Vol. XVI No. 3
May - June 1998
ISSN 0115-9097
Who Pays for Our Health?
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or office workers in Makati, to be a card-bearing member of some health maintenance organization (HMO) is one office perk they couldn’t do without. Others are even more fortunate because such benefit is extended to their dependents, thanks to generous employers. Still, those who can afford to pay for their own premiums have a wider option and may therefore go for a commercial-indemnity health insurance—for reasons of their own. Meanwhile, in some far-flung sitio, some nongovernmental organizations (NGOs) are laying the groundwork to provide their chosen community some access
EDITOR'S NOTES May and June of this year have been memorable and busy months for Filipinos. On May 11, millions of Filipinos went to the polls and decided on their new set of political leaders who will steer the country into the development challenges of the 21st century. Predictably enough, the winners of the election, especially for the presidential position, were those whose popularity ratings have been consistently high in preelection surveys. However, what ran contrary to many other predictions was the relatively peaceful and honest conduct of such political exercise. Which is what should really be. For it is not only the choices that a people make but the manner by which they make those choices that truly becomes a measure of a people’s level of political maturity. And what
WHAT'S INSIDE 2
to health care funds. With low-income families as members, these NGOs help the community find other means of supporting what would become their own health care scheme. These examples are just few of the schemes created to help Filipinos meet the spiralling cost of health care. These are options offered or initiated by the private sector, which is fortunate because studies show that the public sector’s sources of health care funds— taxes, for one—may be increasingly inadequate to meet the growing health care needs of the population. A baseline study entitled “Evaluation of the Potentials of the Private
better way to observe the centennial of the nation’s declaration of independence on June 12 this year than this display of certain political maturity? After all, even as people may be awed by a canopy of incandescent fireworks as displayed on Independence Day as well as be touched by the flurry of nationalistic activities taking place throughout the year, what counts in the end is how they internalize the meaning of all these symbolic trappings. And the kind of involvement of the people in the recent election is one proof of the quality of internalization process that has taken and is taking place. All these are not lost to the officers and staff of the Institute. That is why in addition to its regular fare of lecture series focusing
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Influencing EnvironmentFriendly Cropping Through Market Prices Establishing an Electronic Database for Asia-Pacific Antidumping in a Global Open Economy: Still a Key Instrument for Protection PIDS Joins Centennial Fever
Insurance Industry as a Source of Health Care Financing in the Philippines,”1 takes a look at four types of private health insurance categories: k commercial-indemnity health insurance (wherein life insurance companies are included). Firms in this category provide health and accident insurance; k health maintenance organizations (HMOs). These have companies whose schemes combine the provision of services with their financing; k employer-provided health benefits. These are provided by employers to employees because it is ei-
=6 ———————— 1 Written by the Health, Education and Welfare Specialists, Inc. for the project entitled “Baseline Policy Research for Health Care Financing Reforms” under the auspices of the Department of Health (DOH) and the Philippine Institute for Development Studies (PIDS).
DEVELOPMENT RESEARCH NEWS
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an agricultural policies affect the land use and planting patterns of farmers? Can they be used to encourage the planting of more environment-friendly crops? These were the questions considered by Dr. Gerald Shively, assistant professor on environment and natural resource economics at the Purdue University, in a paper he presented during a recent PIDS Pulong-Saliksikan. Using a dynamic model of portfolio choice wherein relative prices and price risks guide the allocation of land use between annual food crops (for example, rice) and tree crops, Shively used empirical data from 115 farms in Palawan, a southern province in the Philippines, to examine mango-planting decisions among low-income farmers and how such decisions influence the health of the ecosystem.
Background The choice of mango as the illustrative case for the crop-planting decision was based on the fact that mango is a long-lived, dense-canopied tree that has the potential to stabilize landscapes and improve microhabitats in upland areas. It is also easily incorporated into mixed cropping systems that include upland food crops such as rice and corn. The most important consideration, however, is the existence of both domestic and international markets for mango. Philippine policies have traditionally protected staple grains like rice and corn, thereby discouraging farmers from planting mango and other exportable tree crops. Over the past two decades, in fact, policies like the exchange rate overvaluation, direct and indirect taxation, and other impediments to trade have resulted to tree crop prices that are 25 to 50 percent below world prices and far more volatile than prices
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Influencing EnvironmentFriendly Cropping Through Market Prices for staple grains. Only recently have there been moves to reverse this trend. For instance, in the latest medium-term agricultural plan of the Department of Agriculture, mango was identified as the first of the five national “banner crops” to be targeted for promotion in marginal rice and corn areas. It is hoped that this, together with the proposed tariff reductions, will induce an improvement in the producer prices of mango and encourage farmers to plant mangoes. It is in this context that Shively sought to examine – k the effects of policies relating to prices and price risks on low-income farmers’ decision to shift their cropping patterns from, for example, annual food crops to more tree crops like mango, and k the relationship between cropping patterns and two environmental indicators, namely, erosion and species diversity.
