development {OECD)is studying a new criteria for recipient countries and a modified definition of ODA.
Background
29
il ........... i.............................. BOX 3, TABLE AND
]:
:.PRIVATESECTOR,_RUNFACILITIES_,, (In P thousand) ,P_m, CityGov'L " 'Sector Operating Profit Op_ratln 9 Operating Profit i_''Expenses (3): (1)1(2) Income Expenses (6): (4)/(5)
_' ' _, " 'Service Type'
.....,:
:_",'': i(!),, (2)
(3)
(4)
(S)
(6)
i /_'-i'
PÂŽ,u,tioI
,
791,221
0.20 10,272,099 7,475,623
SolidWasterand SanitaryServices'
1.37
182,063
74,312
2.45
51,828
31,584
1.64
Waterworks, Electricity/.. Light/Power i;.. Telephone ' .. ]..Fa.cilil:ies ..: '"' "... i "
6,907,182 4,935,791 1.40
Transport Faoilities
i Marketand $1aughterhouse 146,880 79:904 Cemeteries
_;::_ .i:;547
1,130
3.131.026 2,433,936
1.29
1.84 .1,262,369 684,018
1.85
1.37
277,460
.1.57
0.16
34,9,218233,196
177,166
'.... Opera_iQns i.: =, _......,.131670 85,871 i'
TOTAL'' Note:
319,744 958.126
0.33 22.433,24516,045.626
1.50 1,40
OtherPerce._geTaxesareincluded in _is analysis becausetheVATreplaced someof_esetaxes.
i $o¢=-_:. P/_CO/PHILNOR, 1992:. percent for the United States, 0.32 percent for Japan, 0.41 for Germany, 0.45 percent for Canada and a high of 0.80 for Netherlands increased
as of 1991
assistance
(Table
to countries
1.9). Many
donors
undergoing
transition
percent percent
are providing to democ-
TABLE 1.9 ODA FROM MAJOR DONORS TO ALL RECIPIENTS (PERCENT OF DONOR GNP) (In US $ million)
1970
1975
1980
1985
'7988
1989
1990
1991
UnitedStates 3153 (0.32) 4161 (0.27) 7138 (0.27) 9403 (0.24)1.0141 (0.2t) 2676 (0.15)11394 (0.2I) 11362 (0.20) Japan z758 (0.23} 1148 (0:23)) 33353(0.32) 3797 (0.29) 9134 (0.32) 8965 (0.31) 9069 (0_31)10952_(0.32) Netherlands Germany Canada Australia
9.
_
599 196 (0.61) (0.32) 1689 608 (0.75) (0.40) 3567 1630 (0,97) (0.44) 2942 1136 (0.91) (0.47) 4731 233t (0.39) (0.98) 2094 4949 (0.94) (0.41) 6320 2592 (0,94) (0.42) 2517 6890 (0,88) (0,41) 337 (0.41) 880 (0.54) !075 (0.43) 1631 (0.49) 2347 (0.50) 2320 (0.44) 2470 (0.44) 2604 (0.45) 2t2 (0.59) 552 (0.65) 667 (0.48) 749 (0.48) 1101 (0.46) 1020 (0.38) 955 (0.34) 1050 (0.38)
Source: WorldDevelopment Report1993,WorldBank.
_" (b
32
Financing
Donor
Social Programs
in the Philippines
Policies
The major
sources
of ODA and Other official flows to the Philippines
are Japan, World Bank (WB), Asian Development Bank United States, Germany, Canada, Australia, and Netherlands. global
strategies
allocation
influence
of their
•assistance
their
country
assistance.
are economic
programs
As of 1991,
and
and
their
infrastructure
(ADB), Their
the size and
priority
areas
development,
of
poverty
alleviation, environmental protection, structural adjustment, population planning, promotion of democracy, protection of human rights and improved administration. At the global level, there is a positive trend toward a more balanced distribution of their ODA budgets
which
Japan's medical
favors
social water
of primary
education
and
accounted
and
policies
7.4 percent
bursement
in 1990-1991
sanitation, vaccine
are
share
1990-1992 assistance
or an annual billion
or by
of its global
was second
strategy
increase 22
production.
considered
of Japan's
and and
General
sensitive
areas
per
to the Philippines
bilateral
The
ODA dis-
to the social sectors by an 1987-1989 to $3.0 billion in
of 40 percent.
percent
ODA in 1991.
total
only to Indonesia.
WB increased its global lending average of $1.1 billion per year from to $5.5
health
construction
and cultural reasons. It plans to recycle five years. Social infrastructures and
for 12.3 percent
Philippines'
development.
also goes to pursuing supply,
schools
population
due to historical, ideological $70-75 billion in the next services
huma_
ODA to all countries
care, nutrition,
equipment
and
year
It plans in
to raise
1993-1995.
emphasizes
policy
this WB's
dialogue
based on sector analysis and funding, in health, support shall be given to the control of communicable diseases, maternal and child health,
institutional
strengthening
of the
public
health
system
including LGUs and nongovernment organizations (NGOs) and health studies. Specifically, urban health and nutrition assistance shall
be
provided
in three
major
communities and safe motherhood of family planning. Strengthened
urban
areas
with
large
poor
shallibe pursued as a component local water districts and urban
water supply systems and solid waste management are also priorities. The emphasis in education is to raise the quality of teachers, reduce dropouts, reforms in higher
achieve stronger education.
techr_ical
education
and institute
Background ADB status
33 is committed
of women
development. and
It emphasizes
cooperation
operations. the social
to poverty
and vulnerable with
gender
NGOs
States
assistance
analysis,
survival
and
extensively
engaged
keting
other
care,
and
Bank
projects
financing,
in
the priori-
development demands a spacing improves child
private
as development
modalities
of assisted
health
two major strategies. Economic and educated workforce. Birth The
approach
implementing
services, environment and and education are pursued
through healthy
fertility.
the
of human
participatory and
addresses
improving
the context
the number term,
tization and privatization of health decentralization. Child survival, health
reduces
and
within
in planning
It plans to increase sector in the medium
United
alleviation
groups
sector
partners
for expanding
and
through
NGOs
are
social
mar-
assistance.
Canada's global program in the social sectors includes health safe motherhood, improved vaccination coverage, nutrition,
food aid, education of girls and women as partners for children. Australia's interest in the social sectors
and providers are on children
in distress, health basic education.
sanitation,
With
regard
Australia
had
and
family
to the
global
the
highest
planning,
water
ODA allocation
allocation
and
of bilateral
for the
social
and
donors,
sectors
at 32
percent of its total ODA in 1989-1991. Out of the ODA going to the social sectors, the United States alloted the greatest for priority human
services
at 58.2
Trends
in Official
Available external data from UNDP disbursed such
Flows
and
loans
from the United
1988-1990 based
billion
(Table
sources States
ODA and other official flows) reveals that the Philippines
Economic
Staff (NEDA-PMS)
worth
is noticeable and
of external
1.11). WB, followed
of disbursed
levels. In 1992, disbursement
on National
Monitoring
to the Philippines
of $1.5
ADB were the biggest ments
(Table 1.10).
assistance (both during 1989-1991
an average
as grants
percent
by Japan
ODA. Reduced
and
disburse-
in 1991 as compared increased
Development
sources.
assistance,
to $1.69
Authority
to
billion
- Project
TABLE1.I0 ODAFROMSELECTED MAJORDONORS TOTHERESTOFTHEWORLD ANDTOTHEPHILIPPINES: SELECTED RATIOS, 1988-1991 Human AidSocialAllocation Ratioa
1988-19891988-19901989-1991 Netherlands Canada Australia UnitedStates Japan Philippines
21.1
21.1
25.9
23.8 6.4 16_ 19.2 10.7
19.7 14.6 t5.9 30.5 11.5
20.3 32.0 19.5 7.9 9.7 13.6
AidSocialPriorityRatio b
1988 1988-19901989-1991 44.5 45.9 31.4 50.4 55.4 25.5
49.1 46.5 15.7 52.4 7t.9 32.0
53.2 44.4 32.9 58.2 42.5 35.4 62.3
AidHumanExpenditure Ratioc
Priority Ratiod
1988 1988-1991 i989-I992 1989-1991 .087 .048 .007 .016 .008 .008 .191
.091 .041 .009 .014 .210 .012 .124
.118 .042 .038 .020 .012 .080 .309
_o _ 8.4
aThepercentage ofdonors'ODAthatgoestothesocialsectorinrecipientcountries. bThepercentage ofsocialsectorODAthatgoestohumanpriorities, e.g.,primaryhealthcare,nutrition, primaryeducation, familyplanning, waterand sanitation in recipientcountries. CThe percentage ofa donor'sGNPtohumandevelopment pdoriUes in recipient countries andtheamountofODAreceived forhumandevelopment priorities bythePhilippines expressed asa percentage ofthePhilippines' dThepercentage oftotaldonors' ODAthatgoes tohuman development priorities. GNP,respectively. Source:HumanDeve/opmentReport(HDR), 1992,1993,and1994.
3 _ _.
Background
35 TABLE1,11
SUMMARYOF EXTERNALASSISTANCETO PHILIPPINESBY SOURCE,1988-1992 (In US $ million) 1988a
1989
1990
1991
1992a (Planned)
1, UN Systemof which IBRD
332.00 310,00
365,00 341.00
452.00 424,00
415,00 359.00
63.00 18.00
422,00
109,00 107.00 794.00
315.00 307.00 1108.00
277.00 276.00 645.00
236.00 236.00 587.00
n.a. 399.00
331,00 361,00
504.00 311.00
324.00 182,00
370.00 187.00
12.30 18,20 12,70 11.00
86.40 22.10 41.60 8,80
42.60 19,90 1,00 19.30
7.60 15.50
4. NGOs
6.00 14.70 0.18 1,90
5. Totalb
756.00
1,280.00 1,883.00 1,356.00
893.00
2. Non-UNofwhich ADB 3. Bilateralof which Japan U.S, Germany Canada Australia
6,80
aDatais incomplete, Source: UNDPDevelopmentCooperationReports,1988-1992.
Among donors and creditors, Australia had the highest aid social allocation to the Philippines at 93 percent, followed by the United States
and
least
to social
Canada
as of 1991.
projects
followed
general trend in 1989-1990 In 1989-1991, external to agriculture, sources,
energy,
local area
education, 11.4 percent
and other
Japan
and
by ADB and
Germany
(Table 1.12). assistance disbursements transport,
development social
communications, and
industry
development
of total disbursements
allocated
WB. This was
(Table
projects
went
mainly
natural 1.13).
for only Develop-
ment Report (1994) estimate for 1989-1991 is 13.6 percent social allocation ratio. Within the social sectors, priority projects
accounted
HDR
estimate
for 1989-1991
(1994)
for 78 percent is 62
re-
Health,
accounted
in 1991. The Human
development
the
also the
for aid human
of disbursements.
percent
for aid
social
35
Financing
Social Programs
in the Philippines
Table 1.12 AIDSOCIALALLOCATIONRATIO(RATIOOFSOCIALEXPENDITURESTOTOTAL EXTERNALASSISTANCE)TO PHILIPPINESBYMAJORSOURCE,1989-1991 (In percent) 1989
1990
1991
Australia U,S, Canada. ADB IBRD
42,4 11.3 27,1 5.7 24.7
56.0 23.2 31.0 13.0 14.0
93.0 25.3 17.9 15,7 10.1
Germany Japan
18,0 15.7
4.8
6.8 3.7
Sourceof basicdata:
UNDPDevelopmentCooperationReports,1989-1991 andHumanDevelopmentReports,1989-1991.
priority ratio. Even in the case accounted for only 14.4 percent (Table
1.14).
In 1991, the Philippines sectors,
of ODA grants, social projects of the total ODA in 1986-1989
of which
low aid social
disbursed
45 percent
allocation
went
9.9 percent
to human
and aid social
of ODA for social
priority
priority
ratios
services.
The
for the country
are due to two major reasons. First, the Government pines (GOP) has not pushed hard enough for donors
of the Philipand creditors
to allocate more for social and human services in its negotiations either as a matter of practice or policyl And second, some donors and creditors such as Japan and the multilaterals WB) prefer other areas of assistance. The coordination
of ODA between
official
(e.g., ADB and
sources
and
the GOP
is done through the WB Consultative Group (CG) which meets every one to two years. The CG started in the_early 1970s and provides a forum for policy dialogue and for indicating broad levels and areas of ODA and
other
official
creditors.
CG meetings
nutrition
and population
CG has been
challenged
flows
to the Philippines
in the past policy.
tackled
In recent
such
years,
by the unwillir_gness i
by donors special
and
topics
the effectivity
as
of the
of the WB to convene
TABLE1.13 EXTERNAL ASSISTANCE DISBURSEMENT BYSECTOR ANDSUB-SECTOR, 1987-1992 (InUS$ million)
Agriculture Energy Transport andCommunications Natural Resources AreaDevelopment Industry Health ofwhich: Pdmaq/Health Care ImmunIzation andDiseaseControl FamilyPlanning Education ofwhich: Prfmary Secondary SocialDevelopment ofwhich: DrinkingWaterandSanitation Economic Management Humanitarian andRelief DisasterPreparedness International Trade Development Administration Domestic Trade TOTAL Annual(LOAN)Commitment (US$ million)
1987
1988
1989
1990
1991
Planned 1992
10.00 0.43 0.20
53.00 18.20 0.63 2.25 286.00 6.10 60.20 21.50 1.60 37.00 7.10 0,003 0.70 14.40 3.20 286.00 1,00 0.05
152.00 288.00 203.00 47.60 333.00 116.00 471.00 18.10 5.90 15.70 49.90 0.15 12.70 82.50 25.20 217.00 45.70 38.90 23.70 162.00 1.80
242.00 231.00 206.00 160.00 t42.00 113.00 62.00 39,60 1.10 8.00 60.40 36.60 12.60 48.50 35.10 29.80 22.70 20.10 13.00 6.80 1.50
80.40 131.00 241.00 94.00 102.00 30.90 29.40 t8.20 0.13 9.90 50.70 33.20 12.00 43.00 32.80 4.20 t6.00 45.00 7.40 16.40 1.40
0.37 0.20
21.50 0.08
255.00 83.20 87.00 1.00 110.00 15.00 36.80 18,30 4.70 2,80 65.00 18.60 6.20 23.90 18.00 547.00 30.70 0.60 8.50 15.30 0.07
18.04
820.51
1347.67
2309.85
1491.80
999.03
253.40
144.50
1487.20
2266.10
2384.50
1356,00
3.20 0.03 3.00 0.38 0.15 0.08 0.02
Sources:UNDPDevelopment Cooperation Reports,1989-1991. NationalEconomic andDevelopment Authority.
_,
'_
¢0 TABLE1.14
oo
ODAGRANTSANDTECHNICALASSISTANCE, 1978-1989 (By Sector, in US $ million) 1978
1979
1980
1981
1982
1984
1985
1986
1987
1988
t989
10.14 41.68 36,06 22.27
8,59
47.22
80.85
1,59 0.54 20,04 63.47 20.04
9.63 34.09
Agriculture
21.05 20.75 27.06
Industry SocialServices Education
6.33 10.82 5.70 4.62. 9,95 15.87 2.62 2,66 7.20 29.14 34.79 66.09 57.92 49,02 50.77 47.23 38,94 20,21 2.71 3.33 24.78 14.28 6.70 5.88 6.53 2.85 0.08
Populationand Heaith Housing Labourand Other
15.00 24,20
1983
19.64 22.82 34.57 34.96 0.03 6.76
0.52 8.12
ln/raslru_Tre
5.43
7.16
10.69 15.12 22.08 22.33
GeneralDevelopmentPoficyand Planning Multisectoral Others
0.40 2.48 0.08
0.69 t.81 0.28
3.31 5.77 9.00 46.13 0.33 35.82 43.10 0.01 0.32 0.66 1.60 0.01
TOTAL
0.18 6.56
0.18 8.50
34.70 12.57 40.16 34.28 0.02 9.30 7.60 23.02
0.10 0.44
17.77
0.45 1.36
2.36
10.55 1455
11.97
2.13 81.54 3.26
_.
8.90 1,40 38,98 9,68 31,27
_. 6.21 46.12"
9.80*
12.22 11.81 8.76 35,92 33,13 200,55 186.41
64.91 76.30 113.50 134.91 t58.95 145.26 189.01 103.29 140.80 1t7.70 369.71 329.54
*Social Infrastructure. Source: NationalEconomicand Development Authority.
_-
Background it in the and
89 absence
IMF.
pressure along Paris
This
of an agreed practice
on the
adjustment
is abetted
Philippines
program
by
to improve
some
between
donors
GOP
which
its economic
put
management
IMF-influenced ideological lines and provide a condition Club official loan restructuring. Donors quietly support
condition
to the extent
creates their
a more
that it raises
favorable
public
ODA. ODA flows, however,
of formal
CG meetings.
the viability finance
of the economy
environment
have not ceased
In a sense,
for this and
to leverage
even in the absence
CG serves
more
as a vehicle
for
seeking endorsement of the GOP economic programme to raise international confidence on and assistance to the Philippines. Due to the inadequacy of the CG mechanism, a few sectoral _nini CG" meetings have been conducted or planned locally with selected donors in some sectors to raise donor interest in such areas as environmental education
and
economic
management. agrarian
ministers
who prefer
of total aid requirements Within
Special
reform
but
meetings
these
are
are
planned
not encouraged
a more comprehensive
in a formal
GOP, ODA coordination
on by
presentation
CG meeting. is somewhat
dispersed.
At the
political level, the Coordination Committee on the Philippine Assistance Programme (CCPAP) serves as the venue for orchestrating coordination between the executive department and Congress on ODA policy_and priorities. CCPAP consists of selected members from the Cabinet and Congress. As regards ODA grants, NEDA serves as the aid coordinator. It coordinates disbursements. Donors deal with consults
and works
Foreign
Affairs
Department budgetary
with recipient
serves
mainly
of Budget counterpart
programming, monitoring and NEDA as a general rule, which departments.
as the channel
and
of communication.
Management
support
based
The Department provides
on authorized
the
of The
required
legislations.
Loan processing involve more agencies in view of their debt-service implications. The Department of Finance and Monetary Board of the Bangko based
on existing
of-payment must
Sentral
pass
ng Pilipinas
laws and
and monetary the evaluation
(ICC), a subcommittee
policies effects.
approve and
the conditions
considering
All foreign
of the Investment of the cabinet-level
of loans
their
loan-assisted
balanceprojects
Coordination
Committee
NEDA Board.
ICC reviews
42
Financing
Social' Programs
in the Philippines
opportunity to decide to utilize the Country Strategy Note (CSN) with the assistance and cooperation of the Resident Coordinator. The CSN is a concise government document priorities and plans and indicates how system The
can best be mobilized
content
human
may
range
development
should
help
degree
to which
progress
poverty
UN
alleviation
rehabilitation
a process
the
towards
to meet its key development
from
to relief,
establish
based on the country's the resources of the UN
and
for reviewing
system
goals
and
development.
and
assistance
key development
concerns.
strategies
It
evaluating
is helping
and targets
the
support
of the country.
The CSN seeks also to synchronize the programming cycles of the UN and link these with the GOP planning process. This would have to consider however,
the MTPIP and intended
of the respective Specific The
of official
through
policy terms
As of end-1992,
these
These
these
sources
of tapping continues. would
flows
process
Philippines
Economic
sources
accounted
are the
Cooperation
WB, Fund
for 96 percent
of
amounting to US $10,247 billion. WB OECF for 34.6 percent and ADB for 23.8 must,
therefore,
them despite As in relations
mean
to the
the Overseas
total official commitments accounted for 37.5 percent, percent.
CSN is not,
preparation
and Recommendations
sources
ADB and Japan (OECF).
too. The
for the program
UN organizations.
Findings
major
MTTAP processes
to substitute
continuing
be protected
their relatively less witt_ other creditors policy
dialogues,
if the
GOP
concessional and donors,
the development
a richer pipeline of viable project proposals and improved capacity. The latter would involve a higher availment
of
absorptive rate (the
proportion of actual to scheduled a_ailments) approximating the 93.5 percent rate on 39 program and !project loans from the WB as of December mean
1992.
additional
availment
rate
68.6 percent)
of 73 percent), and $60.7
or a total of US $811 ment rate of program conditions
Raising
the availment
disbursements
were
met.
of $248 US $502.7
million from other
rate million million sources
to this
level would
from ADB (from its from OECF
(from
(from 71 percent)
million (Table 1. li6 ). The 100 percent disburseloans from all sources is very notable as policy The lower
availtnent i
rate
for project
loans
is
Background
43 TABLE1.15
SUMMARYOF EXTERNALASSISTANCEDISBURSEMENTBYTYPE,1988-1992 (In US $ million) Type of Assistance
1988
1989
1990
1991
1992 (Planned)
Free-standingtechnical cooperation
426.0
466.0
505.0
354.0
248.0
0.18
33.0
67.4
19.4
4.0
Investmentprojectassistance 314.0 Programme/Budgetary Aid or Balance-of-PaymentsSupport 11,0 FoodAid 51.
513.0
1010,0
772.0
556.0
233,0 26.0
251,0 17.0
262.0 33.0
52,4 0.30
10.3
33.1
16.9
23.0
1281.3
1883.5
1357.3
893.7
Investment-related technical cooperation
Emergencyand relief assistance GRANDTOTAL
756.3
Source:UNDPDevelopmentCooperationReports,1988-1992.
due to right of way problems, delayed contracting, design, slow release of funds and other reasons. The
sectoral
profile
official
loan
percent
of total commitments
14 social
sources
of the
it _
ment
projects.
18.7
tap official
will then
If the
a small
percent
funding
projects
source
loans
in 1991), for such
bear the brunt
projects
1992
(Table
to finance
shows
1.17).
practice
could projects.
Budgetary
of financing.
This
from
only
clearly
9.0
for by demon-
and human
stays,
be principally
that
in
development projects. policy on the extent to
social
of all ODA and
funded
were accounted
to fund social a very explicit
present
proportion
188
and availrnents
low usage of loans additionally, make
which
comprise
as of December
development
strates the GOP must,
largest
changes
only
other
grants
official
relied
which
flows (i.e.,
on as external
and other
On the other
develop-
local sources
hand,
GOP must
44
Finandng
Social Programs
in the Philippines
TABLE1.16 CUMULATIVEOFFICIALLOANSTO SELECTEDPROJECTSBYFUNDINGSOURCE As of December1992 ScheNo.
duled Actual
Funding
Loan
of
Net
Avail-
Source
Type
Loans
Commitment % $ M Share
WB
39 Project 32 Programme 7 46 Project 44 Programme 2 66 Project 61 Programme 5 37 Project 35 Programme 2
ADB
OECF
Others
TOTAL Project Programme
18 8 17 2 16
3,846 2,558 1,288 2,440 2,338 102 3,542 2,775 767 419 391 28
37.5
23.8
34.6
4.1
10,247 100.0 8,062 2,185
ment
Un.
Avail-
drawn
merit
ment Balance
Rate
Avail-
($ M)
($ M)
($ M)
(%)
2,012 1,180 832 1,213 1,111 102 2,019 1,390 629 255 244 11
1,881 1,044 837 886 784 102 1,386 757 629 181 170 11
1,765 1,514 251 1,554 1,554 2,156 2,018 138 238 221 17
93.5 88,5 100.6 73.0 70.6 100.0 68.6 54.5 100.0 71.0 69.7 100.0
5,499 3,925 1,574
4,334 2,755 1,579
5,713 5,307 406
78.8 702 100.3
Source: ProjectMonitoringStaff(PMS),National;Economic and DevelopmentAuthority (NEDA).
undertake social
a major
projects
The
reallocation
ff loan financing
reallocation
process,
may start with more dialogues agencies Education
of fuZ_re
loansources
is going to be actively whether
from
loan
between
official sources
in favor
of
used.
or grant
sources,
and recipient
such as the Department of Health (DOH), Department of Culture and Sports (DECS), Department of Public Works
and
Highways
and
policy
(DPWH), in the case of Water and
coordinating
bodies
like the National
sanitation Nutrition
projects, Council
Background
45 TABLE1.17
SECTORALPROFILEOF SELECTEDFOREIGN-LOANFUNDEDPROJECTS As of December1992
No. of
Net
Actual % Share %Share
Commit. ment
Avail- (oftotal (oftotal ment commitavail-
SECTOR
Projects
($i)
($a)
ment)
merits)
Energy,PowerandElec_calion
26
2,155
675
21.0
15.6
Transportation Others WaterResources
49 10 39
1,814 1,694 1,241
664 1,002 454
17.7 16.5 12.1
15.3 23,1 10.5
Industry,Tourism,Science andTechnology SocialInfrastructure Social Environment andNatural
18 8 6
1,125 579 363
599 163 184
11,0 5.7 3.5
13.8 3.8 4.2
8
512
302
5.0
7.0
Communication
13
306
149
3.0
3.4
Integrated AreaDevelopment Agriculture andAgrarian Reform
5 6
157 301
33 111
1,5 2.9
0.7 2.6
10,247
4,336
100.0
100.0
Resources
TOTAL
188
Source: ProjectMonitoring Staff(PMS),NationalEconomicand Development Authority (NEDA) and the Population with fund the
sources
Social
Commission. under
Development
Regular
dialogues
the close
coordination
Committee
of the
and interaction
and
supervision
of
NEDA
Board
and
technical guidance from the ICC would give the better chance to access external assistance.
social
sectors
Social development tify and subject of return
to traditional
to education,
preventive with
those
project
health,
cost-benefit
particularly
basic
of economic
proposals
water and
are more difficult analysis.
at the primary and
physical
sanitation investment
with a
to quan-
Estimated
rates
level and for girls, compare
favorably
projects.
Thus,
46
Financing
there
is no reason
social
projects.
Sanitation
why foreign
A WB study
Sector
Project
Social Programs
in the Philippines
loans,cannot
be tapped
of the first Water
Supply,
in the Philippines
estimated
a weighted
economic excluding
chemical children
studies in India, Indonesia and Nepal show that giving extra vitamin A can reduce Child deaths by as much as one by protecting
(Humphrey immunization
et
the
of return ranging health and other
and
average percent,
fourth
internal rate unquantified
for financing Sewerage
immune
response
to infectious
2_4 to 3.4 times the cost; the fortification (MSG) with vitamins produced benefits 1993).
estimated that immunization,
diseases
al. 1992). Giving vitamin A supplements during services would further enhance its cost effectiveness
and viability. In a comprehensive study in the dosage with vitamin A capsules every six months
(USAID
from 8 to 32 benefits. Bio-
Another
WB
study
Philippines, mass yielded benefits of
of monosodium glutamate of 6 to 21 times the cost
(Jamison
and
Wesley
1990}
the cost per healthy lifeyear gain ranges from $5 for $6 for vitamin supplementation and immunization
to prevent neonatal tetanus to $25 folr oral rehydration therapy and $35 for antibiotic therapy for acute respiratory infection. A massive capacity
building
agencies
tapping
to foreign
loans
would, if these
drawbacks
intensive in management tion and community comparable
problems
had
a 95.3
such
foreign
percent
is no point
for social
quickly projects
Nonsocial
access
utilized. is that
projects
as right of way issues projects,
rate while
sector
in increasing
they are
require a lot of social These problems
addressed.
loan-funded
availment
and
of social
skills and participation.
if properly
Of the 188 major
be necessary
There
are not properly
One of the potential
insurmountable
however,
offical loans.
preparaare not have
on public
their roads.
the lone DOH project
the 5 DECS projects
had
low 40.5 availment rate. Three integrated local development projects had an even lower availment rate of 25.6 to 35 percent. The Third Country United exceeding
Programme Nations
of Cooperation
Children's
90 percent.
ess and close working
Fund
It applies relationship
for Children (UNICEF)
bad
a participative with partners.
released to recipients based on quarterly and liquidated eve .ry six months.
work
between
GOP and
an availment programming Funds and
rate proc-
are directly
financial
plans
a
Background
47
An innovative debt
way of increasing
forgiveness
opportunity budgets
as part
for bilateral with
regular
minimum
Paris
Club
loan
loans.
diplomacy.
ODA loan
sources
additional
outlay.
restructuring.
Agency for International loans to the Philippines. so on certain
official commitments
of social
jointly
This option
with donors.
impact projects Bangko Sentral
is through
offers
to protect This
In 1986,
a unique their
ODA
will go
beyond
United
States
the
Development (USAID) condoned France and Germany have reportedly must
by GOP and creditors. GOP must of funds to credit condoned loans identified
This
be considered
some done
more seriously
appropriate equivalent amounts which would fund local projects
Fortunately,
of the Debt to Equity ng Pilipinas continues
the facility
for high social
Conversion Programme despite the suspension
of the of the
Programme to signal GOP's firm commitment to social development. The quarterly ceiling of $10 million for high special impact projects under
the Programme
could
now be raised.
The redemption
about 89.9 percent is appropriate. Within the entire UN system, the individual all sources
for health,
are exceeded
education
only by disbursements
humanitarian
assistance
ture,
and
forestry,
endeavor
and
fisheries
to protect
aid and
population
PKO. Budgets
and reduced military The introduction GOP is now working programming
10,
from being
for PKO must
with the UN system It would
The
agriculUN must
by humanitarian from fresh
initiative
to make
assist
from issues,
and
1993.
be taken
expenditures of donors. of the CSN is a worthy
framework.
development
eroded
of
development
management
as of June
aid budgets
disbursements
and social
for general disaster
rate
sources
by the
UN.
it an operational
in orchestrating
related
projects of the UN and those of other donors in the country. The Joint Consultative Group (JCGP) of the United Nations in the Philippines
which
Population
Fund
some
cases
working
Organization
(WHO),
(ILO), is already human
is composed (UNFPA) and
Program
Food
donors
such
International
in joint
poverty
UNDP,
other
UNHCR,
involved
crevelopment,
monitoring environment
with
of UNICEF, World
consultation
alleviation,
as Labor
United
Nations
(WFP} and World
Health
Organization
on programming
population
in
management,
of the social implications of structural adjustments, disaster relief and rehabilitation, and decentralization.
on
48
Financing In light of present
external
conditions,
assistance.
Donors,
to improving
local vaccine
commitment
to Universal
on a multi-antigen Service (BPS) has culosis
and
BCG (about
a number
particularly capability
of specific
6 million
BPS could doses)
areas
could
in support
warrant
give priority
of the President's
Child Immunization
as recommended
standards.
in the Philippines
Japan,
in perpetuity
strategy. The government's stopped producing tetanus
(BCG) vaccines
facilities
Social Programs
based
Biological PrOduction toxoid (TT) and tuberby WHO
to upgrade
its
pro'_ide all the requirements
and most
TT vaccines
(8 million
for doses).
Another promising area of assistance is in salt iodization technology to combat iodine deficiency and its consequences. The procurement system the
of UNICEF
latter
Vaccine
using
has been peso
Independence
by Rotary
international
resources
used
to procure
vaccines
Initiative,
UNICEF
must
and DOH, through
review
this practice
to ensure its sustainability. In all. these encteavors, private participation should, be encouraged toward the production cost supplies. Social viation
and
human
cannot
development
be addressed
as Components
through
macro
Intervention services must be preferably Often, donors and GOP do not have their to supervise
the
opportunities
delivery
have been
of assistance explored
and package
for such popular and
early
ested
several
projects
childhood
to intended
recipients,
proposing
particularly
similar
projects
cumbersome process. of criteria for relending in order
water
to objectively
local government and
and
primary
ration
programs health
discourage units,
creditors,
GOP and official sources based on critical social prioritize
of services. GOP could
relending would
Many
to address
delivery Code,
Supply,
These
to donors
allealone.
targets.
be expanded
externally-assisted
as rural
action
directed and targeted. own local infrastructure
and could
development.
sector of low-
of poverty
policy
this general issue of effective targeting and Consistent with the 1991 Local Government develop
the
care, inter-
from directly which
is a very
could agree on a set and other indicators
limited
resources.
UN
agencies, such as UNFPA and UNICEF, along with NGOs experienced in the field could be harnessed 1Io deliver services for other donors
which
Development
have
no field presence.
Assistance
Bureau
The Australian
(AIDAB)and
inteI'national
Canadian
Interna-
Background tional
49
Development
Agency
(CIDA) have
with UNICEF by GOP using Closer externally
this general
monitoring and assisted projects
cost-effectiveness. expressed
to prepare
of the
goals
Annual
for submission
to regularly
development three
of City reports
to the
determine
or five years
executed
President.
to GOP the conduct
indicators,
the status
which
through
study
through
to collect
a series
integrated the country.
UNDP
formally
would
data
surveys
are
USAID
on the
UNICEF
multi-goal and
updated
human
only
and censuses.
every
This would
of administratively the conduct of a 14 mid-decade
goals
or by piggybacking
to cover
be used
and
of core social
surveys
baseline
of households
The data
in and
on the achievement
of an annual
currently
sector
of cluster
survey
when Recently,
als0 make up for the inadequacy and inaccuracy derived data. In addition, UNICEF is supporting feasibility
executed
cooperation.
of 60 city mayors through a Declaration to achieve the 1995 Mid-Decade Goals
Progress
have also recommended survey
are better
and goals are quantified.
and UNICEF got the support of Commitment to Children and
projects
of donor
evaluation need to be integrated in the interest of accountability
Commitments
by local leaders
funded model
all provinces
on
and
for policy advocacy
the
cities
and
in
better
programming.
SUMMARY Philippine by wild
economic swings
stabilization
even
and
as the
since the early
government
structural-adjustment
penditures proved the macroeconomic expenditures
performance
embarked programs.
to be highly vulnerable environment. At the
were constrained revenue
(which
of economic
activity)
but also by the targeted
ongoing ceilings.
IMF program
was marked
on a series Government
by itself is dependent
of available
on the overall
level
level of the fiscal deficit
program. Thus, there was to be reduced substantially
in order
of ex-
to these fluctuations in same time, government
not only by the amount
government
under the IMF stabilization for government expenditures
1980s
for government
to meet
a tendency under an the
fiscal
50
Financing Reforms
stration
Social Programs
in both the structure
of tl_e tax system
in the last half of the 1980s
revenue improved
in the Philippines
have improved
and its adminithe government's
performance. Thus, both tax effort and tax since 1.986. However, estimates of tax evasion
buoyancy in recent
years indicate that vast opportunities still exist for better collection without raising the rate of eXisting taxes or imposing
tax new
ones.
that
Using
some
very
P8.8 billion
conservative
assm_iptions,
it is estimated
can be raised
this y_ar by curbing
evasion
of the
individual income tax and the value-added tax alone. Keeping tax evasion in check involves a major reform of the tax administration system against
and a strong political will to apply the full force of the law tax evaders. In this regard, decentralization of tax collection
agencies, dures,
improvements improved
in the
assessment
computerization
and
of the system,
compensation scheme, and rules on hiring in BIR and BOC, are recommended. The ploited
revenue
potential
in the Philippines.
of user
charges
The share
of user
collection
proce-
restructuring
and
firing
has
not been
charges
of the
of personnel fully ex-
to total national
government revenues has continuously declined between 1976 and 1992 largely as a result of government's failure to automatically adjust user charges and services. Capital
to reflect
receipts
changes
in the cost of producing
from the ongoing
privatization
goods
program
contrib-
uted significantly to the governrr_ent's nontax revenues in 1987-1992. However, the privatizatiofi program slowed down considerably since 1991 because of legal impediments arising from the nonconveyability
of the
bidding procedures, the part of GOCC conomic
and
environment,
RA 766.1. was
amendments
designed
restrictive
government
of the assets, resistance on unfavorable m acroe-
arid constraints
with the Congress'
program,
introduced
of NPAs,
poor marketability managers/superVisors,
political
7`1.81. Consistent .tization
majority
avowed pa_sed to _asten
support
imposed
by RA
for the priva-
in December the privatization
1993.
It
proc-
ess and facilitate the sale of remaining!NPAs which are described as '"hard-to-sell." In particular, RA 7661 i_ expected to lead to the early resolution
of judicial
hand,
recent
the
privatization
proceedings
privatization
of Manila
Hotel
invol_ing of PETRON
indicate
APT assets. and
On the other
the progress
khat the opposition
in the of GOCC
Background
51
managers/supervisors political Finally,
to privatization
is not
will is manifested consistently the turnaround in the economy a conducive
environment
for the
sustain
the privatization
process,
the following
centralization
involvement conflicts
of the
of interest
activity mental
disposal
of GOCC managers and
source
development
payments share
to avoid
privatization
financing.
There
has
divestment
to the Philippines
financing resources
going
APT, minimal
activities of the
if the government's
domestic of ODA
in the
treatment
assistance
of development
plements
function
To further
are recommended:
on Audit. Given this perspective, increto some P 1.8 billion can be generated
yearly in the next five years is accelerated. Official
program.
in the disposition
differential
by the Commission resources amounting
if
from the higher levels. in the first half of 1994
provides the
insurmountable
program
is a significant
and
technical
and
contributes
to balance-of-
a noticeable
increase
been
to priority
human
assistance.
services,
such
It supin the as
basic
education, 1988-1992.
primary health care and low-cost water supply from This could be further increased if government makes
more
active
use
ment
projects.
these more
projects at present. The global competitive. The government
through tent
of official Grants
a more
with
national
loans
to fund
are the main
thorough
selection
priorities,
social
source
and
human
of external
financing
from the reduction
of ODA-funded
increased
availment
in tax evasion,
charges, the acceleration utilization of ODA will estimates scaled the
of additional down
social
projects rate,
sectors
increased
consisand
more
resources
reliance
on user
of the privatization program, or improved flow into the social sectors. Thus, the
revenues
by the government's
service
for
ODA environment has become can enhance ODA utilization
efficient implementation of projects. It is unrealistic to assume that all of the incremental raised
develop-
provided marginal
or on human
in this section propensity
development
should
be
to spend
on
priorities.
2 Intersectoral
THIS
chapter
reviews
last 18 years reallocations. As nomic cut
of the
crisis
in real
ditures the
increased
public
in
1986-1993 the
(Figure defense
on
(i.e.,
an
of 15.7
that
1987,
obligation percent
period
were on the
of 4 percent recovered,
by
5 percent
government
and
ratio
eco-
economy
surged
the
the
increases
In particular,
in 1986, ratio
average
economic
as the
and
expenditures
during
to annual Then,
in the
savings
during
government
expenditure
sharply
government
adopted
yearly
1986-1993.13
to GNP),
a yearly National
and
compared
expenditure
expenditure from
measures
1975-1982.
from
of the
for intersectoral
aggregate
government
average
Restructuring
pattern
by 8.7 percent
terms,
from
national
on the
stabilization
declining
average
total
spending opportunities
of 1983-1985,
deeply,
the
the
to identify
part
average
Budget
1990.
basis,
yearly expen-
Consequently,
of national
government
14 rose
in 1975-1985
on real
dramatically
to 21.5
percent
service
sectors
2.1). and
sectors,
peace
and
in that
order, order,
the
social
suffered
the
brunt
of the
13. Government expenditure in current year's prices is deflated by the GNP impicit price index to arrive at estimates of government expenditure in 1985 prices. 14. Data on government obligation expenditures are based on accrual accounting and as such, expenditures are reckoned relative to the time contractual obligations are made. In contrast, government cash expenditure data are based on cash accounting wherein expenditures are reckoned relative to the time actual disbursements for both current and prior year's obligations are made.
FIGURE2.1 NATIONALGOVERNMENTEXPENDITURESASA PERCENTAGEOFGNP:4975-1993
2 4%
,/,.__
/'x, i _,
/ i
/" \
22%
] 20./. 18% _ 16%
I
\
\X,
'x..
\.
_..
/ J
,_
'\,_ I
/[
[- X.
1 2°/. 10%
\--_i I
75
76
l 77
_ 78
I
_
I
79
80
81
_ 82
I
I
83
84
L
_.
±___ 85
86
I
_
I
]
_
1
87
88
89
90
91
92
<_ 93
_..