What Factors Affect Farmers’ Decision to Plant Trees Faced with the choice of how to allocate a parcel of land of fixed size between a food crop and a tree crop, with the objective of maximizing the present values of the expected return of the cropping pattern or mix in the future horizon, Shively’s model showed
the farmer as basing his decision on three factors: k the cost of investing in trees, k the expected prices of the tree crop and the food crop, and k the relative riskiness of trees and the significance of such risk for the farmer. In terms of expected prices, Shively used three forms of price data, namely, current prices which are contemporaneous to planting decisions, forecast price changes, and ratios of price variability. The forecast prices represent one-period projections of prices based on past price trends. Meanwhile, the relative riskiness of trees is important because when investment is costly and takes place under uncertainty, the risk associated with the investment will drive a wedge between the optimal and observed levels of investment.
Empirical Results The results of Shively’s regression exercises indicate that price levels and expected price changes during the period 1981–1994 were correlated with mango planting decisions. Higher prices for mango in terms of currentperiod mango prices as well as of the one-period forecast of change in price were consistently associated with an expansion of area planted to mango. Tree planting also increased during periods
DEVELOPMENT RESEARCH NEWS
when rice and corn prices declined. Conversely, tree planting declined when the current- and forecast-period prices of rice and corn went up, indicating that higher grain prices reduced incentives for tree planting. Links between price variance and land allocation likewise revealed a positive relationship between rice and corn price variance and mango planting, that is, when the relative price volatility of mango declined, area devoted to mango increased. Shively’s model also looked into an association between farm size and tree planting. The results show that all things being equal, large farms planted more mango trees, showing that larger farm size is positively correlated with mango planting. This reflects the relatively greater land-intensity nature of mango production in comparison with cereal crop production. However, Shively's study also shows that in terms of land share, the proportion devoted to mango planting decreases as farm size increases. This may probably be explained by the presence of an initial fixed cost in tree planting associated with efforts to obtain planting materials. Thus, while there was a larger total area planted to mango, the results show that larger farms planted a proportionately smaller share of land to mangoes than did small farms. The empirical findings also note that price variability reduced the incentive to diversify into tree crops. Nonetheless, as seen in the observed expected returns to production, neither price risk nor risk aversion constituted an insurmountable barrier to tree planting. Smallholder portfolios could be shifted in favor of tree crop production even if price increases were accompanied by relatively large increases in price variability. In short, even if farmers were sensitive to risks associated with tree crops, such risks could not to-
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tally discourage them from going into tree planting. Put in the context of market liberalization, the results of Shively’s study show that even if liberalization was accompanied by substantially higher price variability, higher prices could still encourage tree planting, including among risk-averse farmers.
Resulting Environmental Outcomes Did the farmers' allocative choice in cropping patterns have any impact on the environment? If so, in what way?
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However, it was shown that farmers respond primarily to relative prices and, to a lesser extent, to relative price volatility. What are the implications of this finding? First, Shively noted that pricing policies, including those that liberalize agricultural trade, tend to encourage cultivation of tree crops such as mango trees. As such, “the findings underscore the potential role for economy-wide policies to support targeted or projectbased efforts to encourage tree-planting in low-income areas,” Shively stated.
"...The findings underscore the potential role for economy-wide policies to support targeted or project-based efforts to encourage tree planting in low-income areas."
The addition of trees to annual crop systems—in this case, the inclusion of mango trees to the rice and corn cropping pattern in the farms of Palawan—was expected to bring in benefits to the environment in terms of reducing the erosion rates and providing greater species diversity in rural areas.
Second, the results also emphasize the importance of price variability in influencing environmental outcomes. Crop diversification as an effort to reduce portfolio risk—especially the addition of trees to annual crop systems—is likely to have beneficial impacts on erosion rates and species diversity in rural areas.
For one, tree crops are known to generate less soil disturbance over time and provide greater continuous ground cover than annual crops, thereby causing lower erosion rates. And two, farms where tree crops are integrated often provide microhabitats that better support local wildlife than farms with annual crops alone.
Recommendations
Conclusions Based on Shively’s study, price levels, price changes, price risk and farm size all influence the tree planting decisions of low-income farmers.
Given the important link between agricultural decisionmaking and environmental outcomes, Shively recommends two actions based on the findings of his study: k further research on the environmental impacts of trade and tax reform should be more sensitive to the role of risk and diversification in decisionmaking, and k the findings of price-responsiveness should be confirmed for other crops under different geographical and environmental settings. DRN
DEVELOPMENT RESEARCH NEWS
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nformation in various forms is very much in demand. The need for it from within and, more so, from outside of national boundaries has further been heightened by globalization. Recent advances in information technology have been of great help as they facilitate the access to various information and minimize the distance between people and organizations. Valuable information—especially that accessed from electronic databases—now finds its way very easily to many doorsteps as it is being utilized for numerous purposes, one of which is in making sound decisions, whether business, political or personal.
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ies (PIDS), where a proposed establishment of a common electronic database that will tap institutional linkages in the region was discussed. The members of the network, composed of representatives from the member-institutions,1 attended the forum. The proposed establishment of a common electronic database will, according to EDAP Director Dr. Jungho Yoo, improve the capabilities of the network’s member-institutes in conducting research and in providing policy advice. This will in turn lead to the promotion of regional cooperation. “With the 21st century just around
Establishing an Electronic Database for Asia-Pacific Tapping the EDAP Network Recognizing the need to have accurate and timely information about the Asia-Pacific region at one’s fingertip, the Economic Development Management in Asia and the Pacific (EDAP) Network, a network of 11 research institutes in the Asia-Pacific region created through a regional project of the United Nations Development Programme, sponsored a forum recently, in collaboration with the Philippine Institute for Development Stud-
the corner, the region should keep up with the rapid global economic shift and the quickly evolving technology in pursuing EDAP’s goals,” Dr. Yoo said. However, Atty. Rafael Lotilla, Deputy Director-General of the National Economic and Development Authority (NEDA) who was invited as the keynote speaker during the forum, recognized the fact that the setting up of such a database will be “highly dependent on the information technol-
———————— 1 The network’s member-countries include the following: Australia (National Centre for Development Studies of the Australian National University), China (China Institute for Reform and Development), India (National Council for Applied Economic Research), Indonesia (Institute for Economic and Social Research), Korea (Korea Development Institute), Mongolia (Institute of Economics of the Mongolian Academy of Sciences), Pakistan (Pakistan Institute of Development Economics), Philippines (Philippine Institute for Development Studies), Thailand (Thammasat University Faculty of Economics), United States (East-West Center), and Vietnam (Central Institute for Economic Management).
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ogy (IT) infrastructure of the membercountries.”
The IT Efforts of the Philippine Government The Philippine government acknowledges that IT is an essential tool in economic development in the 21st century. Thus, policy initiatives are being pushed to promote IT infrastructure, establish a well-equipped IT manpower, and strengthen private participation in IT programs so as to attract more foreign investments. The government is currently implementing an interconnection of government offices in a computerization program called the RP Web which will further promote greater transparency and information exchange among government agencies and ultimately lead to a greater exchange between the Philippines and other EDAP membercountries. At present, there is a scarcity of trained IT personnel in the Philippines because they are lost to better job prospects abroad. In addition, there is a relatively small market and low demand for their services within the country. However, there are already various national government agencies which are in the process of setting up their respective databases as part of their individual homepages. This trend indicates that electronic provision and exchange of information has finally caught up in the Philippines. To cite a few, major government data providers such as the National Statistics Office (NSO), the National Statistical Coordination Board (NSCB), the National Economic and Development Authority (NEDA), the Department of Finance (DOF), the Bureau of Labor and Employment Services (BLES), and the Philippine Institute for Development Studies (PIDS) have their respective websites where data can be easily accessed.
DEVELOPMENT RESEARCH NEWS
A Proposed Common Electronic Database for Asia-Pacific Dr. Eliezer A. Albacea, Division Head of the Institute of Computer Science at the University of the Philippines–Los Baños (ICS–UPLB), presented a prospective model for an electronic database system for Asia-Pacific which the EDAP network may employ. According to Dr. Albacea, it would be logical to employ an Internet-based database by creating a webpage that can be easily accessed even by nonowners of personal computer units. He cited an online database system called Key Indicators Online (KEYIOTM) as a possible model to be used. This system was developed by the ICS-UPLB to produce highly accurate and timely information on various economic indicators. A version of the system, currently being utilized by the Data and Information Resource Program (DIRP) of the PIDS, is userfriendly and does not require training in order to generate graphs and statistical data. Basically, KeyIOTM System can accommodate any data either in a timeseries or other database structure formats. Users can access database files in raw table format and refine their queries by selecting relevant variables or period coverage. They can also select from three frequency modes, namely, total, average and end-of-period. There are two possible designs of a web-based electronic database system: a system that manages a centralized database like the ones used by the UPLB Labserver and the PIDS-DIRP, and another that manages a distributed database such as the APEC Labor Market Information System (APEC-LMI). The second system is basically an extension of the KeyIOTM . However, instead of the database being placed in one server, the database of a particular country is stored in the country server.
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"...The most important features of an ideal common electronic database among EDAP membercountries are the consistency and comparability of data across countries and across time."
Each country is then provided with the front-end software for accessing the distributed database. Albacea stressed that the most important features of an ideal common electronic database among EDAP member-countries are the consistency and comparability of data across countries and across time. The ability to compare country performances within a certain time frame or under a certain policy environment shall be facilitated by this common database. The establishment will be a concrete achievement since it will reduce the burden on the part of the researcher to adjust data to account for differences in scope and measurement of variables from country to country.