Year Total
Expenditures
i'
Tot.Net
of Debt Service
¢b o_
_b
TABLE2.1(continued) 1975- 1983- 19751982 1985 1985
19861993
1986
1987
1988
1989
1990
1991
1992
1993
16.73 12.31 t4.76
8.98
10,t9
8.24
11,10
9.88
5.82
8,65
9.48
9.72
13.49
8.68
11.34
6.09
6,71
5.59
7,39
7.42
5.49
5.23
5.86
6.20
GeneralPublicAdminisl_ation
7.70
7.08
7.42
8.89
5,88
9.67
8,62
9.78
11.12
7,90
8.80
8.43
DebtService
7.04
Unallocated
4,89
NationaZ Defense andPeace andOrderofwhich: NationalDefense
GrandTotal-Debt Service
19.97 12.82 38.42 24.51 45._6 5.71
5.26
92.96 80.03 87.18
5.53
4.30
2,47
_. = _-
42.60 32.59 41.58 41.08 38.11 36.38 2.61
4.10
3.62
61.58 75.49 54,84 57.40 67.41 58.42
3.6t
7.08
11.78
58.92 61.89 63.62
Source:Sectoraldistribution computed byauthorbasedonCommission onAuditChartofAccount usingagencyleveldatafromDBM
O1
TABLE2.2 NATIONAL GOVERNMENT EXPENDITURES, BY SECTORALCLASSIFICATION,OBLIGATIONBASIS: 1975-1993 (Percent of GNP
GRANDTOTAL TotalEconomicServicesof which: Agriculture Agrarian Reform NaturalResources lnfrastructure Powe_,_d Energy WaterResources " Development Transportationand Communication OtherEconomicServices
1975-
1983-
1975-
1986-
1982
1985
1985
1993
1986
1987
1988
1989
1990
1991
1992
1993
16.45
14.80
15.65
21.45
19.20
23.18
21.14
19.01
23.63
23.16
20.68
20.91
6.98
5.34
6.20
4.36
6.30
4.39
3.59
4.04
4.71
5.14
3.89
3.68
0.89 0,t 1 0.31 4.60 1.09
0,67 0,06 0.19 2.53 0.44
0.79 0,08 0.25 3.62 0.77
0.71 0,25 0,28 2,51 0.33
1.24 0,06 0.22 1.91 &,%
1.33 0,18 0.22 1.96 0.20
0.93 0,20 0.24 1.83 .O.O0
0.54 0,54 0.36, 2,18 0,04
0.49 0,50 0,36 2.93 &72 0.02
0.54 0,21 0.33 3,33 0_45 0.06
0.67 0,13 0,24 2,67 0.17 0.07
0.55 0,14 0.22 2.4t 039 0.09
0.21
0.06
0.14
0.08
0.11
0.08
0.11
0.14 2,18
2.82
2.43
1.94
_= ('b _. O
_. "x
3.30 0.60
2.06 1,60
2,71 1.08
2,11 0.43
1.25 2.69
,67 0.26
1.72 0.14
2.00 0.25
0.30
0.59
0.04
0.20
TotalSocialServices
3:49
2.79
3.16
3.83
4.28
3.60
3.82
4.25
4.24
3.84
3.67
3.36
co S
Education HeaLth
2.04 0.62
1.68 0.50
t .87 0.57
2.71 0.63
2.34 0.55
2.52 0.60
2.78 0.69
2.99 0.69
3.07 0.71
2.59 0.70
2.69 0.69
2.58 0.43
"u
0,19
0,24
0.23
0.19
0,13
0.15
0.20
0.21
0.33
0,26
0.27
0.41
0.47
0,26
1,20
0.35
0.20
0,37
0.25
0,21
0.03
0,08
EmpLoyment and SocialServices,Laborand OtherSoc]aI 0,29 Housingand Communication Development 0.53
_ _
¢b ¢3
5_ TABLE2.2(continued) 19751982
I9831985
19751985
19861993
1986
1987
1988
1989
1990
1991
1992
1993
and Order ofwhich:
2.75
1,82
2.31
1.93
1.96
1.91
2.35
1,88
1.38
2,00
1,96
2,03
NationalDefense
2,22
1.28
1.78
1.31
1.29
1.30
1.56
1.41
1,30
1,21
1,21
1,30
GeneralPublicAdministration
1,27
1.05
1,16
1,91
1.13
2.24
1.82
1.86
2,63
1,83
1,82
1,76
DebtService
1.16
2,96
2.01
8,24
4,71
10,47
9.00
6.19
9.82
9.51
7,88
7.6I
Unaflocated
0.80
0.84
0.82, 1.19
0.83
0.57
0,55
0,78
0,85
0.84
1.47
2.46
15,29
11.84
13,66
13.21
14.50
12.71
12,13
12,81
13.80
13,64
12.80
NationalDefenseand Peace
GrandTotal-DebtService
Source:Sectoraldistributioncomputedbyauthorbasedon Commissionon AuditChartof Accountusingagencyleveldatafrom DBM
13,31
£3
E*
TABLE2.3 REALPERCAPITANATIONAL GOVERNMENT EXPENDITURES: 1975-1993
GRANDTOTAL TotalEconomic Services
1975 1,894.72
1976 1977 1,998.80 1,8t8.54
1978 1979 1980 1981 1982 1983 1,976.09 1,998.05 1,917.22 2,179.87 2,076.68 1,948.59
1984 1,558.27
839,32
852.89
700,36
847,77
844,2"[
785,70
976,75
874,71
685,94
552.64
148.21 21.40 34.43 21.15 1220 3.80 77.95 3,19 470,98 46.03
168,94 14.48 37.95 16.13 12.25 4,99 104.86 1633 386.01 90.34
96.82 "[5,60 37,52 10.27 10.23 3.12 87,00 14,30 359,83 65.68
163.77 "[5.71 4127 13,96 11,17 6.47 157.49 13.52 374.61 49,62
49.87 I4.47 38.44 16,81 10,75 9.39 176.94 25.23 463.93 39,39
6t.54 13.75 37.07 51.27 t.76 • 3.46. 135.91.• 50.22 399.22 41,49
103.13 9.65 38,81 106.61 1.97 4.92 140.60 39,54 413,26 118,26
I18.95 9.06 36.72 66.11 1.78 6,34 137,74 26.72 369.65 101.66
100.86 10.07 32.97 35,56 6.58 2.59 82.89 4.97 322.93 86.52
63,26 4,96 16.38 24.99 3.58 1.61 64,57 1,47 195,62 176.20
340.67
377,82
35204
397.68
447,_2
440.56
476.38
458,92
436,90
278,62
217,64 66.23
228.43 74.22
220,63 77.04
256.98 68,95
242.98 73,75
245.96 72,37
269,06 78,94
268.66 85.03
224.20 80.30
174,28 51.16
41.91 14,89
43,08 32,09
29.14 25,22
34.75 37.00
32.14 98.25
31.06 91.17
37.20 91.I9
34,66 70,57
35.29 97.t1
19.55 33,63
National Defense
352.34
382.22
366.23
367,86
259.84
215,03
211,03
243.31
190.82
1456.3
TotalPublicServices
172.33
192,33
186.72
239,50
242,87
223,20
274.46
187.09
230,25
165.09
152.59 19,75
149.34 42.99
144.74 4199
140.59 98.91
160.32 82.56
137.61 85.59
193.25 8123
143.69 43,40
150.08 80.19
110.35 54.74
Others
95.02
92.20
99.60
100.05
84.07
98,20
92,88
144.10
11.63
85,70
DebtService
95.04
10135
113.59
123.24
119,93
154.54
148,34
198.54
293,05
330.59
AgricuJture AgrarianReform NaturalResources Industry Trade Tourism PowerandEnergy WaterResources Development Transportation andCoenmunication OtherEconomic Services TotalSodafServices Education Health SociafServices,LaborandDevelopment andOtherSocial HousingandCommunication Development
P_Jblic Administration PeaceandOrder
GrandTotal- DebtService DefenseandPeaceandOrder
1,799.68 1,897,45 1,704,96 1,852.86 1,878.12 1,762.68 2,031.53 372.08
425.21
498.22
366,76
342.39
300.62
292.26
1,878.14 1,668.54 1,227.68 286,71
' 272.01
200.37
r_ _
;:3.
O',
TABLE 2.3 (continued) 1985
1989
1990
1991
1992
1993
2,384.93
2,179.67
2,784.49
2,677.02
2,319.10
2,307.12
463.58
399.41
463.67
554.70
594.26
436.06
406.10
127.89 6,02 22.49 16.94 0.29 6.23 57.49 10.96 129.30 277.93
140.93 19.22 23.17 43.58 0.52 2.46 21.21 8.80 176.70 26.96
102,83 22.62 26.91 23.23 1,31 3.60 -0.25 12.27 191.16 15.71
62.17 61.57 41.42 14.47 130 3.37 4.67 15.66 229.83 29.21
57,32 58.58 42.33 12.64 1,10 2.45 84.94 2.91 257.50 34.95
62.71 24.35 38.29 ll.88 0.97 2.50 51.59 3.37 326.57 68.03
74.76 15.07 26.61 12.76 0.90 2.68 19.46 7.68 271.99 4.13
61.17 I5.66 24.35 12.78 0.87 2.73 42.74 9.46 214.17 22.15
266.67
443.04
380.41
424.40
487.70
499.62
443.39
410.99
371.11
176.64 46.92
242.03 56.70
268.53 63.30
309.01 76.43
342.93 78.93
362.24 63.24
299.94 80.82
301.81 77.20
284.69 47,42
16.06 27.05
20.12 124,16
13.8l 36,77
16.41 22,56
23.16 42.68
25.04 29,t0
36.31 24,32
29.13 2.86
29.83 9,16
NationalDefense
113.82
133.16
136.88
173.57
161.75
152.84
140.11
135.95
143,02
TotalPublicServices Pub]ic Administration PeaceandOrder
155.66 102.98 52.88
t85.97 116.84 69.13
301.62 236.71 64.91
289,64 202.40 87.24
266.76 213.1l 53.65
318.87 309.59 9.26
302.89 211.41 91.47
288.00 204.13 83.68
275.83 194.49 81.33
_"
90.60
65.44
60.40
61.21
89.36
100.72
96.68
164.30
27i. 76
'_ _u "_t "5 _. ,.a
GRANDTOTAL TotalEconomic Services Agriculture AgrarianReform NaturalResources Industry Trade Tourism PowerandEnergy WaterResources Development Transportation andCommunication OtherEconomic Services TotalSocialServices Education Health SocialServices, LaborandDevelopment andOtherSocial HousingandCommunication Development
Others
1986
1987
1,544.16
1,985.80
1,446.64
574.22
651.55
69.59 5.66 17.69 21.95 2.94 1.58 10.54 12.20 205.16 226.91
1988
['O
5" ¢b
03 o 5. ,-_
;3"
DebtService GrandTotal- DebtService
343.00 1,201.16
486.65 1,49.9.15
1105.76 1,342.88
1000.71 1,348.22
710.43 1,469.24
1157.73 1,626.76
1099.68 1,577.34
683.79 1,435.31
839.28 1,46764
202.28
201.79
260.81
215.40
162.12
231.59
219.83
224.36
,"b
DefenseandPeaceandOrder
166.70
TABLE2.4 NATIONALGOVERNMENT DEBTSERVICEEXPENDITURE,1976-1991
_*
(In P million) o 1976
1977
1978
1979
1980
198I
1982
1983
INTERESTPAYMENTS
743
898
1,136
1,841
2,296
2,429
3,560
4,997 10,409 14,652 21,612 36905 45,865 54,714 71,114 83,426
DOMESTIC
596
747
758
1,084
1,098
1,445
2,312
2,615
5,785 10,261 15,681 24,224 32,183 41,032 53,323 6,3309
596
747
758
1,084
1,098
1,445
2,312
2,615
5,785 10,261 t5,022
0
0
0
0
0
0
0
0
0
0
147
151
378
757
1,198
984
1,248
2,382
4,624
4,391
5,931 12,681 13,682 13,682 17,791 20,117
147 0
151 0
378 0
757 0
1,198 0
984 0
1,248 0
2,382 0
4624 0
4,391 0
5,931 0
PRINCIPALAMORTIZATtON
334
936
697
990
1,287
1,468
1,332
3,451
4,588
4,099
6,449 32,789 25,455 27,800 35r232 39,357
DOMESTIC
209
406
512
504
636
736
541
1,203
1,408
744
1,979 24,150 12,408 16,057 14,952 20,196
209 0
406 0
512 0
504 0
636 0
736 0
541 0
1,203 0
1,408 0
744 0
1,979 15,626 0 8,524
125
530
385
486
651
732
791
2,248
3,180
3,355
4,470
8,639 13,047 11,743 20,280 19,161
125 0
530 0
385 (_
486 0
651 0
732 0
791 0
2,248 0
3,180 0
3,355 (_
4,470 0
6,253 2,386
8,333 2,360
6,157 2,960
9,005 8,603
8,970 7,191
0
0
2,354
2,626
2,672
3,000
Regular AssumedLiabiliUes FOREFGN Regular AssumedLiabilities
Regular AssumedLiabilities FOREIGN Regular AssumedLiabilities Debt ReductionProgram TOTALDEBTSERViCE
1,0Tt
1,834
2,033
2,831
3,583
3,897
4,892
t984
1985
1986
659
1987
18'88
1989
1990
1991
18,678 25,710 34,814 46,770 58,220 5,.546
6,055 6,626
6,473
6,991 6,691
6,218
6,553
5,089 ,._.
6,550 10,355 11,626 7,132 7,436 8,491
6,249 11,052 9.895 13,754 6,159 5,005 5,057 6,442
8,448 14,997 t8,751 28,061 69,694 71,320 82,514 106,346 122,783
O_
TABLE 2,4 (continued)
1976-19821983.1985 1986-1991 1986 1987 1988 1989 1990 1991 INTEREST PAYMENTS
64.04
71.23
65.24
77.02 52.95 64.3t 66.31 66.87 67.95
DOMESTIC
399l
44.22
47.79
55.86 34.76 .45.12 49.73 50.14 51.56
Regular Assumed Liabilities
39.91 0.00
44.22 0.00
41.44 6.35
53.53 26.80 3605 42.19 43.98 47.42 2.35 7.96 9.08 7.54 6.16 4.14
_.
FOREIGN Regular Assumed Liabilities
24.14 24.14 0.00
27.01 2701 0.00
17.45 988 7.57
2t.14 18.20 1918 16.58 16.73 16.38 21.14 869 9.80 7.94 9.74 9.47 0.00 9.5t 9.38 8.64 6.99 6.92
_"
PRINCIPALAMORflZATION
35.96
28.77
34.76
22.98 47.05 35.69 33.69 33.13 32.05
_.
DOMESTIC Regu[ar Assumed Liabilities
17.59 17.59 0.00
7.95 7.95 000
!8.67 I2.18 6.49
7.05 34.65 17.40 19.46 I4.06 'i6.45 7.05 22.42 8.76 1339 9.30 11.20 0.00 12.23 8.64 6.07 4.76 5.25
FOREIGN Regular Assumed Liabilities DebtReduclien Program
18.37 1837 0.00 0.00
2081 20.81 0.00 0 00
16.09 8.98 4.89 2.22
100.00
100.00
100.00
t5.93 15.93 0.00 000
12.40 8.97 3.42 0.00
18.29 11.68 3.31 3.30
14.23 7.46 3.59 3.18
19.07 8.47 8.09 2.51
15.61 7.31 5.86 2.44
go ,:3
_.
"U TOTALDEBTSERVICE Source:
Bureauof Treasury.
10000 100.00100.00100.00'i00.00100.00 "_
,_.
Intersectoral
Budget
burden
has
hampered
needed
services
Interest service
Restructuring the government's
payments
bill in total debt
consistently
19 years.
service
payments
dramatic
rise
to the
the
for the
in debt
deficits
which
given the easy access of the petro
dollar.
1986-1992
when
the government government because debt
service
more has
evenly
an
were primarily to foreign
In turn,
active
the
servicing
then
had
overhang.
to borrow
Foreign
deficit,
24.8 percent in 1.983-1985 starting in 1986, the national financial
rehabilitation
program.
the national
government
Domestic
Debt
As noted
in the
financed from 43.4
borrowing the heyday
of debt
service
due
banks
in
and
program.
on domestic
as The
borrowing
given
a declining percent
the govin large
its huge portion
in 1975-1982
of to
to 22.5 percent in 1986-1990. Also, government assumed the liabilities of
institutions Because
(GFIs) of this,
nearly
preceding
in 1980-
during became
from foreign
borrowing
government
government
loans rely
evolution.
by foreign
debt reduction
to increasingly
between
expansionary
markets
of these
on a foreign
split
the fact that This resulted
this led to the swelling
embarked
(Table 2.3).
recession
financed
financial
of debt
of domestic
an interesting
countries'
pursued
of its inability
the national
much
of the interest
on the average
was
the industrialized
government
bulk
the share
countercyclical expenditure program despite ernment's revenue effort was deteriorating. budget
to provide
went to the servicing
principal amortization external debt.
The 1982,
account
In 1986-1991,
was 65.2 percent
While the bulk of interest
In response
capacity
to the people.
in the last
liabilities, local and
65
as total
part
of the
outstanding
latter's debt
of
doubled.
paragraph,
domestic
debt
massively
accumulated from 1986 to 1991. Domestic debt grew by 28.3 yearly on the average between 1986 and 1990, twice as fast as GNP which increased percent Thus,
by 14,2 percent. annually
both
the debt-GNP
rose at a tremendous in both ratios
Similarly,
on the average, ratio
payments
at a faster
and the interest
pace during
are indicative
interest again
the period
of the difficulty
rate
rose by 18.6 than
payment-GNP
GNP. ratio
(Table 2.5). The trends of servicing
the debt in
TABLE2.5 PUBLICDEBT ANDBUDGETDEFICIT:SOURCEOF ECONOMICINSTABILITY 1
2
3
4
Domestic
Interest
Interest
Debt
Payments
Payments-
5
6
7
8
10
11
Primary Real GNP
Inflation
Lending
Growth (%)
Rate (%)
Rate (%)
Interest Rate{%)
Real
Years
(in P Debt-GNP {in P GNPRatio millions) Ratio millions) (%)
1980 1981 1982 1983
22,529 29,287 36,203 41,830
9.3 10.4 11.5 11.5
2,296 2,429 3,560 4,996
0.9 0.9 1.1 1.4
4.6 3.2 2.8 1.5
17.61 12.37 10.2 10.18
14.8 15.9 18.2 19.3
-3.4 2.8 8.0 9.2
1984 63,220 1985 88,368 1986 189,779 1987 240,551 1988 269,332
12.4 15.9 31.8 35.9 34.0
10,409 14,652 21,612 36,905 45,865
2.0 2.6 3.6 5.5 5.8
-8.8 -7.0 4.1 4.6 7.7
50.34 23.11 0.75 3.79 8.76
26.7 28.2 17.4 .13.3 16.0
-23.6 5.1 16.6 9.5 7.2
1989 292,201
32.0
54,714
6.0
5.9
10.6
19.5
1990 199t 1992
28.5 27.1 23.8
71,114 74,922 79,539
6.6 5.9 5.8
4.5 0.4 1.0
12.65 17.71 8.93
24.1 -0.4
307,345 342,117 327,715
9
Balance
(8)- (5) -8.0 -0.4 ' 5.2 7.7
(InP millions)
{10)- (3)
-1,09l -9,7t7 -10,844 -2,436
-3,387 -12,146 -14,404 -7,432
-14.8 12.1 12.5 4.9 -0.5
344 3,511 -9,640 20,212 22,659
-10,065 -11,141 -31,252 -16,693 -23,206
8.9
3.0
35,146
-19,568
_'
11.4 48574
6.9 -26,348 -1.0
33,920 17.71 63,574
-37,194 26,348 -15,965
_ ._~.
Sourceof basicdata: Departmento1Budgetand Management,EtangkoSentralng Pitipinasand Nationa_ StatisticalCoordinationBoard.
_. 4'3
_. _
9"
Intersectoral
Budget
Restructuring
67
the near to the medium term and the overall government's fiscal position. Standard
economic
analysis
debt-GNP ratio is determined non-interest budget surplus),
shows
unsustainability
of the
that the rate of growth
of the
by the primary fiscal balance (i.e., the the rate of growth in real GNP, and
the real interest rate. 15 The higher the growth rate of output, the more
the interest rate and the lower likely it is for the debt-GNP ratio
to rise. In contrast,
surplus
fall. Specifically, rate
of interest,
a large primary
if real GNP is growing the
government
needs
tends
to make
the ratio
at a rate
less than
the real
to have
greater than the interest bill in order to maintain debt-GNP ratio. On the other hand, if the interest the rate
of growth
maintained
while
Table
of GNP, the stability still running
2.5 reveals
that
while
primary
Philippines
surplus
the stability of the rate is lower than
of the debt-GNP
a limited the
a primary
ratio
can be
deficit. was
running
sur-
pluses in its primary fiscal balance every year since 1984 (except in 1986), its debt-GNP ratio was increasing. This was because its GNP growth has been less than the real interest rate and its interest payments exceed its primary balance. The study
high was
mopping
real
due up
interest
rate
to a number
operation
which
situation of factors. was
during
the
period
First,
the
government's
undertaken
to meet
under liquidity
targets under the IMF program called for much larger volumes of domestic debt issue than what was required to finance the national government deficit. national government quently, interest volume
interest
rates
This was then cash balances
reflected in the build-up of in the Central Bank. Conse-
shot up as the government
had to offer higher
rates in order to increase the attractiveness of the larger of Treasury Bills it was offering. Second, the government had
to follow a high interest
rate policy to keep
the foreign
exchange
rate
down in an attempt to avoid the upward adjustment in the servicing of its foreign liabilities. All these led to the unsustainable situation where the large stock of domestic debt resulted in an ever increasing domestic debt burden, which further led to increases in the fiscal
15. This is given by the following relationship: db = b(r-y)-x, where db is the change in the debt-GNP ratio, b is debt-GNP ratio at the end of the previous year, r is the real interest rate, y is the rate of growth in real GNP. mid x is tile ratio of the primary fiscal balance to GNP.
68
Financing
deficit
that
had
consequently, Between counted
for more
tic
than
means
that
debt within
financial
Moreover,
The short-term
a year,
exerting
and
this meant
strong
that increased
by increasing
borrowing
pressures rates
the average
maturity
debt
of the domestic most
of its
on the domes-
to higher
interest
ac-
of domestic
to refinance
et al. 1992). that'the budget
and
maturity
nature
had
contributing
quickly in the interest bill (Diokno Diokno et al. (1992) suggested mitigated
domestic
of 70 percent
the government
market
in the Philippines
debt stock. debts with short-term
an average
on the average.
stock
internal
by more
an ever growing 1986 and 1990,
outstanding debt
to be financed
Social' Programs
interest
rates.
are reflected problem
of public
more may be
sector
debt,
by reducing the interest rate paid on holders of government securities, and by improving the efficiency of the primary and secondary market
for debt
issues.
Expansion
of tlae medium-term
segment
of
the public sector security market may be enhanced by the issuance of small-savers instruments. On the other hand, less stringent monetary targets market conditions
and allowing the exchange will significantly lower the
same
time, an increase
ment
securities,
more
sophisticated
in the number
the intelligent
of primary
use of different
management
External
point
leads
to a P1.4 billion
billion
in
balance-of-payments October
methods,
systems the
of governare
simulation interest
reduction
using the rate by 1
in interest
17, 1983
in 1970, the external
1983
when
crisis. which
the
A debt
meant
debt increased
country
experienced
pay-
moratorium
postponing
was
foreign
rapidly another
declared
all or some
portions
maturing debt for the period. Thereafter, the government in a series of restructuring and debt-reduction operation country's
and
also ex-
Debt
From a level of $2 billion to $24
dealers
auction
information
pected to lower interest rates. Counterfactual PIDS-NEDA model shows that reducing percentage ments.
rate to reflect real interest rate. At the
on of
engaged with the
creditors.
The Philippines opted some clamor for putting
to honor all external indebtedness a cap on d*bt service or even
despite outright
Intersectoral
Budget
Restructuring
repudiation
of so-called
nonconfrontational strategy
fraudulent
debts.
policy by pledging
taken
elements:
69
to manage
the debt
implementation
to repay was
of policy
The
country
adopted
all foreign
debt.
composed
reforms
a The
of the following
by the government
in
order to revive the economy and put it on the growth path; availment of financial relief from foreign creditors; restoration and maintenance of short debt-reduction By the billion
term credit schemes.
end
of November
compared
in external factors. First,
to $ 26.2
the
$4.6
credits
budgetary
and
for various
1991, billion
debt from end-1985
long-term
works
lines and
million (which
Sewerage
external
in 1985
debt
of several
stood
net
were
availments
of short,
of two forms:
projects System
such
by several
medium
(a) program
support;
and
- Manila
Water
and
loans
(b) project
as the Metropolitan
(MWSS)
at $29.7
(Table 2.6). The increase
to 1991 can be explained
balance-of-payments
development
and
the implementation
for
loans WaterSupply
TABLE2.6 FOREIGNEXCHANGELIABILITIES (In US$ million) End-1985
End-Nov.1991
26,252
29,764
Net availments FX Fluctuations
Debt reductionfrom 3,245
ParisClubcapitalized interest
variousschemes
3,913
Assignmentsof 737
creditsto FCD Adjustments
8,598 Net increase= 3,512 Source:CentralBankof the Philippines.
(376) (797) 5,086
70
Financing
Rehabilitation
Project,
Power
Philippine
System,
Project,
National
Project,
Drainage
Second,
of Public
Third,
Works
currency loan $3.2 billion.
the
$737
rescheduling
million
wherein
debt
were
ever,
the increase
(a) $4 billion
debt reduction
Sector
(DPWH) - Metro projects).
against
in Which
other
foreign
a big portion resulted
interest
(from
of the
in an inParis
payments
of outstanding
debt stock
Club
of maturing
principal).
How-
was offset by the following:
from varioL_s schemes,
to Foreign
and (c} adjustments certain credits and
other
of interest
to form part
of credits
Highways and
capitalized
in external
{PNOC) Energy
is denominated)
portions
capitalized
assignment
yen
- 2nd
(NIA) - Irrigation
and
Project
the
(NPC)
Oil Eorporation
of the USdollar
(in particular,
in the Philippines
Corporation
Administration
Rehabilitation
country's third crease of about
Power
National
the depreciation
currencies
$797
National
Irrigation
Department
Manila
Sociali Programs
CurrenCy
(b) $376
Deposit
arising from the repayment other transactions which
Units
million
(FCDUs),
16
and cancellation of amounted to about
million.
The Philippine
experience
without
veering
strategy
and negotiation
the country social
could
sector.
away
from
utilize
in debt reduction the country!'s
(Box 4) showed
conservative
framework,
res0urces
to augment
the budgetary
The expected
reduction
could
in: interest
that
overall
debt
be freed which allocation
rates
to the
will decrease
the debt-service burden and obviously, _elease budgetary resources for public spending in health, nutrition ]and education. The various debt-conversion schemes do not only reduce the stock of foreign debt but can also meet objectives The
"donation"
scheme, in the
a third secondary
scheme
can
party
purchases
market
and
The peso proceeds
are then
as the Department
of Health
proceeds
be used
to achieve
such
be used
as environmental for this
discounted exchanges
"donated"
Philippine the debt
to_a specified
or Education certain
purpose.
human
protection. Under
debt paper
paper
for pesos.
institution
on the condition development
this
such that
the
goals.
16. Local foreign currency dePosit units (FCDU_o purchased Philippine debt paper from foreign lenders. Because the FCDU is consiklered a Philippine resident corporation, the purchased debt is no longer part of foreign liabilities.
Intersectoral
i,,,, ,: :BOX
Budget Restructuring
71
4
, ',,, _"
j:.....Debt Restru_ "
, ,,,
,,,,,,,,_=,,,
,,_
,,F'
'
Debt roductlO,rlh_O_i Severalschemes resulted in the reductionof the debt stockbyl about$4 billion(see table below). Dudngthe period1986;1991, the debtbuybackreducedthe stock of foreign debtby as muchas $1.4 billion.Underthe debtbuybackscheme, the countryrepurchasedsome portionof its outstandingforeign debtfromthe secondarym_rketat a discountforcash byusing its foreignexchangereservesorresourcesfrom officialsources.The debt-to-equityconversionprogram reducedthe debtâ&#x20AC;˘by another $1.4 billion,Under this scheme,an investorboughtback foreign debt paper from the secondarymarket for redemption by the Central Bankofihe Philippines(nowcalledthe Bangko =Sent_ ng Pitipinas) at the highestbidprice.The pesoproceedsarisingfrom the transactionwillbe directedto investmentsin prescribedareas. Qn the otherhand,swapschemessuchasdebt-for-debt,debt_for/asset,debt-for-noteand otherschemesreducedthedebt stockby i:another $1.2 billion.1 In summary,thegrossincreaseof about$8.6 billionwas offsetbya reductioninextema_debtstockof $5.1 billion, leading to a net increaseof only$3.5 billion. j '="
BOX4,TABLE1 DEBTREDUCTION, 1986-NOVEMBER 1991 (InPmillion)
Debtbuyback Debt-to-equity Debt-to-debt Debt-for-asset Debt-for -note Pesorepayment Others TOTAL {
:
Source: Central BankofthePhilippines,
Amount 1,374 1,36_7 216 369 134 433 20 3,913
j
i i
I
72
Financing Social Programs in the Philippines
i
, Creditor iPmfil;
i i i i i
Box..4,Table=2 shows the pror.e, oT_!e coumnj s foreign debt ab" of November 199...1i,. Of the total foreig_ .liabilities, $11 billion or 3r percent are due to foreign ¢ommerci_t.Ibanks and other financiall institutions;$9,6 billion or.32 percent from bilateral sources; $6._ billion or 22 percent from multilateral ;ources and $2,9 billion or_
i i i
percent from.other sources. Since.1 _5,i.therehas been.a s:hiff'il_, i financing source from Commercial=c.r_ditors.to bilateral and multi- .ii lateral sources... 'i
,,
,,
,,
Maturity of Debt
i i
As of November i=:9.91., the bulk (or 83;6.percent) of foreign .de._l ..
.consistedof medium- and long-term _edit while 16.4 percentWet_!
i .short-term cred ts ....n.contrast as ol end 1985, 67:3:percent _f ,. ' foreign debtwere medi.um_and 10rig-t{rmcred.its=wh.i'l.e 32.7 percerl,t. i :were short-term, Box..4,.Table 2 al,,0:shows thedistribution 5f foreign exchange liabilities by b0rrower: As of NoVember199i, the. public sector had an 80,6 percent shzre of foreign debt comparedl .to 19,4percent of the private.sector,='r)is comparesto the.situatiot_i in end-1985 where the PUbi.!csector ada 69.,8.percen!share and, the private sector had a 30.4 p.ercenti_ha:re... .Commercial Banks' Financing.Package Of the $11.billion loans owed to_foreig_cbmmerciai banks and oth=_r_ financial institutions $8...biltionare m_dium- and IQng-term.i0an_l i while $3:billion are.short-term, ofthe1 $8bi,ionlabout $514:billio_l ';. have.been restructured: of.which$4,!lbitllon.are public secto.rde_!t ! and $1.2 billionare:owed bYthe privat _sector_The..BangkoSentr_ i ..ng.Pflipinas reports thatall public )ctor restructureddebt (i._. "those foreigndebts under various rel_tructuring;agreementsw]!_! commercial banks) are eligible .for e:(change under ._hediffere.r_ schemes. This is estimated.to be abo,_t.$4.8billion as of Februa_ 1992.The Commercialbunkfinancing 3ackageSeekstO(a) provid[_
i J
l
[nteraectoral
Budget Restructuring
73
i
,(InU$$billion),
Amount
%" ", :"":Amount
%
ByCreditor
...
;,
• '
Foreign KBsandFIs" Multlta/erai Institutton,_ Bilateral Credilors OI_ere"
11.09 6.41 9.36 2.9
_i,2.0 .. 2!,50 ' 31;_: ' 59.,90
15.28 4.50 2.87 3.66
58.t0 17.10 "i_.90 13,90
•MediumandL0i_g-Term Shr_t4erm'
24.91 4.89
83.60 16.40
17.70 8.60
' 67.30 32.70.
_te Sector Private,%ctor
24.02 5.78
80.60 19.40
18.30 ' 69,58 8.00 30.42
'
....
i:
'i'
*KBs_ commercial banks;FIsarefinancial institut_ns.
.,
.SoUrce: CentralBankofthePhilippines. , Itl|p_illl_flO_illi_II_ZSl4_l!14qlQAlqlllIt_lllIitll!tltZ!_it _IIs_s_I_s_tts;_s_ss;_s_"_s1_t_t_m_"_1_I_I_)_I_s_I_I_I!_II_!_=_
=
• debt retiefby reducing the debt stock and debt-service burden, and :. (bY'raisenew money fromthe commercial banks. The paclr_ge:has _t_ following components: debt buyback; exchange of,e_sting .creditsfor.aS-yearprincipalcollateralized interest reductio_i(PClR); . . _harIge of existing Philippine credits for 15-yeartemporary later: est,red_ction (TIP,R) bonds and new money through the flotation =
, :i
,
!
76
Financing
size
and
population.
General
Social Programs
public
services
was 2.6 percent
of GDP in the last six years
was
of GDP from
1.8 percent If government
(measured
relative
outlay while
in the
that
former
in the latter
1984-1988.18
expenditure
on
general
to GNP) were frozen
P8.3 billioncould
in the Philippines
public
administration
at its 1975-1985
be saved yearly. 19 Alternatively,
level, some
the same
amount
could be saved_annually if the Philippines sets its expenditure on general public administration at a level similar to that of Thailand.i째 However,
the discussion
in Chapter
the Executive and Legislative reforms in this direction. Social
Service
6 suggests
branches
no support
of government
from both
for pursuing
Sectors
National government expenditure orl the social service sectors pears to have been heavily affected by developments in macroeconomic
environment.
both nominal economic categories,
and real terms
turnaround
commitment
in
to social the
years
of 1983-1985
percent
concerns.
and general
when
of GNP in 1975-1985
social
Aquino
growth following
public service
ranked
administration
to 3.8 percent
in terms
during
expenditure
the major expenditure social service sectors
the
expenditure
expenditures
exhibited
in
administration's
Of the major service
of the pattern
slowest growth rate among government outlay for the
1986-1993
andJ the
of all social
This is a reversal
substantial
in the period 1987
service
aggregate
third next to debt service of growth.
It registered
apthe
the crisis posted
the
items. Thus, rose from 3.2
in 1986-1993
(Table
2.2). However, the fiscal crisis in 199_ and 1991 resulted in a slight reduction in the allocation to the social sectors relative to GNP. 18, The Philippine allgcation 2 percent of GDP for general order.
for general puMic services is broken down as follows: public administration and 0.6 percent for peace and
19. Savings is computed based on the average difference between what was actually obligated and what would have been obligated if the expenditure level were get at 1.4 percent of GNP in the last three years. 20. The amount were set stration
amount of savings is computed based on the difference between the actual obligated for this item and what would have been obligated if expenditures at 1.2 percent of GDP (the average expenditure oil general public adminiin Thailand) in 1991-1993.
Intersectoral
Budget
Similarly, service
in the
percent
even down this
the social
sectors
from 21.2
Restructuring allocation total
indicator
ratio
national
in 1981-1982
to 17.5 percent net
of debt
(i.e., the share
government
to 18.8 percent
in 1986-1993
is measured
expenditure
7_
relative service,
of the social
budget)
declined
in 1983-1985
and
(Table 2. 7). However,
to total
national
it actually
when
government
increased
from
22.8
percent to 23.5 percent to 29 percent during the three periods under study. Table 2.8 shows that the country's social allocation ratio is just about lower than
half of the UNDP norm of 40 percent and, in 1988, is those of South Korea, Malaysia, Thailand and Singapore,
regardless
of whether
the total national tures net of debt
one reckons
government service.
Table 2.7 shows of expenditures health
care,
basic
and
sanitation,
the
social
1991, social
budget
the social
human
education,
service
sectors
percent
priority
low-cost
ratio,
relative
and
to
expendi-
is, the share (like
primary
peri-urban
water
21 to the total expenditure impervious
It has risen
in 1983-1985,
that
priorities rural
support) is more
situation.
ratio
or to the aggregate
development
and nutrition
macroeconomic to 39.3
that
on
the Philippines'
to swings
from 34 percent
to 56.7
percent
on
in the
in 1981-1982
in 1986-1993.
In
the social priority ratio suffered a mild contraction like the allocation ratio. Table 2.8 indicates that the Philippine social
priority
ratio
The human
human expenditure ratio (the ratio of expenditures on development priorities to GNP) like the social allocation
ratio,
is higher
than
the average
is vulnerable
to the overall
expenditure
ratio dropped
human
1981-1982
to 1.1 percent
for developing
economic
environment.
from an average
in 1983-1985
countries.
Thus,
the
of 1.3 percent
in
but rose again to 2.2 percent
in 1986-1993 (Table 2. 7). Because the Philippine public expenditure and social allocation ratios are lower than those of other countries (even if its social priority ratio is higher), its human expenditure ratio is also lower than those of other countries {Table 2.8}. The human 21.
Annex
human
development
development Table
1 provides
priority
expenditures
ratio,
to total
a list of the components
that
is, the
government
of human
development
ratio
of
expendipriority
expenditures for purposes of this paper, On the other hand, Annex Table 2 presents the sectoral breakdown of human development expenditure from 1981 to 1993. I1
78
Financing
Social Programs
in the Philippines
TABLE2.7 PUBLICEXPENDITURE,SOCIALALLOCATION,SOCIALPRIORITY, ANDHUMANDEVELOPMENTRATIOS,1981-1993 Public
Social
Expenditure Allocation Ratio Ratio
Social Priority Ratio
Human
Human
ExpenditureDevelopment Ratio Priority Ratio
Year
(GEIGNP)
(SSE/GE)
1981 1982
.17,2 16.3
21.8 22,1
34.0 38.2
1.3 1.4
7.4 7.9
1983 1984 1985
15.5 13.9 15.2
22.4 17,9 17,3
38.1 41.9 '37.8
1,4 1.0 1,0
8.1 5.7 6,4
1986 1987 1988
19,2 23.2 21.1
22,3 15.5 18.1
31.3 :56,7 :58.4
1.3 2.0 2.2
6,9 8.8 10,6
1989 1990 1991 1992 1993
19.0 23,6 23,2 20.7 20.9
22,4 17,9 16,6 17,7 16.1
'584 :63,0 58.5 63.6 63.8
2:5 2.7 2.2 2.3 2.1
13,1 11.3 9,7 11,3 10.3
Average 1981-82 1983-85 1986-93 1981-93
17,2 14.9 21,4 19.2
21.8 19,2 18.3 19,1
34.0 39,3 56.7. 49 5
1.3 1,1 2.2 1.8
7,4 6.7 10.2 9,0
UNDPNorm
25,0
40.0
:50.0
5.0
20.0
Key: GNP GE SSE HDE
= = = =
(HDE/SSE) (HDE/GNP)
gross nationalproduct(nationalincome) governmentexpenditure social-sector(government)expenditure humandevelopmentexpenditture
Sourceof basic data:AnnexTable2.
(HDEIGE)
Intersectoral
Budget
Restructuring
7"9
TABLE2,8 SELECTEDCOUNTRYEXPENDITURESHARES,1988
Country
('20/20' Target) Public Social Social Human Human ExpenditureAllocation Priority Expenditure Development Ratio Ratio Ratio Ratio Priority Ratio (GE/GHP) (SS/GE) (HDP/SS) (HDP/GNP) (HDP/GE)
Zimbabwe Rep.of Korea Morocco â&#x20AC;˘Malaysia Thailand Botswana Colombia CostaRica Singapore Brazil* SierraLeone Philippines Mauritius China Jordan Kuwait Bangladesh Chile Tanzania Sri Lanka Nigeria* India* Argentina Pakistan* Indonesia*
52 16 29 32 16 51 15 41 35 34 13 21 27 19 50 36 12 33 29 31 29 37 41 25 25
49 30 42 29 37 37 40 50 35 32 39 18(31) 40 24 25 42 24 50 15 43 20 20 35 21 13
50 77 52 68 42 41 36 26 35 38 31 58 29 46 44 26 42 19 55 18 38 34 16 14 18
12.7 3.7 6.3 6.3 2.5 7.7 2.2 5.3 4.3 4.1 1.6 2.2 3.1 2.1 5.5 3.9 .1,2 3.1 2,4 2.4 2.2 2,5 2,3 0.7 0,6
24.5 23.1 21,8 19.7 15.5 152 14.4 13.0 12.3 12.2 12.1 10.6(18.3) 11.6 11.0 11.0 10.9 10.1 9.5 &3 7.7 7.6 6,8 5.6 2.9 23
Average(all) (nonfederal)
30,00 30,00
32.40 35.20
38.20 40,60
.6 4,0
12.0 13,5
UNDPNorm
25.00
40,00
50.00
5,0
20,0
*Largefederalsystems Key: GNP = gross nationalproduct(nationalincome) GE = governmentexpenditure SS = social-sector(government)expenditures HDP = humandevelopmentpriorityexpenditures Numbersin parenthesisfor Philippinesreferto net of debtservicebudgetshare. Sources:GovernmentAppropriationsAct, Departmentof Budgetand Managementfor Philippines;UNDP,HumanDevelopmentReport1991,Table3.1, p. 41, for all countries.
80
Financing
tures,
follows
the trend
from
7.4 percent
then
recovered
Philippine average
of the social
in 1981-1982 to
10.2
human
but is only slightly
allocation
in the Philippines
ratio.
to 6.7 percent
percent
in
development
in 1981-1991
countries
Socia_ Programs
ratio
(Table
and
2.7).
of 9 percent
half the UNDP norm
below the average
it faltered
in 1983-1985
1986-1993
priority
is less than
Thus,
The
on the
of 20 percent
for some 25 selected
developing
(Table 2.8).
Breaking social sector expenditures down into its components, it was observed that national government expenditure on social welfare
in nominal,
well-defined
real
upward
and
trend
real
per
during
the
capita
terms
period
exhibited
under
study.
a
From
1986 to 1993, its nominal growth rate accelerated to five times the average rate of growth inthe ten-year period ending in 1985 while its share
in GNP rose
this increase reflects
tions,
typhoons
wise registered
percent
does not necessarily
largely
years. National
from 0.19
a reaction and
indicate
to the series
earthquakes)
government
a major hit
the
during
1986-1993.
However,
imperceptibly
government
country
to 0.64
change.
It
erup-
in those
and health
like-
although
both
the period
expenditure
from 0.57 percent
However,
(volcanic
on education
tendency
tapered off starting in 1991. National government tion rose from 1.9 percent of GNP in 1975-1985 most
policy
0f calamities
that
expenditure
an upward
to 0.2 percent.
outlay for educato 2.8 percent in on health
percent
grew
al-
of GNP (Table
2.2). Real per capita expenditures on education reached its peak (P362) in 1990. In contrast, real per capita expenditures on health have not yet recovered the reductions suffered during the crisis years. Their highest level after 1985 was than their 1982 level (P85) (Table 2.3). Table 2.9 shows
that
the Philippines
P83 in 1990, ranks
like Malaysia, Singapore and Thailand (but terms of its allocation on health and education ured
to GDP or to the total national
government
below
even
lower
its neighbors
above Indonesia) in whether it is measbudget.
82
F_'nancing Social Programs
Economic
in the Philippines
Sectors
National government outlay to the economic service sectors lagged behind most of the other expenditure categories in. terms of growth from
].975-1993,
1975-1982 sectors
except
and
had
increasing
from
1986-1993,
1983-].985.
expenditure
the slowest
growth
by' 3.3 percent
and
in 1986-1993
nomic
service
percent
-1.6 percent
(Table
sectors
Despite
this
contraction
periods
economic
yearly
service category,
on the average
in
government expend!.tures on of GNP in ].975-1982 to4.4
aggregate
to 20.3
in the
expenditure
2.2). Moreover,
in the
in.1975-1982
on the
in the major
real terms, respectively. As a result, these sectors dropped from 7 percent percent
Thus,
the
share
budget
sank
percent
in 1986-1993.
in the
allocation'
for the
of the ecofrom
45.6
economic
service sectors, the agrarian reform subsector emerged a big winner in 1986-1993. In those years, the agrarian, reform budget expanded by 16.7 percent
yearly
on the average
in real terms
compared
to an
annual decline of 10.2 percent in 1975-1.985. Consistent with its commitment to the ]and reform progI'am, government outlay for agrarian
reform
rose
GNP (Table 2.2). On the other
three-fold
hand,
from 0.1 percent
government
expenditure
on infrastructure
and energy,
tation and lost ground
communication) partially regained in 1986-].993 some during the crisis years. Thus, expenditure on infrastruc-
were equal
This
figure
1975-1982 the
resources
of
(i.e., power
ture
water
to 0.3 percent
to 2.5 percent
is equa]
to the
of GNP on the average 1983-1985
level (4.6 percent).
transportation
and
development,
level but
In the infrastructure,
communication
subsectors
and transpor-
in 1986-1993. lower thani:the however, actually
only recov-
ered from the slump suffered during the crisis years, growing from 2.06 percent of GNP in. 1983-1985 to.2.11 percent in 1986-1993. Similarly,
national
development the same power
and
government
shrank
period. ener[y
from
expenditure
0.06
On the other development
percent
hand,
of GNP to 0.08
national
contracted,
on water government continuously,
resources percent
in
outlay
for
from 0.8
percent of GNP in 1975-1985 to 0.3 percent in 1986--1993. Partly due to the low levels of government spending on infrastructure and institutional weaknessds, infrastructure deficiencies
I
Intersectoral
Budget
emerged
one
Bank
as
(1992)
Restructuring
of.the
major
83 bottlenecks
gave four primary
in the
explanations
economy.
economic infrastructure. "First, a failure by government a strategic vision for its economic infrastructure and necessary decisions to realize such a program... and in some cases declining levels of maintenance expenditure nomic
have
diminished
services
from
regulatory
failures
of services
by the private
have
caused
the
existing
(including
demand
country's
ability
have
to swell beyond
in
to develop to take the
to extract
eco-
assets.
constr4ained
and government
crisis
Second, irregular, and rehabilitation
infrastructure
pricing)
sector
World
of the current
Third,
the supply
corporations,
the capacity
of these
and service
providers. This, in turn, has resulted in rationing, outages, accelerated deterioration of assets and financial and macroeconomic instability. ciently
Fourth,
infrastructure
distributed
National
across
Defense
investments
have
been
ineffi-
regions."
and Peace
and Order
Government expenditure on national defense and peace and order combined exhibited a definite downward trend in 1975-1.985, declining
from 3.5 percent
2.2). However, picked
up, settling
Relative on national compared
peace
22.
at 1.9 percent
and and
in 1985 (Table
expenditure
on the
sector
in 1993.
at 3.0 percent,
this perspective, peace
be noted
These
1993,
to other countries in the region, Philippine expenditures defense is the lowest at 2 percent of GNP in 1993,
Thailand
Given should
1986 and
to the figure for Singapore
percent, defense
of GNP in 1975 to 1.6 percent
between
order
ratios
are
that
and
for
and
reallocation order
1988.
three
Indonesia
that
at 3.9
at 1.8 percent.
to be limited.
outlay
times
Malaysia
of resources
appears
the country's
is almost
at 5.3 percent,
for national for health.
from
22
national
However, defense
it and
84
Financing
Social Programs
in the Philippines
DISTRIBUTION OF GOVERNMENT EXPENDITURES ACROSS ECONOMIC CATEGORIES CURRENT
government
GNP in 1975-1985 plummeted
government
from
(Table 2.10).
current
10.4
while
percent
capital
Further
expenditures
of
outlay
decompo-
shows
that rapid
was exhibited by three major items: interest payments, transfer t_o government corporations and expenditures on
personal
services.