Points of Agreement There was a unanimous opinion among the EDAP network members that, indeed, such an electronic database is very important. Thus, several points were agreed upon during the network’s business meeting which was held after the forum. Some of these are: Data that will be published on the web must be consistent and correct. This point is critical since there is no automatic detection of inconsistencies. A database administrator may check the data but it is the respective organization’s responsibility to ensure their correctness. With regards to database produc-
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tion, adopting a decentralized approach will ensure the accuracy of data since these will come from the main source. Such an operation will also develop the capability of each institution to maintain the supply of updated information. The network, on the other hand, should be primarily concerned with the identification of common key variables that will be put online and the possibility of updating these data on a regular basis. Access to the EDAP database will be free of charge on the first and second years and on a subscription basis in the succeeding years. Citing the fact that the practice of charging users for the data they need is already common in the internet industry, Mr. Glenn Sipin of the De La Salle University and Dr. Albacea said that this is important in order to make the EDAP endeavor self-sustaining. At present, the NSCB only charges for the actual direct cost of the data requested by their clients. One suggestion referred to the “priority system” or the rationing of information depending on how much one is willing to pay and the speed at which the information will become available. Mr. Sipin suggested that all the statistical data need not be placed in the database at once. He proposed a second website wherein other variables can be gathered until such time that they become in demand. Each member-country will have its own homepage and provide links to other member-countries. Based on the various comments and suggestions, each network member-country agreed to have its own homepage whose database will be maintained by an identified institution, including the collection and processing of data to be updated either monthly or quarterly, depending on the various needs of users. Each site will provide links to other EDAP member-countries who will be given free access. DRN
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May - June 1998
ther legally mandated, agreed upon by both labor and management, or simply a decision of management; and k community-level insurance/ financing by socioeconomic population groups. These refer to communitymanaged health care financing schemes with elements of risk-sharing and pre-payment.
Take for instance the members of the commercial-indemnity insurance types and HMOs. A survey of 48 enrollees showed that 83 percent and 88 percent, respectively, were college graduates. In contrast, 75 percent of members of community-based insurance organizations were NOT able to reach college, proving that such organizations primarily target the low-income groups (Table 1). Finally, respondents enrolled in employer-provided schemes are almost equally divided between those who have reached college and those who have not.
Most of all, the study attempts to show how each type of private health care scheme provides the answer to the government’s quest for health care financing for all.
The survey further showed that members of the community-based health care organizations and employerprovided schemes belonged to bigger households.
...Our Health From page 1
types is that those covered also include the low-income groups as well as employees’ dependents.
Individual, Family or Corporate Accounts? The choice as to what kind of health care organization to turn to is, of course, dependent on a variety of factors, foremost perhaps is the financial outlay. For the common office worker, for instance, the type may depend on his income, the affordability of his premiums, his health care “demand” and the accessibility of the type within his area. If he were considering an HMO, there is still the issue of whether he could pass the often rigid screening process regarding his health and financial risks (Table 2).
Table 1: Who Are the Beneficiaries? Commercial-indemnity
HMO
Employer-Provided
Target: Corporate sector, Target: Same as that employed, high- and mid- of the Commercialindemnity Health income. Insurance.
Available to individuals who can pay premiums and within set age group, usually 18-65 years old; may be employees classified by occupational class.
Target: Corporate sector, but generally includes a wider range of income groups, with lower and mid-income individuals as dominant groups.
Same description as Groups are classified by that of Commercialposition and status of indemnity Health employment. Insurance; age group is 15-45 years old.
Niche Marketing Each of the types of private health insurance organizations has its way of sourcing funds. These may be through out-of-pocket payments, employer’s subsidy, regular premium collection from members or communal self-help. The study shows how each type differed in the kinds of benefits each provides as well as the type of beneficiaries catered to. In some sense, the four types seemed to create their own “niche markets.”
Community-Based Target: Low-income groups in target communities.
Members confined to those within a community organization, but benefits may also be extended to relatives of members.
A count of members by branch further indicated that HMOs have the most number of members in the National Capital Region (NCR). Indeed, the profile revealed that, like that of commercial-indemnity insurance, members are urban-based and regularly employed in the formal sector. Members of employer-provided schemes are also regularly employed, but what sets them apart from enrollees of the two other private health insurance
Despite the small sample size of memberenrollees drawn by the study due to insufficiency of data from the companies or organizations, two interesting results were drawn from the exercise. First, 55 percent of the enrollees who were surveyed said that their health plans were obtained through their employers. This partly explains why almost half of the HMOs and commercial-indemnity firms’ customers were enrolled under the corporate account.
Second, half of the respondents under all four insurance types said they were enrolled in their health plans for at most three years while 27.3 percent said that they have been enrolled for four to six years. These results indicate that it was only recently that some companies or organizations have engaged in the provision of some form of health insurance.
DEVELOPMENT RESEARCH NEWS
What’s in this for the Folks? Commercial-indemnity insurance may provide benefits to members in the form of either cash reimbursements or hospitalization services. They may either impose restrictions on where or from whom members could consult or avail of medical services or, as in the case of life insurance firms, allow members to consult any service provider (i.e, doctors, medical technicians, dentists, etc).
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Table 2: The Price One Pays HMO
Commercial-indemnity Premiums paid are determined by type of benefits and sometimes age of applicant; premium costs are based on actuarial computations.
Same premium description as that of the Commercialindemnity Health Insurance.
Employer-Provided Premium is companyappropriated.
Community-Based Contributions are based on members’ perceived affordability.
Table 3: What Are on Offer Commercial-indemnity Plans and benefits tend to be physician-focused, hospital based.
HMO Same as that of commercial-indemnity firms.
Employer-Provided Plans and benefits are focused on primary health care.
Community-Based Plans and benefits are focused on primary health care, with paraprofessionals as primary providers.
On the other hand, HMOs’ range of services is comprehensive: out-patient Benefits are generally on a Benefits are on a Some benefits are direct Some benefits are direct consultation, diagnostic sercash-reimbursement basis. direct-service provision services; also provides services; also provides vices and hospitalization. basis. medical loans, as needed. medical loans, as needed. Members, however, could Has in-house service Same as HMOs, Usually does not restrict Same as HMOs, only avail of the services of providers, with referral although smaller enrollees’ choice of although smaller their HMOs’ accredited support provided by a network of service service providers. network of service service providers. In nonwide network of providers. providers. emergency cases, members accredited providers. are required to request for referral slips or letters of authorizations from HMO coordinators prices, health expense reimbursement Conclusion Because of the characteristics inin their respective hospitals. In emer- (although limited), cash loan or free herent in each type of private health gency cases, procedural controls re- supplementary food for malnourished care insurance, no one can say that one main in place. That is, members are still children under the age of 5. Table 3 of these is the best option for the whole required to notify their HMO coordi- summarizes the kinds of health services population. Rather, each type can connator of their confinement within a offered by the four private health intribute toward the government’s aim specified time. surance types in the Philippines. of giving each and every Filipino access Because health benefits given by Despite the “smaller benefits” of- to health care funds. The study noted employer-provided organizations are fered by community-based and some that commercial-indemnity insurance decided upon in negotiations, such employer-provided schemes, it is worth- companies and HMOs cater to a fairly benefits are likely to be more diverse while to note that both focus on pri- constricted market—i.e., the urban in scope. Like HMOs, employers use mary health care. This is, in fact, in line employee with regular income. Using accredited service providers. Unlike with the government’s program toward 1988 data, this means that only 10 perHMOs, however, management is more preventive medicine (as opposed to cent of the population can afford these lenient with the use of nonaccredited curative medicine). Both encourage types of insurance. Employer-provided service providers. the use of para-professionals as primary health care schemes, on the other providers, although one still cannot hand, can cover some of the lowFinally, community-based schemes negate the fact that community-based income groups. And community-based vary depending on the community’s schemes are often unable to provide health care financing might just work situation and capacity. Benefits may be adequate coverage for the cost of hos= 12 in the form of a discount on drug pitalization.
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May - June 1998
Antidumping in a Global Open Economy: Still a Key Instrument for Protection
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ntidumping action is basically a tool to protect one’s market from the unloading by foreign exporters of goods in quantity below cost prices. Why does dumping occur in the first place? In the earlier years, the rationale for dumping was to force competitors abroad to go out of business by lowering the price in the export market way below the cost of production. Because of high profits earned in one’s closed home market where there is an absence of domestic competitors, a producer can afford to sell his product abroad at very low prices and subsequently force competitors in the foreign market to lose and close down. With the present emphasis on globalization, however, where a more open and fair competition in the global trading arena is being encouraged, the problem no longer seems to be the low price in the export market. Instead, it is the closed market at home itself that is increasingly seen as the culprit because it prevents global competition. As such, there is a growing perception that antidumping action is no longer as critical as it was considered before and that it is now only a second-best solution. After all, antidumping action does not open up the market. It only serves to make the export prices of goods sold in a foreign market higher. Does this then relegate antidumping action into the background?