Interest The
soared
in 1986-1993
from 5.2 to 3,5 percent
sition of national growth current
expenditures
to 18 percent
Expense
share
of interest
payments
in thei total
national
government
budget expanded from 9.4 percent in 1975-1985 to 25.4 percent in 1986-1993 (Table 2.11). Consequently, {nterest payments mounted fl_om an average of 1.5 percent of GNP in the first period to 5.4 percent in the latter (Table 2.10). The interest bill was so huge from 1987-1.992 deficit
that
during
would on
deficit
debt
larger
Thus,
tham
posted
service, rate
the
the national
if interest
of the national
payments
government,
of GNP in 1983-1985
have been
domestic
even
the period.
of the overall 0.1 percent
it was
and
rise
in interest
of interest,
larger
were netted surpluses
3.2 percent
(Table 2.5). As discussed payments
volume
government to
in 1987-1992
in the subsection was
of domestic
due debt
dered by the government's strict monetary policy, the government's assumption of GFI liabilities, and the relative of foreign
out
equal
to high engennational scarcity
loans.
Interest
payments
on domestic
debti grew by 43.0 percent
yearly
on the average in 1980-1991 compared to a 29.5 percent increase on foreign debt. Thus, the !share of domestic
annual interest
payments
in 1991
(Table
national
from 47.8
percent
in 1980
to 73.1 percent
2.12).
Personal â&#x20AC;˘While
rose
the
Service share
Expenditures of t_ersonal
government
budget
service was
exl_enditures
fairly
stable
in the aggregate at 25-26
percent
in
Table2,10
_'
NATIONAL GOVERNMENT EXPENDITURES, BYECONOMIC CLASSIFICATION, OBLIE FIONBASIS,1975-1993 " (Percent ofGNP)
o
19755 1982
I9831985
18751985
19861993
1986
1987
1988
1989
1990
1991
1992
1993
TOTAL
16.45
14.80
15.67
21.45
19.20
23.18
21.14
19,01
23.63
23.16
20.68
20.91
I.Current Operating' Expenditures A.PemenalServices B,Maintenance andOtherOperating Expenditures a, tnterests b.Transfers 1.tolocalgovernrnent 2. toallgovernrnenl corporations 3. toothers c.LoanRepaymer_t andSinkingFund Contribution d, OtherMOE
10.65 4.35 6,30 0,91 1.43 0.67 0.25 0.50
10.15 3,77 6.38 2,11 1,04 0,67 0,20 0,17
10,41 4,08 6.34 1,47 1,25 0,67 0,23 0,34
17.97 5.41 12.57 5,45 1,87 1,'E6 0,37 0,34
12.98 19.02 4.78 4.70 8,20 14.32 3.62 5.58 1,37 1.24 0,61 0.63 0,33 " 0.22 0,43 0,39
18.21 5.50 12.71 5.79 1.06 0.58 0.29 0.19
16,06 5,70 10,36 4,35 1.43 0.63 0.39 0.40
20,13 5,94 14,19 6.57 1.75 0,74 0.29 0.73
19,03 5,48 13.55 5.92 1.64 0.60 0.62 0.22
17.81 5,60 12,2l 5.74 1.94 1.53 0.22 0.18
18.24 5.13 13.11 5.15 3,26 2,52 0,46 0,29
0.50 3.46
0.85 2.38
0.66 2.95
2,79 2,45
1,08 2.12
4.89 2.61
3.21 2,65
1.89 2.69
3.25 2.61
3,60 2,40
2,14 2,39
2,46 2.24
II,CapitalOutlay A,Land,LandIrnprovernents andStructure Outlays B,Buildings andStructures C,Equipment D,Investment Outlay a.tolocalgovernment b toallgc_emment corporations c,toothers E.LoansOutfay a,tolocalgovernment b,toallgovernment corporations c.to ot_ers
5.80 2.12 0,77 0,27 2,37 0,08 2,32 0,05 0.26 0.00 0.22 0.05
4.65 t.03 0.42 0,29. 1,49 0,00 1,36 0,13 1,41 0,00 1,36 0.05
5.25 1.61 0.61 0.28 1,96 0,00 1.87 0,09 0.81 0.00 0.76 0.05
3.47 1.35 0.69 0,32 0.45 0.00 0.42 0.02 0,66 0,02 0,55 0.09
6.22 0,51 1.00 0.10 2.09 0,00 2,06 0,03 2,53 0,00 2.53 0.00
4,16 1,12 0,56 0,18 0.70 '0.00 0.69 0.01 1.59 0.03 1.14 0,42
2.92 0.95 0.55 0,35 0.30 0.00 0,27 0.03 0.77 0,03 0.62 0,12
2,95 1.17 0,69 0,38 0,38 0.00 0.30 0.08 0.32 0.01 0,17 0,13
3.50 1.74 0,96 0,23 0,28 0,00 0.27 0.01 0.27 0.02 0.20 0.05
4,13 1.89 0,99 0,40 0.15 0.00 0.14 0.01 0.70 0,02 0,64 0,04
2,87 1,40 0,61 0,42 0,19 0.00 0.18 0.01 0.25 0.01 0.16 0.09
2.67 1.35 0.31 0.33 0,41 0,00 0,40 0,01 0,28 0,01 0.23 0.04
Source: Manasan, Rosario G,,1994,
1_
c_ _;3.
Table 2.11 PERCENTAGE DISTRIBUTION OF I',tATIONALGOVERNMENT EXPENDITURES, OBLIGATION BASIS, BY ECONOMIC CLASSIFICATION, 1975-1993 19751982 TOTAL
I983. 1985
1975. 1985
1986. 1993
1986
I00.00 100.00 100.00 100.00 I00.00
1987
1988
1989
199o
1991
1992
1993
100.00 100.00 100.00 100.00 100.00 100.00 100.00
I.Current. Operating Expenditures 64.74 A.Personal Services 26.48 B.Maintenance andOtherOperating Expenditures 3828 a. Interests 5.51 b.Transfers 8.71 t. to localgovernment 4.09 2.toallgovernment corporations 1.55 3.toothers 3.07 c.LoanRepayment andSinkingFundContribution 3.03 d.OtherMOE 21.04
68.58 25.48 43.11 14.23 7.04 4.53 1.38 1.t3 5.74 16.10
66.48 26.02 40.44 9.41 7.96 4.29 1.47 2.20 4.24 I8.83
83.80 25.21 58.59 25.43 8.71 5.41 1.72 1.58 13.02 11.42
67.60 24.91 42.68 18.87 7.!1 3.16 1.73 2.22 5.63 1t.06
82.06 20.28 61.78 24.07 5.34 2.72 0.95 1.67 21.09 11.28
86.17 26.04 60.13 27.40 5.00 2.74 1.37 0.89 1521 12.53
84.49 30.00 54.49 22.91 7.50 3.34 2.05 2.10 9.93 14.t5
85.20 25.13 60.06 27.80 7.43 3.14 1.21 3.08 13.77 11.08
82.16 23.65 58.52 25.56. 7.08 3.44 2.70 0.94 15.53 10.35
66.I1 27.06 59.05 2i.76 9.36 7.39 1.08 0.89 10.36 11.57
87.22 24.53 62.69 24.65 15.60 12.05 2.18 1.37 1174 10.70
[I.CapitalOutlay A. Land,/andImprovements andStructure Outlays B.Buildings andSlructures C.Equipmenl D.Inves_entOuIlay a. IoIoca4 governmenl b. loallgovernment corporations c. toothers E.LoansOutlay a. tolocalgovernment b. toallgovernment corporations c.toot_ners
31.42 6.98 2.86 1.96 10.10 0.01 9.21 . 0.88 9.52 0.08 9.16 0.36
33.54 10.26 3.87 1.77 12.49 0.08 11.93 0.56 5.15 0.01 4.82 0.31
16.20 6.3l 3.22 1.50 2.09 0.01 1.98 0.10 3.08 007 2.57 0.44
32.40 2.63 5.19 0.51 10.88 0.00 I0.75 0.13 13.19 0.01 13.16 0.02
17.94 4.84 2.42 0.79 3.04 0.01 2.97 0.06 6.86 0.12 4.91 1.83
13.83 4.48 2.59 1.68 1.42 0.01 1.27 0.14 3.66 0.14 2.93 0.59
15.51 6.16 3.63 2.02 2.0I 0.01 1.58 0.44 1.69 0.08 0.92 0.69
14.80 7.35 4.15 0.96 1.19 0.00 1.13 0.08 1.16 0.10 0.84 0.22
17.84 8.16 4.30 1.71 0.65 0.00 0.60 0.05 3.02 0.09 2.77 0.16
13.89 6.75 2.96 2.05 0.91 0.02 0.86 0.04 1.22 0.04 0.77 0.41
12.78 6.45 1.48 1.57 1.97 0.00 1.92 0.05 1.32 0.03 1.12 0.17
Source:
Manasae, RosarioG, 1994"
35.26 12.91 4.69 1.63 I4.43 0.08 14.13 0.30 1.61 0.02 131 0.28
0'3 ,3 _" d
r,-_.
h_ _ _. ,u _" t...o
TABLE2.12
_"
INTERESTPAYMENTSOF THE NATIONALGOVERNMENT, 1990-1991 Levels (in P million)
c)
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991 Average
Inte[estPayments Domestk; DirectNationaIGovernment
2,296 1,098 1,098
2,429 1,445 1,445
3,540 2,361 2,361
4,887 2,615 2,615
10,063 5,785 5,785
14,454 10,261 10,261
20,819 15,022 13,845
36,981 24,301 18,678
45 155 32,18t 25,685
56,885 40,913 34,695
72,213 53,304 46,751
76,746 28,872, 56,1"F8 20,450 52,424 17,970
AssumedLiabilities Foreign DirectNationalGovernment
0 1,198 1,198
0 984 " 984
O 1,179 1,179
0 2,272 2,272
0 4,268 4,268
0 4,193 4,193
1,177 5,797 5,797
5,623 12,680 6,054
6,496 12,974 6,991
6,218 15,972 6,549
6,553 3,694 18,909.20,630 10,355 11,842
AssumedLiabilities
0
O
0
0
O
0
0
6,626
5,963
7,132
7,436
6,922
2,842
LoansRetenl Corporations
0
0
0
0
0
0
0
0
0
2,2ÂŁ1
1,118
1,866
440
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991 Average
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.08
100.00
100.00
100.00
100.00
47.82
59.49
66.69
53.51
57.55
70.99
72.16
65.7_
71.27
71.92
73.81
73.12
65.34
47.82
59.49
66.69
53.51
57.55
70.99
66.50
50.51
56.68
60.99
64.74
68.31
60.33
0.00
0.00
0.00
0.00
0.00
0.CO
5.65
15.21
14.39
10,93
9.07
4.81
5.01
52.18
40.51
33.31
46.49
42.45
29.01
27.84
34.29
28.73
28.08
26.19
26.88
34.66 28.74
PercentageDistribution InterestPayments Domestic DirectNationalGovernment AssumedLiabilities Forek3n Direct NationalGovernment
2,480 8,421 5,140
52.18
40.51
33.31
46.49
42.45
29.01
27.84
16.37
15.48
11.51
14.34
15.43
AssumedLiabilities
O.00
0.00
0.00
0.00
0.0O
0.00
0.00
17.92
13.25
12.54
10.30
. 9.02
5.25
LoansRelentCorporations
0.00
0.00
0.00
0.0O
0.00
0.00
O.OO
0.00
0.00
4.03
1.55
2.43
0.67
Sourceof basicdata:
_.
;:3.
Departmentof Finance. 00 ",1
88
Financing
1975-1993,
personal
services
Social Programs
accounted
in the Philippines
for a growing
portion
of the
total budget net of debt service. However, personal services expenditure rose from 4.1 percent of GNP in 1.975-1985 to 5.4 percent in 1986-1993 salary
(Table
2.10).
adjustments
Aquino board
This came
granted
administration. salary
executive
increase
in July
included
the
as a result
employees
during
across-the-
increase
increase
em-
government agencies in 1987, and the increases standardization scheme implemented in July
services
expenditures
rose
by a yearly
to keep pace for inflation, average
of 8.7
percent in 1986-1993 compared to 1.1 percent in 1975-1985. The expansion of personal services expenditure, however, also be explained ees. Data
the
for career
for rank-and-file
1989. These adjustments were more than sufficient with inflation at that time. Thus, after adjusting personal
of the
10 percent
1986, the 5 percent
the 30 percent
ployees in selected due to the salary
partly
to government
These
positions,
about
by the rise in the number
from the Department
of Budget
of government and
may
employ-
Management
(DBM)
shows that the personnel complement of the government rose from 1 million in 1987 to 1.2 million in 1990 (Diokno 1990). Carifio (1990) noted
that the government
stration
was subject
reorganization
to many
ironies:
under
the Aquino
(a) it increased
admini-
both the offices
and the personnel of the bureaucracy and (b) it increased the number of executives for every 100 nonexecuti_e personnel such that some of the increases in the number of rank- and-file employees may
be accounted
for by the growth
of the executive
people at the front-line services. More recently, ment embarked on a retrenchment policy that attrition. have
However,
expert
opinion
suggests
offices,
not of
the Ramos governis based on natural
that
this effort will not
a significant impact on the current size of the bureaucracy. Moreover, under the new Local Government Code substantial
functions,
responsibilities,
national volved
government agencies,
bureaucracy
to the
expenditures of Agriculture
agencies there
are
particularly
the administrative to cater
personnel
needs
for general
to local
of devolved and
personnel.
from
For de-
offices that
A comparison
services
Department
units. streamlining
office personnel
at the central
administrative
(DA), DOH
for
of regional
services
were devolved
government
opportunities
in terms
support
and assets
the and used of the
in the Department
of Social
Welfare
and
Intersectoral
Budget
Development lution,
(DSWD),
indicates
expenditure
and
done
services
three
that
two agencies
the dramatic
post-devolution
so, their
in 1993
89
of the agencies
the last
item despite
personnel have
Restructuring
combined
would
decline
budget
affected
have
not reduced
in number
been
for general
lower
by devothis
of retained
(Table 2.13 and
outlays
have
most
2.14}. If they
administrative
by P424
million
(Table
2.15). 23 A comparison
of government
expenditures
on personal
services
in the Asian region shows that the Philippines ranks higher than Indonesia and South Korea but lower than Thailand and Singapore (Table 2.16}. This suggests the possibility of trimming down the size and cost of the bureaucracy when viewed in an international context. Subsidies Current
to Goverament transfer
0.2 percent (Table
(or subsidy)
to government
of GNP in 1975-1985
2.10}.
subsidies
The
to
(GOCCs)
Corporatioas
performance subsidies
to 0.4 percent
substantial
expansion
government-owned
occurred
despite
as a whole to GOCCS
corporations
(Manasan
during
of GNP in 1986-1993
in national
and
some
and
government
controlled
improvement Intal
the latter
grew from
corporations
in their 1992).
period
The bulk of the
went
to the National
Food Authority and the National Irrigation Administration. Not as apparent as the explicit government subsidies subjected process) are
to the usual that
those
which
are reflected
that
involve
tial tax
treatment
Nevertheless,
tax
legislative
expenditures, and which
of certain
private
budgetary
for example, involve activities
are
review
expenditure
usually sector
(which
program subsidies
the preferenover
others.
from the budget process because they represent not collected and therefore, not programmed.
tax expenditures
expenditures
and
in the government's
are extra-budgetary
These are excluded revenues that are ment
executive
operating
just
like
should
be considered
part of govern-
wages
and
of government
salaries
personnel. 23. This estimate assumes that the appropriations for general administrative services expenditures of these agencies for 1993 should have been equal to the product of three factors: the ratio of retained budget to total agency budget, the allocation for general administrative services in 1992 and regular growth in expenditures (assumed to be 14 percent).
90
Financing
Social Programs
in the Philippines
TABLE2.13 NUMBEROF,DEVOLVEDPERSONNEL,1992 ! S"
Numberof
Numberof
IPersonnel Personnel Numberof Before Department/Agency
After
Devolved,
Devolution Devolution Personnel
Departmentof Agriculture Officeof the Secretary.. NationalMeat InspectionCommission Departmentof Budgetand Management Departmentof Environment and NaturalResources Departmentof Health Departmentof SocialWelfareand.... _ ... Development OtherExecutiveOffices ..
29,638 29,234 404 ' 3,532
11,965 11,570 395 1,882
' 17,673 17,664 9 1,650
21,320 74,896
20,425 29,000
895 45,896
6,932 191
2,788 166
4,144 25
191
. .:, 166
25
i 36,509
66,226
PhilippineGamefowlCommission Total '
l
70,283
"
Source: 1993NationalExpenditurePrggram,RegionalCoordinationStaff,DBM. .,
.,
,
Given the government's limited it is essential that an evaluation benefits case
and
studies
costs
arising,
below
raise
.
_apacitv to generate resources, b e undertaken of the relative
from the Various doubts
I
subsidy
programs.
on the cost-effectiveness
The
of subsi-
dies, in general, and those given toj the NFA (Box 5) and to firms registered with the Board of Investments or BOI (Box 6), in particular. . ..... Maintenance Maintenance payments, tractual percent 2.JO).
and Other and current
Operating
othell operating transfer
or discretionary in 1975=1985 ..
Expense expenditures
and
loam repayments
portion
of MOOE)
to 2.4 percen
., , ,
(MOOE), other
than
interest
(i.e., the nonconcontracted
t of GNP in 1986-1993
from
3.0
â&#x20AC;˘{Table
Intersectoral
Budget Restructuring
91
TABLE2.14 AGENCYBUDGETSAND DEVOLUTION,1992" (In P thousand)
,, Department/Agency Departmentof AgradanReform Departmentof Agriculture Departmentof Budget and Management Departmentof Environment and NaturalResources Departmentof Health Departmentof PublicWorks and Highways Departmentof SocialWelfare and Development Departmentof Tourism Departmentof Transportation and Communication PhilippineGamefowlCommission Total
'
Budget Before
Budget After
Devolved
Devolution
Devolution
Budget
1,842,374 " 5,210,028
1,832,985 4,154,408
465,379
292,532
9,389 1,055,620 ' 172,847
3,941,782 9,991,392 ' 27,109,267
3,774,!07 6,140,313 _ 26,012,920
167,675 3,851,079
1,320,708 207721
454,288 204968
866,420 2753
7563929
7563832
97
1.5,208
6,503
8,705
50,436,856
7,230,932
57,667,788
1,096,347
*Basedon the 1992ExpenditureProgramand incorporatesa full.yearimpactof the functions/projects/activities devolved. CapturesonlyexpendituresofdevoMngagencies(i.e.,Officeof:theSecretaryof Departmentsexceptthat of.Agricultt_re whichalsoincludestheNationalMeat Inspectioncommission).Source:1993NationalExpenditureProgram,RegionalCoordinationStaff,DBM.
While this expenditure item posted 1986-1993, it has not yet fully recovered
nominal and real growth in from the setback it suffered
during the crisis years of 1983 - 1985. In particular, the P 16.7 billion allocation for other MOOE (in 1985 prices) in 1993 is even smaller than the need
the P23.3 premature
billion
outlay
deterioration
for an early rehabilitation
in 1976.
This development
of government of the same.
capital :
assets
has
led to
and
the
9_
Financing Social Programs in the Philippines TABLE2.15
ADMINISTRATIVE SERVICE BUDGETS OFSELECTED DEVOLVED AGENCIES, (InPthousand) Ratioof Retained
Agencies DA DOH DSWD
Actual 1992 (1) 253,712 329,144 106,788
Actual Appropriate Difference 1993 Level1993 (2-3) (2) (3) (4) 178,680 612,830 135,192
230,604 230,613 '41,878
Budgetto Total1992 Budget (5)
(51,924) 382,217 93,314
0.7973 0.6146 0.3440
*Thisestimateassumes thattheappropriations foi generaladministrative services expenditures oftheseagencies for 1993shouldhavebeenequaltothe productof threefactors:theratioofretained _budget tototal agencybudget, theallocation forgeneraladministrative servicesin1992andregulargrowthin expenditure (assumed to be14%) Sourceofbasicdata: GeneralAppropriations ActfortheDepartment ofAgriculture (DA), Department ofHealth(DOH)andDepartment ofSocialWelfare andDevelopment (DSWD).
: TABLE2.16 GOVERNMENT EXPENDITURE ONPERSONAL SERVICES INSELECTED COUNTRIES, 1986 Countries
% of GDP
Indonesia
2.9
Philippines Korea
4.7 2.4
Thailand
6.1
' Singapoie
7,9
Source: FiscalStatistics Handbook, Department bofBudgetandManagement (DBM).
94
Financing Social Programs in the Philippines
...... 7":................. ;........... '"'":............... :'"':'_"ii ............. :'"'"i ....... :..................... %"........ i................. i"......... ' Is 'this expense commensurate t:)the success of:the NFA;'_, :" carrying out,its mandate? "The res,llltS of a number of stud,i_ ,, ','' (Lantican arld:Unnevehr 1987;"Um![i,,1989; Clarete et a! 199_ ,,, ' .suggest that the NFA h.as."n0tbeenv_ry effective in stabilizi.ngll_ '.. .price.0.f.."palayand rice..Atthe sam ;time, Clarete et al. (19.9_ . t.ha.n....1.0 "perceril."of.t.he estimated 3 millt_l . estim.a{ed..th.at..less farme.rs'inthe;c0uhtryhave actually N,nefitted from the implicit.Nl_
.. .
. subsidy on palay,,and"th:atonly ab0 it .2pe.rcent .ofthe estimat_(_,_.. 10 million ..hoUseholdsin the counl "y.have benefitted .from tl1!i ,:",, ".implicita.FA.s.ubsidyon rice..Moreo_ ,'r,,the .regi0na.ldis.tdbut:i'on __F ,. NFA rice appears to be negatively re atedt0the numberofhou.s _ :' .holds belowthep'0verty line..Thus; b_CauseNFA subsi.dy.is,la.rg._' ' "."Ufltargeted,:its withdrawal,is not likel, to hurt the poor. ' ' " ',."'..."..F nalty Clarete eta!, showed tl at' the total cost0f the..a_ "": Subsidy program..is substantially hi_her than the actual subsii_i, ."...receivedby rice...:..producers".and cdnsUme.rs.The differe.nce_l .. attributable.to the' high Costincurrel in.the administration .of tlI_ : "subsidy.' They pointed,Out the poss bility o.fa bloated..: ,..Theyestablished :..that ,, in 1991,.it ccst the NFA P1.52 to ' ..,. every P.i of subsidYtofarmers and ci)ns.umers.alike(B0x 5, 2). ! , ',, ,
'
'
:,
,'
"
:
,
,
' --"'
;
,, i,
: : ',
i,: i
' BOX5jABLE2' , COEO'F"D'E:uvERiNG-_ _,SUBSIDY,' '19'91, , .... , (InP billioi_),,:, ,,....... ,,, , ,
,
Tradir}gLoss
',,,,
' :.,
: ,
",
, ,
',
Costof Delivering Subsidy
:
,
,
:.
,,:
.
: '
,:
,
,,:
_,,
:
" I!
2.5:
'
.. . .. :
,:
, ,
._
' _ ,
,,
Less: Subsidies to,Farme,(s" Less: Subsidies toConsumers .,
',''
:,,i,, ,,
.0.51 ' , 0:41
.'
, ' ...:,.
,, ',
,,'
,,
,
,
, , , ,, '
,
, ,
' ,
1.5',
,:
,
,
Source: Clarete,RamonL et al,,"SecurinFoodSecurity:Performance Assessment andFutureDirectionfor.theNFA."December 1992. , ,
, ,
,",,
.
, ,
',:,
,,
,
.,
:,
,,
, ,
'
"
"' '
",
""
'
'
'
'
"
t
'"
':"'
i
, . ,,
=
Intersectoral
Budget
Restructuring
95
:losses continually exceeded national , , ,,, thatthe NFA had tO effectively o_its currentoperations and points to the ntsituation; If these effective withdrawbgovemment i__; i,,_
.gove_n_
billion currently
are better.spent _nutrition and ¢_ei;hu,man d_Velopment
3,1; •,
'_.,, _ ";,
;,,,
,,._
,
.
G "Breaking Awayi_from_ll=,tFisca Bncl:_Ref_tng_i!te ;..,..,._x,....
;,,_,_,,:._:_l_,',,,,_:.',,.,_ ........ 1•..:•',.; ...................... :_._,_,......................... ;......... .............................
Capital
Outlays
The
brunt
primarily
of the been
fiscal
adjustment
absorbed
carried
by capital
out
since
expenditure
1983
of the
has
national
government. Aggregate national government capital outlay continuedto shrink, declining from 5.8 percent of GNP in 1975-1982 to 4.6 percent in 1983-1985 to 3.5 percent in 1986-1993 (Table 2.12). This contraction was largely in terms of national government equity infusions in government corporations. ment investment on its own account started
its slow upward
GNP in 1991.
Note,
however,
level of 5.1 percent The depressed years
climb
Meanwhile, national governregistered a turnaround and
in 1987, that
peaking
at 3.3 percent
this is still lower
than
of
its peak
in 1975. levels of public
did not augur
well for the
sector country's
investment growth
in the past prospects.
10 The
positive relationship between economic growth and public investment is generally taken to be part and parcel of conventional wisdom or received empirical (a) while sector
knowledge. support
a feedback
expenditure
Moreover,
to this and
recent
contention.
evidence
Manasan
relationship
exists
economic
growth,
between public
provides
(1994)
shows
current sector
some that public
infrastruc-
9_
Financing
Social Programs
in the Philippines
BOX6 Board of Investment
Incentives'
"
Since the post-war period, various tax. incentive laws. have beem enacted as part of the country's industr alization strategy. The first. such law Was Republic Act (RA) 35 of 1!)46 which granted new and'.i necessaryindustries
exemptions from[a number of.taxes. It wasll
repealed in 1953 and its replacement._as been superseded many_ times since then. The latest revision o[.the investment i.ncentives}i law was in 1987 wi.t.hthe issuance of Executive Order (EO).226,:; otherwise.known as.the Omnibus Inve._tments.Code. Since 1967, the" Board of Investments. (BOI) has been tasked'; with .the administration of t.he fiscal in(entives made available to: .preferred industries. As part of this funi:t.ion, the BOI prepares the. Investments Priorities Plan (IPP) annu_41y,,processes the applica-,. tions for registration of enterprises/proc ucts, processes registered. firms' applications for the availment o incentives, .and monitors. compliance of BOI-registered enterpris, _swith the terms and con-" "" ditions of their registrati.on. ' Estimates of the revenue foregone due to incentives.prov ded by the BOI are presented in Box 6,. able 1.. The cost of fiscal incentives to industry has risen almost !ive-fotd in nominal terms in
•'
the last six years from P2.2 billion in 1£_86to P10.8 billion in 1991. Relative to GDP, the. total revenue from.fiscal incenforegon e tives is not. negligible. Moreover, it has I_eengrowing quite steadily, from 0.4 percent of GDP in 19.86 to 0.9[ 3ercent in 1991. However, revenue foregone from BOI incentives
_ppears to.be more signifi-
cant when measured relative to total nalion.al government revenue, They represent 2 and 4.9 percent of nat onal.governmentrevenues in 1986 and 1991, respectively. At the s_ m.etime,, revenue.foregone ;' from tax incentives amounted to 14-52 )ercent of the consolidated public sector deficit in 1987-1991. • With the government having,to scroange for.new tax measures, every year to cover its growing fiscal .diffiCit, it is but natural to aski •i
whether the benefits arising from the fiscal inoentive system exceed its cost. The use of fiscal incentives as
tool of industrial policy has.
.. ..,
Intersectoral
Budget Restructuring
97
i?,,_;_ .......... _................................................................................... --'r:........................................................... " _:" ' " BOX6, TABLEI" ,', ,',;_,"Ji,,'_,,"_ ,,:, REVENGE FOREGONE BYTYPEOFINCENTIVES '"'_""':" :_ (InPbillion) ', Average 19861986 1987. 1988 1989 1990 1991 1991 TaxDeducSons
0.1
0.2
0.2
0.1
0.1
0.2
0,1
TaxExemptions TaxCredits Total RealLevel (in1985prices)
1.0 1,1 2.2
4.0 1,7 59
3,7 3,1 70
4,8 2.1 7.0
60 2,1 8,2
7,8 2.8 10,8
2.7 1.3 4.1
2.2
5.3
5,7
5,2
5.5
62
3,0
%toGDP 0.36 %toNational Gov't.Revenue 2.79
0.86
0,87
0.75
0.77
0.87
0,77
5.72
6.18
4.55
4,55
4,90
4.84
%toConsolidated PublicSector Deficit 7.19 45.40 23.49 18,05 14.42 5157 21.63
i_ It It! i; ;; ;;;;; :; :;::::: :;::-" ::::::::::::::::::
:::::::::::::::
::::-"::::: ."::::: ."::-"::::-":=:::::-":,: ::::: =:::::::::::::::::::::::-"::::
Š::::::::::::::
::::: ::::::
:::::-':::
been justifiedontwo grounds.First, fiscal incentivesmay be used to directly coelnteractgenuine market failures (e.g,, imperfect capital markets and imperfectinformation), institutionaldistortions (e.g., wage dualism) and policy-originating distortions (e.g., tariff and nontadff protection) [Power 1989]. In this regard, vadous studies note that the existing protection structure (a) penalizes exports relative to import substitutes, (b) encumbers nonmanufacturing relative to manufacturing sectors, (c) discourages a more even dispersal of industries across regions
i
98
,
Financing Social Programs in the Philippines
(because protected finished prOducst n to ca r the eeds o urban populations and because of th_ heavy dependence of:the. same.,onimported inputs that can .be accessed through the!i portsthat:tend to be concentrated Urban 'Centers),and. (.d)" ,
, ,
,
, ',
,
,,
,,
•
impedes the development of small anc of the inherentadvantage of large _nterprises..:.in securing .favorable,.tarlffrates) (BautiS_, PoWer.and As.c .1979; Pernia and Paderanga 1983;"lecson et al, 1990).. recent studies (Medalla. 1986. ]990; iPante and Medalla. conf rm that wh..e both•the:averageeff_Ctiveprotection (.EP.R)I .am: the dispersion of EP.Rsacross sector _,havebeen reduced.as _: combined result of.the tariff reform pro_ram and the import itberali-!; Zation program in .1980-19'90,the cha lges have not s gn f cantlyi altered the inherent biases Ofthe prote :tien.structure, i_ •'
"
'
''
'
'
''
',
'
i'
i
' The question thatisthese raisedthen is: s .without:in:trod.ucingnew! the BOlincentive Systemi;! effective in offsetting distortior'_ Ones? The answer is n0._it has been ointed out.that the specific2 features 0f.the Philippine.incentive s, ,ternin the past have rem-lJ. forced, rather thanneutralized, the bia ..esoutlined above. Thus,:i_" has been,shown that Be! incentives end (a) to.fav0r"in.dUS{ri.es locating in the national, capital regio_ relative to.other regions (because of the inadequate decentraliz _tionof the BOl"registrationl process); (b) to favor large relative to _mall.firms. (because smal firms are less ableto afford,the fixe¢ cost associated.with bOW registration and.availmentofincentive,' from the BOI and becaus the capital-biased incentives BOI use tend to favor larger firm,_ which are generally more capita!inten,' ve than smaller ones), an6 (c) to favor sectors with" high. tariff r_tes, through the choice ai industries,and/orsectors included in ti e !PP (Tecs°net al..19.89 Power 1989). Manasan. (1986,..1990 has also shown .thatBOI incentives tend tounduly cheaPen'cap al relative._olabor becaus_ of the reliance on nonfact0r neutral ir _.entives.Finally, Mana_a.r., (1993), based on more recent da!a den onstrated,lhat.biases of the fiscal incentives system con{inue up the present: .in particulal BOI has become more distortio.naryon l _vocounts. One,.thecapit_ ,_ ,
:
,
,
,
:,
,
intensity of BOI projects.have riddenbeivveeni987 and 1991..Two ' ! .............
,....................................................................................
'
I
'
'
:
Intersectoral
Budget Restructuring '.
99 ,
,'
,,
of BOl fir.msincreased in the same .Onthe other hand, although the..i.Scaie and locationbias of incentives persisted, both have. declined during the same _.':,;. The second justification for the use_offiscal incentives is their i :. alleged importance .in attracting foreign direct investment (FDI). i The changes .introduced under the 1987 Omnibus Investments i . Code were put in place ostensibly to make the Philippines more , i,..competitive withits neighbors.Manasan(1993) confirmed that the _ country offers roughly equaiinducements in terms of the impact of â&#x20AC;˘incentives on the profitability of promoted firms. However, the ' ,..".results .of a .number of studies (Allen 1979; Lindsey 1980; MITI .... .;_11987; Rana I988; Lamberte 1991) that have examined the impor"_,tattceof fiscal incentives in stimulating FDI inflow in more .'":systematic.fashion tend toshow that the.locationdecision of foreign ..investorsare more influenced by market fundamentals (e.g,, size ;of.the market, GNP growth, macroeconomic stability and political i" ._ Stability) than.-the presence of fiscal incentives. Moreover, the .:..".._experience of other countries (like Indonesia) that have withdrawn i .:_:_ !.incentivesindicate that they have not been hurt by such a move. i..,; :' in.conclusion, the performance of BQI incentives in counter...' .._asti g distortions in the overall policy environment and in attracting '!!?FDl.d.oes_not appear to warrant the fiscal cost of the present .;;,.":' ".incenti.ves, system. Thus, it is suggested that the BOI incentive ?_:package be eliminated. However, incentives for exports, particu".I.;latly those that provide export producers access to inputs at world 4'.',':market. prices (through duty/tax exemption and drawback) should :i... be;maintained.At the sametime, the provision of net operating.loss ii_:¢_3/ over and accelerated depreciation to all firms is recom_ i,_im_ded. to allow the Philippines to compete.with other countries in } :i;_._:the region,in drawing.FDI into the country. Doing this could save i.:;."':::...i!the....govetnment:.some P4 billion based on 1991 incentives avail_.,',J:,! ,,'.(_. !.:i ?:_}Sou_.o_;Manasarl, RosarioG., 1994.
},i;t._.t,_t_....t .......... ,,.............. :............................................................................ :.....................................
i O0 ture
Financing expenditure
Social Programs
Granger-cause
economic
in the Philippines
growth;
24 (b) public
sec-
tor capital expenditures have stronger output effect than public sector current expenditures; and (e) public sector infrastructure investment
crowd.s in private
non-infrastructure
sector
investment
investment
crowdsl
out
while
public
private
sector
ment. With a growth-oriented strategy i the infrastructure will tend to compete very strongly with _he social service terms
of increased
government
sector invest-
sectors sectors in
all0cati0n.
SUMMARY i The rapid 1986-1993
expansion of government expenditures does not indicate an inordinate growth
in the in the
period size of
government. This is so because debt service.accounted for approximately one-third of the government budget during the period. Net of debt tracted capita
service
and
total
go_ernmenti
expenditure
actually
con-
between 1975 and 1993. Morepver, the 1993 level of per government expenditures net of debt service in real terms
was lower than
the
1981 level. In effect,i the debt burden
hampered
the government's capacity to provide services to the people. The accumulation of domestic deb_ accelerated between
1986
and 1991 given the government's limi_d access to foreign loans. Coupled with a high interest rate regime, an increasing domestic debt led to further increases in the fi_cal deficit that had to be financed
by more
domestic
growing
debt stock.
Other
be mitigated improving
borrowing analysts
by increasing the
government
efficiency
securities,
the
and,
maturity
that
and
by developing
an ever
the problem
of public
of the primary and
consequently,
suggested
sector
secondary a small
may
debt, market
savers
by for
instru-
ment. These moves are expected to lower the interest rate on government debt issues. In this regard, it has been shown that a one percentage billion
point
reduction
reduction
in interest
in the interest
rate
leads
to a P1.4
payments.
i
24. A variable is said to past values) is a good underlying theoretical
Granger-caxlse another ?ariable predictor of the latter in a htatistical relationship between themk
if the former (including its sense,
regardless
of the
Intersectoral
Budget
Government order 1975
Restructuring
expenditures
10l
on national
combined, as a proportion and 1993. This allocation
However,
it is still three
Government proved years
to be resilient
the budget, Aquino
times
larger
than
the budget
on
general
public
next
years.
to stringent Then,
budgetary
service.
relation
to GDP is higher
general
public
than
percent
of GNP) or set at a level
percent
of GNP), then
indicate
National the
slowest
periods these
growing
sectors
between
and
dropped
these
two
during
public
services
in
budget
for
of Thailand.
If the
at its 1975-1985
similar
to that
can
save
for such
from
on a
could
be
administration, and Legislative
service
item in the Government
7.0 percent "rhe
(1.2
billion
a move.
expenditure
periods.
level (1.2
resources
to the economic
1986-1993.
the
of Thailand P8.3
outlays on general public in both the Executive
major
1975-1982
is true
of government
outlay
item in
same
government
no support
government
the crisis
growing
on general
is pegged
amount
saved yearly by reducing interviews with officials branches
that
administration
yearly basis. While a significant
and
on health.
during
fastest
The
expenditure
the
peace
administration
cuts
it was the second
only to debt
Philippine
and
of GNP, declined markedly between is the lowest in the ASEAN region.
expenditure
of 1983-1985.
defense,
budget
in
was the
expenditures
to 4.4
failure
sectors
percent
to add
on
of GNP
substantively
to
infrastructural capital over the last six years and the deterioration caused by inadequate maintenance threaten to produce a crisis over the
medium
financial developing
term.
and
This can be overcome
implementation
clear regulatory
tion in the provision
through
capacities structures
of public
to facilitate
of infrastructure"
building agencies
private
(World Bank
up the and
participa-
1992a).
Given government's limited capacity to generate resources, it is essential that an evaluation of the relative benefits and costs arising from its various analysis incentive
indicates package
industries
was
subsidy
programs
be undertaken.
In particular,
that some P4 billion can be saved provided by the Board of Investments rationalized.
can be realized
if the
explicit
Food Authority
was reduced
Similarly, and
significant
implicit
or eliminated.
subsidy
the
if the fiscal to preferred
savings
(P1.2B)
to the National
102
Financing National
was
government
heavily
Thus,
substantial turnaround allocation, UNDP eight than
growth
by
on the
developments
government in the period
social
in the Philippines
social
in the
service
Sector expenditure
1986-1993
sectors
macroeconomic
following
registered the economic
in 1987. Despite this improvement, the Philippine social ratio continues to be equal to approximately half of the
norm
of 40 percent
percentage
Likewise,
expenditure
influenced
environment.
Social Programs
the
points Philippine
half the UNDP norm
while
the
lower than human
social
the'UNDP
development
of 20 percent.
priority target priority
ratio
is about
of 50 percent. ratio
is less
3 Performance, Public Expenditures and Challenges in the Health and-Nutntlon Sector
THE objective sector where
of this savings
chapter is to identify areas within the health can be made through the use of lower cost
alternatives, cost recovery and better targeting, and where additional resources are needed. The first section provides a situation analysis for the years 1980 to 1990. It describes status and health outcomes during the period.
the trends in health It covers mortality,
morbidity and nutritional status. The second section discusses distribution of public expenditure on health across various grams. problems
Finally,
the
third
and
challenges
section
addresses
confronting
SITUATION
the
the health
specific
the pro-
issues,
sector.
ANALYSIS
Mortality Estimates
of infant
mortality
(based
on various
country vary widely. However, all estimates tion in infant mortality rate (IMR} stagnated such
that its level may even have
However,
a slight
decline
been higher
in the indicator
data
indicate between
sources)
in the
that the reduc1976 and 1985
in 1985 than
in 1980.
in the last half of 1980s
104
Financing
appears
to have
Because
of the
Philippines
brought stall
registered
Social Programs
it back
in the
to its
1980
IMR in; the
first
the lowest
percentage
regio n (TaMe 3_2), It has beennoted appearst per capita
0 coincide
with the trend
GNP {World Bank
that
in the Philippines level
(Table
half
of 1980s,
reduction the trend
3.1). 2a the
in IMR in the
.in IMR over time
in macroec0nomic
indicators
like
1993a). TABLE3.1,
INFANTMORTALITYRATE (Infant deaths per 1,00i0live births)
..
Year
Rate
1976 1978 1980
64.0 57.0 59.0
1982 1984 , 1986. _990P
57.0 63.0 63.0 60.0
p= preliminaryestimates Source: AlejandroN. Herrin,et al. "HealthSectorlReview:Philippines,"HealthFinance DevelopmentProject,No. 3,.March1993and NationalStatisticalCoordination Board(NSCB). InfeCtious and preventablediseases in the country despite some pr0gres_ diseases
in recent
the top two causes
years.
Overall,
of death,
persist as the major â&#x20AC;˘killers in the control Of infectious
pneumonia
followed
and
by diarrheal
tuberculosis diseases,
are
malnu-
trition and measles in terms of importance (Table 3,3). In recent years, chronic ailments like heart diseases are on the rise as causes of death. For children are
respiratory
below
one year
infections
and
of age, the leading diarrheal
diseases.
causes
of death
Together
with
25, Note that the estimates in Table 4,1 are based on the estimates recommended by the Task Force on Infant Mortality Rate (TI_-IMR).These are almost double the direct estimate based on vital registration whikh places the IMR at 30.1 in 1988. However, the TF-IMRdiscarded the latter because ofthe higl_levels of under reporting in. the vital registration system.
Health
and Nutrition
Sector
1 05 TABLE3:2
INFANTMORTALITYRATESIN SELECTEDASIANCOUNTRIES,1970-1990 % decline 1970-
1975-
1980-
1985-
1970-
1975
1980
1985
1990
1990
Bangladesh China
140 61
137 40
128 39
110 32
21 48
india
135
126
110
99
27
Indonesia
114
105
95
82
28
47
35
30
20
Lao PDR
145
135
122
110
Malaysia
42
34
28
18
Country
Korea,Republicof
Nepal
57 24 57
153
147
139
127
26
Philippines 1 Thailand
64 65
52 (60) 53
51 (61) 38
52 (61) 31
19(6) 52
VietNam
90
62
53
46
49
1 Estimatesfor the Philippinesare derivedas follows:the 1970-1975estimateswere providedby theWorldBank,Pupulationand HumanResources;the 1975-1990esimates werederivedfrom thedirect estimatesof mortalityusingthe NDS-1988data (as reported by the PhilippineTaskFoceon InfantMortality(TF-IMR,NSCB).The valuesin parenthesisrepresentthesuggestedvaluesby the TF-IMR,basedon indirectestimates, for an equivalentperiod. Source: WorldBankDataFile, ascited in WorldBank,"Devolutionand HealthServices: ManagingRisksand Opportunities,"1993. nutritional all infant
deficiencies deaths
and measles,
they account
for about
half of
(Table 3.4). 26
Morbidity Table 3.5 shows the
leading
morbidity
that with the exception
causes (Herrin
of mortality
are
of influenza also
the
and bronchitis,
leading
et al. 1993).
26. Infm_t deaths alone comprise 15% of all reported deaths.
causes
of
106
Financing
Social Programs
in the Philippines
TABLE3,3 LEADINGCAUSESOF DEATHS;1968,1978,1988and 1989 (Rateper 100,000population) Causeof Death
1968
1978
1988
1989
122,9
100.0
80.8
77.0
Tuberculosis,all forms
79.5
62.4
46.0
43.8
Diarrhealdiseases
41.9
34.5
17.9
13.5
19.2
17.6
5,9
12.3
13.2
11.2
34.4
56.6
69,.1
74.6
Pneumonias
Avitaminosesand othernutritionaldeficiencies Measles Diseasesof the heart
17.1
. P
Source: Herrin,A. N., et al. "HealthSectorReview:Philippines."1993.
Nutritional
Status
Malnutrition dietary
among
energy
Filipinos
deficiency
is caused
which
by three
is common
factors:
among
(a) chronic
young
and pregnant and lactating women;. !b) protein energy tion as manifested by growth deficits among preschool
children
undemutriand school
children; and (c) micronutrient deficiencies particularlY in Vitamin A, iron and iodine among a large group of the population from all ages
(Herrin et al, 1993). The inadequate level of energy
proportion was
of fat in the
adequate
Overall,
the
diet. The
at 89 percent average
the total
dietary
of 20-25
percent.
intake
intake
which
intake energy
In the case
intake
declined
of fat acdounts
compared
is attributable
to the
of children
of pregnant
65 percent
adequate,
and
lactating
respectively
Although the nutrition child malnutrition remains
women (National
and
to 87 percent
1982
in 1987.
for a low 15 percent recommended between
six years of age, their dietary ener_y intake percent of their daily requirement, iLikewise, intake
in 1978
to a low
was
was the
six months
Nutrition
and
only about 65 dietary energy
only 69 percent
status of young children prevalenti. In the period
of
proportion
Council
and 1991).
has improved, 1989-1990, 14
Cb
TABLE3,4 LEADINGCAUSESOFINFANTDEATHS:1981-1985,1986, 1987, 1988and1989
_"
•
Causeof Death
1981-I985
;
1986
1987
1988
1989
_.
Rate
%
Rate
%
Rate
%
Rate
%
Rate
%
10,2
24,8
10.0
25,5
8.5
26.3
8,0
26,7
7.1
26.0
Respiratoryconditionsof fetusandnewborn Diarrheas
5,5 3,6
13.4 8.7
5.3 3.1
13,6 7,8
4,6 2,1
143 6,4
4.1 2.0
13,5 6,6
4,0 1,4
14.6 5.0
Congenitalanomalies Avitaminosesand othernutritionaldeficiencies Measles
1.9 1.7. 1.3
4,6 4,1 3,t
1,8 1,6 1.2
4.5 4.1 3.0
1,4 . 1.1 1.5
4,4 3.4 4.6
1:5 1,0 1.0
4.8 3.4 3.3
1,3 0.9 0.8
4,9 3,1 2.9
Birthinjuryand difficultlabor Acute brochitisand bronchiolitis
1.1 0,7
2.8 1.8
1.0 0.7
2,6 1,7
0.9 0.5
2.7 1.5
1.0 0.4
3.3 1,4
0.8 0.3
2.8 1.0
Septicemia Meningitis
0.6 0.5
1.5 1.3
0,7 0.5
1.7 1.3
0,6. 0.4
2,0 1,2
0.8 0.4
2,5 1.4
0,8 1.3
2.8 1,0
Pneumonias
_
(3
Source: Herrin.A. N. etal. "Hea}thSectorReview:Philippines,"1993. 1,,,,¢
C3 'N
108
Financing
Social Programs
in the Philippines
TABLE3.9 TEN LEADINGCAUSESOF MORBIDITY:1983-1987,1988and 1989 (Rate:CasesPer100,000 Population) S-YearAverage (1983-1987)
1988
1989
...... i
Cause
Number
Rate
N_mber
Rate
Number
Rate
Bronchitis
558,276
950.7 659,511
Diarrhealdiseases
511,268
870.6 6_-0,185 1,090.2 741,733
Influenza
410,177
698.5 5F6,404
981.6 773,802 1,287.5
Pneumonias
179,150
305.1 201,902
343.8 232,056
386,1
Tuberculosis
146,119
248.8 1_3,133
311.8 210,272
349.9
Malaria
105,945
180.4 1i4,679
195.3 125,114
208.2
80,330
136,8 li0805
188.7 150,257
250.0
.59,713
101.7
!_6,211
129.8
98,813
164.4
Measles
64,641
110.1
70,801
120.6
68,496
114,0
Malignantneoplasm
25,696
43.8
28,940
49.3
33,777
56.2
Accidents Diseasesof the heart
1,293.4 893,550 1,486.8 1,234.2
Source: Herrin,A. N. et al. "HealthSectorReviev_: i Philippines."1993.
percent
of preschool
children
were underweight,
stunted and 9.0 percent were wasted to the inadequate intake of protein known as protein-energy malnutriti0n malnutrition level is worse than that that and
of Indonesia
in terms
11.6 percent
(_Fable 3.6). This may be traced 0r calories or both (otherwise or PEM). of Thailand
of the propolrtion
The but
Philippines' better than
of underweight,
stunted
wasted children aged below five years (Table 3.7). Tableâ&#x20AC;˘ 3.8 presents data on the incidence of micronutrient
Ciency
in the
increased that iodine
country.
between
the
Philippines
deficiency}
The
1982 has
and
prevalence
of iron
1987. The World
the
highestl
in Southeast
Asia.
were
deficiency Bank
prevalence At the
same
deficiency, which is manifested as night blindness, among those in the poorer segments 0f society.
anemia
(1993a)
of goiter time,
definoted (due
to
Vitamin
A
is widespread
Health
and Nutrition
Sector
109 TABLE3.6
UNDERNUTRITION AMONGCHILDREN:1978,1982,1987and 1989. 1990 (Percentof Childrenin AgeGroup) 1989-1990 Both Typeof Undernutrition
1978
1982
1987 Sexes
Male Female
21.9
17.2
17,7
14
9.8
17
9
5.5
4.1
6.3
Underweight (below75%of standard weight-for-age) 1-6years 7-10 years
1-2.4
Stunted (below90% of standard height-for-age) 1-6 years
20,6
14.1
11.6
11.8
11,6
7-10years
22.4
12.1
14,2
12.7
15.6
9.5
12,7
9,0
6.7
11,4
Wasted (below85% of standard weight-for-height) 1-6 years
13.8
Source: Herrin.A. N. et al. "HealthSectorReview:Philippines,"1993.
Factors
Affecting
The deceleration
Health
Status
in improvements
in overall
health
status
(in terms
of IMR or malnutrition) is closely linked to the high fertility level in the country. The rate of decline in fertility is lower in the Philippines relative attributed
to Thailand
and
Indonesia
{Table
to the low levels of contraceptive
At the same
time,
breastfeeding
is highly
3.9). use
In turn,
this is
in the country.
correlated
with nutri-
tional and health status of infants. Data shows that the prevalence and duration of breastfeeding has declined between 1978 and 1983,
i I 0
Financing
Social Programs
in the Philippines
TABLE3.7 BASICNUTRITIONINDICATORSFOR SELECTEDASIANCOUNTRIES(1978) ' % of ChildrenUnderFive % Low Country
Birthweight
Underweight
Wasting
Stunting
China
6
21
8
41
Indonesia
14
51
11
46
Philippines Thailand
18 12
33 26 ,
7 10
42 28
Source: WorldBank,Devolutionand HealthSetrvices: ManagingRisksand.............. opportunities,1993. particularly among young women, those with low level of education and thoseâ&#x20AC;˘in rural areas (Herrin et a_. 1993). On
the
other
hand,
the
prevalence
associated
with poor environmental
70 percent 73 percent
of the population of households
(Herrin
of diarrheal
sanitation.
diseases
is
As of 1987, less than
had access to safe water supply while had access to sanitary water facilities
et al. 1993).
HEALTH EXPENDITURES Government
expenditures
tors were fairly stable years
in hea!thl
at 0.6 percent
nutrition
_7 and
population
0fGNP in the period
During
the crisis
deeply onlyof
cut relative to that of other sectors GNP. Starting in 1986, the health
of 1983-1985i,
health
sector
' sec-
1975-1982.
expenditure
was
and averaged 0.5 percent sector started to recover
and reached a peak expenditure level of 0.7 percent of GNP, equal to the 1990 level. However,â&#x20AC;˘ as a result of the fiscal crisis in the period 1990-1992, government allocation _or health dipped once 1991 onwards and settled to 0.5 percent of GNP. Likewise,
again in real per
i i
27. The data for government health expenditure used in this paper refer to actual obligation expenditure.
Health
and Nutrition
Sector
]I I TABLE3.8
MICRONUTRIENT DEFICIENCIESBY TYPEOF NUTRIENT,1987 (Percentof populationgroup) Nutrientand PopulationGroup A. VitaminA deficiency 1. Nightblindness 6 months- 6 years 7 years- 14 years 15 years- 19 years 2. Bito'sspot 6 months- 6 years
1987
0,7 0.g 1,0 0,2
B. iodinedeficiency(withgoiter) 7 - 14 years(male) 7- 14 years(female) 15- 20 years (male) 15- 20 years (female) 21 yearsand over (male) 21 yearsand over (female) Pregnantwomen(21 - 49 years) Lactatingwomen(21 - 49 years)
0,8 6.4 0.2 6.2 0.7 7.1 12.4 10,7
C. Irondeficiency(withanemia) 6 - 11 months
70,4
1 - 6 years 7- 12 years 13- 19 years(male)
38.7 41.2 26,3
13 - 19years (female) 20- 59 years(male)
36.9 21,3
20 - 59 years (female) 60 yearsand over
38.9 46.9
Pregnantwomen Lactatingwomen
45.3 50.6
Source:Herrin,A. N, et al. "HealthSectorReview:Philippines,"1993.
112
Financing
Social Programs
in the Philippines
TABLE3.9 FERTILITYDECLINESIN THAILAND,INDOI_E$1A ANDTHE PHILIPPINEs ....
Country
1965.1969
1988
Decline
Thailand
6.30
3.0
3.30
Indonesia
5,57
3,4
2,17
Philippines
5.72
4.3
1.42
Source: WorldBank, Devolutionand HealthServices.ManagingRisksand Opportunities,1993, i capita
government
to its 1982.
1986
Table diture
expenditure
level of P57, 3. 10 shows
on health
GNP and
is still lower
that
5 percent
public
DOH budget
the bulk
into leconomic
6.2
services salary
budget
such
The brunt
of;fiscal
and
in 1991.
expenditure adjustments
that
On rose
the share;of from then the
of
to 0.6 (World
implemented
8.3 percent
other
percent on accounted was
borne
expenditure
in the
in 1980-1982
to 5.6
l_a_nd, the
in i989-1991 in tgose
con-
the remaining
adjustment
capital
it was
on health
captured
from 9.5 percent
sharply
categories,
ol_erations -- 51.4 s_rvice expenditure outlay
dropped
in 1983-1985
percent
Philippines
expenditure
while capital
(Table 3.11). outlays
DOH total percent
expen-
1 percent
compared
for the
of governmenti
40.7 percent
7.9 percent
public
about
expenditure,
respectively;
sistently went to maintenance and the average in 1980-1991. Personal
by capital
level of P85 in
1980-1989,
countrieslaveraged
of total
the
that
for another
_han its peak
Categories
Disaggregating observed
in 1993 has been cut back
in the period
in 14 Asian
percent and 3.3 percent, Bank 1993a). By Economic
on health
years.
in 1986-1990 share
to
of personal
as a result
of the
Health
and Nutrition
Sector
113 TABLE3.10
PATTERNSOFPUBLICHEALTHEXPENDITURES IN SELECTEDASIANCOUNTRIES (AVERAGE1980.1989) Country Bangladesh China India Indonesia Korea Malaysia Myanmar Nepal PapuaNewGuinea Philippines Sri Lanka Thailand Vietnam
GNP
PublicSpending
0.7 1.1 1.2 0.8 0.6 2.5 1.0 0.7 3.3 0.6 1.4 1.0 0.6
4.3 4.4 6.5 2.6 2.6 6.2 6.5 3.1 9.2 3.3 4,1 61 3,3
Source: WorldBank,Devolutionand HealthServicesand ManagingRisks an-d............. Opportunities,October1993. By Function Some
70 percent
in 1981-1993. share
of the DOH budget Preventive
of administrative
was
care accounted services
was
allocated
to curative
for 21.8 percent 7.9 percent
(Table
while
care the
3. 12)( 28
28. For purposes of this paper, DOH expendittn'es were classified into curative and p,-eventive expenditure based pt'imarily an tile distinction between hospital selvices m_d field health services. Expenditures incun'ed il'*operating hospitals, sanitaria and medical centers were classified as curative. Those incun'ed ira providing field health services mad implementing such prograilas as MatenKd and Chik[ l-lealth, Nu trition, Family Plmaning, Malm-ia Control, Schisto._omiasis Control and the like wel'e classified as preventive. The brcakdow_l or" actual DOH obligation expenditures into said px_ograms, functions m_d activities is not easily accessible. Thtts, file ratio of preventive (cm'ative or administrative) expenditure to total DOH budget was fil.-st computed using information lbund in the General Appropriations Act (which lefel to plmlned expenditure). Subsequently, this ratio was applied to the actuM obligation data.. Lmluza etal. (199d) classified government heath expenditures in 1988-1991 into public health sezvices mad personal caa_ selwices based on thc cotaccptual distinction betweet public a1_d private goods. A comparison of estimates m'ising from these two approaches to classifying health expenditures show that on tic average estimates of curative expenditm'e as defined in this paper m'e about 10 percentage points higher thma estimates ofcxpel_ditttre on preventive care services in t.he Lmmza etal. paper while estimates thin1 estimates of expenditure
for curative care are about on personal cm'e services.
9 percentage
points
lower
TABLE3,11 THE DEPARTMENTOF HEALTHEXPENOITURES IN 1985 PRICES
¢=
(In P million) Average 1980Years
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
199,0
1991
Recuren_
2,359
2,976
3,356
3,273
2,I34
2,269
2._0
3,077
3.859
4,089
4.316
PersonnelServices Maintenar',ceandOperations Capitai
883 1,475 255
!.148 1.828 288
1,324 2.032. 226
1,229 2,045 206
g"g4 1,!40 ! 13
1,014 1.256 143
139t 1._ _0a_ 192
1,338 i,740 305
1,680 2,178 448
2,012 2,0Z7 448
2 248 2.068 58_
185
}70
20t
30
65.
45
142
181
268
232
70
118
1
173
47
96
5,3
123
174
205
2,6t4
3,285
3,468
2.247
2,412
3,382
4,306
4,537
!,'lfrastructu-.'e Equipment TOTAL
3_570
3.092
1992
1993
1993
4,554
(745
3,083
3,356
2,275 2.279. _2
2,483 2.262. 75
1,174 • 1.514 1..909 1,843 458 289
407
I00
63
125
159
!66
I91
11
332
125
4,90!
4.856
4,820
3=54l
3,644
5. o rb
% 1980°/°Distribution
1980 . 1981
1982
1983
1984
1985
19,86
t987
1988
1989
1990
1991
1992
1993
1993
Recuzrenl Pe_onneiServices
90.24 33 79
91 17 35 18
94.00 37.08
94.36 35.42
94.97 44 25
94.09 42.03
93 79 45 00
91.00 39.55
89.60 39.0,2
90 12 44 34
88 06 45 87
£379 4885
98 45 51 51
87.07 33.16
92.I2 4155
MainleaanceandOperaliens Capital Infrastructure
56 44 9 76 7.07
55 99 8 83 5 22
56.91 6.32 5.64
58.95 5.95 0.88
56 73 5.02 2 91
5207 5.9t 1.86
48.79 6.21 4 58
51.44 9.00 5.36
50.59 10.40 6 22
45.78 9.88 5 11
42 19 1194 8 3I
4694 _.21 2.25
4693 t.55 t .3!
53.92 12 93 3 54
50.57 7.93 4.3-6
2.69
3.6t
0.03
4.98
2.08
3.98
1.62
3..64
4.05
4 51
3 38
3.93
0.23
9 39
3 44
Equipmen!
TOTAL Sourceof basicdata:
100.00 IC_Z0010000 10000 10000 10000 1C_C,.00 1C_.001C_3C_q 10000 100rd0 I_Z:,C,010000 1000"3100.03 Depa_tmenlof Heatlh Exper_d_ture levetsfrom theDepadmenlel Budgeland Managemel_t.
o0 "'_' rb
_
Preventive Year 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 Average 1981-1982 1983-1985 1986-1993 1981-1993 Sourceorbasicdala:
Amount
TABLE 3.12
_;
USE OF DOH EXPENDITURE IN 1985 PRICES
_.
(In P million)
;_
Curative %
Training
Amount
%
Amount
Administrative
Tota3
%
Amount
%
Amount
%
808 964 822 527 33t 798 971 859 858 762 734 867 1252
243 264 232 246 139 25.8 28.7 20.0 18.9 15.5 18.4 24.7 44.5
2,178 2,440 2,437 1,408 1,868 2,087 2,289 3,170 3,226 3,702 3,885 3,499 1,660
65.5 668 687 65.7 78.4 675 67.7 73.5 74.6 774 75.I 68.0 42.1
30 24 19 13 14 37 27 39 36 49 10 7 4
0.9 0.7 05 0.6 06 1.2 08 05 O3 02 02 1.1 12
309 226 269 195 169 170 96 297 422 388 228 447 624
9.3 6.2 7.6 9.1 7,I 5.5 2.8 6.0 6.2 6.9 63 62 12.i
3,325 3,655 3,547 2,143 2,382 3,092 3,383 , 4,302 4,536 4,901 4,857 4,820 3,540
1000 10C0 1000 1000 1000 1000 1000 1000 t000 1000 1000 100O 1000
886 560 888 812
25 4 208 21.2 218
2,309 1,904 2,939 2,603
66.2 70.8 70.3 698
27 15 26 24
0.8 0.6 C,6 0.6
268 211 334 2_
7.7 7.8 8.0 7.9
3490 2691 4179 3729
1000 1O0O 1000 1000
o
o
For1981to 1985._a1_os fromff.4TERCARE, fo_1986-1_3,ownes!,mates toased on INTERCARE dehnilion usingGAA O1
TABLE3.13 DOHPROGRAMSBYOFFICEANDSERVICEANDSOURCEOF FUNDS, 1993APPROPRIATIONS (In pesos) DONORS DOHPrograms OfficeFor PublicHealthServices MafariaControlService MalariaControlProgram TuberculosisControlProgram TuberculosisControlService SchistosomiasisControrProgram SchistosomiasisControlService CommunicableDiseaseControlService LeprosyControlProgram RliariasisControlProgram SexuallyTransmittedDisease ControlProgram RabiesControlProgram DengueControlProgram EnvironmentalHealthService*** WaterSanitationProgram ExcretaandWasteDisposalProgram FoodSanitationProgram PublicPlacesProgram Noncommunicabre DiseaseService CardiovascularDiseaseControlProgram CancerControlProgram SmokingControlProgram Programon thePreventionof Blindness CommunityBasedRehabilitationProgram OccupationalHealthProgram NationalQuarantineOffice NationalQuarantineProgram
% GOP 11.87 11.87 27.26 27.26 1.19 1.19 5.43 1.51 0.30 2.96
GOP 132,487,000 132,487,000 304,228,000 304,228,000 13,247,000 13,247,000 60,616,793 16,889,952 3,393,399 32,992,870
USAID
WHO
650,000 650,000
920,000 920,000 995,000 995,000
0.28 3,1t0,791 0.38 4,229,781 11.47 128,028,199
15.54 7.49 4.91 0.18 2.17 0.29 0.50 2.36 2.36
173,436,348 19,014,560 83,619,159 4,713,510 54,757,430 4,465,400 2,032,661 24,262,726 7,052,000 3,196,540 2,783,650 5,567,832 26,305,000 26,305,000
;_ UNICEF
WB 78,618,867 78,618,867 52,485,560 52,485,560 38,3t6,207 38,316,207
CIDA _ _. r_ 8" "1
14,525,808 1,009,970 13,515,838
750,000
4,000,000 102,250,000
_, ,q
TABLE3,13(continued)
_., DONORS
DOHPrograms
% GOP
GOP
USAID
OfficeFor SpecialConcerns Matemaland ChildHealthService 1190 132,804,941 103,655,103 ExpandedProgramon Immunization 8.09 90,327,119 40,024,168 Programon theControlof Acute 1.50 16,774,174 30,265,260 RespiratoryInfections Programon theControlof DiarrhealDiseases2.06 23,031,583 10,686,306 Breastfeedingand WeaningPromotionProgram MaternalCareand Under-fiveCareProgram 0.24 NutritionService.... 8.02 MalnutritionRehabilitationProgram 8.02 VitaminA DeficiencyPrevention and ControlProgram MicronutrientSupplementation Program Fami!yPlanningSp.rvic_.. . . 0.64 FamilyPlanningProgram 0.64 DentalHealthService 2.84 DentalHeaithProgram 2.84 NationalAIDS Preventionand ControlProgram 1.48 TOTAL * ** *** ....
100.00
2,672,065 22,679,369 89,495,000 8,933,377 89,495,000 8,933,377
7_@9Q000253,524,000 7,090,000 253,524,000 31,671,887 1,144,004 31,671,887 1,144,004 16,500,000 4,791,667 %115,910,168
391,712,711
WHO
0o
UNtCEF
7,531,430 17,663,854 1,231,000 5,595,800 2,513,950 3,750,000 1,216,000
3,164,300
2,570,480
5,153,754
WB
CIDA
8,917,016 41,413,840 41,413,840 8,917,016
_20,939,106 20,939,106
o _-
. 1,010,372 1,0t0,372 7,206,400 32,7t2,711
32,939,010
301,526,756
SasakawaMemorialHealthFoundation. AmericanLeprosyMission. WaterSanitationExcretaand WasteDisposal,FoodSanitation,PublicPlacesProgram MalnutritionRehabilitation,VitaminA DeficiencyPreventionand Control, MJcronutrient Supplementation Program.
Source: Schwartz, J.Brad, NationalHea_th Accounts: PublicSectorDOHPrograms.HealthFinanceDevelopmentProject, I993.
41,413,840
_.
'_ _ _
TABLE3.13 Icontinued) DONORS DOH Programs
ROTARYiNT
OfficeForPublic HealthServices MaladaControlService MalariaControlProgram TubercuJosis ControlProgram TuberculosisControlSe_ce SchistosomiasisControl.Program SchistosomiasisControlService CommunicableDiseaseControlService LeprosyControlProgram FiliarJasisControlProgram SexuallyTransmittedDiseaseControlProgram RabiesControlProgram DengueControlProgram EnvironmentalHealthService.... WaterSanitationProgram ExcretaandWasteDisposalProgram FoodSanitationProgram PublicPlacesProgram Noncommunicable DiseaseService CardiovascularDiseaseControlProgram CancerControlProgram SmokingControtProgram Programon the Preventionof Blindness CommunityBasedRehabilitationProgram OccupationalHealthProgram NationalQuarantineOffice NationalQuarantineProgram
AIDAB
UNFPA
ITALIAN GOVT
SMHF*
ALM**
TOTAL % TOTAL
- 212,025,867 - 212,025,867 7,140,000 365,498,560 7,140,000 - 365,498,560 51,563,207 51,563,207 12,,500,000 7,875,000 95,517,60t 12,500,000 7,875,000 38,274,922 3,393,399 46,508,708 3,110,791 4,229,781 235,028,199
9.91 9.91 17.09 t7.09 2.41 2.41 4.47 1.79 0.16 2.17 0.15 0.20 10.99
192,450,908 88,332,669 58,222,830 -, 2,032,661 31,314,726 5,980,190 5,567,832 26,305,000 26,305,000
9.00 4.13 2.77 0.t0 1.46 0.28 0.26 1.23 1.23
~._
_,
TABLE3.13(continued) DONORS C) DOH Programs
ROTARYINT AIDAB
UNFPA
ITALIAN GOVT
SMHF*
ALM*_
Office ForSpecial Concerns Maternaland ChildHealthService 38,350,00025,371,682 ExpandedProgramon Immunization 38,250,000 7,750,000 Programon theControlof Acute RespiratoryInfections Programon the Controlof DiarrhealDiseases Breastfeedingand WeaningPromotionProgram MatemalCareand Under-fiveCareProgram - 17,621,682 NutritionService..... MalnutritionRehabilitationProgram VitaminA DeficiencyPrevention and ControlProgram Micronu_entSupp!emen.L_tJ or_Program FamilyPlanningService -135,075,116 FamilyPlanningProgram
TOTAL * ** *** ....
375,607,866. 17.56 224,591,927 10.50 62,220,400 2.91
38r250,000
1.78
50,697,350 119,367,483 119,367,483
2.37 5.58 5.58
- 395,689,t16
18.50
33,826,263 33,826,263 36,065,567
1.58 1.58 1.69
7,875,000 2,138,945,637
t 00.00
7,567,500 32,939,182 135,075,116
38_098,189
:395,689,116 18.50
-135,075,116
DentalHeafthService DentalHealth Program NationalAIDS Preventionand ControlProgram
TOTAL % TOTAL
7,140,000
12,500,000
â&#x20AC;˘
SasakawaMemorialHealthFoundation. AmericanLep_-osy Mission. WaterSanitationExcretaandWasteDisposal, FoodSanitation,PublicPlacesProgram. MalnutritionRehabilitation,VitaminA DeficiencyPreventionand Control,MicronutrientSupplementationProgram.
Source: Schwartz, J. Brad, NationalHealthAccounts: PublicSectorDOHPrograms.HealthFinanceDevelopmentProject, 1993.
= C) o o _ _. F_ 9 hu _ =.
Health
and Nutrition
Sector
I_1
Program
addresses
the provision
through sources.
the control and surveillance The Proper Excreta and Sewage
at the construction through Program
of safe and potable
or improvement
drinking
of existing water supply Disposal Program is aimed
of sanitary
toilets in households
the Primary Health Care approach. involves the evaluation and control
The Food Sanitation of food establishments
and promotion of household food sanitation to prevent food-borne diseases and to protect food consumers. Sanitation
Program
Environmental aster-affected The 1976,
aims
Sanitation areas.
Expanded
1992,
sanitation
Program
of Immunization
morbidity
and
and control The Public
is directed (EPI),
mortality
while
caused
the
at dis-
launched
in
by tuberculo-
pertussis, tetanus, polio, measles and hepatitis B and pregnant women through vaccination. As of
the program
age, 92 coverage,
public
Management
Program
aims to reduce
sis, diphtheria, among children
to improve
water
had
impressive
results:
percent DPT3 and OPV3 90 percent fully immunized
94 percent
BCG cover-
coverage, 90 percent measles child coverage and 78 percent
TT2 coverage (UNICEF 1993). The EPI Program is one of the largest programs. It had a P225 million budget in 1993, 40 percent of which was sourced The
from the government's
Malaria continues Malaria Control
to be one of the leading causes of morbidity. Program, introduced in 1926, has resulted in
the decline of the annual 1000 population in 1987 However, slippage.
is relatively
The
Nutrition
formulated morbidity population,
incidence per 1000
large with a budget Program
(API) from population
14.5 per in 1991.
with
of P212 million
a budget
of
Pl19
in 1993. million
was
in 1992 and is directed at reducing mortality and rate due to vitamin and nutrition deficiencies among the especially
among
of malnutrition
prevention, Acute
parasitic to 7.28
some technical and operational prcrb_rr_ led to some The API went up to 8.75 in 1992. The Malaria Control
Program
prised
own resources.
and
infants
rehabilitation,
mieronutrient
respiratory
and
preschoolers. Vitamin
supplementation
infection
(ARI),
although
It is comA deficiency
programs. preventable
and
curable, is the leading cause of death among children under five years of age. In response to the importance of ARI, the Control of Acute
Respiratory
Infections
(CARl) was created
in 1987.
Still in its
Health
and Nutrition
Sector
123
ISSUES
AND CHALLENGES
Underinvestment
in the Health
Relative
Sectors
to Other
Cross-country tionship
comparison
between
Sector
shows
per capita
a well established
health
rate. While this may indicate
expenditure
that
promoting
sectors
like nutrition
and
out indications more resources
sanitation
rather
that the to healththan
to the
China 1991).
cannot be explained by health spending alone (RTI/UPSE Likewise, Solon (1988) showed that sanitation and nutrition higher
impact
on health
it should
the
mortality
is under-investing
sector
However,
For instance,
rela-
health
have
itself.
and infant
the Philippines
in health, some analysts have pointed country might be better off if it allocates
negative
status
be pointed
low IMRs in Sri Lanka
than
direct
medical
and
care.
out that in the Philippine
context,
most of the so-called health-promotive services are administered by the DOH and are, thus, included in the health budget of the national government. To illustrate, DOH handles most of the nutrition programs
and
General ($3.51)
some
of the water
government
expenditure
in 1993. Even
care,
it is not enough
basic
health
and
sanitation
29 per capKa
if all of this amount to cover
interventions
the price
which
programs.
is spent
reached
of a minimum
was estimated
P95.10
on basic
health
package
by the World
of
Bank
(1993b) to cost $12 per capita in 1990 or $12.61 in 1993. 30 Thus, if these factors are taken into account, then one can conclude with greater confidence that spending on health. OveraUocation On the whole, and expansion, been
sound
the Philippine
for Curative
government
is truly
under-
Care
"DOH's choice of public health programs for funding in both preventive and curative dimensions, has (but not
complete)
in terms
of disease
and
mortality
29. General government is the sum total of the national or central government and local government units. 30. The 1993 figure was calculated by assuming an annual inflation rate of 2.5 percent.
124
Financing
patterns" curative
Social Programs
in the Philippines
(World Bank 1993a). However, the very high share of care services (relative to preventive care services) in total
government expenditures on health suggests that the government is over-investing in the former and under-investing in the latter. This conclusion is bolstered by the fact that five out of the top six leading causes
of death
at present,
are infectious
and
communicable,
but
preventable, diseases. This indicates an inadequate level of public health services in the field despite improvement in their coverage in recent
years.
(1993)
estimated
goals
Much
for health
(Table 3.14). It should care
government
the
to be done.
the financing
exceeded
be stressed
services,
financing
remains
that
available
finance. will tend
funding
that public
are not efficiently
In particular,
requirement
Because
by P798 million
h_alth
funded
services,
through
of theiI_ public
to under-finance
Alano
public
et al.
of the mid-decade
unlike
means
goods
in 1993 personal
other
nature,
health
than private
programs.
Because of the spillover of benefits across political jurisdictions, financing of public health serVices cannot be left to local
government public
units
health
(LGUs)
services
ing by LGUs
alone.
Ir this regard,
can be leveraged
(Soloi_ et al.
1993).
DOH spending
to induce
additional
DOH is now actively
on
spend-
promoting
comprehensive health care agreements with LGUs in support common priorities and public health programs. A key element these
agreements
is DOH's
commitment
to support
of in
LGUs in imple-
menting the programs. In 1994, DOH will spend some P2.6 billion on national health programs. This iamount is less than half of projected LGU expenditures on health of around P5.3 billion in the same year. Thus, DOH allocation for national health programs needs to be increased to enable it ta better influence LGU budget allocation in support tion on devolution.)
of national
In the final analysis, government
the
expenditures
health most
programs.
cogent
on public
resource peso
allocation
spent.
alternative
process
Although types
of health
interventions
is the
relative
health interventions primary goal of the
maximum
estimates I
for increasing
services
The
is to obtain
existing
argument
health
cost-effectiveness of preventive/community relative to curative care interventidns.
(See also subsec-
health
gain
of cost-effectiveness
are crude,
they indicate
per of that
TABLE 3.14
_ "
ESTIMATE OF RESOURCE GAP, 1993 (in P thousand)
;_
SOURCES
Total
_-_. _"
Resource
Total
GOAL
Needs
GOP
UNICEF
CSP
WHO
PHDP
CIDA
RI
AIDAB
USAID
{1)
(2}
(3)
(4)
(5)
(6)
(7}
(8)
(9)
(10)
(11)
1.EPI*
679,827
07,573
4,446
50,670
1,227
41=414
38,250
2.CDD
59,466
21,000
2,766
35,24t
1,360
3.CAIRJ
49,444
16,200
3,750
29,565
2,514
4.8FHI
31.968
5.NUTRITION*"
TOTAL
7,750
8,917
700
957
400,169
r_,317
1,220,874
193,090
10,982
116,433
5,101
8,917
41,414
38,250
7,750
700
Resources (12)
Resource Gap
cb
(2). (12)
231,330
448,497
60,387
(921)
61,646
(12,202)
957
31,011
68,317
331,852
422,637
798,237
*Includes IdDGsforPolio,NNT,Measles. *'IncludesIDA1VAD andIDD Source:
Alano,Bienver_ido P.Jr.,elal.,"CostEstimates of thePhilippine's Mid-Decade Goals."Corporate Assistance andResource Associates, inc.,Seplember 1993. t_
126
Financing
Social Programs
fn the Philippines
cost per life saved is much higher (at least two to five times as much) in czlrative care than in preventive care (Table 3.15). Moreover, the '_public they
good"
nature
are not
pocket system)
of community
efficiently
funded
expenditures of households [Solon et al. 1993].
In line with the possibility curative care services, Solon Care for Mental 1993,
Health
its budget
maintains Thus,
eight
was
problems,
current of the
suggests
means the
most expensive
to P21.4
million.
at a cost of about approaches present
time, the World
insurance allocation to the National
DOH facility.
Likewise, P175
the
million
of the mental
to their
treatment,
interventiorls
relative
Bank _(1987)
that
(e.g,, out-of-
of reducing government et al. (1993) noted that
for a review of the nature
cost-effectiveness options. At the same
equal
services
other
or through
is the single
leprosaria
they called
leprosy
health
through,
pointed
In
DOH
per year. health
and
and
the
to other
out that
"it is
the financing of expensive hospital care that needs change, not the existence of the care as such." Thus, it recommended that "governments
must
find ways
to charge
benefits of publicly provided funds can be freed for critical and
for subsidizing
In Chapter number
who are able to pay for the
curative care, so that limited public health programs with public benefits
care for the poor. '_One way of achieving
by charging users of public the next paragraphs: Overallocation
those
hospital
for Administrative 2, it was
argued
of DOH personnel
This is discussed
in
Services
that. the (45,000
billion out of P10 billion ) should tion in its outlays for general contrary, DOH appropriation 1993. Even after adjusting
facilities.
this is
devolution
out of 75,000)
of a substantial and budget
have led to a proportionate adn_inistration services.
for this iitem rose for inflation and
by 86.1 regular
(P3.9 reducOn the
percent growth
government expenditure, the 1.993 a_location_ for general adminiswhat the reduced trative services was P382 million higher than personnel and budget warrant.
in in
128
Financing
Underfunding
Social Programs
in the Philippines
of Maintenance
and Operating
Expenditures
The
of health
production
services
is labor-intensive.
However,
the
shortage of complementary inputs like i drugs, medicines, supplies, fuel, and building and vehicle maintenance reduces the effectiveness ratio
of health of DOH
operating
staff (Solon et al. 1993)i Table3.11 reveals that the personal service expenditures to maintenance and
expenditures
0.63 in 1980-1982 Clearly, this trend financing
in real
terms
declined
of maintenance
expenditures
Use of Less Cost-effective (1993)
given
therapy based
pointed
control
treatment
of
and
proclivity
of the
on this expense
Interventions out that recent
immunization to the relatively
in the
the
reductions
toward increasing efficiency in health on more cost effective interventions. (a) universal as opposed
an average
to an average of 1.02 in the period 1989-1991. is worrisome and efforts should be made to secure
government to impose across-the-board item in periods of budgetary restraint.
Solon etal.
from
coverage; expensive
of diarrheal the use
(b) adoption of low-cost intravenous-cum-antibiotic
diseases;
of simple
diagnostic
to BHS-
procedures
therapy and sophisticated diagnostic tests (X- rays) in the of acute respiratory infections; and (d) cost reduction
in these
areas.
_n-drawing)
(like
tal-based treatment
giving consumers promoting greater
chest
(c) the shift
ORT
of rapid
the use of generic
and
are geared
detection
through
breathing
DOH initiatives
service production by focusing These initiatives include:
{erminology
in drug
dispensing
In 1991, only 49.5
ippine
to acute
Medical
thereby
greater choice in the purchase of drugs and competition. However, much remains to be done percent
of diarrheal
children under five were treated with 0RT (National Survey 1991). Moreover, 84 percent of tlospitalization were due
in lieu of hospi-
respiratory
Care Commission
and
gastrointestinal Survey
1989).
cases
among
Demographic cases in 1989 infections
(Phil-
Health
and Nutrition
Poor Logistics Logistics drugs
medicines.
Alano
and
areas:
planning,
distribution,
System
are pervasive,
for drugs
following
129
Management
problems
and
system
Sector
particularly
(1993)
medicines
noted
that
is riddled
accreditation
and inventory
in the distribution the
with
DOH logistics
problems
of suppliers,
management.
of
in the
procurement,
The study
recommended
the following: * Task provincial delivery government personnel) drug
utilization
medicines
while
to
the
delivering
regional
procurement
personnel
strengthened,
field
functions
after
that
their
of
to regional
capability
the number
(considered
personnel-and
and
allocation
This will ease the workload
office considering by the system
drugs
drugs;
some
provincial
in the
improve
centrally-procured * Delegate
teams (composed of provincial with gathering information on
been
of the logistics
of line items
too large
and
has
relative
handled
to its existing
resources);
. Build up a reliable database that monitors the reliability and capability of suppliers. It should also include a review of the preferential view of delayed have that
been
treatment
deliveries
traced
suppliers,
suppliers
supplies
in
which
particularly
those
financed;
use of obligation
of allotment
to small
and substandard
to certain
are marginally
* Authorize
given
authority
(AA) as the
basis
instead
of the advice
for bidding,
with
the
AA
needed only for the approval of the Purchase Order. AAs for the first quarter are usually issued towards the latter part
of that
quarter
the operational * Institute present Bureau
needs
random
every batch
and
therefore,
of the public
testing
of each
registration
conducts
batch
testing
delivery
is somewhat
of Food and Drugs
product
health
during
in the
testing
considering redundant
(BFAD) conducts
and,
case
manufacture;
with
programs;
in lieu of mandatory
supplier
requirement
not synchronized
of
that
the
since
the
tests
prior
of antibiotics,
to
130
Financing â&#x20AC;˘ Deliver
drugs
than
through
take
advantage
Social Programs
and medicines regional
of the cost
â&#x20AC;˘ Study the possible networks instead
directly
offices)
Manila
supplies
from the central
savings
and
about
million
P 1.2 billion that,
five percent
argues
that
charges
to
and
office to either
(The experience to the feasibility
of the of and
from this scheme.)
P1.8 billion was allocated
{P640
Box 2 shows
office
in DOH Hospitals
In 1993, some facilities
(rather
central
involved;
the regional or provincial of_ces. i National Immunization Day points
Cost Recovery
the
use of drug distributors' distribution of private lhaulers contracted by the
DOH in delivering
potential
to provinces
from
savings
in the Philippines
for regional
centers hospitals
expenditures.
At the
be achieved
hospital
centers
tertiary
of their
can
medical
medical
average,
gains
for DOH- retained
tertiary
on the
efficiency
in these
to eight
in Metro
and hospitals).
same
recover
only
time,
Box 2
by increasing
user
facilities.
If another 10 percent of the costs of operations of these hospitals were to be recovered from fees and charges (bringing the recovery level to 15 percent),
some P 180 millioni in additional
be generated. This amount finance the cost of achieving
revenues
could
(P180 million) is almost sufficient to the EPI targets under the middecade i
goals in 1993. Similarly, the cost to operate
i LGU[hospitals
P3.3 billion in 1993. If another recovered from user fees, another by LGUs,
money
programs. Box 2 pointed
that
would
out that
allow
amounted
to some
10 percent of these costs were P330 million could be mobilized tl_m
one of the major
to support
public
constraints
health
to increased
cost recovery in government hospitals! is their inability to retain the fees and charges they collect for their own use. Addressing this problem requires policy change as well as legislative action, both at the national legislative user
and the local levels. As inaicated support
charges
for user" charges
is rooted
in the
rrtay not be easy.
possibility
limit the ability of the poor to access
in Chapter
h0spital ! I
I
that
Opposition
charging
services.
6, securing to
fees might
In this regard,
Health
and Nutrition
it should
be noted
is progressive ment hospitals
Sector
that
131
although
utilization
(i.e., the proportion of households who tend to increase with the level of income),
percent
of current
users
are above
whether
the World
Bank
(1992)-adjusted
the line is used for increasing
of government
(Table 3.16).
user
charges
Thus,
the
poverty
there
the poor if the government pricing program.
puts
appears
on
estimate
to be some
hospitals
in place
use governsome 30-50
line depending
or the official
in government
hospitals
without
a well-managed
of
scope hurting
socialized
TABLE3.16 PERCENTOF HOUSEHOLDSWHICHHAVEUSEDGOVERNIMII=NT HOSPITALS DURINGTHI=PASTYEAR,NATIONALHEALTHSURVEY,1987
IncomeClass
All Households
Philippines Under10,000 10,000- 14,999 15,000- 19,999 20,000- 29,999 30,000- 39,999 40,000- 59,999 60,000& Over Not Reported Note:
of Health
In the second clearly
health income was
% of Distribution
Using Gov't Hospital
of Usersof Hospital
32.2 27.6 31.6 34.1 35.8 34.8 32,7 30.1 50,4
100.0 16.4 18.0 16.3 19.2 10.9 9.0 9.9 0.3
10,756,579 2,062,503 1,974,987 1,660,541 1,855,377 1,086,520 955,939 1,139,388 21,324
Officialestimateof the povertyline for 1988is P6,334per person.WorldBank (1992)adjustedestimatefor the sameyearis P3,800.Adjustingfor inflation,this translatesto a povertyline for thehouseholdof averagesize (5,5persons) of P29,552for 1986basedon officialestimateand P17,729,basedon the WB adjustedestimate.
Devolution
was
% of HH
Services
half of 1980s, progressive.
government In those
provision
years,
per
of health capita
services
government
expenditure was higher in regions with lower per capita (Table 3. 17). The distribution of government health facilities
also
progressive.
The
population-to-government
hospital
bed
TABLE 3.17
to
PER CARTA HEALTH EXPENDITURE 0aCHE)AND PER CAPITA INCOME (PCY_ Dv REGION, 1988-1991 1988
PCY
1989
Regions
PCHE
Rank
PCHE
PCY
NCR Region1-
IlocesRegion
13.24 32960.16 115.60 8484.66
13 5
18.32 37963.76 94.68 9636.70
Region2
CegayanValley
1
Rank
1991
PCHE
:Y
Rank
PCHE
PCY
13 5
22.74 43 10169 10
i6 }7
13 5
17.74 4925076 91.2g 12649.56
Rank
13 5
_.
136.86 7501.93
3
121.70 8856.22
4
122.21 10
_'3
4
108.50 10583.85
4
Region3 CentralLuzon
57.57 11689.54
9
54.76 12682.95
8
53.60 15
)0 -
8
43.12 1714506
9
Region4
SouthernTagaleg
68.66 14781.29
11
76.62 16451.37
12
75.16 16
53
12
67.08 22607.10
12
Region5
B_::ol Region
72.94
6448.48
1
91.00 7
)2
1
72.92
8108.14
I
_.