Antidumping: Another Look In a roundtable discussion held recently at the Philippine Institute for
Development Studies (PIDS), Dr. Edwin Vermulst, partner at the European-based law firm Vermulst and Waor and author of dozens of books on the European Community’s antidumping and trade laws and practices, observed that this may not necessarily be so. For despite the mantra of globalization and open markets, there are still—new ones at that—trade barriers that are in place. Dr. Vermulst noted that while reductions in tariffs and dismantling of straightforward trade barriers took place in the developed countries as a result of the Uruguay Round of talks and the General Agreement on Tariffs and Trade-World Trade Organization (GATT-WTO), said barriers are nonetheless being replaced by other more sophisticated ways of market protection, including antidumping action, against exports from other countries. Ironically, these new barriers are in conformity with the WTO rules. Under these circumstamces, developing countries like the Philippines, which agreed to join the WTO but do not have enough resources to be trained in understanding and enforcing the sophisticated concepts and provisions of the WTO, are at a disadvantage vis-à-vis the developed countries. They will thus have to simply continue to rely—and more—on traditional and straightforward ways to protect their own markets and industries. And one of these, according to Dr. Vermulst, is through the antidumping law.
Forms of Dumping There are three types of dumping which antidumping action may address itself: First, price dumping – refers to the selling of articles by foreign producers to an importer in the domestic market at prices lower than in their own national market. Second, cost dumping – refers to the selling of articles by foreign producers to an importer at prices below total cost, the sale or importation of which injures or threatens to injure a domestic industry producing same or comparable articles. Third, nonmarket economy dumping – refers to a situation where nonmarket economies like China and the Russian republics sell quantitites of goods in the market economies. Dumping can easily be found in this form since prices in nonmarket economies cannot be used as basis for dumping margin. Hence, a surrogate country is chosen.
Antidumping Law: Philippine Version In the international open trading arena, there is always the threat of global dumping. Competition, after all, leads to a situation where there are winners and losers. Being a small market, the Philippines may experience the threat of being at the receiving end of dumping. And since it agreed to decrease tariffs on many of its products as part of its commitment in acceding to the WTO agreement, Dr. Vermulst
DEVELOPMENT RESEARCH NEWS
noted that it has given up certain means to protect its market. To provide temporary relief in the event that it is not yet ready to completely open up its economy to international market forces, therefore, Dr. Vermulst suggested that the country make use of the antidumping law as an instrument to protect its market. However, Vermulst cautioned that the Philippine antidumping law should be reviewed and revised to conform with the concepts and procedures of the WTO agreement so that it can be an effective instrument of protection. After all, there are two sides to the issue of antidumping. On the one hand, it can be an instrument to protect one’s own market. On the other hand, this same market’s own exports can be the subject of antidumping action by other countries. If the Philippine antidumping law is to be used effectively, then it has to be consistent with the international rules. The Uruguay Round-WTO agreements provide the basis for such rules. Countries like the Philippines which acceded to these agreements must therefore have their antidumping legislation comply with such. If the Philippines, for instance, with its own antidumping law which does not conform with the WTO agreement, brings a case of antidumping against other WTO signatory countries using the provisions of its own law, then these other countries may challenge the Philippines’ contention and call attention to its many inconsistencies with the international rules.
Philippine Antidumping Law: Inconsistencies with the WTO Agreement At the moment, the Philippine antidumping law and its provisions are indeed not consistent with the rules and procedures of the WTO agreement. An example of such inconsisten-
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cies is the basis used in the calculation of the dumping margin for cases of price dumping. While under the WTO agreement, the preferred basis is the exfactory price level, under Philippine law, wholesale price level is the basis used. There are also inconsistencies in the methods used for deciding whether there is dumping in cases where there are no domestic sales or where domestic sales are made at a loss. The WTO agreement allows the use only of either (a) constructed normal value or (b) export price to a third country in calculating this. Normal value, in turn, is calculated by adding all the costs plus a reasonable profit. In contrast, the Philippine antidumping law allows for two different ways of determining normal value. In addition to the method used in the WTO agreement, the Philippines also uses the landed prices of other producers in the home market. As such, this requires looking into the prices in other countries. Although these differences in calculation methods do not necessarily lead to a higher dumping margin or make the Philippine law more protectionist, the fact remains that there are differences and they are not in conformity with the WTO agreement. So much so that the parties against whom the Philippines may charge for dumping or conversely, others who may charge the country for dumping, can easily challenge the validity of the Philippines’ case vis-à-vis the international rules.
What to Do In assessing the whole set of the WTO agreement, Dr. Vermulst frankly noted that it is much more favorable for developed countries like the United States and the European Community than for developing countries because the former are already well-versed in applying the rules and have the insti-
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tutions as well as the capability to do so. Still, though, he observed that the agreement does give developing countries like the Philippines a number of legal rights which, when learned and implemented appropriately, can be good instruments in protecting the latter’s markets.