Region6
Western Visayas
1"1964.96
6
73:12 1_
_
7
562'1 14965.23
7
,._
Region7
CenlralVisayas
64.08 11`658.44
8
74.62 13624.44
9
70.74 15
]8
10
1753000
10
Region8
Eastern Visayas
80.53
6744.14
2
95.66
7504.40
2
97.46
6
39
2
73.82 9504.44
2
Region9
WeslernMindanao
74.36
7779.76
4
73.84
8471.97
3
73.!,2
_
Y_
3
6629 1,0578.51
3
Region10 Northern Mindanao
9.04 12295.90
10
82.1,4 13924.96
1,0
72.78 1...
_
9
56.87 16543.25
8
2"
Region11 SouthemMindanao
61.53 14874.66
12
67.29 16215.83
11
71.51 17
42
11
8.50 19005.18
11
;_
Region12 CentralMindanao
64.61 10_7.OO
7
65.66 t2029.51
7
74.61 1,_
53
6
61.75 13999.45
6
5687.03
Nole:Regression Results 1.PCHE88 = 106.588-0.0O3109 PCY88 (0.0) (0.0105). 2.PCHE89 = 107.484-0.002372 PCY89 [0.0) (0.0OO5)
1
8101
3.PCHE90 = 108.66870.002084 PcYg0 [o.o) (0.0005) 4.PCHE91 : 87.6142-0.0016099 PCY91 (0.0) (0.010)
5624
,_
~. e
Health ratio
and Nutrition {as well
as
Sector the
population-to-barangay with higher
population-to-rural health
per capita
income
Prior to the implementation of 1991,
local
percent
governments
on the average)
health.
133
The devolution
station
health
unit
ratio) was
higher
ratio
and
in regions
(Table 3.18). of the Local Government accounted
of total general of functions
for a small government
which
accounted
Code (LGC} proportion
(10
expenditure
on
for roughly
40
TABLE3.18 POPULATIONTOGOVERNMENTFACILITYRATIO,1989/1991
Region
PBR1
PRHU2
PHB3
1989PCY
15,831.65
30,464.00
408,856.00
37,963,75
Region1 Region2 Region3
2,491.65 1,782.67 3,463.10
26,968.00 24,124.00 31,098.00
4,615.00 5,162,00 5,388.00
96,36.703 88,56.220 12,682.94
Region4 Region5 Region6 Region7 Region8 Region9
3,765.73 2,641.76 3,502,16 3,74931 1,716.00 3,175.07
28,614.00 34,341.00 38,314.00 28,498.00 20,633,00 25,223.00
5,589,00 5,656.00 5,567.00 4,775.00 5,792.00 8,188.00
16,451,00 64,484.81 11,964.96 13,624.43 75,043.97 84,719.70
Region10 Region11 Region12
2,193.64 4,766.93 4,596.19
27,985.00 42,752.00 28,433.00
5,696.00 6,374.00 6,353.00
13,924.95 16,215.83 12,029,50
NCR
RegressionResults:
where:
1.PBR91=-1509.0105+ 0.32946pcy 91 (0.041) (0.041) 2. PRHU89= 27722.382+ 0.1539PCY89 (0.0) (0.043) 3. PBHS89= -136768.27+ 12.8345PCY89 (0,0) (0.0) PBR PRHU PBHS PCY
1 Datafor 1991 2 Datafor 1989 3 Datafor 1989
= = = =
populationbed ratio populationrural healthunitration populationbarangayhealthserviceratio percapitaincome
134
Financing
percent
of DOH's
1992
implies
a significant
Clearly,
of public
services.
Hand
in hand
to local
realignment
responsibilities. health
budget
Social Programs government
of central-local
devolution
units
health
LGUs now play a major
with the
in the Philippines (LGUs)
expenditure
role in the financing
_f expenditure
responsibili-
ties, the LGC also mandated a substantial increase in the internal revenue allotment (IRA) of LGUs. However, the formula used under the LGC to distribute the IRA across LGUs within each level of government inces
is found
to be counter-equalizing
and municipalities
provincial (using
and
municipal
governments
income
as a measure
per capita
higher
per capita
bating
income
to these ments.
the
government
undertake functions
the
rich
(central
is true
local
province
exacerbelonging
and revenues the
Since the
capacity
for city govern-
government policy.
was progressive,
by poorer
of prov-
tend to get
poor LGUs
to weaken
expenditure
of DOH facilities absorbed
fiscal base)
in the costs
tends
and
case
LGC, thereby,
and
The converse
LGC and
compensatory
distribution
with higher 0f financial
gives rise to a mismatch
under
in the
in the case of cities. 31 Thus,
under
between
of government.
This situation general
IRA allocations
differentials
levels
transferred
but equalizing
capacity
of
combined)
to
the
pre-LGC
cost of devolved
s and municipalities
tend
to
be higher than average. However, the regressive character of the IRA distribution formula under the LGC implies that the incremental IRA of poorer provinces and municip_ilities is less than average, J
thus,
making
it relatively
difficult
for: them
to support
devolved
J 31. Regressing per capita IRA (PCIRA) against p_r capita income (PCY) in 1992 ,(the â&#x20AC;˘ first yem- of Code implementation), the following relationship were obtained: for provinces: PCIRAP_ 52,938 + 0.007 PCYI_ (0.085)
(0,035)
'
R=0.047 for municipalities: PCIRAM
= 124.785-0.002
(o.00o) R=0.015;
and
for cities: PCIRC
PCYM
(0,155)
= 367.834-0,004
I PCYCJ
(o,ooo) (o.162) R = 0.044 The
number
in parenthesis
refer
to level
of signilicance,
Health
and Nutrition
Sector
135
health functions. World Bank (1993a) projected that 18 percent of provinces, 8 percent of municipalities and none of the cities will suffer fiscal deficits in 1993 as a result of the transfer. LGUs source
could
also
revenues.
finance
However,
devolved
analysis
health
of recent
services data
from
local
that
while
shows
no significant relationship between per capita IRA and per capita local tax revenue existed prior to Code implementation, there was a negative
and significant
relationship
all levels
of LGUs
in 1992,
(Manasan
1994).
This implies
ernment substitutes To protect the arising age
the
to allocate
that
DOH resources
mechanism.
At the same inclusion
that will provide source revenue.
two variables
of Code
transfers
the central
adequate
leveraging
for the explicit
first year
these
from the central
government
levels
through
time, the central
form
an incentive
government
by grant
should
formula
to LGUs to improve
risks
for health
of matching
in the IRA distribution
gov-
may encour-
of funding
some
in
implementation
for local taxes under the present regime. health sector from the aforementioned
from decentralization,
LGUs
between
work
of a factor
collection
of local
SUMMARY Per
capita
P95.10
general
($3.51)
government
in 1993.
Even
expenditure
on
if all the amount
health is spent
reached on basic
health care, it is not enough to cover the price of a minimum package of basic health interventions which was estimated by the World Bank to cost $12.61 in 1993. government's underinvestment sectors. The high care that
share
of curative
This is indicative of the Philippine in the health sector relative to other care
services
(relative
to preventive
services) in total government expenditure on health the government is overinvesting on the former and
vesting
in the
five out
of the
latter.
This
conclusion
top six leading
is bolstered
causes
of death
suggests underin-
by the fact that are
infectious
and
communicable, but preventable, diseases at present, in turn, this is indicative of the inadequate level of public health services in the fielddespite
some
improvement
in their
coverage
in recent
years.
136
Financing The devolution
budget
should
for general priation adjusting ture,
of a substantial
have
Programs
number
services.
in the Philippines
of DOH personnel
led to a proportionate
administrative
reduction
On the
and
in its outlays
contrary,
DOH appro-
for this item rose by 86.1 percent in 1993. Even after for inflation and regular growth in government expendi-
the
1993
allocation
DOH is P382 budget
million
for general
higher
than
administrative
whet
services
its reduced
at the
personnel
and
warrant.
The
shortage
supplies,
fuel
effectiveness
of complementary
and
building
of health
expenditure edly from
be made
given
government's 1991,
under zation
inputs vehicle
like drugs,
medicines,
maintenance
reduces
staff. The ratio of real DOH personal
to secure
financing
proclivity
in this expense
In
and
to maintenance and operating 1989-1991. Clearly, this trend
should tions
Social
of maintenance
to impose
item in periods
only 49.5
expenditure is worrisome
percent
services
rose markand efforts expenditures
across-the-board
of budgetary
of diarrheal
the
reduc-
restraint.
cases
among
five were treated with ORT. In 1989, 84 percent cases were due to respiratory and gastrointestinal
children
of hospitaliinfections.
These figures are indicative of the scope for shifting to more cost-effective interventions like ORT for diarrhea and BHS-based treatment for acute The with
respiratory DOH
in the
system
for drugs
following
and
areaS:
medicines
planning,
is riddled
accreditation
average,
expenditures.
tertiary
hospitals
If another to be
recovered
about
of the cost from
hospitals
the recovery level to 15 percent), some P180 revenue could be generated from DOH-retained from LGU hospitals.i It should on the use of userl charges
may be misplaced
considering
that
fees
5 percent and
charges million in hospitals
be emphasized that arising from equity 50 percent
of current
users of government hospitals are ab0ve the poverty line. There is a mismatch in the costs and revenues transferred national ernment
of
of operations
(bringing additional
and P330 million the reservations
were
recover
10 percent
of these
concerns
of
procurement, distribution and inventory management. in this area have been initiated and have to be sustained.
On the their
logistics
problems
suppliers, Reforms
infections.
government agencies to LGI_s under the new Code. Moreover, the capacity of the government
from
Local Govto pursue
Health equity
and Nutrition
Sector
goals is weakened
equalizing. services, leveraged the central
To encourage the DOH should through
some
government
13}"
since the dis_il_tion LGUs to allocate set aside
more resources
adequate
form of matching should
of the IRA is counterresources
grants.
can be
At the same time,
work for ill'explicit
IRA distribution formula of a factor LGUs to improve collection of local
for health that
that will provide source revenue.
inclusion
in the
an incentive
to
4 Performance, Expenditures and Challenges in the Education Sector
THIS chapter
has four parts.
Part I gives a situation
analysis
starting
from school year (SY) 1981-1982. It describes the performance of the educational system at the elementary, secondary and tertiary levels.
Part
distribution issues,
ii discusses
public
of personnel
problems
and
Part IV provides
some
expenditure
and facilities. challenges
of primary
in terms
gross
(a) participation
completion extent that education Gross
and
the
the specific
the education
sector.
recommendations.
The performance of the
Part III addresses
confronting
SITUATION
namely:
on education
and
secondary
enrolment rate;
ANALYSIS
and
(b) cohort
education key
is discussed
efficiency
survival
rate;
indicators, (c) cohort
rate; (d) dropout rate and (e) graduation rate to the available data would allow. The performance of tertiary is discussed
separately.
Enrolment
In the last decade, gross enrolment in formal education grew on the average by about 2.37 percent annually (Table 4.1). At the end of SY 1993-1994,
total
gross
enrolment
was
registered
at
17.3
TABLE4.1 GROSS SCHOOL ENROLMENT BYLEVELOFEDUCATION ANDBYTYPEOFSCHOOL
"_ c3
(Inthousand) Elementary SchoolYear GrandTotal
Total
Public
Secondary
Private
HigherEducation
Total
Public
Private
Total
Public
Private
1981-1982 1982-1983 1983-1984
12,790 13,077 13,499
8,518 8,591 8,717
8,073 8,164 8,229
445 427 489
2,936 3,074 3,205
1,592 1,721 1,844
1,344 t,353 1,360
1,336 1,412 1,577
134 151 336
1,202 1,261 1,241
1984-1985 1985-t986 1986-1987 1987-1988 1988-1989 1989-1990
13,662 13,568 13,944 14,556 15,290 15,763
8,794 8,897 9,230 9,601 9,973 10,285
8,270 8,392 8,639 8,965 9,324 9,604
524 505 590 637 649 680
3,323 3,269 3,357 3,494 3,737 3,962
1,957 1,950 1,996 2,090 2,355 2,517
1E,366 1,320 1,361 1;404 1,382 1,445
1,545 1,402 1,358 1,461 1,580 1,516
258 209 202 222 233 228
1,286 1,193 1,t 55 1,238 1,347 1,289
1990-1991 1991-1992 1992-1993 1993-I994
16,170 16,423 t6,542 17,282
10,427 10,558 t 0,679 10,733
9,728 9,805 9,894 9,915
700 753 785 818
4,034 4,208 4,421 4,592
2,564 2,696 2,878 3,059
1,470 1,513 1,543 1,533
1,709 1,657 1,441 1,497
253 334 274 303
1,456 1,323 1,167 1,194
Source: National Statistical Coordination Board.1991Economic andSocialIndicators.
_.
S' _.
S"_o)
Education million
Sector
141
students
compared
ity of enrolment posted
to 12.8 million
was in the elementary
annual
growth
rates
at the tertiary
In recent
greater
years,
were given to tertiary to Students provides
tuition
education
fee supplements,
Elementary was
92.4
enrolment
percent
1989-1990
in
and
94.8
mentary schools was a continual the secondary 1993-1994 percent
than trend
was
in 1989-1990 because education.
the other sector.
at the hand,
Thus,
education
due
to the
assistance,
out of the total
to 93.3
percent
Although
in
public
ele-
10 percent
to the creation
in the
and 54.2
school's of free
share
in
secondary
The
colleges
state
the public while
perceptively
and
more access public
sector On
by the private
to provide sector
upward
increased.
provided
secondary
while the private
as one of the most
to 15
in 1981-1982.
continues and
compared
of several
level is largely sector
schools
provided
level has
here as primary
rate of return
in 1989-1990
provision
to provide
is still publicly secondary public
share
creation of barangay or rural high level enrolment in 1993-1994, more
education which, on the other hand, On this basis, the educational considered
schools
in the public
were in public
and
the tertiary the
(defined
a high social
This Act
service contracting development fund.
a 66.6 percent
to 63.5 percent
of the desire
education
had
The increase
may be attributed
Primary
textbook
compared
schools
or 20 percent
participation
Assistance
continued to dominate primary enrolment, there slight decrease in its share of total enrolment. At
enrolment
universities to tertiary
annually.
(R.A. 6728).
in 1981-1982.
and the subsequent Of the total tertiary
percent
public
1993-1994,
level, public
300,000
in
which respec-
scholarships
the Government
Education high school
levels
levels compared
secondary
levels
and
of the educational a college faculty
percent
in 1981-1982.
education schools.
through
Major-
3.8 percent,
assistance
in Private
expansion loans and
secondary and
level grew at 0.95 percent
government
and Teachers
scholarship grants, scheme, education
and
of 1.4 percent
tively. Enrolment
in SY 1981-1982.
for basic
levels) which caters
has
to higher
has high private rates of return. system of the country may be
equitable
systems
in the world.
142
Financing
Participation
are the
in the Philippines
Rates
Participation school-age
Social Programs
rate
is defined
population children
enrolled
belonging
as the
proportion
in schools.
toage
of the
In the primary
group
7-12 years
relevant
level, these
old during
the
year while in the secondary level, they are children 13-16 years old. In 1992, the elementary level registered a participation rate of 85 percent period
while
the
1987-1992,
secondary
level was 91 percent Philippine elementary
level registered
the average
participation
and 55 percent
Development participation
Report rate
for the secondary
1993). was
57 percent.
A decline
noted
For the
rate for the elementary
over
level (NEDA,
by 2.4 percent the
last
in
five years
(1987-1992) in contrast to an increaseby 2.1 percent in the secondary level participation rate. Participation rates at the regional level for the elementary level is shown in Table 4.2. The highest TABLE4,2 PARTICIPATIONRATEOF PUBLICELEMENTARYSCHOOLPUPILS,BY REGION
Region
1982. 1983
1985. i1986
19901991
1991. 1992
19921993
NationalCapitalRegion 72.80 CordilleraAutonomousRegion Region I. Ilocos 98,00 II. Cagayan 97,35 III. CentralLuzon 102,08 IV. SouthernTagal0g 88,64 V.. Bicol 93,95 Vl. WesternVisayas 100.94 VII. CentralVisayas 88.75 VIII. EasternVisayas 95.93 IX, WesternMindanao 93.41
79.74 92.85 92.32 90.87 92.39 91.80 85.51 80,86 84.65 91.45
80.55 95.76 99.36 89.73 99.95 ' 99.41, 98.15 92.61 93.69 92.89 97,87
91.99 84.64 91,73 84.75 91,73 90.12 85.63 85.03 79.16 78.50 74.59
93.06 85.61 92.79 85.73 92.79 91.16 86.62 96.02 80.07 79.41 75,45
X. NorthernMindanao 96.80 XI. SouthernMindanao 96,22 XlI, CentralMindanao 99.96 AutonomousRegionof MuslimMindanao
89,55 91.51 93.98
95.76 97,43 107.24
80.09 80.28 â&#x20AC;˘ 75.78
80.01 81,21 76,66
60.63
61.33
:
Source:Departmentof Education,Cultureand Sl:_OrtS, StatisticalBulletin,variousyears.
Education
Sector
participation with
14;1
rate in 1992-1993
96 percent
followed
was
by the
registered
National
in Western
Capital
Visayas
Region
with
93
percent. The lowest participation rate was observed in the Autonomous Region in Muslim Mindanao with 61.3 percent, followed by Western
Mindanao
Cohort
Survival
Survival
Rate
rate is defined
beginning of the
with 75 percent.
grade
or year who reach
required
required
number
number
four years,
as the proportion
4.3 shows
for the elementary
the final grade
of years.
of schooling
Table
For the
is six years; that
the survival
level from 66 percent
percent
in
1993-1994
percent
in 1993-1994
and for the
of students
from
in the
or year at the end
elementary
level,
for the secondary rate barely
in 1981-1982
70 percent
secondary
enrolled
the level,
improved to about
in 1981-1982
level. The average
68
to 76 survival
TABLE4.3 SURVIVALRATESAT THE ELEMENTARYANDSECONDARYLEVELSOF EDUCATION,SY 1981-1982to SY 1993-1994
SchoolYear
Elementary
Secondary
1981-1982 1982-1983 1983-1984 1984-1985 1985-1986 1986-1987 1987-1988 1988-1989 1989-1990 1990-1991
66.0 66.4 65,4 65.4 65.5 65.1 65.7 66.6 68.7 69.7
70.5 77.2 74.7 77.8 73.0 71.7 71.4 76.7 79.1 76.4
1991-1992 1992-1993 1993-1994
69.8 69.8 67,7
76.0 76.0 76.2
Source: NationalStatisticalCoordinationBoard,1991Economicand SocialIndicators.
â&#x20AC;˘ 144
Financing
rate
in the
and
76 percent
percent
last five years reached
never
100 new pupils five years, of the
was
68 percent
for the secondary
never
25 percent
Social Programs
the
made entering
sixth
Grade
for the
elementary
level. This means grade
it to fourth
68 managed
in the Philippines
that
at the elementary
year high school.
Grade
100 first year high school
for every
level in the last
6; for the secondary
entrants
30
level and
Thus,
I at the elementary
to reach
level
about
managed
level, 76
to reach
fourth
year. Completion
Rate
Completion
rate is defined
in Grade
of elementary number
or the fourth
of years
completion percent
in
Dropout
to 66
percent
rate
to 65 percent
declined
in
rate is defined
the required
4.4 shows
the
levels. There was level from
1991-1992.
from
At the
67 percent
at the
in 1991-1992.
as the proportion
to 1.6 percent
for public
dropout rate 1990-1991, Graduation Available and
grade
Rate
in 1981-1982
of pupils
secondary
from
data
in 1991-1992. schools
percent
for graduation levels
respectively
improvement
6.3
in
to total enrolment
Table 4.5 shows a large schools from 3 percent In contrast,
showed
a slight
1983-1984
to 6.9
available increase
in
percent
in
Rate
secondary
percent,
sixth
rate at the elementary
who left school during a given school year, decline in dropout rate in public elementary data
of students
the
Table
and secondary
in completion
completion
of the decade
Dropout
level of education.
1981-1982
level,
of a cohort
who completed
rate for both elementary
secondary start
school
year of high school in exactly
for that
a slight improvement 59
as the percentage
I or first year high
posted
rates high
in 1990-1991
for the elementary
indicate graduation (Table
level from
that
both
rates 4.6).
elementary
of 97 and
It was
94
a marked
the 90 percent
gradu-
TABLE4.4 COMPLETIONRATEIN PUBLICELEMENTARY ANDSECONDARYSCHOOLS,SY 1981-1982to SY 1991-1992
Elementary SchoolYear
Graduates Enrolmentin GradeI
_. 'O =
Secondary Rate(%)
Graduates Enrolmentin FirstYearHS
5 yearsago
Rate(%)
3 yearsago
1981-1982 1982-1983 1983-1984 1984-1985
933,863 975,578 1,035,395 1,031,903
1,574,646 1,616,960 1,647,067 1,717,525
59.3 60.3 62.9 60.I
293,761 296,659 317,404 341,201
436,978 461,268 487,646 487,290
67.2 64.3 65.1 70.0
1985-1986 1986-1987
1,048,690 1,042,444
1,708,529 1,727,035
61.4 60.4
366,781 394,289
534,172 525,782
68.7 75.2
1987-1988 1988-1989 1989-1990 t990-1991 t991-1992
1,076,487 1,055,426 1,175,744 1,227,367 1,281,257
1,750,858 1,791,821 1,809,695 1,859,958 1,941,495
61.5 58.9 65.0 66.0 66.0
423,860 328,720 445,443 465,148 485,741
612,778 594,311 6I5,069 663,610 744,32t
69.2 55.3 72.4 70.1 65.3
Source: NationalStatisticalCoordinationBoard,Economicand SocialIndicators,variousyears. 4_
145
Financing
Social Programs
in the PhiZippines
TABLE4.5 DROPOUTRATEIN PUBLICELEMENTARYANDSECONDARYSCHOOLS SY 1981-1982to SY 1991-1992
SchoolYear
ElementaryRate(%)
1981-1982 1982-1983 1983-1984 1984-1985 1985-1986 1986-1987 1987-1988 1989-1990 1990-1991 1991-1992
2.9 2.8 2.7 2.0 2,0 1_7 1.8 1,7 1.7 1.6
SecondaryRate(%)
6.3a
5.9b
a Cortes(1990). b DEC& Source: NationalStatisticalCoordinationBoard,1991 Economicand SocialIndicators.
TABLE4.6 GRADUATIONRATESOF ELEMENTARYAND SECONDARYLEVELS
Year
Elementary(%)_
Secondary(%)
1981-1982 1982-1983 1983-1984 1984-1985 1985-1986 1986-1987 1987-1988 1988-1989
89.8 90,5 90.5 90.5
95.8 90.8 90.8 90.8
96.9
93.6
1989-1990 1990-1991 Note:
Publicelementaryand secondaryfor 19854990.
Source: Cortes(1990)for 1981-1985;Departmentcf Education, Cultureand Sports for 1990-1991.
Education
Sector
ation
in 1981-1982;
rate
secondary
level was
The would
147
participation, have been
in contrast,
higher
survival,
higher
scarcity
buildings
maintenance
graduation
completion
of funds
rate
for the
at 96 percent.
if the education
by the relative and
the
in 1.981-1982
and
sector
graduation
for the construction
of existing
rates
was not constrained of new school
educational
facilities,
the
hiring of new teachers and the- retention of the teaching force. In addition to these constraints, at the demand side, socio-economic conditions side,
like the prevalence
not only prevented
made
it very difficult
of years pation
and
rates
survival
and
be improved straints. Tertiary Latest
higher
in the country-
education
but also
the required
number
level of education.
level remained
to be improved.
recent government policy contributed to the increase level,
formal
to complete
to the next
have
especially
to basic
for students
graduate
rate at the elementary
completion
high but
At the
Partici-
survival
secondary
and
level, the
to offer free public secondary education in participation rate. Like the elementary
completion
by measures
rates
that
at the secondary
address
supply
level have
and
demand
to
con-
Education available
universities 509
of poverty
access
are
data
(1991-1992)
in the country government
show a total of 2,070
of which
colleges
and
1,561
are private
universities
colleges
and
schools
and
(Table
4.7). Tullao
(1993) points out that the country has more than 2,000 institutions in the tertiary level with some 772 degree-granting colleges and universities
offering
various
The private
sector
85 percent
of total enrolment.
and
universities
(SUCs)
Cortes
(1990)
tertiary
institutions
public tertiary in that period, by statute executive
accounts
reported
programs
to over
for 80 percent Of these
from only a large
starting
1.6 million
of these
schools,
23 such
increase
in 1974-1975.
schools
87 are state institutions
in the
number
Between
students. and some colleges in 1972. of public
1975 and
1988,
institutions increased by 403.5 percent. Of 78 SUCs 53 or 68 percent were created or converted into SUCs
while orders
25 or 32 percent or presidential
were
decrees.
created
or converted
by
148
Financing
Social Programs
in the Philippines
TABLE4.7 NUMBEROFGOVERNMENTAND PRIVATESCHOOLSBYTERTIARYLEVEL SY 1965-1966to SY 1992-1993
Tertiary SchoolYear Government 1965-1966 1966-1967 1967-1968 1968-1969 1969d970 1970-1971 1971-1972 1972-1973 1973-1974 1974-1975 1975-1976 1976-1977 1977-1978 1978-1979 1979-1980 1980-1981 1981-1982 1982-1983 1983-1984 1984-1985 1985-1986 1986-1987 1987-1988 1988-1989 1989-1990 1990-1991 1991-1992 1992-1993 • •*
26 27 27 29 37 37 37 44 44 85 126 168 229 290 298 309 316 324 319 359 293 351 428 424 504 510 509 605
% 5.6 4.9 4.8 5.1 6.3 62 6.1 7.1 7.0 12.3 16.7 " 20.6 24.4 28.4 28,4 28.5 28.4 28.4 27.6 30.6 27.2 30.0 26.7 25.3 28.7 24.6 24.6 28.1
Private 440 528 536 544 552 560 568 576 584 606 628 649 709 731 752 774 795 817 838 816 785 818 1,178 • 1,251 1,251 1,561 1,561 1,547
%
Total
94.4 95.1 95.2 94.9 93.7 •93.8 93.9 92.9 93.0 87.7 83.3 79.4 75.6 71.6 71.6 71.5 71.6 71.6 72.4 69.4 72.8 70.0 73.3 74.7 71.3 75.4 75.4 71.9
466 555 563 573 589 597 605 620 628 691 754 817 938 1,021 1,050 1,083 1,111 1,141 1,157 1,175 1,078 1,169 1,606 1,675 1,755 2,071 2,070 2,152
Dataare as of January6, 1993. Dataincludestechnicaland vocationaleducationinstitutionsand highereducation institutions.
Sourcesof data:
NationalStatisticalCoordinationBoard,1993PhilippineStatistical Yearbook. Departmentof Education,Cultureand Sports,PhilippineEducation Indicators1965-1985. i
Education
Sector
149
In 1992-1993,
1.4 million
or 8 percent
in tertiary Commerce
schools, of which 81 percent and business management
enrolment
in 1990-1991,
with 20 percent. percent;
arts
Teacher and
followed
and
as enrolment
of graduates courses
came
(36 percent),
percent),
commerce
followed
engineering
and
and
by teacher
technology
were
schools. of total technology
accounted
and
medical
for 18
and
health
level has the
(Table 4.8). In 1990-1991, from
and
education
15 percent;
programs, 13 percent (Table 4.8). The distribution of graduates in the tertiary pattern
enrolment
by engineering
training
sciences,
of total
were in private had 29 percent
the largest
business training
same
number
administration and education
(15 percent)
and
arts
(16 and
sciences (14 percent). Latest available data on survival rate in tertiary education is shown in Table 4.9. There is a low survival rate of students in the TABLE4.8 TERTIARYENROLMENTAND GRADUATION,BY FIELDOFSTUDY SY 1990-1991
Enrolment Fieldof Study
No.
Graduation
%
No,
%
Arts and Sciences
196,711
14.6
29,961
13.6
TeacherTrainingand Education
242,828
18.0
34,279
15.5
Engineeringand Technology Medicaland HealthRelatedPrograms Commerce/Business Management
273,408 176,252 392,958
20.3 13.1 29.2
32,402 34,868 79,827
147 15.8 36,1
43,458 20,405
3.2 1.5
7,390 2,111
1.0 1.0
1,695
0.1
209
0,1
1,347,715
100.0
221,047
100.0
Agriculture,Forestry,Fisheryand VeterinaryMedicine Law Religion/Theology Total
Source:NationalStatisticalCoordinationBoard,1993PhilippineStatisticalYearbook.
150
Financing
Social Programs
in the Philippines
TABLE4.9 SURVIVALRATESIN TERTIARYEDUCATIONBY LEVEL,1980-1989 SchoolYear
First
1980-1981 1981-1982 1982-1983 1983-1984 1984-1985 1985-1986 1986-1987 1987-1988 1988-1989 1993-1994a
33.5 35.8 37.8 38.9 40.4 41.9 43.4 45.1 46.7
Second I 22,7 23.3 24.9 26.0 27.2 28.4 29.7 31.O 32.4 30.1
Third
Fourth
11.5 11.8 12.0 12.3 12.6 12.9 13.2 13.5 13.8
11.7 11.6 11.9 122 12.6 12.9 13.2 13,6 13.9 14.2
a Departmentof Education,Cultureand Sports. Source: NationalEconomicand DevelopmentAuthority,Compendiumof Philippine SocialStatistics,variousyears. TABLE4.10 PERCENTAGEPASSINGOFTERTIARYGRADUATES IN LICENSUREEXAMINATIONS,1985-1989 Field Architecture Civil Engineering MechanicalEngineering ElectricalEngineering MiningEngineering ChemicalEngineering Medicine Dentistry Pharmacy CPA Law Total Source:Balmores,1990.
Examinees
Passed
Percent
2,940 26,787 11,227 12,243 324 4,438 9,478 10,442 2,277 66,655 13,229
1,307 11,354 6,461 6,317 150 2,272 6,857 4,822 1,291 17,720 2,924
44.46 42.39 57.55 51.60 46.30 51.19 72,35 46.18 56.70 26.58 22,10
160,040
61,475
38.41
Education
Sector
tertiary reasons
level. Students drop out of the tertiary level for a variety of and these are mostly socioeconomic in nature. Poverty, the
difficulty
of sustaining
landing until
151
a college
a job after graduation
completion. Another dimension
the average tions given between ranged tered
and
bleak
are disincentives
of the performance
prospects
to staying
of tertiary
of
in college
institutions
is
percentage of graduates who pass licensure examinaby the government. Balmores (1990) reported that
1985-1989,
ing rate
education,
college
of only 38 percent from
graduates (Table 4.10).
22 to 72 percent.
in medicine
registered
and
The percentage
Satisfactory
engineering
an average
of passing
performance
but
quite
poor
pass-
was regisin law
and
accountancy.
PUBLIC EXPENDITURES AND THE DISTRIBUTION Distribution
of Facilities
In 1992-1993,
there
IN EDUCATION
OF PERSONNEL
AND FACILITIES
and Personnel
were 34,570
elementary
schools,
dary schools and 2,152 tertiary schools as compared in 1965-1966 when there were 21,877 elementary secondary sector
schools
provides
and 466 tertiary mostly
basic
caters mainly to higher of schools has steadily
schools
education
education. increased.
5,701
secon-
to the situation schools, 2,537
(Table 4.11). The public while
Through Public
the
private
sector
the 1980s, the number schools constituted 69
percent of preschool level; 94 percent of primary and 61 percent of secondary schools. However, educational facilities in rural areas are solely
inadequate
primary
schools
electricity. teaching Natural further ture.
and have
mostly no water
Lack of teaching of mathematics calamities
contribute
However, the participation
which
supply
Some
while
and
science
damage
the rapid
of the private
shortage growth sector
(UNICEF
in the number in tertiary
no
affect the
and physical
of educational
of
have
adversely
subjects
classrooms
48 percent
61 percent
aids and equipment
to the present
despite
substandard.
1992). facilities
infrastrucof schools
education
and
(which
TABLE4.11 t,,a
NUMBEROFGOVERNMENT AND PRIVATESCHOOLSBY LEVELOFEDUCATION SY 1965-1966to SY 1992-1993
Elementary
SchoolYear
Total
Government
1965-1966
21,877
21,053
96.2
1966-1967
22,249
21,319
95.8
1967-1968
22,249
21,319
1968-1969
22,731
1969-1970
22,872
1970-197t
Secondary
% Private
Government
t_
Tertiary
%
Total
% Private
%
Total Government
% Private
%
824
3.9
2,537
924
36.4
1,613
63.6
466
26
5.6
440
94.4
930
4.4
2.679
1,045
39.0
1,634
61.0
555
27
4.9
528
95.1
95.8
930
4.4
2,911
1,136
39.0
1,775
61.0
563
27
4.8
536
95.2
21,792
95.9
939
4.3
3,322
1,406
42.3
1,9l6
57.7
573
29
5.1
544
94.9
21,911
95.8
961
4.4
3,851
1,876
48.7
1,975
51.3
589
37
6.3
552
93.7
23,804
22,638
95.9
966
4.2
4,111
2,125
51.7
1,966
48.3
597
37
6.2
560
93.8
1971-1972
24,497
23,525
96.0
972
4.1
4,590
2,594
56.5
1,996
43.5
605
37
6.1
568
93.9
1972-1973
27,612
26,635
96.5
977
3.7
4,716 • '
2,709
57.4
2,007
42.6
620
44
7.I
"576
92.9
1973-1974
29,192
28,196
96.6
996
3.5
4,778
2,765
57.9
2,013
42.1
626
44
7.0
584
93.0
1974-1975
30,760
29,745
96.7
1,015
3.4
4,844
2,825
58.3
2,019
41.7
691
85
12.3
606
87.7
._.
1975-1976
30,962
29,854
96.4
1,108
3.7
4,908
2,883
58,7
2,025
4t.3
754
126
16.7
628
83.3
.,_
1976-1977
31,134
29,976
96.3
1,158
3.9
4,897
2,865
58.5
2,032
41.5
817
168
20.6
649
79.4 "
rb hu
1977-1978
31,307
30,099
96.1
I, 208
4.0
4,929
2,891
58.7
2,038
41.3
936
229
24.4
709
75.6
1978-1979
31,519
30,221
95.9
1,298
4.3
5,178
3,134
60.5
2,044
39.5
1,021
290
26.4
731
71,6
1979-1980
31,623
30,311
95.9
1,312
4.3
5,163
3,112
60.3
2,051
39.7
1,050
298
28.4
752
71.6
_" rb _" O3 ,0 0
),,4
._ ("b
b_ TABLE 4.11 (conlJnued) Elementary
SchoolYear
Total Government
Secondary
% Private
%
Total Government
Tertiary
% Private
%
Total Government
19804981
31,762
30,436
95.8
1,326
4.4
5218
3,161
60.6
2,057
39.4
1,083
1981-1982
31,902
30,561
95.8
1,341
4.4
5,361
3,298
61.5
2,063
38.5
1982-1983 1983-1984
32,301 32,809
30,946 31,440
95.8 95.8
t,355 1,369
4.4 4.4
5,412 5,430
3,342 3,354
61.8 61.8
2,070 2,076
38.2 38.2
1984-1985
33,104
31,768
96.0
t,336
4.2
5,475
3,399
62.1
2,076
1985-1986
33,156
31,817
96.0
1,339
4.2
5,375
3,357
62.5
2,018
1986-1987
33,485
32,037
95.7
1,448
4.5
5,394
3,327
61.7
1987-1988
33,544
32,000
95.4
1,544
4.8
5,410
3,307
1988-1989
34,526
32,875
95.2
1,651
5.0
5,496
3,347
1989-1990
34,382
32,8t1
95.4
1,571
4.8
5,523
1990-1991
34,081
32,449
95.2
1,632
5.0
1991-1992
34,081
32,449
95.2
1,632
5.0
1992-1993
34,570
32,630
94.4
1,940
5.9
o
% Private
%
309
28.5
774
71.5
1,111
316
28.4• " '795
71.6
1,141 1,157
324 319
28:4 27.6
817 838
71.6 72.4
37.9
1,175
359
30.6
816
69.4
37.5
1,078
293
27.2
785
72.8
2,067
38.3
1,169
351
30.0
818
70.0
61._,
2,103
38.9
1,606
428
26.7
1,178
73.3
60.9
2,149
39.1
1,675
424
25.3
1,251
74.7
3,369
61.0
2,154
39.0
1,755
504
28.7
1,251
71.,3 .
5,550
3,394
61.2
2,156
38.8
2,071
5t0
24.6
1,561
75.4
5,550
3,394
61.2
2,156
38.8
2,070
509
24.6 1,56l"
75.4
5,701
3,504
61.5
2,197
38.5
2,152
606
28.1 1,547"
71.9
_-
" DataasofJanuary6, 1993. •* Dalaincludeslechnical andvocalional educat_nJnslitutions andhighereducation instilutior_s. Sources ofdala:
National StatislicalCoordinalion Board,1993Philippine Statistical Yearbook. Department of Education, CultureandSports,Philippine Education Indicators1965-1985.
01
154
Financing
Social Programs
in the Philippines
would have allowed the government to concentrate mainly on primary and secondary education) many areas, especially in the countryside, lack basic educational facilities. One out of four barrelgays is without any elementary school. Most of these barangays in Regions I, IV, VI AND VIII. In absolute terms, this implies
are that
11,600 out of more than 43,000 baraJagays do not have elementary schools such that more than 1.6 million school age children (7-12 years old) in these barangays do not have immediate access to ally formal educational have neither public
facility. Sixty-one of the 1,540 municipalities nor private high schools (Table 4.12).
This problem is compounded by the existence elementary schools which constitute about 10,839
of incomplete out of 32,590
TABLE4.12 BARANGAYSWITHOUTELEMENTARYSCHOOLS
BarangaysWithoutElementarySchool Region/Division
Total No.of Barangays
No.
%
NCR ARMM CAR
1,689 2,136 1,383
35 899 327
2.1 42.1 23.6
I II III
3,385 2,311 2,968
1,126 483 758
33,3 20.9 25.5
IV V
5,919 3,505
2,230 595
37.7 17.0
Vl VII
4 139 3 187
1,395 784
33.7 24.6
VIII IX
4 389 2 174
1,097 475
25,0 21.8
X XI XII
2 496 2 220 1 401
446 528 452
17,9 23,8 32,3
Total
43,302
11,630
26.9
/
Source: Officeof PlanningService,Researchan_ StatisticsDivision,Departmentof Education,Cultureand Sports.
i
Education
Sector
155
public elementary schools. schools do not go beyond incomplete
state
dropout
rates
education
of these
because
Some 60 percent of these incomplete Grade VI of primary education. The elementary
the difficult
discourages
pupils
dropouts
access
Potential
percent
of the total public
elementary
schoolyear
1992-1993.
critical
completion
of Grade
to lose their
The
elementary elementary
at least four years
229,369
enrolment
Those
or 2.3
million
threshold
literacy.
of elementary
pupils
of 9.91
educational
to attain
to high
the six-year
will approximate
IV in order
contributes
to a complete
from finishing
course.
do not complete
school.s
level is
pupils
education
in
who
are likely
literacy.
The inadequacy
of facilities
is demonstrated
by the enrolment-
to-school ratio, and teacher-to-pupil ratio in public elementary schools. The enrolment-to-school ratio in elementary education, for the
period
1991-1992,
years.
The lower
years
(Table
registered
ratio in 1981-1982
4.13).
The teacher-pupil
a higher
ratio
was better ratios
than than
in the
in previous that
of recent
elementary
and
TABLE4,13 RATIOOF ENROLMENTTO SCHOOLS, SY 1981-1982to $Y 1991-1992 SchoolYear 1981-1982 1982-1983 1983q 984 1984-1985 1985-1986 1986-1987 1987-1988 1988-1989 1989-1990 1990-1991 1991-1992
Total Enrolment Numberof Schools 12,942,166 13,230,885 13,498,520 13,661.361 13,568,035 13,944,273 14,556,327 15,289,613 15,762,815 16,170,160 16,821,378
40,364 40,524 41,754 42,088 41,863 42,291 43,132 45,388 45,497 45,903 4t ,701
Ratio 1:321 1:326 1:323 1:325 1:324 1:330 1:337 1:337 1:346 1:352 1:403
Note:Totalenrolmentincludesthoseenrolledin vocationaland tecMical schools. Sourceofdata:
Officeof the PlanningService,Researchand StatisticsDivision, Departmentof Education,Cultureand Sports.
TABLE 4.14
o_
PUPIL-TEACHERRATIO INTHE ELEMENTARY AND SECONDARY LEVEL OF EDUCATION SY i981-1982 toSY 1991-1992
Elementary School Year
Total
Numberof
Enrolment
Teachers
1981-1982 1982-1983 1983-1984 1984-1985
8,518,283 8,591,267 8,717,469 8,793,773
271,405 272 477 28" 456 283 458
1985-1986
8,896,920
1986-1987 1987-1988 1988-1989
Secondary Ratio
Total
Numberof
Ratio
Enrolment
Teachers
1:31 1:32 1:31 1:31
2,935,732 3,074,219 3,204,551 3,323,063
85 465 89 019 104 177 93 225
1:34 1:35 1:31 1:36
277 076
I:32
3,269,434
60 378
t:54
9,229,595 9,601,322 9,972,571
281 659 284 798 307 141
1:33 1:34 1:32
3,357,014 3,494,460 3,737,104
62 955 69 226 109,138
1:53 1:50 f:34
1989-1990 1990-1991
10,284,861 10,427,077
315 585 317 023
1:33 1:33
3,961,639 4,033,597
118,805 121,887
1:33 1:33
1991-1992
10,558,105
3t8 468
1:33
4,208,151
125,049
1:34
C3
Source: NatJona_ StatisticalCoordinationBoard,I991 Economicand SocialIndicators.
9 b_ o 5.
._. Cb CA
Education
Sector
secondary
levels are shown
average
teacher-pupil
In 1985-1986, 1992,
157 in Table 4.14.
ratio
the average
1:33. The situation
teacher-pupil
ratio
in the secondary
to 1:34 in 1991.-1992.
secondary-level ratio is offset
ratio by the
On the about
other
of lack of access
hand,
This ultimately
was
However,
the
uneven
in physical
access
translates
an
of 1:29 in 1975. 1:32;
in 1991-
level improved
from
improvement
and the relative constancy deterioration in the quality
problem
disparities
(1990) reported
schools
in 1985-1988
the continuing
Cortes
in elementary
1:53 in the
of the elementary of education and
by the disadvantaged.
distribution
of schools
to education
into disparities
brings
between
regions.
in educational
perform-
ance. National Capital Region, Central Luzon and Southern outranked other regions in terms of educational performance.
Tagalog These
regions
primary
have the highest
level achievement Eastern
Visayas,
national
average
Because
and
participation, literacy
Western
and
performance
of inadequate
cohort
rates
survival
while
Central
and
Cagayan
Mindanao
Valley, have
below
classes
nounced
this strategy
of facilities the
and
the
multigrade
dress basic
and
number
of classrooms
teachers.
as a national
classes
immediate education
mobile
lack
The
and
mobile
in the
physical
teachers
cannot
sight
of the fact that
dard
and teachers
be ignored.
educational
an-
the inadequacy
strategy
However, will only ad-
as the lack of access to and the sustainability
The government facilities
pupils and
recently
countryside.
short-term problems such but the quality of education
of this approach
DECS
policy to address
of teachers and
the
indicators.
facilities, class sizes in public schools have increased to 60-70 per class. The government has also resorted to combination multigrade
Bicol,
continue
are ill-prepared
to handle
cooperated
with a number
must
not lose
to be substan-
the growing
school-age
population. The government
of donor
agencies
in
undertaking projects which provided alternative and innovative delivery systems for basic education. The main criticism about these projects
is that
to reach
the mass
constraints expansion
and and
they have
continued
of preschool inadequate
institutionalization
to be pilot projects
and primary personnel
have
of proven
level pupils. prevented pilot projects.
and
failed
Budgetary the
wider
158
Financing
Public
Expenditure
During
the
sector
and
of the was
declaration declined
the
1970s,
national
high
in the Philippines
on Education
1960s
one-third
Social Programs
government
in the
of Martial to less than
the government
priority
budget
list
Law, the
Of the
share
10 percent,
allocated
almost
to education.
government.
of education
with the lowest
in the
share
This
With
the
budget
of 5.6 percent
recorded in 1976 (Table 4.15). In the 1980s, the budgetary allocation for education remained small relative to the previous years because of economic Because and
difficulties,
of the decline
personnel
school-age about
mainly
in the sector's
failed
to match
population.
9.3 million
due to the huge debt-service budget,
the
persons
aged
educational
increasing
This resulted
years
facilities
demand
in a UNICEF
7-24
burden. from
estimate
old became
the
where
"dropouts."
This group includes an estimated 340,000 school-age children who never enrolled and about 8.96 million who enrolled but did not finish elementary,
secondary
and
government in 1986, the national income increased
tertiary
education.
With
the
change
in
allocation for education as a share of in the next few years to as much as 13
percent in 1991 although it declined to about 10 percent in 1993. There .are obviously competing claims on government funds by other sectors, thus, the education sector would find it more difficult to increase However,
its
share
the rapid
brought sonnel,
about makes
sector's
budget
location.
There
textbooks,
in the
growth
tremendous it imperative through
national
interseetoral equipment
and intrasectoral an adequate
Recently, hiring
though,
more
shortages the
facilities
targeted
and
building
the government
teachers.
in textbooks,
which
and
other
Thus,
the
classrooms
textbook-pupil
ratio
large backlog of 17,505. continues to mount.
primary
budget
number facilities.
part of the government's allocation 'for education teachers' salaries and relatively very little is devoted of existing
expenditures.
population,
has
pressure on existing facilities and perto seriously consider increases in the
is a need to provide
classrooms,
government
of the school-age
real-
of teachers, The greater
is directed to to maintenance
new
educational
infrastructure.
has
announced
its intention
sector
still
experiences
anal other facilities. of li:2 has sclaool
not been
classrooms
of
chronic
For example, met while as of 1989
a
Education Sector
159 TABLE4.15
BUDGET OFDEPARTMENT OFEDUCATION, CULTURE ANDSPORTS ASA PERCENTAGE OFTHENATIONAL GOVERNMENT BUDGET, 1963-1993
Year
National Budget (inPthousand)
DECSBudgetPercentof theNational (inPthousand) Government Budget
1960 1961 1962 1963 1964 1965
899,676 1,092,919 1,189,618 1,383,979 1,272,081 2,102,364
247,387 306,880 352,030 404,771 507,155 555,250
27,50 28.08 29.50 29,27 25.72 26.41
1966 1967 1968 1969 1970
2,003,049 2,073,825 2,276,471 2,904,718 3,323,699
596,212 646,124 688,910 780,265 829,945
29.77 31.16 30.26 26.86 24.97
1971 1972 1973 1974 1975
3,716,216 5,562,000 7,909,000 12,897,000 16,684,000
1,004,394 1_093,620 1,296,696 1,496,355 1,643,183
27,03 19.66 16.40 11.60, 9.85
1976 1977 1978 1979 1980
29,84.3,000 28,577,000 34,422,000 41,739,000 41,424,000
1,681,387 2,040,000 3,195,276 3,447,234 3,414,378
5,63 7.14 9.28 8.26 8.24
1981 1982 1983 1984 1985
491481,000 35,854,000 61,799,000 92,107,000 92,511,000
3,827,280 4,387,012 5,471,935 5,613,082 6,145,907
7.73 12.24 8.85 6.09 &64
1986 1987 1988 1989 1990
115,102,000 194,266,000 162,250,000 228,940,000 233,507,847
8,712,162 12,321,912 15,100,335 25,040,675 28,177,760
7,57 634 9.31 10,94 12.07
1991 1992 1993
254,343,983 308,368,476 330,237,082
32,949,919 34,531,399 35,164,138
12.95 11.20 10.65
Souse: NationalStatistical Coo_inationBoard,1993Philipp_eS_tis#calYearbook.
160
FfnaTwing ISSUES,
Basic
CHALLENGES
in the Philippines
AND PROBLEMS
Education
Several
major
problems
beset
basic
ciencies, inadequate resources rates tend to hide the problem pupils
Social Programs
enrolling
every
education:
low quality,
and diSparity in access. because ,of the impressive
schoolyear.
The
Constitutional
ineffi-
Errrolment number of provision
to
provide universal elementary_ education has made possible high enroLment and participation rates. However, when quality of basic "education
is examined,
Survival the
and
basic
school-age
completion
education
there rates
system
population,
the
are
glaring
seem has
quality
flaws
in the
to tell a different
been
able
has
results students
of standard tests among elementary and the percentage of examinees
College
Entrance
Test given to high school
While
most
of the
maintained.
The
to absorb
not been
system.
story.
and secondary level passing the National seniors
college education confzrm the deterioration in quality secondary education (Tables 4.16 and 4.17).
who aspire of primary
for a and
TABLE4.16 PERCENTAGE OF EXAMINEESWHOPASSEDTHE NCEE SY 1981-1982to SY 1991-1992
SchoolYear
Numberof Examinees ExamineeswhoPassed
Rate(%)
1981-1982 1982-1983
700,436 745,970
.420,262 410,284
60.0 55.0
1983-1984 1984-1985
743,832 732,131
409,.108 402,832
55.0 55.0
1985-1986 1986-1987
717,396 802,342
393,756 1320,778
. 54.9 40.0
1987-1988 1988-1989
808,427,.. 824,382
_404,692 414,570
50.1 50,3
1989-1990
910,946
'434,999
47.8
1990-1991 1991-1992
882;689. 863,727
474,935 _61,347
53,8 53.4
Source:NationalStatisticalCoordinaUonBoard, 199i Economicand SocialIndicate. i i
Education
Sector
161 TABLE 4.17
COMPARISONOF MEANPERCENTAGESCORESGRADE GRADESIV ANDVI, BYSUBJECTAREAS
SubjectAreas
1975
1986
Mean Difference
33,23 42.67 45.05 47.72 34.27
41.96 52.98 46.66 58.55 50.48
8.73* 10.31" 1,61 10.83" 16.21"*
39.49 39,17 44,68 48.11 35.71
42.57 40,85 52.79 58,22 44.21
3.08* 1.68 8.11" 10.11"* 8,50**
GradeIV (1976 8OUTELEand 1987 PREEMTests) Reading Language Pagbasa Wika Mathematics GradeVl (1976and 1986SOUTELEPREEMTests) Reading Language Pagbasa .... Wika Mathematics
Legend:
p < 0.05 ** p<0.01 SOUTELE- Surveyof Outcomesof ElementaryEducation PREEM- Preparationof ElementaryEducationMeasuresProject
Source:Cortes,1990, There secondary
is a large variance schools.
in the quality
Local government
of public
units
elementary
finance
the public
and sec-
ondary schools but they have different financing capacities. There is also a large difference in the quality of public and private schools as shown by average scores in Mathematics, English and Filipino. Paderanga (1990) pointed out that private schools, as compared to public schools, have larger expenditures for desks, textbooks, reference
books
Moreover, significant (1993)
and
other
depending
inputs
on the region,
differences
who based
material
in achievement
his conclusions
than
on persormel
salaries.
type of community
and school,
exist as pointed
out by Tullao
on the results
of the
Household
162
Financing
Social Programs
in the Philippines
and School Matching Surveys (HSMS). Private elementary schools scored 1.3 to 1.6 times better than public schools, and urban schools
scored
in regions
15 to 22 percent
with t-righ per capita
higher income
than
rural
schools.
(e_g., National
Schools
Capital
Region,
Central Luzon and Southern Luzon) performed much better than those in regions with low per capita income. The irony is that unless the
quality
of education
rather than achievement
is improved,
schools
mitigate the effects of a student's (World Bank 1988).
will likely home
reinforce
background
on
According to the Report of the Educational Commission (1991), close to half of elementary schools have no water while 60 percent have
no electricity.
and
lack
Rural
competent
sizes can be as large secondary personnel
schools
The significant secondary
There
of the
public
as 60 to 70 students.
rates
reveal
is a huge required,
high
equipped
schools,
The recent
class
policy of free
more pressure against facilities and resources are raised by government
for secondary
dropout
education
system.
are inadequately
In some
education will create and unless sufficient
to meet the rising demand more be sacrificed.
tion
high
teachers.
the
education,
and failure
to complete
inefficiencies
problem
of retaining
number
of years.
quality
in the students While
will once primary
or
educational until
comple-
socioeconomic
constraints affect demand, for education, and the subsequent decision to complete the required, number Of schooling, school-related constraints facilities, ciencies
are also important. Incomplete schools, inadequate ill-trained teachers and staff all contribute to the ineffiin production
of quality
graduates.
Disparity in access to elementary major problem. Participation rates regions
differ significantly.
rate was about of 68 percent. poorer
pation lower
registered
Participation
1987-1992 and than
At the primary
such the
level, school
in 1987-1992
But this is the national
households)
Mindanao period.
91 percent
and secondary education across educational levels
as the lowest
Autonomous cohort
survival
rate at the secondary
with a cohort
survival
rate
participation
with a cohort average.
Poorer Region rate
survival
rate
regions
(and
in Muslim during
this
level was 55 percent
from
oif 76 percent. i
survival rates in the poorer regions the national average. The! i variation i
is a and
Again
partici-
are considerably in expenditures
Education
Sector
163
across regions is a significant determinant of the disparity in access to basic education and the different participation rates across educational
levels
The cohort that only about level.
that
only about education.
1988}
76 percent system
students
come
become
all 68
This
because
education
rate of 68 percent
68 out of the original
Assuming
school, dary
in the regions.
survival
the
permanently
cycle, that A reason relatively
finish
graduates
the primary entered
of them will eventually
finish (World
drop
excluded
as inequitable out
early
from
the
Bank of they
educational education.
stems
of basic
secon-
and
to tertiary
education
provision
high
process
group
completing
secondary
in basic
cost of public
in the
disadvantaged
and
for the inefficiency
higher
level means
is seen
socially
is, from elementary
100 students
elementary
who
from
at the primary
from the
education.
Tullao
(1993} reports that data from the Fund for Assistance to Private Education (FAPE) confirm that public schools tend to be less cost effective
than
public pared
to P662
cost in public P753
private
elementary
institutions.
schools
in private
schools.
high schools
for private
high
more, the quality schools.
Operating
was estimated
In secondary
was estimated
schools.
of basic
Program
rate from
65.7
(SEDP)
helped
to 68 percent
while
main
reasons from
for the relatively region
to region.
the primary
low survival
cohort
was still 10 percent
set for 1992.
The
secondary
was also below
Achievement rate
below
school the
1992
in 1989
(FLEMMS)
indicated
that
conducted
in
the standard
of
achievement targeted
almost
by the National
90 percent
of the
rates
of pupils
percent (NEDA Philippine Development Repor t 1993). On the other hand, the Functional Literacy, Education Survey
survival
However, incomplete and poverty were the
rates.
of 60 percent
Media
spent
in private
level from 71.4
achievement
1987-1992
in 1987-1992
schools
to
such as the Second Elementary Secondary Education Develop-
70 percent percent
per student
higher
in the secondary
The
in
as com-
as compared
public
to 76 percent from 1987-1988 to 1992-1993. schools, the inadequacy of the teaching force, vary
student
schools,
was generally
improve and
per
in 1986
at P1,250
However,
education
The implementation of programs Education Project (SEEP) and the ment
cost
at P940
of 50
level of 70 and Mass
Statistics population
Office had
164
Financing
simple 78.3
literacy percent
compared and
(ARMM) with country. the
57.2
The
percent
had
therefore,
to 83.3
percent
Autonomous
FLEMMS
population
were,
the
Social Programs
had
survey
both
in 1980.
Region the
basic
literacy
that
literacy
literate.
and
literacy
rates
among
regions,
rates
in the
percent
numeracy
Functional
XII with
Mindanao
only 73.2
lower than 75 percent in 10 out of 15 regions. was 73.2 percent. Furthermore, there was functional
Region
in Muslim
lowest
indicated
functionally
in the Philippines
of
skills
and
rate
was
literacy
The national average a wide difference in
the lowest
being
ARMM (44
percent) and Region IX (57.2 percent). To address these issues, the Education for All Plan of Action (1991) .envisions that regions with greater disparities than others "will have priority in investment allocation faster Plan
to enable
than
the
them
rest."
(MTPDP) intends
1995
and
that
literacy
1.8 million
their
Medium-Term
to achieve
a functional
this means
to increase
The
literacy
a literacy of 79.6
Filipinos
rate
need
literacy
rate of 85 percent
at a pace
Development
of 96.5
percent.
percent
In absolute
to acquire
while about 10.5 million require functional pine Education for All Plan targets a literacy a functional
rates
Philippine
by
terms,
basic
literacy
education. The Philiprate of 98 percent and
by the end of the decade.
The need to reorient the education of better quality basic formal education
sector and
toward the provision nonformal education
can be appreciated in the context of rapid development sustained by neighboring ASEAN countries. These _countries have made better use of their labor forces'skills and training to create jobs and wealth for sustained growth and development. Without a strong foundation in basic
education,
it will be impossible.for
to produce a competitive growth and development This view has Plan of Action
been
which
can provide
that
can use
people
arg_led
states
instrument
"oasis
the skills,
information
and
tivity.
It can
empower
a united the
attitudes,
as an antipoverty
knowledge
themselves
and
for common toward
marginalized
of
for All Philippine
education
approach
economy
will be the wellspring
by the Education
that
to organize
useful
also
the Philippine
work.force which in this decade.
and
values
access
greater prevent
to
productheir
exploitation and alienation from the development process." The Ramos administration has announced tile universalization of access to primary
education
as the highest
pr!ority !
goal of the education
Education sector.
Sector
165
It envisions
schools
in
schools;
use
the following:
5,174
experience
teaching
dropout
of new elementary
completion
of multigrade and
establishment
barangays,
of 6,000
and
intervention
provision
of preschool
to strengthen
the
power of schools (Draft, Strategies for Attaining Decade Goals for Education 1993). In compliance DECS Order No. 38 s. 1993, June 9, 1993 mandates schoolyear
1993-1994,
all incomplete
schools
availability
of facilities
and
shall
and/or
multigrade
Tertiary
state
issues
here
the quality colleges
and
concern
the unequal
access
of college
courses,
and relevance universities
provides
proliferation of state colleges the share of private schools.
levels
the greater
in tertiary
recent eroded
of education,
conomically
proportion
including
disadvantaged
education. brings
not constrained organize
by
combination
in order to offer the complete
sector
all
holding
Philippine Midwith this goal, that beginning
Grades
I-VI.
Education
The main cation,
classes
teachers
incomplete
group
The disadvantaged
about
and the role of
education.
of tertiary
edu-
The
private
education
but the
and universities (SUCs) have While there is open access to tertiary
education,
finds it difficult
group's
the high dropout
to tertiary
the
to have
socioeconomic
socioea college
status
partly
rate even at the start of the schooling
years, that is, at the primary and secondary level. Thus, there is adverse social selectivity as the early school leavers come from this group.
Those
who remain
to finish
the tertiary
level come
from the
high income group. There is also an uneven distribution of tertiary level institutions among the different regions. The National Capital Region, Southern Luzon, Central Luzon and Western Visayas more and better-quality schools compared to other regions. The response taged
group
offerings in 1993,
of legislators
was
to create
as the private the government
but the access
the tertiary
which
had
the
of the disadvansame
curricular
schools. Currently, there are 87 SUCs and provided them P5.7 billion for operations
problem
did not disappear. in fact, with more
to the lack of access SUCs
have
and the uneven than
level offering
2,000 various
quality
public programs
of tertiary
and private to more
education
institutions than
in
a million
166
Financing
students,
there
is the
overexpanded.
Thus,
public
tertiary
schools.
elementary
and
both quarter has
of total a 90
varies
to TuUao
from
P2,000 per
1993
P12,800
only
other
student
mates
It
been
fees
observed
(World
tuition
fees
tuition
fees.
by
sufficient
justification
outweigh
social
targeted
and
deserving
expanded
students
and
per
higher
than.
per
level
average
cost
at
the
student
in
student
substantial
from
tuition
student
per
for private
SUCs
per
is quite
expenditure
P2,005
an
liberal
tertiary
student
per
tertiary
1988).
and
cost
student
tertiary
esti-
in SUCs
schools.
in SUCs
was
subsidy in
(Herrin
quality
The
only
higher 1990).
scholarship a restructuring
operate requires
assistance
to mitigate
a subsidy the
institutions
high An
education
since
benefits
at the
comes
that
providing
However,
Regarding in business
with
cost
a
enrolment
training,
student
of offer
about
secondary
budget
in which
Bank
for private
SUCs
is
0.2
schools.
structure"
implemented
existence
comprise
comparative
current
for private
the
population.
support
SUC
1985,
only
education
many
teacher
per
much
to expenditure
"quality-tuition tion
was
total
it was
to 0.9
has
SUCs,
in 1989-1990
of the
that
of tuition
cost
Government
fees. 32 In
while
compared
which
student
estimated
which
10 percent
P3,627
ratio
The
that
Philippines
to be an overexpansion
to P38,000
schools.
revealed
was
(1993l,
student.
in private
since
In some
seems
tertiary
noted
education
of total
there
that
in the
to rationalize
further
secondary
share
of P7,800 was
1993)
is a need
Tullao
Programs
commerce, engineering, medical sciences.
According
cost
there
offerings,
administration, arts and the
(Tullao
SUC enrolment.
percent
curricular
view
Social
equivalent has
been
program the to
the
program of SUCs
impact the
as
private other to
hand, serve
to make
was of high in
without benefits a wellpoor
the
a
tui-
increase
viewed
education, On
on
high
but
subsidy
32. The government will be able to generate substantial savings by increasing the share of tuition and othe_ fees in the SUC budgctt by another 10 percent. The 1993 SUC budget amounted to P5.7 billion of which i10 percent came from tuition and other fees. Increasklg the share of tuition axxd fees from 10 percer_t to at least 20 percent will allow government to free about P570 imillion which can then be used for improving the quality of basic education. There was also a _ecent DECS announcement that elementary and secondary i}rograins shall be phased out of chartered state colleges and universities excep_ for laboratory programs. The resources devoted to SUC elementary and secondar_ programs can also be used instead by DECS to improve basic education, i
Education
Sector
proportional Bank credit
to social
(1988). markets
(Herrin
167 benefit
have
been recommended
Likewise, an alternative to develop or expand
by the World
is to stimulate the private loan programs for education
1990).
Another
major
unemployed
problem
concerns
or underemployed
the
in the
large
pool
country.
of educated
There
is a large
mismatch between jobs by agriculture
education and training and actual demand for and industry. Table 4.18 shows the distribution
of the
according
unemployed
to the
highest
teen percent of college graduates compared to 0.6 percent in 1961 and quite
high
among
high
school
grade
completed.
were unemployed 10 percent in 1980.
graduates
with
Six-
in 1990 It is also
25 percent
unem-
ployed in 1990 compared to 19 percent in 1980 and 13 percent 1961. Paderanga (1990) pointed out that this phenomenon could the result
of a rational
response
to a dual
sector, which is import-substituting wages while the other is unprotected may
choose
to stay away
tunity
emerges
more
credentials
the
protected
from the labor
in the protected to increase sector
once
tion to this phenomenon industrial sector.
sector.
following
that
issues:
democratizing
state
Meanwhile,
an opportunity
where
a job oppor-
they
of their
one
pays high Graduates try to get
absorption
appears.
Thus, sector
into
the
solu-
but in the
SOLUTIONS INTERVENTIONS
intervention
(a) upgrading access
(d) improving
the
addressing
the mismatch
between
is required
of the
to education;
education;
skills and the demand
until
is not in the educational
AND STATE clear
market
market
the probability
PROPOSED
IT is quite
labor
and highly protected, and pays low wages.
in be
of education;
(c) rationalization
internal
efficiency
supply
by agriculture
quality
to address
and industry
(b)
of tertiary
of schools;
of education
the
and
(e)
and training
for educated
and
trained manpower. This study envisions a strategy that will primarily restructure the education budget and institute certain measures that will increase sector.
the
efficiency
of resource
allocation
within
the
TABLE4.18 PROPORTION OF UNEMPLOYED BY HIGHESTGRADECOMPLETED,SELECTEDYEARS (In percent)
Elementary Year
Total NoGrade Unemployed
1-5
HighSchool
graduate
1-3
graduate
College nongraduate graduate
Not Reported
_ G_
1961 965 1976
883 663 780
5.80 6.30 2.31
31,20 26,80 15,13
21.30 28.30 21.79
1980
865
3.58
15,27
1985 1990
1451 1996
1.42 2.80
08,64 12,40
Source:BCSLaborForceSurveySedes
.
18.10 13,30 17.05
12,70 12,70 16,79
10,40 12,20 14,23
00.50 00.50 11.67
0.00 0.00 1.03
16.15
16.77
19,38
17.27
t0.21
0.67
13.75 14.80
13.87 14.20
23.71 24.80
20.64 14,70
t 7.89 15.90
0.08 0.50
2
3
Education
Sector
Quality
169
of EduŠation
Primary tional
and
secondary
teachers
and
general
education
deterioration
educational Commission public
of quality
more
resources
infrastructure.
There
as well as a growing
for addiis also
a
disparity
in
performance across regions, in 1991, the Congressional on Education (EDCOM) report called for the use of all
resources
requiring
need
educational
in education
tertiary
education
aries. The quality quality of inputs
to support to be borne
of basic education which include the
basic chiefly
education
and
by private
for
benefici-
is determined largely, by the teaching force, instructional
materials and other educational paraphernalia. Thus, the professionalization of the teaching staff and the provision of the requisite support formance
services results.
regions need
to teaching are aimed at producing positive perThe disparity in educational performance across
can be addressed to narrow
by allocating
differential
resources
outcomes
across
on the basis regions.
The
of the present
approach in allocating budgets across regions uses participation rates and unit costs as criteria which has allocation biases in favor of more
developed
regions.
The dropout completion rates status
of pupils
Improving sources reduce
the
to the dropout
Incomplete
problem and the consequent are largely correlated with and the economic
quality
educational rates and
schools
to the high incidence (199 I) proposed for every Clearly, which ration More
needs improve
of dropout and
interventions
the government
cannot
require ignore
where
they live. more
re-
of the poorer regions will help survival and completion rates. in the countryside
among
a complete
of the areas
as well as devoting
and lack of schools
the establishment
barangay these
base
of education
low survival and the socioeconomic
contribute
the poor students.
of a complete high
elementary
school
additional without
EDCOM
for every
budgetary causing
school town. outlays
more deterio-
in the quality of basic (primary and secondary) education. resources will be required to build school houses in those
barangays without elementary schools, to complete more and better-trained teachers and provide teaching lia and other facilities. The recently proposed an additional year in either the elementary
schools, hire parapherna-
legislation on requiring or secondary level must
1 70
Financing
Social Programs
in the Philippines
be studied to find out if this will just constitute an unnecessary burden on state resources given the, current quality of basic and secondary
education.
The funds
that would
be spent
an additional year of schooling may ibe better the quality of primary and secondaryieducation. no
empirical
quality
evidence
that
of education.
child
to learning
Table schools
4.19
year
will improve
other
hand,
an early
which
will prepare
may help
reduc6
the dropout
the
exposure them
rate
of the for the
in primary
|
the
barangays
are based
cost of building
add{tional
at home
illustrates
to 11,630
estimates
On the
concepts
school environment schools.
an
in maintaining
spent in upgrading There seems to be
without
on 1992
11,630
cost
implications elementary
unit costs
new school
of teachers schools.
published
houses
and
The rough
by UNICEF.
amounts
The
to P5.3 billion;
cost of desks is about P439 million while the annual salaries of two teachers for each new school will be _slightly over P 1 billion. Textbooks
per
schoolbuildings
pupil
per and
year
desks
amount alone
to P275.
is about
The
P5.8 billion
cost
of the
which,
with a
10 percent inflation adjustment, willi amount to about P6.4 billion in 1994. While itmay not be feasible for government to immediately allocate an additional P6.4 billion to basic education in the national budget estimates, intrasectoral resources for basic education.
budgetary, This means
adjustments that working
may free within the
TABLE4.119 COSTIMPLICATIONSOFADDITIONAL. TEACHERSANDSCHOOLS
Costof building11,630schools Costofdesks Teachers'salaries/ per year Costoftextbooks/ per year/ pupil
P5,349,800,000.00 439,614,000.00 1,005,995,000.00 275.00
Assumptions: UNICEFestimatesP460,000to buildone two-classroomschool 37,800to buydesksfor eachnewscho_ 86,500peryearfor salariesof twoteaci"ersin one newschool 275 per yearfor one pupil'stextbooks
Education
Sector
1 71
budgetary
ceiling
imposed
on DECS
sector can tea!locate resources pay-off activities such as basic Access
to Basic
by the
intended education.
for the 3a
The wide disparity
of Higher
Education
regions
in educational
performance
rates
region
incidence
Clearly,
regions
in most need.
of the (shown
earlier and
especially
sector
which
can
among
a bigger
equitable
sharing
should
be generally important
to complete the
share of public
approach
take
measured
poorer not only
by the
explanation the
of school-
poorer
This will result The private
situation
and
dropout
number
then
budget.
poverty
incidence,
of the
the required
resources.
over the poverty
the
into account
expected to put up more private schools in poor private returns are not assured. Given the present concern
may
to resource
to favor
is given to poverty
disadvantaged) of the
regions
but also the level of development
If more weight
to be an
across
be devised
unit costs
the failure
will have
deep
to higher
resources on the basis are biased in favor of
an alternative
should
The criteria
and
in the region.
problem ing,
regions.
among
participation
education
â&#x20AC;˘
be traced to the current system of allocating of participation rates and unit costs which allocation
the
Education
and Rationalization
more developed
DBM,
regions
into more
sector
cannot
be
areas where the administration's
its desire
to alleviate
poverty in the countryside, a measure providing more educational resources to the poorer regions will find a b_0ad-based support from the executive public
and
legislative
branches
of government
and
from the
in general.
In this respect, a review of SUCs is in order. In 1993, P5.7 billion were allocated to SUCs compared to P5.2 billion in 1992. To rationalize the creation of new curricula and educational institutions, DECS issued Order moratorium on the creation
No. 69, S. of additional
1987 which imposed a barangay high schools,
33. An immediate Source is the P570 million savings identified earlier that could come from increasing the share of tuition and other fees in the SUC budget. This will require a thorough review of the pricing policy of tertiary education to eliminate undue subsidies an d make pricing policy more responsive to market forces. Primary and secondary education are provided free to the public.
172 and
Financing Order
state
No. 51, S. 1987
colleges
programs
and
possible
the
the
ciency
considerations.
school
departments
of new tertiary and
conversion
Many
(Table
SUCs
maintain
in 1992,
have
4.20);
They
also
into
The
and
effi-
elementary 25 percent
made
SUCs.
for equity
compete
state
lobbying
of several both
of new
curricular
colleges
Congressional
are imporiant
which,
in the Philippines
on hold the creation
of schools and
rationalization
enrolment
put
However,
establishment
and
Programs
the opening
conversion
universities.
review
total
which
and universities,
and
colleges
Sodal
and high of the
with
the
SUCs' private
sector in curricular offerings but at great cost to society since they are not as cost effective. The argument for the creation of SUCs has always
been
that they create
income
groups
schools
that operate
other
fees
access
who are unable
required
to higher
education
to get higher
education
on a "quality-tuiti0n" by
private
structure.
schools
are
providers of quality tertiary education. The creation of SUCs and even th_ expansion the
may
problem
deserving
not necessarily of lack
students.
be the immediate
of access Well-targeted
to tertiary and
from private The tuition
beyond
capacity of the low-income groups. However, the are not as cost effective as private schools. Neither
offerings
for the lower
the
and
income
SUCs in general are they efficient of their curricular
solution
education well-defined
to address of poor
but
scholarship
TABLE4.20 TOTALENROLMENTIN STATEUNIVERSITIES ANDCOLLEGES, BY LEVELOF EDUCATION Levelof Education
1991
%
1992
%
19,002
4,76
21,545
4.88
HigherEducation SecondaryEducation ElementaryEducation Nondegree/ Vocational
236,709 101,3114 13,1111 28,746
59.34 25.40 3.29 7.21
271,875 100,329 14,208 33,936
6t.52 22,70 3.22 7.66
TOTAL
398,882.
AdvancedEducation
i
Source:Department of Budgetand Management,,
441,893
Education
Sector
schemes
1 73
for poor
efficient
and
but
cost-effective
must,
therefore,
table
and
allocated
various use
the Educational
The
P6
billion
schemes
Contracting
a more
of budgetary
for poor
but
deserving
(a) a program
scheme
and
Relevance
(d) privatization
equi-
the use of this
currently
similar
SUCs to curricular
of SUCs.
of Education
The mismatch between supply of and demand for education skills by agriculture and industry (as manifested by the number
of educated
assessment from
Philippines
of their society.
s. 1993
requiring,
offerings
on a regional
basis.
on
avoidable the
natural
duplication
following sciences
education. courses
The Order
ings outside educational
such
industry
science
and
education.
teaching
the industrial
ship with business
fisheries to provide
areas..,
of curricular
of the
with
community;
gives emphasis forestry;
the
and teacher
in course nearby
by involving
(b) support
(c) active
of
technical-vocational
The involvement offerings;
in
advantage unnecessary
and
expansion
especially
staff;
and industry;
specialization
and engineering,
or even
of the
and universities
The Order
issue will also be addressed
in higher
as (a) design
sionalization
"competition
needs
the rationalization
colleges
encourages
agriculture,
and private
the DECS issued
costs and to take idea is _to minimize
technology
of the priority institutions."
The mismatch and
courses:
avoid
others,
state
of programs."
including
to the
For its part,
and large
calls for an
in both public
among
The SUCs are encouraged and
underemployed) relevance
of chartered
each SUC "to avoid unnecessary existing faculty strengths." The and
and
offerings
viewpoint
No.77,
the
curricular
as a modernizing
of the program at least
unemployed
of various
schools Order
to
implemented
in the secondary level; (b) integrating uneconomic-sized achieve economies of scale; (c) reviewing the SUCs' offerings;
a more
government
to have
Aside from considering
may be considered:
Service
provide
to SUCs.
alternatives
scholarship
the following
may
of almost
to SUCs.
in creating
students,
students
alternative
consider
cost-effective
resources amount
deserving
(d) a system
private business
can be in areas to the profes-
interaction
and (e) developing
offer-
between
of apprenticeskills and trade
1 74
Financing
standards,
and other
areas
responsive
to actual
and
Socia_l Programs
of practical
in the Philippines
collaboration.
expected
demand
By being more
by future
users
and
employers, tertiary schools would be able to reduce oversubscription in certain courses and stimulate enrolment in undersubscribed programs. Internal It was
Efficiency pointed
effective quality
as
out
fits.
that
schools.
and their inputs
expenditure The
earlier
private
of inputs
for educational major
of Schools
Internal:
schools Private
and infrastructure consisted
adjustment
were
efficiency
availability.
recently
salary
public
as cost
is related
to the
schools
than
public
of teachers'
of teachers
not
had
spend
more
schools
salaries been
whose
and bene-
ignored
by the
government for a long time that when it came, it consumed the bulk of expenditure allocation for education. The DECS must review current
regulations
and
practices
certification, salary and career the most cost effective manner the
quality
greatest regions
of the
teaching
impact would not sufficiently
to upgrade
on _he recruitment,
path o4 teachers in order to find out of selecting teachers, maintaining
force
and
deploying
be created, that served by pri_ate
the quality
of basic
textbooks,
desks
program
like the
reviewed reason
and increase
for this
scheme
is the
due to budgetary with DECS paying
to satisfy
the
objective
while
otherwise
have
at the
structing considered
more school in secondary
been
same
time,
a
now
be
The guiding educational
are enrolled
in private
fees. This approach
lJoor students Saving
for hiring
to the
through
must
of public
Pupils
for the tuition
utilized
Scheme
inadequacy
of providing
education
sector
and ,equity objectives.
limitations.
the
the internal
especially
to the private
Contracting
to efficiency
where
inputs should be provided. to such basic inputs as
paraphernalia,
services
Educational
with respect
resources schools
and other teaching regions. educational
them
is, in the disadvantaged sector schools. Likewise,
education
efficiency of public schools, more qual!ty The government must focus attention disadvantaged Contracting
assignment,
resources
more
seems
access
teachers,
houses. Ai similar approach and tertiary ]education. i
to basic
that
would
and may
conbe
Education
Sector
1 75
The government for greatest they
must
social
are located;
(a) review the curricular
impact
and
(b) raise
relevance,
tuition
fees but
cost-cutting position
between
in providing
needs
review
tertiary
and
and
public
schools
clarification.
education
The
for many
years
private but
the
SUCs has eroded this dominant position. to higher education to the disadvantaged, objective ings,
in itself,
has
given
oversubscription
unnecessary in general, sector
rise
a well-targeted
tertiary
education
sector
has
recent
proliferation
The desire though
to duplication
dominated of
to give access a meritorious
of curricular in certain
offercourses,
costly overhead expenses of SUCs, and budgetary situation in the education
for the government.
The government
must
also examine
the extent
of its involvement
in the production of education. Given the comparative private schools in using resources, the government alternative
ways
without
being
by which
directly
1993). Providing programs
it "can extend
involved
assistance
of private
education schemes
colleges
Other education, facilities;
use
the freed
the
the recurring from
and mobile with
of DECS
and teacher
(Tullao
development
sharing
the cost
of
efficient scholarship that will increase the
creating the need for more in tertiary education, the
resources
procurement competing
nonteaching
improved
process"
for basic
education.
will enhance the internal efficiency of basic education, consist of the following:
distribution
(b) decentralize
them
schools
could
measures that most especially
(a) review
grade
universities,
without presence
in education
and faculty
of the disadvantaged through are just some of the interventions
government
review
in the production and
advantage of should review
its support
to the research
.efficiency of tertiary education SUCs. With a more limited
free
where
and efficiency-enon the relationship
and undersubscription
expenses and an overextended
of SUCs
in areas
maintain
scholarship program; and (c) impose hancing measures. The government's private
offerings
especially
personnel
and
of textbooks demands
responsibilities; classes;
34 (t) provide
achievement
rates;
educational
and supplies;
(c)
for teachers'
time to
(e) introduce
multi-
budget
(g) use
incentives
to
parent-teacher
34. This is a short-term solution to the lack of classrooms and teachers. While this approach will have a wider coverage of the school-age population, it may result in the deterioration of the quality of primary education.
176
Financing
associations
effectively
parent-teacher in nature,
Social' Programs
to contain
relations.
While
the
these
they may help improve
the sector. Thus, better results.
the limited
dropout
rate
measures
the use
budget,
in the Philippines and
improve
are nonbudgetary
of resources
-
allocated
if Used efficiently,
to
will provide
SUMMARY
STATE
intervention
upgrading
the
education; efficiency supply ture
is required
quality
(c) rationalizing of schools; and
of education
and
to address
of education;
for educated
skills and and
the restructuring
education, the
and
efficiency
enhance
the adoption
the access
adjustments
example,
an immediate
this chapter tuition and The quality and
of inputs
which
source
measures within
the provision
to
include The
that will increase the
sector
and
will
Intrasectoral
for basic
education.
For
million
of savings
that
P570
is determined
the teachers,
the share largely
instructional
professionalization
of the requisite
by agricul-
in favor of basic
to education.
is the
education
facilities.
more resources. more resources tertiary
budget
will free resources
of basic
educational
(a)
access
manpower.
identified which can come from increasing other fees in the budgets of!the SUCs.
quality
staff and
of certain allocation
of the disadvantaged
budgetary
issues:
efficiency and equity issues sector. Recommendations
of the education
of resource
the demand
trained
Resources will be needed to address that have been identified in the education include
following
tertiary education; (d) improving internal (e) addressing the mismatch between the
and training
industry
the
(b) democratizing
Support
by the materials
of the services
of
teaching
will require
Based on both efficiency and equity considerations, should be devoted to basic education relative
to
education.
At present the government uses participation as criteria in allocating educational resources
costs
This approach is a need
is biased
to allocate
reverse
the
growing
regions
and
income
in favor of the more developed budgets disparity
groups.
in favor
of the
of educational
rates and unit among regions. regions.
depressed performance
There
regions across
to
Education
Sector
A review nor
177
of the SUCs is in order.
efficient
providers
of quality
They are neither
tertiary
and well-defined scholarship schemes students may be a more efficient and SUCs. The privatization the government. To address education offerings
and must
the
mismatch
skills,
both
society.
in the public
supply
and
users
Various schools. such
and
private
business
of these
as the Educational
can improve
rates;
supplies;
Contracting
(e) incentives
improve
curricular to the needs
industry
parent-teacher
efficiency
(a) the use
Scheme;
in the
with improved
associations relations,
to contain among
of public
of a program
(b) cost-cutting
of DECS personnel of the procurement
to schools
(f) use of parent-teacher
rate and
for
offerings will make the and expected demand
the internal
are the following:
ures; (c) review of the distribution across regions; (d) decentralization and
demand
schools' and
by
employers.
measures
Some
of and
their relevance
design and implementation of the curricular education sector more responsive to actual by future
but deserving alternative to
be given consideration
determining Involving
Well-targeted
for the poor cost-effective
of SUCs should
be reviewed,
of a modernizing
education.
cost-effective
meas-
and facilities of textbooks achievement the dropout
others.
5 Performance, Challenges
THIS chapter starting faced
consists
in 1980. by
the
Expenditures and in the Water and Sanitation Sector
of four parts.
Part
II addresses
Metropolitan
Part I gives a situation the
issues
Waterworks
and
and
analysis
opportunities
Sewerage
System
(MWSS), the Local Waterworks Utilities Administration (LWUA) and water districts in providing water supply services. Part III discusses the
specific
problems
and
challenges
confronting
household water and sanitation services. common issues and offers recommendations. Water
and
sanitation
services
can
the provision
Finally
Part
be significantly
through a more liberal policy on foreign investments' in natural resource development and the privatization bution
networks
utilities ought water losses. involved nance
and
waterworks
utilities.
participative water
in the design,
systems.
choices merit higher local organizations
Community collective and users.
construction
expanded
and
private
and reduce to be more and
organizing attention
of up
participation of the distri-
Public
to improve their financial management At the local level, communities need
of local
technology government,
of public
IV takes
mainte-
and and
wider
action
by
/
180
Financing
Social Programs
SITUATION
From 1980 to 1990, there coverage of water supply (latrines)
ANALYSIS
have been continuous improvements in from 59 to 80 percent and sanitation
from 50 to 70 percent
of the entire
population
However, water coverage noticeablyldeclined due to reduced investments for communal water of the debt
crisis;
then
it markedly
the portion of population with percent in Manila (9.81 million), (18.34 trend
million), improved
in annual
public
The growth
and
84 percent
during
improved
(Table 5.1).
in 1986 and 1987 services as a result
in 1988-90.
In 1992,
access to potable water was 62 58 percent in other urban areas (36.11
the decade
investments in water
in the Philippines
million)
even without
in rural
areas.
The
a marked
increase
outstripped
that
(Table 5.2).
and Sanitation
coverage
population in the period 1980-1990. Still there was increase in the number of cases related to improper
of
a tremendous use of water,
poor sanitation and improper hygiene_ Diarrheal morbidity rates escalated between 1980 and 1989 from 413 to 1,234 per 100,000 population which is a 300 percent increase (Table 5.3). Diarrhea ranked third among the leading causes of death of infants and children
(1-4 age) through
the
1980s.
TABLE5.1 TRENDIN WATERANDSANITATIONCOVERAGE,1980-1990 Year
%Water
%Toilet
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990
59 65 69 72 76 77 71 71 75 79 80
50 57 59 60 66 67 69 69 70 72 70
Souse: Annual Repots (1980-1990),EnvironmentalHe_ Health.
Service,Departmentof
Water and Sanitation Sector
181 TABLE5,2
WATERSECTORINVESTMENTS a,1981-1989 (InPmillion) Year
MWSS
DPWH
LWUA
RWDC b DILG DOH
TOTAL
1981
627
280
188
2.0
4.6
1,102
1982
812
415
153
1.5
5.3
1,418
1983
960
354
208
3.2
17.5
1,543
1984
1,276
284
110
1.7
28.4
1,701
1985
1,345
186
169
3.4
33.4
1,737
1986
793
187
140
6.1
47.2
1,173
1987
774
167
184
2.5
58.6
"1,_,87
1988
602
547
251
6.0 1,034(52) c
1989
878
818
412
11.0 1,995(74)
1990
2,180(48)
1991
2,810(77)
1992
-
2,434(54)
1993 _
3,994
988
1,201
55
-
6,238
1994
4,376
815
1,987
98
-
7,276
1995
3,468
836
2,164
237
-
5,706
1996
2,678
1,042
2,545
343
-
6,608
1997
3,242
764
2,370
275
-
6,651
1998
3,271
321
2,361
191
-
6,844
aExcludes investments oflocalgovernment unitsandequityofprivately managedwater systems. bRWDC wasabolished in 1987. CFigures inparenthesis aredisbursement rates,i.e.,actualpercentage ofplanned investments. dPlanned nationalinvestments for 1993to1998whichaccountforabout5-6percentof totalnationalgovernment infrastructure investments. Some70percentisexpected tocomefromforeignsource. Source: Medium-Term Philippine Development Plan,1993-1998, ADBandAgencies Covered; and TasmanEconomic ResearchPty.Ltd.
82
Financing
Social: Programs
in the Philippines
Table5,3 RATEANDNUMBEROF DIARRHOEALMORBIDITY.FOR ALLAGES, 1980-1989 (Rateper 100,000Population) Year
Rate
Number
1980 1981 •1982•
413, 483 436
.100,357. 239,117 221,191•
1983 • 1984 1985 1986 1987 1988 1989
529 1036 956 962 1,032 1,063 •1,234
275,068 551,590 522,762 538,849 ••591,858 624,355 741,733
Morbidity
due
to other
water
_ch as typhoid
fever, infectious
Lcreased
1980
Low
from health
tilization ygiene
to 1989
impact
of water practices.
can
and
and
largely
attributed
On the sanitation handling defecating
other
hand,
unhygienic
of communities to diseases,
and
on health
Of food andwater; with '_nature,"
nate-disposal
of stool
inadequate into
canals,
installed,
practices the
and
are due
relationship
promotion.
traditional
and
poor
Operational
or other
and
lead to careless
of urinating
toilet training; rivers,
to low con-
of water
These habits
the quality
and
and indiscriminearby
water
:
systems. Thus,
are poor
of WATSAN facilities. These deficienare installed near Sources of
)ntamination, essential parts are poorly ' materials used aresubstandard. sciousness
also
to inadequate
(WATSAN} facilities
of underutilization
mditions and poor location Les occur when facilities
diseases
and schistosomiasis
(Table 5.4). be
sanitation
Causes
,sanitation-related
hepatitis,
the
national
water
and
sanitation i
program's
impact of reducing the incidence of water-borne diseases yet been felt. Lessons learned from the Water and Sanitation
intended has not Decade
Water and Sanitation
Sector
183
TABLE5.4 RATEANDNUMBER OFMORBIDITY ANDOTHER WATER ANDSANITATIONRELATED DISEASES, 1980-1989 (Rateper100,000Population) TyphoidFever
Schistosomiasis
Year
Rata
No.