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Vol. XVI No. 3
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Editorial Board Dr. Ponciano S. Intal, Jr. President Dr. Mario B. Lamberte Vice-President Mr. Mario C. Feranil Director for Project Services and Development Ms. Jennifer P.T. Liguton Director for Research Information Ms. Andrea S. Agcaoili Director for Operations and Finance Atty. Roque A. Sorioso Legal Consultant
Staff Jennifer P.T. Liguton Editor-in-Chief Genna J. Estrabon Issue Editor Corazon P. Desuasido, Barbara B. Fabian, Edwin S. Martin and Liza P. Sonico Contributing Editors Valentina V. Tolentino and Rossana P. Cleofas Exchange Delia S. Romero, Galicano A. Godes, Necita Z. Aquino, Lilet L. Lamayo and Federico D. Ulzame Circulation and Subscription Jane C. Alcantara Lay-out and Design
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May - June 1998
PIDS Joins Centennial Fever
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t seems fitting that the Institute commenced its seminar and research lecture series for 1998 with the visit and talk of Dr. Cesar E. A. Virata, Vice Chair of the National Centennial Commission, in early January when he acquainted the PIDS staff on the objective of and the various activities and preparations being done for the celebration of the centennial of the country’s declaration of independence. For what better way is there to face the challenge of addressing the current financial crisis that the country is experiencing—besides the usual rigors of economic analyses as the PIDS is mandated to do—than to be imbued with the inspiration of knowing what the Filipino spirit can do, as shown by our forebears, to overcome adversities? In recounting the events and sacrifices involved in the struggle to attain our independence and in defining their meaning today as we celebrate the centennial of such process, Dr. Virata helped set the tone for the Institute’s involvement in the observance of the centennial affair. With the creation of a Centennial Year Com-
mittee within the Institute headed by Ms. Jennifer P.T. Liguton, Director for Research Information, a year-long program of activities was drawn up. This includes the following: k field trip to one or more historical sites included in the Centennial Freedom Trail or Landas ng Kalayaan, k regular dissemination of information and schedule of activities related to the centennial observation, k membership in the Philippine Centennial Movement, and k lecture series on centennialrelated topics. For the field trip, the PIDS staff are scheduled to visit historical sites in
Cavite in September this year, coinciding as well with the Institute’s celebration of its 21st founding anniversary. The distribution of relevant information materials and schedule of activities related to the Philippine centennial and significant events/heroes/personalities of the Philippine Revolution has likewise taken place regularly, thereby increasing the level of awareness of the staff on such matters and promoting the extent of their interest in participating—whether on their own or on an institutional capacity—in any centennial-related programs. Meanwhile, if the number of PIDS staff, together with their relatives and friends who voluntarily joined the Philippine Centennial Movement, is any gauge, then it can be said that the desire and interest of the staff was not simply to participate in centennial-related activities but also, and more importantly, to rekindle in today’s realities and challenges the spirit that moved our ancestors to fight and work for the welfare of the nation.
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The PIDS staff pose in their Filipiniana attire during the June 11, 1998 ceremony to commemorate the centennial celebration of the Philippine independence. Seated in the foreground from left are Research Fellow Dr. Myrna Austria, Director for Research Information Ms. Jennifer Liguton, PIDS Vice-President Dr. Mario Lamberte, PIDS President Dr. Ponciano Intal, Jr., and Administration Officer Ms. Nilda Lagapa.
DEVELOPMENT RESEARCH NEWS
Strengthening this interest is the series of lectures on centennial-related topics being held for the entire year. With well-known and respected historian-educators included in the line-up of speakers, the objective of the series is to broaden the expanse of knowledge and understanding of the PIDS staff about Philippine history and the search for the Filipinos’ value in the world of nations and peoples.
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May - June 1998
Former Education Minister and UP President Dr. Onofre Corpuz talked about nationalism and its definition. Completely in agreement to one of his remarks is Dr. Ponciano Intal, Jr. Mr. Ambeth Ocampo, columnist and historian, gave a particularly spirited talk on Philippine history.
Historian-educator Ambeth Ocampo, guesting in May, gave an account of the events preceding the June 12, 1898 declaration of independence, focusing on the conflicts and fears among the major actors in the historical drama. Mr. Ocampo lamented the fact that official historical accounts often ignore the exposition of painful truths which are nevertheless an inevitable part of a revolution. He noted that it is only in accepting the truth— no matter how painful the facts sometimes are—that the wounds are healed and a people and nation can grow and mature. The discussions also highlighted the need to preserve historical literature and to make history a point of everyday interest among ordinary people. For the month of June, the PIDS Centennial Lecture Series had Dr. Onofre D. Corpuz, former Secretary of Education and President of the University of the Philippines, as guest speaker. Dr. Corpuz focused on the historical events that triggered the Filipinos’ uprising against their colonial masters. He also spoke on the concept of nationalism which should not be taken as an external theoretical imposition but rather as an intrinsic and self-realizing need to belong and be part of a group. In other words, nationalism, for him,
United Nations Resident Coordinator Ms. Sarah Timpson gave a heartwarming greeting to every Filipino during the June 11 celebration of the Philippine centennial independence.