Rate
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989.
6.6 8.7 10.4 10.4 18.9" 28.7 24.6 26.7 27.0 29.6
3,222 4,300 5,282 5,420 10,073 15,706. 13,764. 15,290 15,830 17,794
5.6 6.1 7.5 6.6 8.2 i 7.9 19.8 24.2 20.9 42.8
No. 2,686 3,009 3,801. 3,454 4,388 9,764 11,074. . 13,892 12,273 25,699
Infectious Hepatitis Rate
No.
19.8 20.1 17.0 â&#x20AC;˘ 18.4 28.8 29.3 25.9 28.0 27.5 . 24.6
9,578 9,943 8,615 9,549 15,320 16,022 14,523 16,084 16,125 14,761
Source: Philippine HealthStatistics, 1989. (i 98 i-1990) indicate that increasing access to the facilities alone is not enough. Proper use of facilities, effective hygiene education, and viable community participation arestrategies that need to be strengthened to encourage positive behavioral changes for stronger health impact. .. Institutional
Arrangements
Many institutional players are involved in this sector. The National Water Resources Council formulates framework plans and policies. The Department of Public Works and Highway s (DPWH) performs engineering and Construction functions such as drilling of wells and development of spring sources to service a maximum of 50 households at ,30-80 liters per capita per day (Icpd). Spacing of point sources is about 250 meters subject to population density. The LWUA is a specialized government lending institution for the promotion,â&#x20AC;˘ financing, and development of self-supporting local water
184
Financing
utilities
owned
Waterworks vide services average
and
by Water
of 200-1,000
for water
households.
(WDs) and
WDs are considered
supply
supply
water
and
sewerage
disposal
services
supply
based
and
sanitation
to local governments
quality
of water (RA
(DILG) is assistance
of RWSAs.
LWUA, DPWH and DILG reported
the
accomplishments: in subscribers to 746,050; to 390 WDs and construction
WDs since * DPWH - installation
1973; : of 75,469
level 2 systems â&#x20AC;˘ DILG - assistance
since
National
policies
Republic
Act No. 6716 collectors,
existing water ment requires
level 1 systems
provides
and
2032
of 893 level 1 systems,
,and 111 level 3 systems.
for the construction
development
of 203
1988;
in the installation
404 level 2 systems
of springs,
and
of water
wells,
rehabilitation
of
wells in all barangays in the Philippines. This enactthe formation of Barangay Waterworks and
Sanitation Associations water facilities. BWSAs with elected
treasurer,
and undertakes
Code of the Philippines
in the formatior_
* MWSS - increase â&#x20AC;˘ LWUA - assistance
nities
of water
of Interior and Local Government and institution building through
As of end of 1992, MWSS,
rainwater
four
one city and five in Rizal. These
projects
and certification
on the SanitatiOn
6716). The Department responsible for capacity
following
to the
service area of 9.81 million as of 1992. The (DOH) implements the sanitation component
disinfection
systems
government
therefore, managed and operated independent Of The MWSS, a government corporation, is respon-
represent a population Department of Health the inspection,
Rural
(RWSAs). Many WDs prodistribution system to an
cities and 13 municipalities of Metro Manila, municipalities in Cavite, and 14 m_nicipalities
of integrated
in the Philippines
Districts
and Sanitation Associations in the form of simple water
corporations and local governments. sible
operated
Social Programs
secretary
(BWSAs) for the purpose of maintaining are organizations of water users in commu-
officers
composed
0f a president,
and
an appointed
caretaker.
vice-president,
Water
and Sanitation
Sector
185
Under the 1991 Local Government tation of basic services and facilities,
Code (LGC), the which include
sanitation,
national
have
been
devolved
from
government units (LGUs) such as: (a) Province: Construction and ture
facilities
funded
: Provision
to local
of infrastruc-
to serve community
including, but not limited to, intermunicipal age, sewerage, flood control and irrigation (b) Municipality
agencies
maintenance
by the province
implemenwater and
needs
waterworks, systems; and
of solid waste
disposal
drainor envi-
ronmental management systems andservices or facilities related to general hygiene and sanitation; construction and maintenance pality
to serve
limited tors,
of infrastructure the
needs
to artesian
and
water
wells, supply
facilities of the
spring
residents
systems,
and
The National tation
â&#x20AC;˘sanitation.
and
sewerage Supply,
the government's
new projects
Sewerage program
in the pipeline
Government policies in these plans * Provision of three levels
include: of service
* Equitable . Promotion
faucet
system;
distribution
and
Level
delivery
by
are the
(PPAC) goals of and sanitation.
to urban
source
and
and
system,
and
rural
Level
2 -
3 - waterworks
of services;
of self-reliance;
* Organization and
1 - point
Sani-
will be assisted
Plan of Action to safe water
Level
and
on water
others. 1993-1998
means of achieving the Philippine increasing the population's access
communal system.
not
collec-
systems.
the WB, ADB, AIDAB, OECF, and JICA, among The National Master Plan and the MTPDP,
communities:
but
rainwater
units to exercise the power of artesian wells, water
Plan of Water
outlines
Several
munici-
systems.
drainage
Master
(1988-2000)
by the
including,
development,
The LGC empowers local government of eminent domain in the construction supply
funded
Sanitation
of Water
Districts
Associations
or Barangay
Waterworks
(BWSAs);
- Cost recovery and cost sharing development and maintenance;
in project
planning,
186.
,
Financing
• Health
education
hygiene
and
of water
supply
by 1995
of 71 percent
1990 census planned:
and
33,150
0 •Rehabilitate
personal
as an integral at all times.
targets
of safe water
and
bY 2000,
81 percent
following
level 1 water 5,700
improved
of water
93 percent the
on
part
and
1993-1998
by 1995
in the Philippines
sanitation
activities;
as baseline),
° Install
emphasis
of the quality
the MTPDP,
of 83 percent coverage
with
environmental
• Safeguarding To achieve
Social Programs
level
and
a sanitation
by 2000
intermediate
systems 1 water
coverage (using
the
activities
from
1993
systems
•are
to 1995;
from
1993
to
t995; • Install
850,000
family
latrines
• Install
67 level 3 water
from
sYstems
1993
from
• Develop 26 Provincial water supply plans from 1994 tO 1995; and • Train
23
provincial
implementation Emphasis
shall
nonfunctioning
office_rs
from
be given
level 1 water
t994
1991 and
to 1995;
sanitation
sector
sector
planning
and
to 1995.
to the systems
for
to 1995;
reduction from
of the
15 percent
number
in 1990
of to 10
percen t in 1995 and5 percent in 2000. The number of underutilized sanitary toilets shall be reduced from 9 percent in 1990 to 6 percent in 1995 and
3 Percent
in 2000.
LEVELS As of 1992, million.
Other
the
service
urban
2 AND 3 WATER SERVICES area
areas,
of MWSS
which
had
reqUire
a popuiation Of 18.34 million. The population 36.11 million. Water districts, which are provide
•water
supply
to 5.7
millio_
by LGUs
or through
privat_
utilities.
i
of 9.81 had
in the rural areas was supervised by LWUA,
households
percent of all households throughout the Metro Manila. The rest are provided by water ma_laged
a population
level 2 and 3 systems
or roughly
63
Philippines outside of systems developed and
Water and
Sanitation
In urban
areas
tap water sources. who own or share areas,
â&#x20AC;˘Sector serviced
by WDs,
only 57
had
own or share
in WD-served
Level 3 (own tap) services areas.
In rural
covered 9 percent, and 8 percent of the and non-WD service areas, respectively. scope
_ercent
In rural areas served by WDs, the share of those tap water is only 22 percent. In non-WD urban
only 22 percent
34 percent
187
for providing
more
level 2 and
areas,
in contrast
Level
to
3 services
population in WD-served There is therefore a big
3 services
in both
areas.
MWSS A population 709,742
of 9.34 million was served by MWSS as of 1991 through
water
service
liters per day of water
connections. generated
Only
42 percent
revenues
or 1.1 million
out of the 2.4 million
processed by MWSS. The 58 percent of water currently can be traced to leakage from its old pipe network and fighting cent)
(32 percent),
and
percent
â&#x20AC;˘illegal connection
measurement
errors
ones
service
being lost use for fire
withdrawals
(14 per-
Losses
to be 65
used
in 1986.
The Manila Water System and (MWSRP) I aimed to replace 108,000 new
and
{12 percent),
liters
and
area
repair
where
22,500
Rehabilitation water meters,
in 56 selected
nonrevenue
water
Programme install 42,000
zones
ranges
of the
from 30 percent
MWSS to 68
percent due to at least 700,000 illegal connections. About 80 million liters of nonrevenue water was reportedly recovered. Indications show
that
many
old water
installing new meters Nevertheless, recovery as MWSRP
I and
lines
were
or repairing of nonrevenue
II and improved
not
cut
in the
old ones under water through
enforcement
process
of
the program. such projects
of law against
illegal
tapping can substantiaily improve MWSS revenues. Based on its 1992 sale of about P3.5 billion, a 5 percentage reduction in MWSS water
loss can result
â&#x20AC;˘ Water
loss
due
in a maximum to pilferage
P388 has
million
been
gain in revenue.
addressed
by
MWSS
through better service, increased enforcement and grant of amnesty to owners of unauthorized connections who voluntarily register without P22.8
penalties. million.
registered
which
In 199 I, collection
As of May reflects
1993,
from illegal
15,000
illegal
a very low compliance
connection connections
figure
was were
in relationto
188
Financing
Social Programs
the estimated number of illegal connections. Act is pending in Congress to strengthen
in the Philippines
An Anti-Water Pilferage MWSS's ability to curb
illegal water withdrawal. Under the proposed Act, the existence an unauthorized tap or a tampered meter is sufficient evidence prosecute
the user
or owner.
Iri 1991, MWSS registered a rate Despite this favorable performance, problems
(Table
of to
5.5}. In the
of return of 10.26 percent. MWSS still faces financial its internal
cash
generation financed 70 percent of its capital expenditures. dropped to an average of 55 percent in 1990-1992 due
period
1986-1989,
This to the
implementation of more projects and cost overruns. As a result, MWSS dependence on foreign financing also increased in 19901992
and
interest a result
accounted
for 24 percent
of the
capital
program.
Total
payments accounted for about one-third of total receipts as of increased dependence on foreign and domestic credit.
MWSS is thus
confronted
by a large
backlog
in demand
which
may
not be met due to funding problems. Good financial management, reduced losses, equity infusion and increased private sector investments will be high priorities in the medium term to avoid extreme reliance
on foreign
loans.
LWUA and WDs
The Provincial government and
Water
technical
works
Utilities
lending
assistance
and sanitation
institutional,
and
to water
(WDs) and
and
There
are
578
initiative ment
after
corporations
common must
and
WDs
in the
A WD is usually
charter.
a public
hearing.
RWSAs
normally
be self-sufficient
entities
which
They are
by government
duly
mostly
manage
a local government considered
govern-
rules with PD 198 as their
operate
whose!
with
engineering and techniby LWUA to WDs as part
through
covered
water-
to extend
in the development
municipalities
Philippines formed
financial
rural
It is required
assistance
in cities
organized WDs and RWSAs. Procurement, cal advisory services are normally supplied of its financing package. Level 3 systems.
it to provide
(RWSAs).
and technical
3 systems
LWUA as a specialized
tasked
districts
associations
financial
of Level 2 and
Act established
institution,
Boards
level
2 systems.
of Directors
WDs are
ap-
¢b
TABLE5.5 METROPOLITAN WATERANDSEWERAGESYSTEM(MWSS)AND LOCALWATERU
rtESADMINISTRATION (LWUA):
_.
SELECTEDFINANCIALRATIOS,1985-1992 1985
I986
1987
1988
1990
199I
1992
MWSS LWUA MWSS LWUA MWSS LWUA MWSS LWUA MW_
VUA MWSS LWUA MWSS LWUA MWSS LWUA
1. InternalCashGenerationloCapilalExpenditure
31
20
.74
39
.71
.!.2
.71
-.11.
.84
9
.50
.015
.53
28
.6t
.43
2. Net ExternarFinancingto CapilatExpenditures
33
25
.12
50
-.46
.57
.10
21
-.06
2
.19
.tl
.J8
.40
.35
53
3. Net DomesticFinandngtoCapilalExpenditures 35
25
14
0.11
.75
.31
20
89
23
0
32
90
28
.33
.035
.40
4. InterestPaymentsto CurrentExpendilures
.40
60
.47
0.43
.46
.45
55
.36
.31
.,1
43
.52
.48
.32
.53
36
5. InlereslPaymentslo TotalReceipts
.26
.47
.33
0.30
35
.41
.43
.41
22
27
33
53
33
.19
.37
18
_"_.
¢3 _,. "'t
Sourcesof basicdata: MetropolilanWaterworks andSewerageSystemand LocalWaterworksAdminislration System I,,,,,.
oo
190
.
pointed diction.
by either
Financing the Mayor
Social Programs
or Governor,
in the Philippines
depending
on their juris-
The performance of WDs vary. The viability of a typical WD is a function of management skills, type 0f water source _,water system design
and •losses•, marketing,
exempted
from payment
real property 1992,
taxes
by RA 7109
LWUA's average
WDs have
cost recovery,
of income
difficulty
servicing
price
regime
adjustments
which
requires
of 60 •percent
pose financial problems The situation •faced perform factors.
August
efficiency their
rates
debts
was
finance.
a public
taxes,
1996. In Several
hearing,•
although
a cap and
to WDs. by LWUA is, complicated.
as a specialized lending In the period 1988-1992,
and
55 percent.
90 percent.
charges,•
They are duties
1991 until
to LWUA
exceeding
of current
and
franchise
effective
collection
400 WDs had high collection
and
some
A regulated on
annual
LWUA approval Its
capacity
to
•agency is constrained by many it relied substantially on national
government equity which averaged P245 million per year and net external financing to support its capital •requirements (Table 4). Its internal ditures
cash generation covers 0nly 16 percent from 1988-1992. This liquidity • and
resulted,
among
other
things,
from a mismatch
of its capital expenfinancing problems between
the matur-
ity of loans to WDs with paymentPeriod of 30 years and the loans with shorter payment •period that LWUA •acquired from its own •creditors. There was also an underpricing•of•its loans to WDs due to underrecovery collection rate
of foreign exchange risks in 1.992 was only 54 percent
and cost of equity. Its despite the ability of
some large WDs to service their outstanding obligations to it. The allocation of LWUA's loan portfolio• is unhealthy. As of 1992, 35 percent Of loans went to only six WDS while 80 percent was used by 70 WDs, Thus, the profitability of LWUA was low dur!ng the period 1989-1992, in 1992. DOH
with net pro fits acc ountiilg data
sources
indicated
for j u st 2.5 percent
national
coverage
of equity
rates
of 80
percent and 70 percent • for water and sanitation, respectively in 1990. The levels do not provide the true •picture with regard to access, reliability and quality. The e_aluation of the International I Drinking
Water
Supply
and
Sanitaliion l
Decade•
which
involved
a
Water
and Sanitation
household
survey
the following
Sector
191
and ocular
inspection
of selected
facilities
reports
findings:
° 12 percent water and
of 2,362 surveyed other ,sources due
households to absence
used spring of convenient
sources; * 19 percent
have
water
only for 6-12
• 65 percent
have
water
for free; and
• 30 percent are within
of the 483 communal water 10 meters from a latrine.
On sanitation
facilities,
• 85 percent
the same
of 2,010
hours
evaluation
surveyed
daily;
facilities
inspected
showed
that:
households
had
sanitary
toilets; • 71 percent of 334 surveyed households had sanitary toilets in controlled areas, i.e., where there are either no Levels II and III water facilities or where Level I facilities are
far
(beyond
households ® 40 percent
meters)
maintained
participation,
or serve
more
than
20
and
of 73 communal
were poorly odor. On community
250
per facility;
sanitation
and
facilities
54 percent
inspected
emitted
only 25 percent
offensive
of 5,600
house-
holds reported being consulted in the planning and construction of the local water system. Participation was highest in construction (54 percent) and planning (51 percent) and least in operation, repair and maintenance (37 percent). These findings reveal a major gap between explain holds.
coverage
and access
the persistence
GENERAL Four sector.
common These
issues have
and in quality
of environmental
ISSUES
of services diseases
which
affecting
largely house-
AND RECOMMENDATIONS
characterize to do with
the
the water
supply
and
policy
environment,
sanitation financing,
production and maintenance, and community participation. issues are interrelated and revolve around the need to improve
The the
192
Financing
overall
climate
for largerinvestments
•policy reforms
to expand
the implementation raise
1987
,.utilization of natural mum of 50 years production
Of MWSS,
participation.
Constitution.
sharing
must
resources through
clarify
to Filipino coproduction,
water
the
pricing water
sources.
Both
commercial
LGUs,
and
development
to
a. barrier
to large
sources by the private risk. The Government
National
Water
Board,
on the .large-scale
sources,
and
sector, of the
Resources
particularly
by private MWSS
and
citizens and to a maxijoint venture and
Tt_is represents
policies
of ground
sector, •to strengthen
.LWUA and
the exploration,
with the state.
(GOP), through
extraction
through
.t
limits
upstream development of water Supply aside from being a resource depletion Philippines
in the Philippines
in the water• sector
the role of the private
capacities
community The
SocialPrograms
particularly
LWUA.must
be
for legally
equipped and be more zealous in minimizing illegal Water losses. LWUA's specialized lending institution role should be redefined. It could either be relieved Of such function which the Development Bank of the Philippines institutions, could fulfill. through
an adequate
(DBP) and' other government Or it should be given more
capital
build-up
program
financial flexibility
and authority
to lend
to LGUs and privately owned water utilities. On a positive note, the Local Government Code offers vast opportunities for LGU involvement in water supply development through transfer and other schemes of participation.
buitd-0perate-and-
Financing is a common issue affecting all levels of water services. For both MWSS and LWUA, this involves improved revenue water recovery and
and' higher
54 percent
particularly WDs which
collection
respectively.
efficiency Collection
from large users, have huge arrears.
from existing must
levels
be resolutely
of 90
pursued,
including government agencies'and The other areas of reform would be
in pricing, improved.cash management and. diversification of financing sources. Pricing must be based on a.more systematic estimation. of elasticities of demand for water, and _he cost of equ.ity. Similarly, maturities of LWUA loans to WDs sholald match that of its credit sources consider
to enhance alternative
financing
and
opment
assistance
its liquidity position. Both institutions should local financing sources, such as, DBP' and bond
compare
these
as foreign
with lesslconcessional grants
an¢l equity
official
are limited,
devel-
sources.
Water In
and Sanitation
the
case
allocation increased ments.
of Level
particularly investments It must
to maximize
formed
protect
its
present
those provided through DPWH and promote by LGUs from their_internal revenue allotrate to at least 90 percent
of budgetary in the
deliberate
sources.
water
and
is only a first
sector
could
comprehensive
which
step.
supported
be
achieved
privatization
an exercise
ees. A wholly renewed power
company.
of social
privatized
water
investments,
collection.
pro-
operations
distribution.
MWSS.
are
establish
the
private
the
a step
financing
pine National
water sectors
Bank
option
and
where and
who
employ-
could
result
improved
in
billing
policy in the
production
and major
structurally
is the partial
separated
privatization
amendment
of WDs
private and
of
of
of PD 198 to
will significantly
enlarge
is critical to profitable operations. of this option would be necessary
of their
liabilities
to deserving
losses
respectively
character
to attract of their
employees
network
of WDs or the
implications
experience
is akin to the new public
management flexibility which the short term, an appraisal address
resigned
responsibility
A long-term
The privatization
and
the
This did not only boost morale
distribution
reduced
This approach
and telecommunication
trunkline
It can consider
its retired
their own collection
but offered
as
must
In the case of MWSS, a measure with the greatest potential be the spin-off of its piped distribution network. Privatization
MERALCO
from
GOP
also raise its disbursement
a more
of collection
and
1 projects,
investments
through
19;1
the utilization
Larger gram. would
Sector
existing
equity.
similar other
loan and
A takeover
to what
government
other or
In to
liabilities
government
was done for the Philipcorporations
should
be
considered. On the other hand, for transparency purposes, clearer policies and standards on subsidies, pricing and costs should be established and
if WDs are to remain
The problem sanitation
intersectoral community oriented
participation
as a largely
and
and changing
technical
approach. management the provision
or engineering
behavioral
change
puts)
be addressed
must
corporations.
of underutilized and nonfunctioning Level I water systems can best be addressed by adopting an
and interdisciplinary
process
government
(e.g., personal through
This would using
a public-health
of water
activity. hygiene
and
emphasize
Aside
and sanitation from
health,
socioeconomic
the internationalization
in-
of proper
194
Financing
Social Programs
values by individuals and demonstrated The role of BSWAs and Women must the main
conduits
for community
in the Philippines
through community action. be strengthened as they are
involvement
through
labor
and
monetary available
contribution. A wider range of technologies should be to local communities which can then allow them to make
informed
choices
ards,
costs,
in terms
location
of water
and
ability
to operate
water
ferro cement
technical
stand-
maintain
these
and
systems.
For instance,
ventilated effective
improved pit latrines which require little water proved in Sulu and Tawi-Tawi. In lfugao, organized women's
groups
facilitated
rain
and sanitation
the
installation
approaches are expected building with emphasis mation,
education
pursued
of local
water
and
sanitary.,
systems.
Both
to enhance use and maintenance. Capacity on advocacy and monitoring through infor-
and communication
with greater
tanks
and maintenance
should
be
vigor at all. levels.
SUMMARY Water
supply
percent related
and
sanitation
coverage
continuously
increased
to 80
in 1990. However, morbidity due to water and sanitation diseases increased in 1980-i990. Low health impact can be
attributed
to underutilization
unsatisfactory
hygiene practices. Water and sanitation through
of WATSAN
operational
a more
liberal
condition services policy
and
could on
facilities bad
(due
location)
be significantly
foreign
to their and
poor
expanded
investment
in natural
resource development. Larger investments in the water sector Could also be achieved through a more deliberate and comprehensive privatization program. work for MWSS could losses
and improved
privatization
of Water
A wholly privatized water distribution result in renewed investment, reduced billing
and
districts
collection.
will enhance
On the othel" hand, management
recovery are
MWSS and and
in pricing,
higher cash
LWUA, this involves collection management
efficiency. and
improved The other
diversification
the
flexibility
which, in turn, will foster profitable operation. Financing is a common issue affecting all levels of water For both
netwater
services.
revenue areas
water
of reform
of tinancing
Water sources.
and Sanitation
195
In the case of Level 1 water,
its present allocation should also promote The problem SAN systems
can
management
the government
particularly those provided increased LGU investment
of underutilized
and interdisciplinary the
Sector
best
and
of Level
by adopting
Greater
1 facilities
community
oriented
process
will amplify
an intersectoral participation
will encourage
its health
It
Level 1 WAT-
maintenance. Moreover, reorienting people's perception provision as a purely technical and engineering activity health
protect
through DPWH. from their IRAs.
nonfunctioning
be addressed
approach.
must
impact.
their
in
proper
of WATSAN to a public-
6 Political
Economy
of Budget
THIS chapter documents the government how the various players interact with
budget process, describes each other and how the
process and the players affect the magnitude tion to the social sectors.
BUDGET In principle,
the budget
into a financing
budget
accountability
cycle that the budget year's
The budget
process
preparation
phase
accountability of Fiscal
The budget
revenue)
and
budget
certain
of other years. started is being
for the national
preparation
involves
legisand
is an annual and ends
stages
with
in a given
For instance,
in January
1994
the -- the
prepared.
government
is described
the determination
in
of appro-
levels given the basic budget constraint (i.e., level of the fiscal deficit and the projected level of
the priorities
In the budget
However,
Year (FY) 1994
process
6. 1. Budget
priate expenditure given the targeted plan.
phase.
with those
plan
The budget
budget preparation, budget execution or implementation,
or review.
time that the FY 1995
Figure
and projects.
with the budget
cycle may overlap
execution same
begins
alloca-
of the development
programs
process consists of four phases: lation or authorization, budget
of government
PROCESS
is the translation
plan for specific
Allocation
enunciated
legislation
phase,
in the national Congress
development
reviews
the Presi-
198
Financing
Social
Programs
in the
Philippines
FIGURE 6.1 NATIONAL
NATIONAL
I.
Department
Budget Coordination Commiss on
Budget and of Management
Omce of the President
1. _
BUDGETARY
GOVERNMENT
Development
l. Determines expenditure revenue, debt ceilings
II.
GOVERNMENT
l
BUDGETARY
National
1
Government Agencies
2. Sets general guidelines for budget preparation•
4, Conducts sectoral/ regional consultation
3. Issues budget call
5. Prepares budget estimates
House of Representatives
2. Reviews President's budget
and
] 6. Reviews and consolidates budget estimates
Committee
5. Reconciles two versions
budget bill
of the General Appropriations Bill
3. Drafts General Appropriations Bill
iii.
Government Agencies
of Budget and Management
National
Department
1. _,
2. FundsReleases _
PROCESS
• Department of • Budget Management
Senate
4. Reviews/ Amends
PROCESS
/President,_x_ / budget / _ J
President
6. Enacts approved budget bill .1_
T
/ General "X_ ] Appropriations I
\Act/
_
Source: Bienvenido Alano, Jr. and Emelina S..Almario, "National and Local Government Shares in Health Care Financing," October 1992.
Political Economy dent's
budget
of Budget
and
Allocation
subsequently,
Act (GAA). In creating
the
passes
spending
Congress
ultimately
activities.
35 This is so because
money
controls
a General
authority
how much
money
the executive
that is not appropriated.
disbursement Department
199
Budget
Appropriations
through will be spent branch
implementation
and
examination are disbursed
A more detailed description of the budget government is presented in Box 7.
To a large extent, parallels
government
the budgetary
that
of the
budgeting
and
is described
a budget specific
terms
AND DYNAMICS
funds
were
process
for
phase
Local
local
between
government
in Box 8.
IN THE ALLOCATION
RESOURCES
Level
Executive
Branch.
President
exerts
In the
strong
across
sectors.
should
do or should
executive
influence
His priorities
commitment
branch
of government,
on how the budget
and
philosophy
direction. to support
For instance, the
social
government
budgeting the President
sectors
during
part of the Aquino administration. DBM officials reported those years, the DBM, which was tasked with the primary for directing
the preparation
government
expenditure
growth
than
rates
those
for the for other
of the budget, social
sectors
the
is subdivided
of what
not do steer the government
ery in the appropriate
sibility
book with
However,
review
execution.
OF GOVERNMENT
strong
the
in the local government
government,
budget
in more
for which
process
national
includes
authorization
KEY PLAYERS
for the purposes
of the agencies' in accordance
authorized. the national
National
spend
involves
regulations
budgeting
on what
cannot
accounting
budget
GAA,
of spending authority and cash allocations by the of Budget and Management (DBM). The Commission
on Audit also undertakes detailed of accounts to ensure that funds
level
the
made exhibited
machinmade
a
the early that in responsure
that
higher
sectors.
35. In the Philippine system, the President has item veto power and can thus imPound funds appropriated by Congress.
200
Financing •
,
,
,Soci_,l Programs
in the Philippines
,
'_
BOX7 NATIONAL GOVERNMENT
BUDGE_F PROCESS
Budget Preparation Budget preparation generally extend_ from March to July of eac{h!! year. 1 The Development Budget Cooldination Committee (DBC_)I_,: first determines the overall budget ¢bhgahon cetllngs, based oh'i._. projections of national government revenue, including ODA, a_ ' ' 2 _• the.fiscal deficit target for the year. Flhe budget ceilings and t_ financing plan must be consistent w_th projections/targets ofke_Ii macroeconomic variables like GNP, ir#lation .rate, 9.1-day Treasu_ bill rate, foreign exchange rate, Lon_lon .Interbank Offered Rate_ among others. The level of expenditures net of the debt burden distributed to different sectoral concerns, namely: economic sentices, social services, defense and generalpublic.services.
3 T_
revenue projections, the deficit, target and the budget Ceilings a_ then submitted to. the DBCC and tl_en to the Cabinet and the President for .approval. ... I Oncethis is obtained, the Depart_nent of Budget and Manage_!_, ment (DBM) issues a Budget Call. The Budget Call is a directive t_ the different government
agencies io prepare and submit their:: :f,
budgets in accordance with the prescribed budget ceilings arid_r_, ' , guidelines and consistent with the o_erall and sectoral objectiva_, _ of the MTPDP. The schedule and. procedures are dis0 included _i theBudget Call including the department/agency budget ceiling_.li'. However, there are years when the agency cedmgs are prowd_'_i one to two months after its issuance• The expenditure ceilings f6_ the agencies are meant to minimize dloated budget proposals an_'. to guide agencies in prioritizing their funding requirements.
_.
Upon receipt of the ceiling, th e agencies/departments require their subdepartmental units to submi[ their budget proposals with .allocations by function/projectJactivity/purpose, by exPense classic. and by regional and subregional areas. Generally, pr0visions.for all.. mandatory requirements like personal services, retirement L,_,me-;' fits, rent, and others are set aside before the balance is distributed_ to the different programs based on tile department's ............................................L...._ .............................................................................
pnorltlzatl0n.! ' :...............:.........';.........
Political Economy of Budget Allocation .......
p..............................................................................................
201 _..................................................................
Before preparing their budgets, the different departments are also expected to conduct consultations with the chairmen of the Regional DeY_topmentCouncils (RDCs)where they present their criteria for all_ting their expenditure betweencentral and regional programs, and the, subdivision of the regional budget across regions Later; regional budget hearings in close coordinationwith the RDCs are held to ensure that the programs, priorities and plans of the various regions are taken into account in the agencies' budget p[oposals, The regional offices then submit their RDC-approved budgets to their head offices which, in turn, consolidate these into the budget proposal of the entire department The DBM then reviews the various budget proposals based on the Budget Call guidelines and on the standard costing for equipment that is available from the DBM Essentially the evaluation process follows an incremental budget approach Subsequently, these are collated and the result is an overall budget that is presented to the Cabinet for deliberation and to the President for approval. Budget Legislation The budget legislation or authorization phase begins with the submission of the President's Budget (in the form of a detailed Expenditure Program accompanied by the Budget of Expenditures and Sources of Financing, the President's Budget Message and the Regional Allocation of Expenditure Program) to Congress within 30 working days after the opening of the regular session This normally occurs toward the end of July and the whole process usually ends in December. In Congress, the initial review of the proposed budget is undertaken by the Committee on Appropriations of the Houseof â&#x20AC;˘ Representatives The Committee then summons the officials of the different Departments to explain and justify their respective budgets. Based on the results of these hearings, the Committee drafts the General Appropriations Bill which is then forwarded to the Senate.
'
202
Financing Social Programs in the Philippines
...................
........................
F"'" ...............
r'"_ ..........................
1..............................................................
_"'"_
In the Senate, the Bill is referred to the Senate Fina.n_ Committee. This..committee conducts litS.own budget hearings b! calling on agency "heads/0fficials to le×plain their budgets,Thl Senate Finance. Committee .then pr_p0ses amendments to th_ House Budget Bill for the Senate body!s.approval.The difference,' betweenthe House version andthe SEnateversion of the Budge Bill are .then threshed Outin a Conference Committee which_pro poses a common budget,bill.Once this is approved by .theHous_
i i
and the Senate Vo!ing...separately,it i_ submitted.to the Presider for signing into law.'it is.then known asithe.General Appropriation., Act (GAA). " " "-
• '
'"
" ,
i ,
' Budge.tExecution ''
} i
,'
,"
,
,'
, ,
"
..... ' ,
.,
,,,
,•Budgetexecution refers to the operatiOnal.aspectof.budgeti.ng.an_ involves•the utilization of the differentldepartments of their appr_ " pr ations The budget execution stag_ siarts, nJanuary of eac .... ,, ', , ,, , , , ' ,, " "_? • year. • ". ' .'. ..... ' ' ' ' • ' After"the GAA. is enacted, the paNrequires .the. differe4 agencies to Submit their respectlve_w0rk and financial pian_ (WFPs)..The WFP.s..indicatevarious putputs to be..accomplis.h.._,. i every..quarter;,and...amonthly breakdown.. 0f..the agencies" financial. '. ..{ requirements based on a scheduleof p[ogram implementation Th_ { '
"
'
"
'
'
' ''
'
'
'
i
DBM then rev ews and pro£rams OfgoVei'_. mentfunds. .. the.WFPs ' . ' the , release ' ' ... ".. .,.." i
The disbursement procedure has been revised over t.heyear_.i •,.. .Underthe Mod fed D sbursement Sy_,temintroduced in 1990 the' Bureau of Treasury (BTr).deposits the .minimum funding recluir_ ments for each agency.in the desig_.atedgovernment servicir_g bank and regularly".replenishes.thea_ency.accounts to reimburse. -. . the banks for checks withdrawn by.th_ government.agencies.over, itime:". . . ,, . ', '. .' " ..... ' ..'_"".."' the.DBM first issues two kinds;of documents to effect the.! ,., i."release0f government funds. The Advice of AiIotment"(AA) give_ •government agencies the authority tq incur obligations and enter_ . into contracts..The AAs may. be .issu_ed . . or an.nu.1! ,on a quarierly. !
i i
i
. '. =
Political Economy ,
'; = ,,
of Budget
Allocation
203
,
=,i!basis, On the. basis of the AA, the DBM issues a NotiCe of Cash :_lloCat'ion (NCA) to the designated servicing bank, the,BTr and the ageflcy_ NCAs, are .issued on a monthly basis and Specify the â&#x20AC;˘ .maximum amount of withdrawal that an agency can make from a gov@mmentservicing bank for the period indicated. With the NCA, .the agency can.then issue checks to its creditors who in turn can encash them in the servicing bank. Officials of the DBM and the BTr meet monthlyâ&#x20AC;˘ to ensure that cash is available for NCA releases. In case of a cash shortfall, proportionate across-the-board
budget cuts are instituted.
Budget Accountability Budget accountability involves the preparation and submission of accountability
reports, performance review and financial audit of
government departments/agencies.
Departments/agencies
are re-
quired to submit financial and physical reports of operation (which contain information on the actual physical accomplishment of the agency in relation to actual expenses incurred) on a regular basis for submission to the fiscal agencies and Congress. At the same time, the DBM, in coordination with NEDA and other fiscal planning agencies, reviews the general performance
of government
pro-
grdms in relation to expenditures. Finally, the COA undertakes detailed examination of the agencies' books of account to ensure that all expenses have been disbursed in accordance with accounting regulations and the purposes for which the funds have. I_een authorized. 1Starting withthe'preparation ofthe1995Budget, however, theprocess hasbeenstmtch_l from Janua_'y tpJulytogiveagencies ampet metothoroughly study and_'epare theirbudgets andensure _eitcomprehensiveness andconsistency withtheoverall government plan. 2TheDBCC iscomposed oftheBudget Secretary asChairman endtheEconomic Planning Secmta_j, ReBangko $entral ngPilipinas (BSP) Governor andtheFinanc_ Secretary asmembers. Itisassisted bymeExecutive Technical Board. 3Theprocedure thatisfollowed todetermine sectoral andsub-sectoral ceilings haschanged overtime andisdiscussed ingreater detailintheSection onthedynamics ofbudget allocation.
,
204
Financing Social Programs in the Philippines
Box8 LOCAL GOVERNMENT
BUDGET PI_OCESB
Budget Preparation
.; ,'
i
Budget preparation in the local government units.starts with th_ issuance of the Local Government BuDgetCircular.by.the DBM in June or July of the current year. The 14ocalChief Executive (LCE) then issues policies and guidelines toldepartment heads to guide the Preparationof budget proposal& in principle, the Local Finance Committee (LFC), composed of the Local Treasurer,. , . .the Loc_ Budget Officer and the .Local Plannin_land Development Officer_ "determines projected income for the .following fiscal year an_ recommends the level,of annual expelndituresand .the ceilings of .spendingfor economic, social and general services..The LFC als4 allocates expenditures between Current"0perati..ngexpenditure_ "and capital.outlays, and the capital,oqtlays for each.developmen_ ' activity or infrastructure project in accordance with the projectsand activities identified in the local development plan. At the same time{
..
i i i !
! i :i
department or office heads are require_ tOSubmit budget proposat_ ' i for their respective offices. These budget proposalsshould confor_ 'i with the.policy and program guideline8 issued by the LCE and thff i budgetary ceilings prescribed by the LJFC. ' ...... i' = The LFC then reviews and consolidates.the budget proposal i submitted by the different department heads, First, the LFC recon_ ciles the consolidated budget proposailwith the projected incom4 of the LGU. Since LGUs are not albwed by law. to have fisc a) .deficits (i.e., total income including proqeedsfrom borrowing should not be less than expenditure, at alltinles), fixed ,expenditureslik_ those for personal services and other mandatory requirements,like the 2.0 percent.Development Fund are first set aside by the .LFCi Then. the variable portion of the department .budgets is analyze_ in consultation with the department heads, In the budget revie_ the priorities setby the LCE aregiven due.consideration, Sub_
i =
"i i
:i i i i
sequently, the LFC drafts the ExecutiveBudget.which includes:.(a! i a budget message that enunciates the Bignificanceof the propose_ i appropriations in relation to the local development plan, (b) a brie_ .= "
i
Political Economy of Budget Allocation
205
summaryof the pia.nnedactivities of the LGUin support of its goals and objectives in the .ensuing fiscal year, and (c) a summary of financial Statements Showing the actual/estimated .income and expenditures in..the_astcompleted fiscal year, in the current fiscal year, and in the.ensuing fiscal year as well other financial statements that will _indicate the financial condition of the local government.
Budget Legislation The Executive Budget is submitted to the local legislative body or Sanggunian (i.e., Sangguniang Panlalawigan, Sangguniang Panglungsod and Sangguniang Bayan for provinces, cities and municipalities, respectively)which legislates LGU budgets not later than October 16. The Sanggunian conducts public hearings and reviews the Executive Budget. The local legislature can only decrease or delete an item in the budget but cannot increase total appropriationsas proposed by the executive branch. The amended budget is subsequently enacted to an Appropriation Ordinance before the end of the current fiscal year. The LCE then either signs it into law or vetoes it and sends it back to the Sanggunian. Budget Review Within 10-days of its enactment, the Appropriations Ordinance is submitted by the Local Budget Officer to the DBM Regional Office in the case of budgets of provinces, highly urbanized and independent component cities and municipalities within Metro Manila, and to the provincial budget officers in the case of municipalities and component cities for review. The review process is meant to check compliance with budgetary requirements and provisions of existing laws, rules and regulations. Amongothers,the budgetaryrequirementsare: â&#x20AC;˘ Total amount appropriated shall not exceed estimates of income;
206
Financing
i',,, ','
,.' Full provision shall be 'made _all, : ' , , :,', , . ,
,
Social Programs
in the Philippines
statutory and ,,Con{t_act_,i: , , ', , , _ , ,,,
obligations of the LGUs;, ,,, ,
.
....
:
• Apprc_o,r,iatio,nsfor debt servic4 shall not exceed 2,0:,pef'ce[_ .., Of, the.LGUs ,, , ,,,' ,• , , , regular,income , ,
,
". _'
'
P,rov• ,rices; , ,,.:c ,' t es":.and , , , rnunicibalities shall provide .aid ..,_. ' ' barangays at.noless.than P1,000 per barangay;. 6 , Five percel_t revenue ' from regular sources:St_ ,, , of,estimated , ,,, , , , , , , , be set aside for,:use ,in times of Calamity and, .......
:
i....
" ,.
(iRA)..:shal.lbe.set aside._or, deVel0pment ,,, ,projects. , • ment At least 20perCent of LGUs'..annual.internal revenue all,_ ... "
i , ,
:
:' ' ' :,
:
: i
:
,'
ifit
,,:,,
,,
,',,
is ascertained
,' ','
:,,
,''
,:,,,
,,
:
'''
that the orqinan.ce.cloesnot, , , , , , ,
,:
:
meet"sa_".
requirements., the. reviewing .authority shall .declare the ordinan$_ ' . . noperative nits.entirety'or in part. I '
'
'
'
'
'
'
,'i
,,
,
Budget Execution. a, dAcc , , ," , , ,
"_
ntabili ,
Budget execution starts in January and _nds in Decembe[ of each ye_ During this period the.DBM releases the AAfor the IRA Ona c0mpreh_ sive/quarterly basis and the N.CAon a monthly basis. 'Budget executi¢_
'
involves the implementation ofthe programs and activities approved in !!{ i Appropriations Ordinance, It should be ntotedthat .Sangg.uni.an. may int_ .' .i duce changes in the ordidanceby enacti.n_asupplemental budget i. of public calamity by Way of b'udgetaryrealignment to gi' ' p.
i
priations for the purchase OfSuPplies.a_td..material s and.service.s are urgently neededto Prevent'.irnminentldanger
.'t
i
A Supplementalbudget mayalso be..enacted.when.sup.ported by ! , =cationfromthe local treasurerthat fundsJare actually available. ,Befo,re:_,any, too'no,y, from total 'funds1are disbursed; the ,lOcal" officer has,tOcertify,that there 'areapprop_riationsfor'the purpose, the , ,,a¢countantfia_t,o ol_e,it fir_ and,the,localtreasurer has to certif_ :: fuhd.s,areaVailabiefor the Same.At any I_otntin time disbursements = anY Ityca!fune.may not .exceed 50 perc1_ntof the. i:.:".accrUing .tosl_.¢h'fund_, in additi,on {o actua.i.collections, However, :rlo. i ."_"°0verdraftina_ local fund .ma,ybe incurrledat the end of the fiscal i '""' _"The.t)ael_,s,,accej.frt[8,"p,apers,,cashof the local.treasurer, the Io i". , b'Jdget officer, the*.!oc, al a¢_btJrita.ntand_other accountable officers .='be Openfor.COA inspection at,all times ,, ,, '
i.
: " .= ...
Political Economy
of Budget
Allocation
207
In those the different
years, the DBM held consultations with the heads of agencies on the allocation of sectoral and subsectoral
expenditure
ceilings.
budget,
defined
earmarked
Early
as
the
for personal
expenses
on,
the
portion services
for regular
agency
DBM
of the and
computed agency
the
maintenance
functions
and
baseline
budget
which
and
is
operating
for ongoing
foreign
assisted projects. During the consultations, the departments agreed on the distribution of the allocable component of the subsectoral ceilings, that is, the difference between the subsectoral ceiling and the total baseline budgets of department/agencies within the subsector. In later Cabinet
years,
or the
budget, the Subcommittee
for
Aid Plan
personal
requirements was created
services
• Ongoing
implications;
° Positive
net revenue
second
first stage criteria: and
stage,
process.
were given obligation
points
all other
based
on a Delphi goal
loans
expenditure release)
with
activities
on a point
budget
in 1993.
other service
included with the source
of
6.1). The weight
incidence. criteria
of the Subcommittee social
not system
distribution,
(Table
on poverty
for the
criterion,
an
over budgetary
goal, regional
was based
survey
first priority:
project/activities based
capability
assigned
Projects Fund up against the Project/activi-
with
in 1993; to program
generating
development
criterion
the
expenditure
a two-stage projects
for
provi-
and
were prioritized
implementation
hand,
development
1993
Council
maintenance
characteristics
support
the regional
to the
After making
Priority are lined
foreign-assisted
• Projects for completion ° Project/activities tied
finance,
left of the
Coordinating
functions, activities
ratio (1991 expenditure of 60 percent or above;
following
essentially preparation
the
and
then followed
ties with the following
In the
the
(CCPAP) as members.
of regular agency and all other agency
PPF. Prioritization
under
was
during
from DOF, DBM and
Philippine
sions
prioritization Thus,
prioritization strategy was developed by the DBCC's on Prioritization which was headed'by NEDA with
representatives the
the
DBCC.
were
members.
for
On the other determined Under
projects/activities
the and
208
Financing
Social Programs
in the Philippines
TABLE6.1 PRIORITIZATIONCRITERIAUSEDIN THE PREPARATIONOF 1993 BUDGET Criteria
PointScore
I. Natureof the Project A. DevelopmentGoal SocialServices PhysicalInfrastructure Agriculture,AgrarianReformand Ind:ustrialDevelopment EnvironmentalProtection Defense,Peaceand Order,Justice B. Regional GroupI Bicol,WesternVisayas,EasternVisayas,and NorthernMindanao GroupII Ilocos,SouthernMindanao,CentralVisayas,SouthernTagalog, CordilleraAdministrativeRegionand nationwideprojects GroupIII CagayanValley,Westernand CentralMindanaoand CentralLuzon GroupIV NationalCapitalRegion C. Premiumfor HighRevenue-Generating or UrgentProjects
65 35 35 35 31 18 16 20 20
II. Financing of the Project A. Foreign-AssistedProjects 1.Grant 2. Loan B. Locally-FundedProjects
30
II1.ImplementationCapability A. New/Without1991ExpenditureRate 1. Foreign-Assisted Projects 2. Locally-Fundedprojects B. With 1991ExpenditureRate of, 1. Foreign-Assisted Projects(in percent) 0-19 20- 39 40- 59 2. Locally-FundedProjects(in percent) 0-19 20 - 39 40- 59
15
TOTALPOINTS
15
10 5 10
30 25 5
5 10 5 10 15 5 10 15 100
Source: Guevarra,EmmanuelQ., "Questionsand Answerson GovernmentBudgeting," Budge[and ManagementBulletin,May-July 1992.
Political Economy
of Budget
Allocation
_09
physical infrastructure projects/activities received the same weight and tied for the first place. Agriculture, agrarian reform and industrial development ranked a close second. The allocable sectoral and subsectoral
ceilings
of a given the hurdle
were implicitly
sector's expenditures rate to the total PPF.
In the preparation tization
strategy
as the ratio
of the
on projects/activities
of 1994 and
was
derived
followed.
1995 budgets, First,
money
sum
that
passed
a different
priori-
was
set
aside
for
personal services and maintenance expenditures of regular agency functions. Budget proposals of the different agencies over and above their minimum requirements were prioritized in relation to the Medium-Term
Public
In_gestment
activities
included
inclusion
of projects/activities
steering are
in the
committees
ranked
practice,
the
convince
the sectoral
choice
of the agency's
MTPIP
(MTPIP).
were
Specifically,
considered.
its yearly
of their
is based
on
the
or subsectoral
proposed
activity
review.
readiness
In principle,
ability
of agency
activities In
heads
to
on the advantages
of other
instance, the aggressiveness of department heads advantages of their projects strongly influences projects. depend
the
by sectoral
for implementation.
committee over those
only
In turn,
in the MTPIP was decided
during
on the basis
Plan
agencies.
For
in arguing for the the selection of
DBM officials noted that the assertiveness of agency heads on technical as well as nontechnical factors. On the one
hand, well prepared projects or those at a more advanced stage of development are by nature easier to sell. On the other hand, the agency this
head
regard,
natural
may
possess
the popularity
aggressiveness
boon to their mitted some
better
marketing
of the current
of the current
than
Secretary
Secretary
others.
of Health
of Education
In and is a
respective departments. Interagency negotiations peragencies like the DOH and the Department of Trade
and Industry to frontload years of the Plan period.
their
investment
Since 1993 (in time for the preparation NEDA draws up the Core Public Investment to effectively secure resources fiscal restraint. The criteria (a) foreign-assisted or ongoing
skills
projects
FAPS with
good
for essential for inclusion
spending of the Program
early
1994 budget), (CPIP) in order
projects even in times of in the 1994 CPIP are:
(FAPS) for completion implementation
in the
within
performance,
the year (b) new
210
Financing
FAPs
or locally
projects,
funded
projects
and (d) projects
will receive
More stringent personal
department/agency
same.
is the
ceilings
or the President
Here again,
primary
from
there
prior
of their
compared
if they were given budget.
indicate
of the total budget
infrastructure) Thus,
stration,
budget.
to achieve
formal
for this.
procedure
so far, there
in
exists
an
to the Cabinet
approval
of department
secretaries
ability
that
to 32 percent
a chance
that
from the executive increasing
user
there
officials
have
allocated
sectors
38
(including
service
the national appears
in
sectors
government
to have
evolved
in
in the executive branch that the be treated more favorably in terms sectors including the social service branch
fees,
sweepstakes highly as potential the social sectors. New revenue
service
of
additional
government
in the social
to restructure
it is noteworthy
to garner
they would
to the economic
the early 1990s some agreement economic service sectors should of allocation relative to the other sectors. Officials
1995
can be set aside
the
described
the assertiveness
determinant
line agencies
percent
of the
that
financing for their respective departments. At the same time, interviews with some the
do not
at the DBCC that capital
will be imposed
apart
(c) power that
process through which department heads attempt budget ceilings by asking for reconsideration from
the DBM Secretary the
sectors,
in the preparation
that
in the Philippines
corporations
on the amounts
admit
informal appeals to increase their
social
was reached
and maintenance
DBM officials setting
priority
guidelines
services
in the
of government
require subsidies. Recently, a policy decision outlays
Social Programs
rank
reforms
privatization
in tax adminiand
PAGCOR/
sources of additional financing measures, cut in debt service
for and
loans from the external sector were the least popular choices, a6 Officials from the executive branch are of the opinion that measures reducing
debt service
lack legal basis.
that doing so would make it more access external sources of financing.
Moreover,
they are convinced
difficult for the government to On the other hand, they assert
36. Individual officials from the Executive branch do not Seem to favor new tax measures. However, this.is not consistent with the official position of the Executive branch which has proposed a number ofnewtaxes and higher rates for existing taxes.
Political Economy
of Budget
Allocation
211
that Congress, particularly the Senate, the passage of new tax measures. Legislative
Branch.
The
1987
is the major
Philippine
impediment
Constitution
to
provides
that '_no money shall be paid out of the Treasury except in pursuance of an appropriation made by law." There are divergent views, however, on allocation.
the
extent
to which
On the one hand,
officials
Congress
is not
authorized
proposed
outlays
for each
dent's budget, concern about insertions
the
or introduce the increasing
way beyond
legislature
influences
from the executive to increase
branch
(it can
expenditure new ones. incidence
the authority
budget
DBM upon asserts
made
by Congress
approval
that
they
President's
budget
Moreover,
there
of the President. are
allowed
may
have
the strong
On the other
by the
hand,
Constitution
sentiment
backing
branch
to do
only be implemented
that
Congress the
the overall
outlay.
should
exercise
come of local
by the
to realign
they
greater control over budget allocation. Congressional insertions/substitutions 'They
the Presi-
message for 1994 items in the Presi-
as long as they do not increase is growing
reduce) in the
of the legislative
shall
that
Furthermore, they express of Congressional cuts and
so. In reaction to this, the President's veto provided that increases in various expenditure dent's
assert
only
item included
budget
via
officials
two and
routes. the con-
stituents of politicians. Alternatively, they may have the backing of agency officials who are, in effect, making an end run around the President's their
budget
and
appealing
own strongly felt priorities" A variance analysis of the
approved
by Congress
for 1993 and
the legislature
tends
1994
of DOH,
Public
budgets Works
and
directly
1994
to favor the economic DECS,
Highways
to Congress
on behalf
(Penner et al. 1994). President's budget and
SUCs,
shows service
DSWD,
(DPWH)were
sectors. and
the
GAA
on the whole, While the
Department
all augmented
gress, the biggest increase, both in proportional went to DPWH (Table 6.2). In that year, the budget is even larger than the increase DECS and DSWD combined.
that,
of
of
by Con-
and nominal terms, increment in DPWH
in the budgets
of DOH, SUCs,
212
Financing
Social _Programs
in the Philippines
TABLE6.2 VARIANCEBETWEENPRESIDENT'SPROPOSEDBUDGET ANDGENERALAPPROPRIATIONS ACT, 1993-1994
1993
(1) PRES.BUDGET
(2) GAA
(3) Variance
(In P thousand)
(In P thousand)
(1) I (2)
3,185,405 3,720,490 18,598,192 5,869,580 34,975,641 5,618,442 5,336,073 458,681
5,495,987 3,562,754 18,999,238 4,305,089 33,686,832 5,741,987 6,914,732 445,276
0,58 1.04 0.98 1.36 1,04 0.98 0.77 1.03
DA DENR DPWH DOTC DECS SUCS DOH DSWD
(1)
(2)
PRES.BUDGET 1993
(3)
GAA
Variance
(In P thousand)
(In P thousand)
(1) / (2)
6,139,761 4,358,204 17,695,150 5,011,726 37,160,251 5,561,987 6,787,221 615,299
5,972,162 ,4,238,731 23,157,946 ,4,681,751 37,780,450 6,078,360 7,332,191 756,029
1.03 1.03 0,76 1.07 0.98 0.92 0,93 0.81
DA DENR DPWH DOTC DECS SUCS DOH DSWD
Source:ExpenditureProgramand GeneralAppropriationsAct,1993and 1994.
The biggest department in that
increase
under
year,
in the
1993
the economic
DECS's
and
budget
service
DSWD's
was
sector,
budgets
also posted the
were
by a
DA. Moreover,
even
reduced
by
for 1994 originated
in
Congress. Most of the changes the Lower House. of many
that
impact,
high
infrastructure)
in the DPWH budget
This appears
Congressmen visibility, that tend
to be consistent
with the observation
tend to increase/insert district-specific to boost their
outlays
projects rating
(mostly
among
their
for quick physical constitu-
Political Economy ents.
In this
has
of Budget
regard,
21 a
it is not surprising
also consistently Officials
Allocation
been
of the
that
augmented
Legislative
Office (LBRMO) of the Senate
the
budget
for SUCs
by Congress.
Budget observed
Research
and
Monitoring
that the pervasive
sentiment
among Senators is to favor both the economic service sectors and the social service sectors but to give greater preference to the latter. They pointed out that during the deliberation for the 1993 budget, the Senate increased the DOH's budget for drugs and medicines by P1.3 billion arose
which
was
financed
from the appreciation
by savings
from
of the exchange
rate.
debt
service
With regard to potential social service sectors, there
sources of additional financing is some agreement in Congress
focus
in tax administration,
cut
should in debt
be on reforms service.
Members
of Congress
gram. New revenue measures, were the least-favored sources Nongovernment
Organizations.
and Legislative branch consultation to generate cial
service
advocacy
sectors
opined
The
legislators
causes listen
espoused to their
the
real
will on the part of divestment pro-
and increasing
Officials
the
Interest
budget
user
fees
from both the Executive
are
process
groups
and similar organizations Congress firmly believes
helpful.
that
and
noted that the holding of wider public constituency/interest support for the so-
during
intervention.
organizations sector and
earmarking, of funding.
for the that the
privatization
constraint to privatization is the lack of political the Executive branch to pursue the government's
that
always
such
is an as
NGOs,
important people's
could advocate for the social that this approach will be keenly
watching
the
different
by so-called interest groups but are also willing to demands because these groups command some
degree of popular support. Another approach that bears consideration is the proposal to educate the legislative body on the importance of providing more resources to the social sectors. However, officials from both the Executive and the Legislative branches assert that timing of the advocacy is critical and the best time to present the cause of the social sector to those who are responsible for identifying the priorities lative)
(the executive)
is right at the start
and
enacting
of the budget
them process
into law (the legiswhen
the executive
214
Financing
issues the budget pare their annual Local
Social Programs
call instructing the various budget estimates.
in the Philippines
departments
to pre-
Level
This portion of the study is based On four provinces, one city and one municipality. Executive
Branch.
In the
LGUs
local chief executive who takes priorities. However, some formal
included
sample
in this
LGUs:
study,
it is the
the initiative in setting or informal consultation
legislative body is undertaken in the formulation In most cases, the priority projects and activities
two
spending with the
of these prioritieS. are determined in
the Local Development CoUncil's deliberations on the local develop_ ment plan. In two of the LGUs included in this study, no budget ceilings
for each
process. initial
department
Rather,
are
department
estimates
heads
of the budget
any restriction.
In these
the
estimates
projected
are asked
LGUs, however,
of various income
development
at the
requirements
fully apprised of the priorities analysis, whether or not budget budget
set
of the
budget
to come up with their of their
offices without
the department
heads
LGU
heads
are reconciled
in accordance
with
Consistent
With observations
provinces)
support
with
the
local
plans. made
in other
studies,
physical
infrastructure projects receive high priority in two of the LGUs. However, the other two LGUs included in the case (both
are
and vision of the LCE. In the final ceilings are set, the sum total of the
department
of the
start
showed
to the social
a high
service
propensity
sectors
to provide
sample studies
budgetary
both on the average
and
at the
margin. In fact, social service provision is the centerpiece program of one of these provinces which cut the infrastructure budget relative to previous expand bulk
year's
allocation
its allocation of the
livelihood
budget
Servicing
share
programs.
improvement
by a considerable
to social
of the social
The province
of 19 hospitals the
hospital
service
loan
that
amount
Sectors.
Health
service
sectors,
is even negotiating were
is expected
devolved
in order captures
to the
followed
.by
a loan for the from
to be derived
the
DOH.
from
cross
Political Economy
of Budget
Allocation
subsidies of self-sustaining same loan. Local officials in the
activities
interviewed
administration
21S that will be financed
for this study
of taxes
followed
identified
by grants
and local sources as the potential sources for the social service sectors. While officials opportunities revenue
in the introduction
measures
Legislative
Branch.
coordination
in budget
ecutive Thus,
branches
at the local
review
modifications on
priorities allocation
the
and
the
with their
constituencies.
budget
earlier,
are
between
proposal
Organizations.
to be more and
to the national
the Committee submitted
introduced always
seems
that new
the Legislative
level compared
Thus,
by the
Interviews
with
Exlevel.
on ApproLCE, the
in the Sanggunian reconciled
spelled out by the executive. is usually followed.
Nongovernment
there
particularly
budget
changes
from both external
of additional financing from two LGUs see some they noted
allocation
while the Sanggunians,
priations, tions
As noted
improvements
of new taxes,
are not popular
from the
delibera-
the
spending
the executive's
budget
with the local officials
indicate that projects and activities included in the local development plan are usually translated into actual monetary terms and spending priorities. At the local level, a well-defined venue called the Local Development organizations can
Council (LDC), exists where NGOs and people's participate in the formulation of the local plan.
Moreover, since members of both the executive and the legislative bodies are included in the LDC, it is easier for NGOs to access both groups
at the
the social
same
sector
time.
This is an advantage
at the local level should
that
fully exploit.
advocates
for
In two of the
case studies, a direct link exists between the active participation of NGOs in local governance and the relative importance given to the social
sectors
however, that not participate their lack
in budget some NGOs as actively
of familiarity
ming operations. NGOs to enable
allocation.
Some
observers
have
noted,
engaged in the social service sectors in the LDC as in other fora because
in the government's
planning
do of
and program-
Thus, there is a call for capacity building them to better participate in the LDC.
among
216
Financing
Social Programs
in the Philippines
ASSESSMENT As a result
of the current
eting for agencies'
practice
regular
of relying
functions,
on incremental
the present
budget
process tends to focus on projects and to give priority sisted projects. This tendency then leads departments their
activities
appropriate
even if sustained and
to rely
on
principle, are their regular sustainability of the conduct ties and
functions
and
10ng-term
external
sources
of the social
service
sector
to foreign-asto '_projectize"
programs even
functions, raising of these activities.
budg-
allocation
are more
for what,
in
questions on the Because the activi-
agencies
are not quite
as susceptible to being undertaken on a project basis (in contrast to infrastructure, for example), this system tends to work against the said sectors. Moreover, agreement tors,
there
in the
particularly
in terms surmise
appears
to have evolved in the early
1990s
branch
service
Executive infrastructure,
tl_t
should
the economic be treated
more
some sec-
favorably
of budget allocation relative to other sectors. One can only that this is a reaction to the severe shortage in basic
infrastructure,
specifically
this period. in the enactment Congressional
in the power
of the
initiatives
1993
became
sector,
and
experienced
1994
more
budgets,
pronounced.
during so-called
Under
this
system, members of Congress add their own projects to the budget and cut the budget (or totally delete) other projects included in President's
budget.
Over the years,
Congress
consistently
augments
the budget of the infrastructure sectors at the expense of the other sectors. While some social service agencies like the DOH were able to secure those tends
additional
appropriations,
these
for site-specific infrastructure. to focus on district-specific,
were
never
as large
as
Moreover, since Congress quick impact, high visibility
projects, the incremental allocation for the social sectors mostly comes in the form of nonhuman development expenditure like support for state colleges and universities. From a macro-perspective, the present substitution ment
of projects
program
canceled
project
outlined
adversely
affects
in the national
is assisted
by foreign
practice
of Congressional
the efficiency
development donors,
of the invest-
plan.
the country
'%Vhen the not only
Political Economy of Budget Allocation
217
loses on the rate of return on its counterpart contribution but it also loses foreign exchange and it creates ill will among donors" (Penner et al. 1994). Thus, there is a need for discipline to control the political propensity to substitute one project for another. First, the President should impose discipline on the Cabinet members so that they do not circumvent his budget. Second, Congress must discipline itself. One way of doing this is by imposing a rule that forces budget neutrality on each agency, for example, inserted projects for a given agency will have to be financed by cutting projects out of the same agency's budget. However, if this discipline is not enforced, then it is incumbent upon the agency heads to be as aggressive as possible in securing additional funding for their programs and projects. While NGO advocacy might help in moving resources to the social sectors they do not have a formal venue in which to influence the public sector allocation process at the national level at present. Thus, NGO effort in this area involves overall social mobilization aimed at raising public awareness and understanding the need to protect and secure higher funding levels for social sector programs. Their immediate impact on the social sector budget is rather limited since there is no tradition of publicly dissecting the proposed national budgets (Magno 1994). The transfer of substantial powers and functions from national government agencies to local government units implies that LGUs now have greater control on the amount of public funds that will be spent on the social sectors, particularly health. Thus, advocates of increased and more efficient public spending on the social service sectors now would have to include the local budget process in their field of vision. Fortunately, the new Local Government Code institutionalizes the participation of NGOs in various local special bodies like the LDC. The limited survey of LGUs conducted for this study indicate that, whether by coincidence or design, LGUs which allow substantial NGO participation in local governance allocate a greater proportion of their budget to the social sectors. At the national and local levels, the consensus is that curbing tax evasion is the most desirable way of raising additional revenues. Recently, the BIR brought to court a number of tax fraud cases. Only time will tell whether the government has pulled together enough political will to finally pursue these cases. Moreover, the BIR chief
_I 8
Financing
is currently
talking
Social Programs
of reorganizingthe
in the Philippines
bureau
to
obtain
results and rid it of corruption. These efforts are direction. Estimates of revenue losses from tax evasion the
pay-off
from
great. Similarly, ability
there
of the
additional branches.
improvements appears
equity usually ticularly that corporation
to be some
privatization
resources However,
in collection
program
in both the the opposition
that
In this
quarter
is about
regard,
of 1994
the
augurs
on the use public
debate
forge new agreements additional
of mobilizing the Legislative of government
financing.
Obviously,
economy's
good
needs before
there
performance
well for an accelerated
of user
itself, pargovernment is an
this hurdle is passed, however, the comes in form of market fundamen-
pany, is quite successful. In contrast, some disagree broader
a means
Executive and to divestment
to be privatized.
gram. The recent public offering subsidiary of the government-owned
strategy,
as
is indeed
on the accept-
comes from the government bureaucracy part which manages or supervises the
incentive problem here. Once other obstacle to privatization tals.
machinery
agreement
better
in the right indicate that
in the
first
privatization
pro-
of shares in the PETRON, a Philippine National Oil Comon
charges,
the
appropriate
subsidies
to be conducted
debt-service
to industry. on these
one can rely on these
means
Thus,
subjects
to
of raising
7 Summary,
Conclusions and Recommendations
THE study explained to the social sectors,
the need to provide greater budgetary support particularly in human development priorities.
Philippine
income
per capita
the region.
The incidence
in the last in terms
10 years.
of poverty
Furthermore,
of most human
a significant and sanitary found
rate in the primary
the
social
tion and
countries
not declined
in
significantly
did not perform
indicators mortality
remained
illiterates grades
do not have
SOURCES The paper
has
of most
in the 1980s.
rate during
well There
the period.
high. As of the end of 1990,
proportion of the population had no access to safe water toilets. More than a quarter of the population vcere
to be functional
the country
in infant
of malnutrition
that
the country
development
was a stall in the decline The prevalence
is lower than
considered sector:
as Of 1989. There
and about elementary
one-fourth
main sources
(a) increased
(c) intrasectoral
revenues;
reallocation.
of all barangays
in
schools.
OF INCREMENTAL three
is a high dropout
FINANCING of additional
resources
(b) intersectoral Table
7.1 presents
for
reallocaa bird's
eye view of the possible sources financing that are forthcoming
and the likely levels of incremental from each. The aggregate level of
additional
social
resources
for priority
programs
from the measures
220
Financing
Social Programs
in the Philippines
TABLE7.1 POTENTIALSOURCESOFADDITIONALFINANCING FOR SOCIALSECTORPROGRAMS,ONA YEARLYBASIS â&#x20AC;˘Source I.
II,
._,mount
INCREASEDREVENUES 1
P2.8B
Curbingtaxevasion Privatization
1.8B2 0.4B3
Improvedcapacityto absorbODA
0.6B4
INTERSECTORALREALLOCATION 1
1,4B
Reduceddomesticinterestrate
0,3 B5
Reducedoutlayfor generaladministrativese='vices in DSWD Withdrawalof NFAsubsidy Restructuringof BOIincentives
0.1 B 0,2 B" 0.8 B
III,tNTRASECTORALREALLOCATION A.
Healthand Nutrition Reducedoutlayfor generaladministrativeservicesdue todevolution Increasedcost recoveryin DOH-retainedgovernmenthospitals Increasedcost recovery.indevolvedhospitals
B.
2,0B
0.4 B 0.2 B 0,3 B
Improvementin logisticssystem
*
Reviewnatureapproachesto treatmentand costeffectiveness of presentinterventionsin mentalhealthand leprosy Shiftto morecost-effectiveinterventionlikeORT,BHS
*
treatmentand use of simplediagnosticproceduresfor ARI
*
Education Increasedcost recoveryin SUCs Improvedinternalefficiencyin publicschools
0.6 B *
Summary,
Conclusions
and Recommendations
221
TABLE7,1 (continued) Source C,
Amount Waterand Sanitation Improvedcollectionefficiencyof LWUA Reducedwaterlossesof MWSS
0.2 88 0,3 B_
Increasedcommunityparticipationin managementof level I water andsanitationsystems Increaseddisbursementratesof appropriationfor level I water andsanitationsystems IV. GR_NDTOTAL
* *
P6,2B
Estimatenotavailable, 1.Grossestimatesof incrementalresourcesfromthis sourcewerescaleddownby marginalpropensitytospendon thesocialsector.Basedon past performance,this is assumedto be equalto 0.2 exceptfor DSWDitem. 2, This assumesthat themarginof error in the estimatedevasionlevelis 50%and that the governmentis able to collect25 percentof theamountof taxesevadedin the first yearafter a concertedprogramto improvecollectionefficiencyis instituted. 3. This assumesthatthe privatizationprogramwillwind up in five yearsand that the proceedsfrom governmentdivestmentfrom theremainingassets(valuedat P66 billion) are evenlyspreadout overthis period.Net recoveryrateis assumedat 0.4. 4. This assumesan increasein theavailmentrateof 149programand projectloansto 80 percent basedon 1992scheduledavailment.Thestockestimateof P9 billion thus derivedwas furtherassumedto be spreadout evenlyovera three-yearperiod, 5. This asumesa one percentagepointreductionin theinterestrateon TreasuryBills. 6. This refersto theexplicitsubsidyonly. 7. This asssumesan improvedcollectionefficiencyof 72 percentas comparedto 55 percent in 1992.This is equalto the averageannualgovernmentequityinfusionto LWUAin 1988-1992. 8, Thisassumesa 3 percentagepointimprovementin waterrecoveryper yearto achieve a targetrateof 57 percent in five yearsfrom42 percent in 1991.This amountis roughly 85 percentof the P295millionaverageannualgovernmentequityinfusionto MWSSin 1988-1992.
222
Financing
recommended
Social Programs
in Table 7.1 added
in the Philippines
up tO P6.2 billion
in year
1 of their
implementation. A. Increased The
first
curbing
revenues source
is increased
revenues
of tax evasion,
major
privatizafion
and
from
the
following:
improvement
in the ab-
sorption of ODA. In the medium term, some P2.8 billion in incremental resources is expected every year from this major source alone.
It is noteworthy
taxes
or levies just
that
expanded
VAT exemplifies
at which
existing
Chapter
are averse
This under
is not
this
(which year
to say
that
that
source
is projected
to raise
political
evaders.
In this regard,
new on the
of raising
imposing
members
three
P1.8
specific Keeping
rates
new
of the
taxes.
Legislative
billion
measures tax
taken
evasion
the
full force of the
and
in
system
rules
and
law against
of the tax collection
system and procedures increased computerization
scheme
up
in check
in additionalresources
of the tax administration
decentralization
of compensation
personnel
unpopularity
furor
of new tax measures.
easy.
will to apply
cies, improvements in the and collection enforcement,
impose
The public
and/or
many
the are
a maj or reform
a strong
turing
levied
to the passage
major
1) involves
are
shows
need not
this amount.
the extreme
taxes
6 definitely
branch
the government
to realize
tax agen-
in assessment and restruc-
on hiring
and
firing
of
are:
(a)
in BIR and BOC are recommended.
With
regard
to privatization,
the â&#x20AC;˘principal
legal impediments, (b) opposition itself, and (c) poor macroeconomic
Constraints
from the government bureaucracy environment. Recent experience,
particularly those of PETRON and Manila Hotel, shows that the turf-related resistance of GOCC managers/supervisors are not insurmountable. At the sametime, the case of PETRON also shows that
the best
resurgence. settlement issued the
time to privatize On the other
of some
against
is now as the economy
hand,
20 cases
the APT. From
privatization
program
incremental
funding
ing actions
are
RA 7761 is expected
in which
this perspective,
is estimated
for the social
recommended
restraining
sectors.
to further
experiences lead to the early
orders
have
been
the acceleration
to yield
P0.4
Nevertheless, bolster
a
the
billion
of in
the followprivatization
S_mmary, process:
Conclusions centralization
intervention
of the disposal
of GOCC managers
activities, COA.
and
differential
On the other which by tradition and technical P0.6 billion ODA-funded
and
in the Philippines,
can
resources
be improved
projects
and
if the government
to finance
social
represent
investments
infrastructure earning
competitive
more
The second
efficient
sectors that
ODA
selection
At the
to use ODA loans sector
in the
same
in (physical) will greatly
of
can be expanded
social
capital
of return
programs.
thorough
its reluctance
are investments
to generate
implementation.
social
in (human) rates
sector
by
projects way
capital,
promote
that each
such
a
policy.
reallocation
major
is intersectoral
task
for ODA, financing
is estimated
for social
A recognition
in government
B. Intersectoral
in the disposition
privatization
by a more
overcomes
projects.
projects
reorientation
supervisors of the
the pool of ODA going to the
further
in the APT, minimal
hand, enhancing absorptive capacity is a significant source of development
assistance
rate
223
function
treatment
in additional
utilization same,
and Recommendations
source
of additional
reallocation.
gies: (a) policies
funding
This is comprised
to lower domestic
interest
for the social
sectors
of the following
strate-
rate;
(b) reduced
outlay
for general administrative services in DSWD; (c) elimination of the NFA subsidy; and (d) restructuring of BOI incentives. The estimated incremental resources for the social sectors from these items add up to P1.4 billion. The accumulation of domestic debt together with the high interest rate regime during the late 1980s resulted in unsustainable levels of fiscal deficit during the said period and through the present. Increasing the maturity of public sector debt, improving the efficiency
of the
securities mended
and
primary developing
to lower
consequently,
and
the
secondary
a small
interest
help reduce
rate
the fiscal
reduction
in the interest
rate
financing
by P0.3 billion. 37
savers
market
for
instrument
on government deficit.
is expected
government are
debt
A one percentage to augment
recom-
issue
social
and point sector
37. This is roughly equivalent to a 20 percent reduction in the interest payments of the national government (from its 1993 level).
224
Financing Reducing
in direct budget
the outlay
proportion
sector
ing BOI incentives to increase social
because The
it should
it is largely
untargeted.
study
showed
also
However,
be pointed
that
branches
of DSWD in its 1992
for allocation
hand,
restructur-
of NFA subsidies are estimated by P0;8 billion and P0.2 billion, out that
an iadverse
social
interviews
The difficulty of reducing tion is further highlighted
sector
on the poor
funding
can
be in-
of general public at its average level
with:officials
indicate
the elimination
impact
in both the Execu-
no support
for such
a move.
expenditure on general public administraby past experience which shows that the
ended up bigger after every attempt at government Thus, this item is not included in the measures in Table 7.1.
C. Intrasectoral The third
of P0.1 billion
some P1.5 billion if the ratio expenditure to GNP were frozen
Legislative
bureaucracy reorganization. recommended
services functions
38 On the other
is not likely to have
in 1975-1985. tive and
savings
programs.
Moreover,
creased by administration
of devolved
and withdrawal sector outlays
of NFA subsidies
in the Philippines
administrative
share
to generate
social
respectively.
for general
to the
is expected
for priority
Social Programs
reaUocations
major
source
of incremental
resources
for priority
social
sector programs is intrasectoral reaUoeation. This consists of the following: (a) reduced outlay for general administrative services in DOH due to devolution DOH retained recovery
in devolved
recovery
in SUCs
efficiency billion. amount
- P0.4 billion;
government
hospitals - P0.6
- P0.2 billion; The aggregate to P2 billion.
and
hospitals
(b) increased - P0.2 billion;
- P0.3 billion;
billion;
LWUA
_MWSS water
revenues
to a successful is legislative
cost recovery (c) increased (d) increased
(e) improved
(f) reduced
incremental
One of the prerequisites in government
hospitals
action
in cost cost
collection
losses
from this major
- P0.3 source
cost-recovery
program
authorizing
retention
38. This item, unlike the others in this category, was not scaled down by the marginal propensity to spend for the social sectors because DSWD is itself part of the social sector.
Summary,
Conclusions
of income
generated
and Recommendations by this
facilities.
225
However,
some
members
of
Congress have expressed reservations on the charging of fees for government services, particularly those in the social sectors, because
of its possible
in this
study
hospitals
ized pricing
on equity.
that
increasing
user
not hurt
scheme
users
Similarly,
impact
shows
need
current
adverse
is installed,
considering hospitals
or improving
in implementing
education
of bringing
ment subsidies while delivery of services. On
the
government members and
other
taking
hand,
allocation of Congress
universities
in government
for tertiary to secure
in their
about
better
is the
funding
of line.
of tertiary of govern-
gains
inthe
to reducing
education political
percent
of the Univer-
pricing targeting
constraint
social-
the poverty
of efficiency
and protect
respective
30-50
socialized
advantage
a major
that
are above
on the experienct
sity of the Philippines is one way
charges
the analysis
the poor as long as a well-managed
of government
replicating
However,
national
propensity
of
for state colleges
districts.
The analysis
in Chapter 6 shows that SUCs account for a substantial Congressional budget insertions in the social sectors.
portion
of
The study also identified other cost saving measures in the social sectors like improving DOH logistics system, shift to more costeffective
health
schools, 1 water
increasing community and sanitation system.
interventions,
estimate of the amount ures are available.
government
decade goals of additional sectors: achieving billion
has
for mothers revenues
of public
itself
from these
meas-
WITH NEEDS to the
attainment
of mid-
and children. Table 7.2 presents estimates needed to realize the MDG for the three
health, education, and WATSAN. the MDGs for health is estimated
yearly
efficiency
forthcoming
RESOURCES
committed
internal
participation in management of level However, no firm or even indicative
of resources
MATCHING The
improving
in 1993-1995.
39 On the other
The resource to reach close hand,
UNICEF
gap in to P0.9 (1993)
39. Alano (1993) estimited the total cost of the MDG for health for the period 1993-1995 to reach P4 billion in 1993, while the estimated ratio of resource gap to funding requirement is 0.65.
226
Financing
SociaiPrograms
in the Philippines
TABLE7.2 ADDITIONALRESOURCESNEEDEDPERYEARTOATTAINMDGGOALS, 1994-1995 (in P billion)
calculated following
Health Education Watsan
0.9 2.3 2,4
TOTAL
5.6
that items
P460,000)
to effect will have
in half of the
1990;
(b) new
salary
desks
of two teachers
(costing
P275
training
of 23;500
teaching; 430,000
target
MDG
11,630
barangays (costing
for each (costing
of multigrade
for each
of the
programs
school);
P86,500);
teaching; 23,500
for the costing one in
(c) annual (d) textbook
new pupils;
each)
for each
(g) teacher's
teachers
of
manu-
in multigrade
to a neoliterate cost per year
is P2.3 billion. 4째 Finally,
(e)
in multigrade
P30 per year)
teaching; (h) cost of transforming a nonliterate per person times 1 million). The additional aforementioned
(each
do not have
of 570,000
(at a cost of P4,000
materials
clientele
that
for each
in each school
teachers
funding
(a) new schools
P37,800
per schoolyear)
P1,500)
for education,
to be found:
(costing
(i_ learning
als (costing
the
(P600 of the
the attainment
of the WATSAN goals by 1995 implies that some P2.4 billion in additional resources per year are spent on the following: (a) 37,000 shallow a unit unit
wells with a unit cost of P20,000; cost of P100,000;
and
cost of P2,000. In summary, P5.6 billion
(c) 1.45
(b) 12,333 million
in additiorlal
year to secure
the MDG for health,
a comparison
of Tables
7.1 and
resources
education 7.2 indicate
deep wells with
of sealed
toilets
are needed
at a per
and wATSAN. 41 Thus, that
the
incremental
40. This estimate assumes that the required investments are spread out over two years only: 1994 and 1995. 41. This was derived by applying Alano's (1993) _stimate of the ratio of the resource gap to finding requirement (0.65 in 1993) to his estimate of total cost of the MDG for health for the period 1993-1995 and then dividing the result by 3. i
Summary,
Conclusions
resources
expected
marized
from budgetary
at the beginning
finance
the resource
be drawn are
easy
administrative,
said than
to identify. legal, and
cessful
implementation
budget
measure
which
are
consensus
of this chapter
from this exercise
not.
done.
the
are just
a clear economy of the
while
there
are
sectors
sum-
adequate
Needless
lesson
that
some
of the to the suc-
revenue
which
and/or
are feasible
measures
in society
can
opportuni-
understanding constraints
specific
to
goals.
restructuring
to determine
different
about
The principal
budget
However, political of each
Finally,
among
possibilities
of the middecade
is that
is necessary
227
restructuring
requirements
to say, this is easier ties
and Recommendations
and
where
is evident,
a
there
are many more where disagreements have to be resolved. In this regard, harnessing the comparative advantage of NGOs in advocacy work
is critical.
the level of public
At the debate
same
time,
to a more
policy
research
informed
level.
could
also raise
228
Financing
Social Programs
in the Philippines
ANNEXTABLE1 ITEMSINCLUDEDIN COMPUTINGHUMANDEVELOPMENT PRIORITYEXPENDITURES Education: 1. Policyformulation/implementation of programsfor: a, preschool b. elementary c. secondary d. nonformal e. vocational/technical 2. Purchaseof books/desks* "k
3. Purchaseof equipment/maintenanceand repair 4. Construction/repair/maintenance of buildings* Health: 1. Communityhealthservices 2. Publichealthservicesincluding: a. comprehensivematernaland child healthservices b. communicablediseasecontrolservices c. noncommunicable diseasecontrolservices d. environmentalhealthservice e. nutritionservice f. familyplanningservice 3, Fieldhealthservices 4. Implementation of primaryhealthcareproglam 5, Purchaseof drugsand medicines 6. Publicinformationand healtheducationservices 7. Healthintelligenceservices 8. Standardsand regulationsservices 9. Aid to puericulturecenters 10.Administrationof incomingUNICEFcommodities Water 1.Maintenanceand repairof wells springsandother watersupplyprojects 2, Operationalsupportfor the maintenanceand repairof wells springsandotherwater supplyprojects 3. Constructionrehabilitationand improvementlofartesianwells and springsincludin9 proceedsfrom foreignloansand grants *For above-mentioned programs,
ANNEX TABLE2 HUMAN DEVELOPMENT PRIORITY EXPENDITURES (InP thousand) Years
1980
1981
1982
1983
1984
1985
1986 o
EDUCATION a.preschool b.elementary c. secondary d.nonformal e.vocational/technical
2,803,117 3,222,181 3,746,008 4,370,953 4,654,905 5,194,403 6,868,372 , 2,483,459 2,767,275 3,242,506 3,757,913 3,983,407 4,485,766 5,967,824 319,658 454,906 503,502 613,040 665,488 706,173 897,61 4,621 1,635 1,909 1,389 829 1,029
HEALTH**
360,749
467,844
455,128
448,072
330,802
821,341
187,516
163,822
204,205
151,049
192,442
E" _. o_ _u ¢3 O
WATER Artesian wells/water supply TOTALHUMANDEVELOPMENT PRIORITY EXPENDITURES %toGNP %toNGExpenditures %toSocialSectorExpenditures Nominal PerCapita RealPerCapita MemoItem TotalEducation Basic Secondary
0 2,803,t 17 1.2 7.6 32.9 58.0 I45.1
0
3,582,930 4,401,368 4,989,903 5,307,182 5,676,254 7,882,155 1.3 7.4 34.0 72.3 162.0
1.4 7.9 38.2 86.7 178.6
1.4 8.1 38.1 95.9 173.1
1.0 5.7 41.9 99.5 117.0
1.0 6.4 37.8 I03.8 103.8
=. ;=°
1.3 6.9 31.3 140.7 136.7
2,803,117 3,222,181 3,746,008 4,370,953 4,654,905 5,194,403 6,868,372 2,483,459 2,767,275 3,242,506 3,757,913 3,989,417 4,488,230 5,970,762 319,658 454,906 503,502 613,040 665,488 706,173 897,610
to to _o
ANNEXTABLE2 (continued) Years EDUCATION a. preschool b. elementary c. secondary d. nonforrnal e. vocational/technical HEALTH**
1987
1988
1989
1990
1991
1992
1993
to
Co
12,412,814 16,561,789 20,830,777 26,171,572 25,381,947 28,622,445 29,023,727 109,584 10,258,673 12,474,363 13,250,689 16,273,811 16,543,198 t9,713,430 20,882,374 1,769,975 4,072,087 7,314,260 9,709,920 7,666,993 7,740,294 7,030,408 7,409 9,539 37,459 109,476 56,144 46,097 8,910 376,756 5,800 228,369 78,365 1,115,612 1,122,625 992,450 1,075,300
1,043,897
1,136,614
1,138,226
1,557,587
2,237,085
2,651,593
209,983
65,983
702,327
1,621,329
1,449,880
1,461,307
533,970
WATER Artesianwells/watersupply TOTALHUMANDEVELOPMENTPRIORITY EXPENDITURES %to GNP % to NGExpenditures % to SocialSectorExpenditures NominalPer Capita RealPerCapita
13,698,097 17,671,669 22,669,718 28,931,126 28,389,414 32,320,837 32,209,290 2.0 8.8 56.7 238.8 215.7
22 10.6 58.4 300.9 248.0
_5 13.1 58.4 377.2 285.1
2.7 11.3 63.0 470.6 315.0
2.2 9.7 58.5 451.6 259.2
2.3 11.3 63.6 491.6 261.5
2.1 10.3 63.8 475.I 236.9
MemoItem
_d
_
Total Education
12,412,814 16,561,789 20,830,777 26,171,572 25,381,947 28,622,445 29,023,727
Basic
10,642,839 12,489,702 13,516,517 16,461,652 17,714,954 20,882,151 21,993,318
Seconda_
co o ÂŁ.
1,769,975 4,072,087
** See AnnexI for itemsincludedin healthexpenditures. Sourceof basicdata: GeneralAppropriationsAct,variousyears.
7,314,260
9,709,920
7,666,993
7,740,294
7,030,408 o_
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OF PARTICIPANTS
Bank (ADB)
Corporate Assistance and Resource Associates, Inc. (CARRA) Rhais Gamboa Department of Budget and Management (DBM) Bingl¢ Gutierrez Raymundo Tornas, Jr. genato de Vera Department of Education, Culture and Sports (DECS) Estela Blan¢o Department of Interior Local Government (DILG) Ren¢ Brion Department of Finance Juanita Amatong
(DOF)
Philippine Business for Social Progress (PBSP) EugenioCaccam,Jr. Philippine Institute for Development Studies (PIDS) Jane Alcantara Necita Aquino Caesar Cororaton Mario Feranil Poneiano lntal, Jr. Mario Lamberte Jennifer Liguton Gilberto Llanto Rosario Manasan Aniceto Orbeta Lezyl Ponce Paul Quintos Celia Reyes Delia Romero Ma. Lourdes Salcedo Anicia Sayos Suzy Ann Taparan
Food and Nutrition Research Institute (FNRI) Rodolfo Florentino
Social Weather Station (SWS) Dennis Arroyo Luz Bautista
Department of Social Work and Development (DSWD) Lina Laigo Milagros Llanes
United Nations Development Programme (UNDP) Edeena Pike
National Economic Development Authority (NEDA) 111 Joel Hugo Josefina Esguerra Elnora Romero Regina Verdeflor Darwin Yambao National Economic Development Authority (NEDA) IV Oskar Balbastro Tony Robles National Nutrition Council (NNC) Matilde Lira National Statistics Office (NSO) gosalinda Bautista
United Nations Children's Fund (UNICEF) Wilfredo Nuqui Bonifaeio Magtibay Keshab Mathema Rose Sales University of the Philippines Population lnstitute(UPPl) Emily Christia Cabegin University of the Philippines School of Economics (UPSE) Mario Taguiwalo The World Bank-Philippines Lani Azarcon
(WB)
THE AUTHORS Rosario Institute tute's
G. Manasan
is a Research
for Development research
on taxation, She holds
program government
a doctoral
Philippines consultant tuions.
M. Llanto
issues
Wilfredo
and
in Economics
Philippine the Insti-
and fiscal policy public
specially
enterprise
policy.
from the University
of the
and has served as adviser and international and private insti-
is a Research Studies
Fellow
at the
(PIDS) with research
Philippine interests
in
advisor and consultant to government and on money and banking, and development
over the years. G. Nuqui is the planning
Fund
(UNICEF)
Manila.
papers on social development ment in the Philippines that formerly
at the
monetary policy and financial markets. He has a in Economics from the University of the Philippines.
He has Served as policy international institutions
Children's
finance
expenditure
for Development
public finance, doctoral degree
finance
on public
degree
Fellow
(PIDS). She coordinates
School of Economics to various government,
Gilberto Institute
Studies
a Deputy
officer He has
of the United written
a number
issues such as on economic considers human factors.
Director-General
Development Authority (NEDA) economic and social development
of the National where he planning.
was
Nations adjustHe was
Economic involved
of
and
in both