should and must begin with the individual himself. It is giving the best of oneself, which eventually redounds to the glory of one’s country and race. Also listed as forthcoming speakers in the series are Dr. Samuel Tan, Director of the National Historical Institute, who will speak on the role of the south—Visayas and Mindanao—in the struggle for Philippine independence, and Professor Randolph David of the University of the Philippines who has been invited to talk about the perspective of nationalism in the age of globalization. Educator Dr. Alejandro Roces and historian-columnist Felice
Sta. Maria have also been identified as tentative invitees to the lecture series. Finally, in a heartwarming display of unity and friendship among nations, the foreign and Filipino officials and staff of the United Nations agencies housed in the NEDA sa Makati building joined the PIDS staff in paying their respect to the Filipino flag in a flag ceremony held on the eve of the centennial of the declaration of Philippine independence. Garbed in Filipiniana attire, the PIDS staff were led by their President, Dr. Ponciano Intal, Jr., while the UN agencies were led by UN Resident Coordinator, Ms. Sarah Timpson. DRN
DEVELOPMENT RESEARCH NEWS
Editor's Notes... From page 1
on economic policies and issues, the Institute scheduled a series of talks on centennial-related topics for the year. Details of the lecture series are outlined in the article found on page 10 of this DRN issue. While not directly related to centennial matters, the rest of the articles included in this issue nonetheless all have a bearing on critical aspects in our national life. The article on page 1, for instance, as written by Suzy Ann Taparan and based on a research done by the Health, Education and Welfare Specialists, Inc. (HEWSPECS) for the joint PIDS-Department of Health project on Baseline Policy Research for Health Care Financing Reforms, deals with the various schemes that may provide health care financing for different sectors of the populace.
...Our Health From page 7
for the 5.3 million Filipinos living below poverty line—assuming that they can be organized as communities. Those that cannot still be covered by any of the above types will have to be the target of the government’s direct or premium subsidy. Of course, these are easier said than done. Before the government can tap the potentials of these types of health care insurance organizations, there remains issues in each that need to be resolved. One is the provision of incentives so as to develop the industry. The study recommends the following, among others: k the education of the public on the value of health insurance; k exemption of health insurance from premium tax;
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May - June 1998
Meanwhile, the articles based on Dr. Gerald Shively’s presentation on the interrelationship among pricing policies, cropping patterns and environmental outcomes (page 2) and on Dr. Edwin Vermulst’s talk on antidumping and a more open global economy (page 8) affect two very important areas—trade and environment. Finally, research is made more meaningful by the existence of timely, accurate and easily accessible data and information. In a recent conference of the members of the Economic Development Management in Asia and the Pacific (EDAP) network where PIDS is a member-institute, a proposal was submitted—and agreed upon by the members—to establish a common electronic database among Asia-Pacific research institutes that will precisely address this concern. More on the nature and description of the database and on how it will affect decisionmaking is written on page 4.
k training of a group who can promote effective health insurance management; k a possible tie-up between public tertiary private hospitals and the companies, especially in areas where there are no tertiary private hospitals; and k promotion of income-generating projects designed to improve the financial standing of a community. DRN
Antidumping in a Global... From page 9
The antidumping document is one such instrument. For the Philippines, however, to be effective, Dr. Vermulst said that all the provisions in the Philippine antidumping law must be made consistent with those of the WTO agreement. Thus, the Philippines may decide to just copy the international agreement and conform with minimum obligations attendant to it so that potential charges of Philippine violation of the agreement may be prevented. In a way, Dr. Vermulst said that following the international agreement’s version will make life easier for the Philippines. While it is true that in some ways, the Philippines would have to comply with certain procedures and substantive concepts, this may be the easier option since the present Philippine law anyway is, by itself, “fairly complicated,” Vermulst concluded. He likewise suggested that the country establish a local pool of experts who may and will study the agreement’s provisions on antidumping in order to help it work well. DRN
DEVELOPMENT RESEARCH NEWS is a bi-monthly publication of the PHILIPPINE INSTITUTE FOR DEVELOPMENT STUDIES (PIDS). It highlights the findings and recommendations of PIDS research projects and important policy issues discussed during PIDS seminars. PIDS is a nonstock, nonprofit government research institution engaged in long-term, policy-oriented research. This publication is part of the Institute's program to disseminate information to promote the use of research findings. The views and opinions expressed here are those of the authors and do not necessarily reflect those of the Institute. Inquiries regarding any of the studies contained in this publication, or any of the PIDS papers, as well as suggestions or comments are welcome. Please address all correspondence and inquiries to: Research Information Staff Philippine Institute for Development Studies Room 304, NEDA sa Makati Building, 106 Amorsolo Street, Legaspi Village, 1229 Makati City, Philippines Telephone numbers 892-4059 and 893-5705 Telefax numbers (632) 893-9589 and 816-1091 E-mail address: publications@pidsnet.pids.gov.ph Re-entered as second class mail at the Makati Central Post Office on April 27, 1987. Annual subscription rates are: P150.00 for local subscribers; and US$20.00 for foreign subscribers. All rates are inclusive of mailing and handling costs. Prices may change without prior notice.